SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Corporate Renaissance Group, Inc.
(Name of Registrant as Specified in Its Charter)
Registrant
________________________________________________________________
(Name of Persons(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $0.01 per share per share
(2) Aggregate number of securities to which transaction applies:
658,750 shares
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$10.25 per share
(4) Proposed maximum aggregate value of transaction:
$6,752,187
(5) Total fee paid: $1,350
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
- ------------------------------------------------------------------
CORPORATE RENAISSANCE GROUP, INC.
1185 AVENUE OF THE AMERICAS
18TH FLOOR
NEW YORK, NEW YORK 10036
NOTICE OF SPECIAL STOCKHOLDERS MEETING
TO BE HELD OCTOBER _____ , 1999
NOTICE IS HEREBY GIVEN to the holders of common stock, par value $0.01 per
share (the "Common Stock"), that a special meeting of such stockholders of
Corporate Renaissance Group, Inc. ("CREN") shall be held at the offices of M. D.
Sass Investors Services, Inc., 1185 Avenue of the Americas, 18th Floor, New
York, New York, on October ____, 1999 at 10:00 a.m. for the following purpose:
To consider and vote upon the liquidation and dissolution of CREN
pursuant to the provisions of the Plan of Complete Liquidation and
Dissolution of CREN approved by CREN's Board of Directors on August 3,
1999.
Stockholders of record on September ___, 1999 are the only persons entitled
to notice of and to vote at the meeting and any adjournment thereof.
Your attention is directed to the attached Proxy Statement. Whether or not
you expect to be present at the upcoming meeting, please fill in, sign, date and
mail the enclosed proxy as promptly as possible. A stamped return envelope is
enclosed for your convenience.
Martin E. Winter
Secretary
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY CARD PROMPTLY
NO MATTER HOW MANY SHARES YOU OWN.
- ----------------------------------------------------------------
PROXY STATEMENT
CORPORATE RENAISSANCE GROUP, INC.
1185 AVENUE OF THE AMERICAS
18TH FLOOR
NEW YORK, NEW YORK 10036
SPECIAL STOCKHOLDERS MEETING
TO BE HELD OCTOBER ____, 1999
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Corporate Renaissance Group, Inc. ("CREN") of proxies
to be voted at a Special Stockholders Meeting of CREN to be held at the offices
of M. D. Sass Investors Services, Inc., 1185 Avenue of the Americas. 18th Floor,
New York, New York, on October ____, 1999 at 10:00 a.m. and at any and all
adjournments thereof (the "Meeting"). The approximate date of mailing of this
Proxy Statement and the accompanying form of proxy card is September____, 1999.
The purpose of the Meeting is to consider and vote upon the liquidation and
dissolution of CREN pursuant to the provisions of the Plan of Complete
Liquidation and Dissolution of Corporate Renaissance Group, Inc. (the "Plan")
approved by CREN's Board of Directors on August 3, 1999. The costs of this
solicitation will be paid for by CREN.
CREN's Board of Directors has selected September____, 1999 as the record
date (the "Record Date") to determine those stockholders of CREN that are
entitled to vote. Only the holders of record of Common Stock, par value $0.01
per share (the "Common Stock") on the Record Date may vote at the Meeting. As
of the Record Date, there were 658,750 issued and outstanding shares of Common
Stock. The holders of shares representing a majority of the Common Stock that
are outstanding on the Record Date must be present in person or by proxy in
order for action to be taken on the Plan.
Pursuant to the Certificate of Incorporation of CREN and Delaware law,
approval of the Plan requires the affirmative vote of a majority of the shares
of Common Stock outstanding on the Record Date. In addition, pursuant to the
provisions of the Investment Company Act of 1940 (the "Investment Company Act"),
as amended by the Small Business Incentive Act of 1980 (the "Incentive Act"),
approval of the Plan will also require the affirmative vote of a majority of the
shares of Common Stock outstanding on the Record Date.
A proxy may be revoked before the Meeting by giving written notice of
revocation in person or by mail to the Secretary of CREN, by delivering a duly
executed proxy bearing a later date or by attending and voting at the Meeting.
Where a choice is specified by the stockholder in the proxy, the proxy will be
voted in accordance with the stockholder's choice. If no specification is made
in the proxy, it will be voted "FOR" approval of the Plan. Abstentions will be
counted as present for purposes of determining whether a quorum of shares is
present at the Meeting, but will not be counted as a vote "FOR" the Plan. The
proposal to approve the Plan is considered a "non-discretionary" proposal, which
means that brokers who hold CREN's shares in street name for customers are not
authorized to vote on such proposal on behalf of their customers without
specific voting instructions from such customers. If a broker returns a "non-
vote" proxy, indicating a lack of authority to vote on the proposal, then the
shares covered by such non-vote shall be deemed present at the Meeting for
purposes of determining a quorum but shall not be deemed to be represented at
the Meeting for purposes of calculating the vote with respect to the proposal.
No matters other than the proposal to approve the Plan may be acted upon at
the Meeting.
In the event that sufficient votes in favor of the proposal to approve the
Plan are not received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Such
adjournments will require the affirmative vote of the holders of a majority of
the shares present in person or by proxy at the Meeting. The persons named as
proxies will vote in favor of such adjournments if they are instructed by a
majority of the shares represented in person or by proxy to vote for the
liquidation proposal. CREN believes that dissenter's rights do not exist in
connection with voting on the Plan.
A COPY OF CREN'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 1998, AND CREN'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER
ENDED JUNE 30, 1999 ACCOMPANY THIS PROXY STATEMENT. IF YOU WOULD LIKE TO
RECEIVE ADDITIONAL COPIES OF SUCH REPORTS, PLEASE CONTACT CREN AT 1185 AVENUE OF
THE AMERICAS, 18TH FLOOR, NEW YORK, NEW YORK 10036, OR CALL (212) 730-2000, AND
COPIES WILL BE SENT, WITHOUT CHARGE, BY FIRST-CLASS MAIL WITHIN THREE BUSINESS
DAYS OF YOUR REQUEST.
APPROVAL OF THE PLAN OF LIQUIDATION AND DISSOLUTION
Introduction
At a meeting held on August 3, 1999, the Board of Directors considered and
approved the Plan. A copy of the Plan is attached as Exhibit A to this Proxy
Statement. If the Plan is approved by the stockholders, the investment
securities and other liquid assets of CREN will be sold, creditors will be paid
or reserves for such payments established, and the remaining net proceeds of
such sales distributed to the stockholders in cash, pro rata, in accordance with
their holdings. A liquidating trust will be established for all the purpose of
liquidating the remainder of CREN's assets (the "CREN Liquidating Trust").
Stockholders of CREN will receive proportionate Units in the CREN Liquidating
Trust. The trustee or trustees of the CREN Liquidating Trust, in accordance
with the Plan, will distribute the remaining assets of the CREN Liquidating
Trust to the Unit holders. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE PLAN.
Background
CREN was incorporated under the laws of the state of Delaware on June 19,
1992. The Company is a non-diversified, closed-end investment company that has
elected to be treated as a business development company ("BDC") under the
Investment Company Act, as amended by the Incentive Act.
The Company's primary investment objective has been to achieve long-term
capital appreciation through investments in companies ("Portfolio Investments"),
which the Company believes have viable existing businesses generating
substantial revenues in established markets, but which have recently completed,
are in the process of undergoing or are likely to undergo a financial
restructuring (a "Restructuring") pursuant to bankruptcy or reorganization
proceedings or on a negotiated basis outside of bankruptcy or reorganization
proceedings and where, as a result, the Company can ultimately obtain an equity
position (either common or preferred stock) at a discount from market value for
comparable companies that are not financially troubled. Such investments are
not generally available to the public because they require large financial
commitments and, in some cases, managerial assistance. The Company makes these
investments either on its own or, more likely, jointly with other investors,
including investment partnerships managed or advised by M.D. Sass Investors
Services, Inc. (the "Investment Adviser") and its affiliates. Any investments
with affiliates of the Company will be subject to restrictions under the
Investment Company Act and conditions set forth in an exemptive order granted by
the Securities and Exchange Commission ("SEC"). In addition to Portfolio
Investments, the Company invests in other securities, including securities of
financially distressed companies, where the Company believes that it can
generate capital appreciation by engaging in portfolio trading ("Other
Investments").
The Company has retained the Investment Adviser as the Company's investment
adviser pursuant to a Financial Advisory Agreement (the "Financial Advisory
Agreement") to identify, negotiate, manage and liquidate investments for the
Company. The Company invests only in transactions recommended by the Investment
Adviser. The activities of the Investment Adviser on behalf of the Company are
subject to supervision by the independent directors of the Company.
The Company is deemed to have commenced operations on November 1, 1994,
when the Company consummated an initial public offering and a contemporaneous
placement to foreign institutional investors of an aggregate of 956,000 shares
of Common Stock at $10.00 per share, which generated net proceeds of
approximately $7,823,000 or $8.18 per share. Since that time, the Company has
made five Portfolio Investments, three of which subsequently were sold. At the
date of this Proxy Statement, the Company had two Portfolio Investments: CVSI,
Inc. ("CVSI"), a provider of computer hardware and software integration
services, and Seaman Furniture Company, Inc. ("Seamans"), a New York based
furniture retailer. Such Portfolio Investments are also held by the Investment
Adviser and its other affiliates. In addition to the foregoing, the Company has
also invested, subject to applicable restrictions under the Investment Company
Act, in Other Investments of equity and debt securities of various companies.
However, the Company's asset base has been relatively small and non-diversified
which has hampered opportunities for growth.
In November 1996, the Company's Board of Directors adopted an open market
share repurchase program, pursuant to which the Company was authorized, from
time to time, to purchase up to an aggregate of 175,000 shares of its Common
Stock in open market transactions. In November 1998, the Company's Board of
Directors increased the number of shares authorized for repurchase under the
Company's open market share repurchase program from 175,000 shares
(substantially all of which had been repurchased at that time) to 350,000
shares. As of the date of this Proxy Statement, the Company has repurchased
297,350 shares pursuant to this program at an average cost of $6.65 per share.
In May 1998, CREN's Board of Directors determined to explore other
strategic alternatives to enhance stockholder value, given CREN's continued
limited asset base and non-diversified portfolio. Such strategic alternatives
included acquiring an operating company and withdrawing CREN's election to be
treated as a BDC; adopting a plan of liquidation; or restructuring CREN,
possibly in connection with raising additional capital.
During the period from May 1998 through February 1999, CREN explored each
of these alternatives. Initially, it was determined that given CREN's then
portfolio values, a liquidation would not provide sufficient return to
stockholders. In addition, CREN determined that given market conditions, it was
not feasible to raise additional capital. During this period, CREN evaluated
the possible acquisition of four operating companies. The Board determined that
three of these acquisitions candidates were not appropriate; the fourth
candidate was sold to another public company.
In February 1999, CREN formed a special committee (the "Special Committee")
consisting of three independent directors, Lawrence W. Leighton, Edward
Lowenthal and Daniel R. Mazziota, for the purpose of evaluating any further
strategic transaction proposals which may be received for CREN.
On March 25, 1999 CREN received an acquisition proposal from a Management-
led group (the "Management Group") consisting of Martin D. Sass (CREN's
Chairman, Chief Executive Officer and a principal stockholder), Hugh R. Lamle
(CREN's Executive Vice President and a principal stockholder) and Walter Kass
and his affiliates (a principal stockholder of CREN). The Management Group
offered to acquire all of the issued outstanding Common Stock of CREN by a
merger of CREN with an entity controlled by the Management Group. Upon
completion of the merger, each share of CREN's Common Stock other than those
held by Messrs. Sass, Lamle and Kass would have been converted into $8.00 in
cash (the "Management Proposal"). The Management Proposal was submitted to the
Special Committee for evaluation. The Special Committee retained the services
of an investment banking firm to assist it in evaluating the Management
Proposal,
On May 23, 1999, the Company received a proposal from Chapman Capital
L.L.C. to purchase the outstanding shares of Common Stock of CREN for $9.00 per
share or, in the alternative, to adopt a plan of liquidation (the "Chapman
Proposal"). The Chapman Proposal was also submitted to the Special Committee
for evaluation.
Prior to the Special Committee's completing its evaluation of the
Management and Chapman Proposals, on June 16, 1999 the Management Group withdrew
the Management Proposal as not representing adequate value to CREN's
stockholders as compared to liquidation, in light of ongoing changes in CREN's
portfolio values.
On June 24, 1999, the Management Group noted that CREN's net asset value as
of June 23, 1999 had increased to $12.21 per share, from $10.17 per share at
June 17, 1999, based on pro forma calculations, as a result of a revaluation of
certain portfolio securities. Accordingly, the Management Group also urged
adoption by CREN of a plan of liquidation.
At a meeting held on August 3, 1999, the Board of Directors adopted the
Plan, attached as Exhibit A, subject to stockholder approval. Under the Plan,
if approved by stockholders, the Company will make a distribution to
stockholders of its cash, following the disposition of its liquid assets, less
anticipated operating and liquidation costs, and then transfer the balance of
its assets, which are anticipated to be primarily its remaining Portfolio
Investments, to the CREN Liquidating Trust. As the CREN Liquidating Trust
disposes of the assets in the normal course of Restructuring related to them, it
will make one or more liquidating distributions.
One or more trustees, who will not be compensated and will be persons
affiliated with the Investment Adviser, will manage the affairs of the CREN
Liquidation Trust. In addition, pursuant to an amendment to the Financial
Advisory Agreement, the Investment Adviser will continue to serve as adviser to
the CREN Liquidating Trust with respect to liquidation of its assets.
Recommendation of the Board of Directors
For the reasons discussed in the preceding paragraphs, the Board of
Directors recommends that stockholders vote "FOR" the Plan.
Description of the Plan and Related Transactions
If the Plan is approved by CREN's stockholders, CREN will voluntarily
dissolve and completely liquidate in accordance with the requirements of
Delaware General Corporate Law ("DGCL") and the Internal Revenue Code of 1986,
as amended (the "Code"). The effective date (the "Effective Date") of the Plan
will be the date on which the Plan is approved by the stockholders. The period
from the Effective Date until December 31, 1999 is referred to herein as the
"Liquidation Period".
After the Effective Date, CREN will promptly seek to convert all of its
investment securities and other assets into cash. CREN anticipates that
stockholders will receive an initial liquidating distribution of approximately
______% of CREN's available cash shortly after approval of the Plan by CREN's
stockholders. The amount of the initial distribution will be determined after
appropriate valuations and reserves are established based on reviews by CREN's
accountants, counsel or other consultants. CREN anticipates further
distributions will be made as investments are sold and CREN will be dissolved
prior to December 31, 1999.
To the extent CREN cannot dispose of any assets during the Liquidation
Period, principally its interests in CVSI and Seamans, or cannot locate
stockholders for purposes of sending liquidating distributions, CREN will
establish and contribute any such assets to the CREN Liquidating Trust.
Distributions will be made from the trust to the stockholders pursuant to the
trust's terms and no assets will revert back to CREN. The expenses of the CREN
Liquidating Trust will be charged against the liquidation distributions held
therein. CREN estimates that legal, accounting, advisory and other fees and
expenses through final liquidation may reduce the net asset value by
approximately $.65-.70 per share on the assumption that the liquidation process
might take 18 months from the time of stockholder approval. The actual time
frame and costs of liquidation are dependent on various factors, such as
regulatory approvals and developments relating to portfolio securities, that
could cause a material variance from these estimates.
Any liabilities of CREN and any claims made against CREN must be paid or
provided for by CREN prior to making liquidating distributions to the
stockholders. If the Plan is approved by the stockholders, CREN will promptly
seek to dispose of any claim against it or otherwise enter into trusts or other
arrangements whereby all of the estimated costs and expenses involved with such
claims will be held back from the liquidating distributions to the stockholders
until the final resolution of such claims. Upon final resolution of such
claims, any assets will be paid from the trust or other arrangement to
stockholders pursuant to such instrument's terms and no assets will revert back
to CREN.
The exact date of liquidating distributions will depend on the time
required to liquidate CREN's assets and the extent to which CREN may need to
hold back sufficient assets to provide for any disputed claims or other
contingent liabilities which may then exist against CREN. Liquidating
distributions will be made on a pro rata basis to the stockholders of CREN. It
is anticipated that the Certificate of Dissolution will be filed with the
Delaware Secretary of State pursuant to the DGCL during the Liquidation Period,
but such certificate may not be filed by CREN until claims of all known
creditors and claimants have been paid or adequately provided for. In the event
that claims are not adequately provided for or are brought after dissolution by
previously unknown creditors or claimants, CREN's directors and officers could
be held personally liable. In addition, claims possibly could be pursued
against stockholders to the extent of distributions received by them in
liquidation.
As soon as practicable after the distribution of all of CREN's assets in
complete liquidation, CREN will close the books and prepare and file, in a
timely manner, any and all required income tax returns and other documents and
instruments. CREN will also file, or cause to be filed, any and all other
documents and instruments necessary to terminate the regulation of CREN and its
business and affairs by the SEC.
The CREN Liquidating Trust will be administered by one or more trustees for
the benefit of CREN's stockholders and will have terms substantially similar to
those of the liquidating trust attached to the Plan as Exhibit A thereto. The
trustees, who will not be compensated, will be persons affiliated with the
Investment Adviser. The Investment Adviser will continue to serve as the CREN
Liquidating Trust's Investment Adviser with respect to liquidation of the CREN
Liquidating Trust's assets. The Financial Advisor Agreement will be amended to
provide that the Investment Adviser will receive an annual fee equal to two
percent of the CREN Liquidating Trust's net asset value (payable in the same
manner as the fee under the existing Financial Advisory Agreement). In
addition, upon disposition of the CREN Liquidating Trust's interests in CVSI and
Seamans, the Investment Adviser will receive an incentive fee equal to 20% of
the net realized appreciation from total proceeds distributed in excess of the
previous high water mark of $13.29 per share at which an incentive fee was paid.
Exchange of Stock Certificates for Liquidation Distributions
Prior to completion of the liquidation, CREN will send or cause to be sent
to its stockholders a letter of transmittal form for the purpose of exchanging
shares of CREN for liquidating distributions. Stockholders whose shares are
held in the name of their broker or other financial institution will receive
their distributions through their nominee firms. No amount will be distributed
by CREN to a stockholder unless and until such stockholder delivers to CREN a
signed letter of transmittal form and the certificates representing the
stockholder's shares or, in the event a share certificate has been lost, a lost
certificate affidavit and such surety bonds and other documents and instruments
as are reasonably required by CREN, together with appropriate forms of
assignment, endorsed and with any and all signatures thereon guaranteed by a
financial institution reasonably acceptable to CREN.
The right of a stockholder to sell his or her shares of CREN's Common Stock
on the Nasdaq Small-Cap Market at any time prior to CREN's filing of a notice of
intent to dissolve will not be impaired by the adoption of the Plan. CREN
expects that on or about the date that CREN files such notice, the trading of
CREN's shares on the Nasdaq Small-Cap Market will terminate.
Federal Income Tax Consequences
PAYMENT BY CREN OF LIQUIDATING DISTRIBUTIONS TO STOCKHOLDERS WILL BE A
TAXABLE SALE OR EXCHANGE. BECAUSE THE INCOME TAX CONSEQUENCES FOR A PARTICULAR
STOCKHOLDER MAY VARY DEPENDING ON INDIVIDUAL CIRCUMSTANCES, EACH STOCKHOLDER IS
URGED TO CONSULT HIS OR HER OWN TAX ADVISER CONCERNING THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE RECEIPT OF A LIQUIDATING DISTRIBUTION.
CREN does not qualify, and does not intend to continue to qualify through
the end of the Liquidation Period, as a regulated investment company under the
Code. Therefore, it generally will be subject to federal income tax on any
investment company taxable income or net capital gain (the excess of net long-
term capital gain over net short-term capital loss) that it distributes to
stockholders.
Prior to the completion of the liquidation, CREN may declare one or more
distributions of any undistributed investment company taxable income (the "Final
Income Distributions"). In such event, the stockholders will report the Final
Income Distributions as ordinary income to the extent that they are paid out of
CREN's investment company taxable income. Because CREN expects that its capital
loss carryforward will exceed its current year capital gains (including any
capital gains recognized on CREN's liquidation), CREN will not be eligible to
make any capital gain dividends to the stockholders.
The payment of liquidating distributions (excluding the payment of any
Final Income Distributions which will be taxed as described above) will be a
taxable sale or exchange to stockholders. Liquidating distributions will first
reduce the adjusted tax basis of a stockholder's CREN shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder. A stockholder will recognize a capital loss if, and to the extent that,
the adjusted tax basis of CREN shares exceeds the aggregate amount of
liquidating distributions received in exchange therefor, and such capital loss
will be recognized in the year in which CREN makes its final liquidating
distribution. Gain or loss must be calculated separately for each block of
shares (shares of Common Stock acquired at the same time in a single
transaction) held by a stockholder. Generally, the capital gain or loss will be
long-term if the shares were held for more than one year at the date of the
liquidating distribution.
To facilitate its liquidation, CREN may transfer some of its assets to a
temporary trust, the CREN Liquidating Trust, for the benefit of the
stockholders. The CREN Liquidating Trust is intended to be treated as a
liquidating trust for federal income tax purposes. For federal income tax
purposes, the stockholders should be treated as if CREN distributed the CREN
Liquidating Trust assets directly to the stockholders, and they contributed such
assets to the CREN Liquidating Trust. In such event, each stockholder will be
deemed to receive a liquidating distribution in an amount equal to its
respective share of the value of CREN assets transferred to the CREN Liquidating
Trust on the date of such transfer. In addition, the CREN Liquidating Trust
should be treated as a pass-through entity for federal income tax purposes, and
consequently the CREN Liquidating Trust's items of income, deduction, gain, loss
or credit should be proportionately allocated to stockholders regardless of
whether there are distributions. Distributions by the CREN Liquidating Trust to
stockholders will not be taxable.
Unless a stockholder complies with certain reporting and/or certification
procedures or is an "exempt recipient" (i.e., in general, corporations and
certain other entities), the stockholder may be subject to backup withholding
tax at a rate of 31% with respect to distributions by CREN. Foreign
stockholders should consult with their own tax advisors regarding withholding
taxes in general.
As of June 30, 1999, CREN had $370,096 in net capital loss carryforwards
and current capital losses that could be used to offset current or future
capital gains. CREN had $3,566,835 of unrealized capital gains as of the same
date. If the liquidation and dissolution of CREN is approved and all or a
portion of such capital gains or any additional capital gains are realized, CREN
would be able to use a portion of its net capital loss carryforwards to offset
such gains. Any remaining capital loss carryforwards that are not used to
offset capital gains realized upon liquidation will be lost, and the benefit of
such capital loss carryforwards will not pass through to stockholders. If CREN
did not liquidate, it is possible that sufficient capital gains could be
generated in the future to use the entire amount of CREN's capital loss
carryforwards.
The foregoing summary is generally limited to the material federal income
tax consequences to stockholders who are individual United States citizens and
who hold shares as capital assets. It does not address the federal income tax
consequences to stockholders who are corporations, trusts, estates, tax-exempt
organizations, non-resident aliens or stockholders subject to special provisions
under the Code. This summary does not address state or local tax consequences.
Stockholders are urged to consult their own tax advisers to determine the extent
of the federal income tax liability they would incur as a result of receiving a
liquidating distribution, as well as any tax consequences under any applicable
state, local or foreign laws or proposed changes to the tax laws.
Financial Highlights
Following are financial highlights of CREN for the fiscal years ended September
30, 1998, 1997 and 1996. Representatives of Ernst & Young LLP are expected to
be present at the meeting and available to respond to appropriate questions, and
they will have the opportunity to make a statement if they desire to do so.
Corporate Renaissance Group, Inc.
Selected Financial Highlights
<TABLE>
Fiscal Year Ended September 30, 1998 1997 1996
<S> <C> <C> <C>
PER-SHARE DATA(A)
Net asset value, beginning of period $8.03 $9.66 $12.36
Operations:
Net investment income (loss) .69 (.17) (.50)
Net realized and unrealized gain
(loss) on investments (.55) (1.49) (2.20)
Total increase (decrease) .15 (1.66) (2.70)
from operations
Distributions to stockholders:
From net investment income
In excess of net investment income
From net realized gains
Total distributions to stockholders
Adjustments to net assets for:
Repurchase of Common Stock .23 .03
Total adjustments .23 .03
Net asset value, end of period $8.40 $8.03 $9.66
Per-share market value, end of period $6.0625 $5.625 $7.8125
SELECTED INFORMATION
Total investment return, market
Value 7.789% (29.69%) (16.88%)
Total investment return, net asset
Value 4.619% (16.87%) (21.85%)
</TABLE>
(A)Per share data is based on the weighted average number of shares of Common
Stock outstanding for each respective period.
Net Asset Value and Market Price
CREN's shares of Common Stock currently trade on the Nasdaq Small-Cap
Market under the symbol CREN. The following table shows the history of trading
of CREN's shares, by quarter, for the last two fiscal years.
<TABLE>
Net Asset Value(s) Market Price(s) Percentage Premium
or (Discount) (%)
Quarter Ended High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
06/30/99 12.21 9.67 11-1/4 7-1/8 (7.86) (26.32)
03/31/99 9.73 9.14 7-3/8 7 (24.20) (23.41)
12/31/98 9.10 8.40 6-3/4 6-1/4 (25.82) (25.60)
09/30/98 8.63 8.38 7-1/8 5-7/8 (17.44) (29.89)
06/30/98 9.50 9.06 8-1/8 7-1/4 (14.47) (19.98)
03/31/98 9.30 8.38 8 5-3/4 (13.98) (31.38)
12/31/97 8.22 7.05 6 5 (27.01) (29.08)
09/30/97 8.30 6.93 6 5 (27.71) (27.85)
</TABLE>
On August 3, 1999, the last trading day before the public announcement of
the approval of the liquidation of CREN by the Board of Directors, the high, low
and closing bid prices of CREN's shares of Common Stock reported by the Nasdaq
Small-Cap Market was $10 1/8. The closing bid price on such date represents a
discount of 16.60% from the net asset value of $12.14 per weighted average share
of Common Stock at June 30, 1999.
Security Ownership
The following table sets forth information as of the date of this Proxy
Statement, based on information obtained by CREN or from the persons named
below, with respect to the beneficial ownership of Common Stock by (i) each
person known by CREN to be the owner of more than 5% of the outstanding shares
of Common Stock, (ii) each of the directors of CREN, (iii) the Chief Executive
Officer of CREN and (iv) all officers and directors of CREN as a group.
<TABLE>
Amount and Nature
of Beneficial Percentage of
Beneficial Owner(1) Shares Ownership Outstanding
<S> <C> <C>
Martin D. Sass(2)(3) 71,300 10.82%
Martin E. Winter(2) 200 *
Hugh R. Lamle(2)(3) 48,600 7.38%
James B. Rubin(2) 0 *
Larry Dinkin(2) 0 *
Thomas M. Garvin(2) 0 *
Lawrence W. Leighton(2) 1,000 *
Edward Lowenthal(2) 3,000 *
Daniel R. Mazziota(2) 0 *
All officers and directors
as a group (9 persons) 124,100 18.84%
Walter Kass
420 Lexington Ave
New York, New York(3)(4) 118,534 17.99%
Robert L. Chapman
Citicorp Center, 23rd Floor
725 S. Figeuroa Street
Los Angles, California (3)(4) 40,000 6.07%
____________________
*Less than 1%
</TABLE>
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of warrants or
options. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and which are exercisable within 60 days
have been exercised.
(2) Officers and Directors.
(3) 5% or Greater Stockholders.
(4) Based on a Schedule 13D filed with the SEC.
STOCKHOLDER PROPOSALS
In the event that CREN has not previously been dissolved, proposals of
stockholders intended to be present at the next annual meeting of stockholders
must be received at CREN's offices, 1185 Avenue of the Americas, 18th Floor, New
York, New York 10036, a reasonable time before the solicitation is made for such
meeting. If the date of such meeting is subsequently advanced by more than 30
days or delayed more than 90 days, CREN will inform stockholders of the change
and a new date for receiving stockholder proposals.
Additional solicitation may be made by letter, telephone or telegraph by
officers or employees of CREN, or by dealers and their representatives.
Martin E. Winter,
Secretary
- --------------------------------------------------------------
EXHIBIT A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
OF
CORPORATE RENAISSANCE GROUP, INC.
This Plan of Complete Liquidation and Dissolution (the "Plan") of Corporate
Renaissance Group, Inc., a Delaware corporation (the "Company"), and the
transactions contemplated thereby have been approved by the Board of Directors
for the Company (the "Board") as being advisable and in the best interests of
the Company and its stockholders. The Board has directed that this Plan be
submitted to the holders of the outstanding shares of the Company's Common Stock
(the "Stockholders") for their adoption or rejection at a special meeting of
stockholders and has authorized the distribution of a Proxy Statement (the
"Proxy Statement") in connection with the solicitation of proxies for such
meeting. Upon such adoption the Company shall voluntarily dissolve and
completely liquidate in accordance with the requirements of the Delaware General
Corporation Law (the "DGCL") and the Internal Revenue Code of 1986, as amended
(the "Code"), as follows:
1. Adoption of Plan. The effective date of the Plan (the "Effective Plan")
shall be the date on which the Plan is adopted by the Stockholders. Such
approval of the Plan shall constitute approval by the Company's Stockholders of
the sale of substantially all of the assets of the Company in accordance with
Section 271 of the DGCL and approval of each of the other actions contemplated
by the Plan. The period commencing on the Effective Date and continuing until
December 31, 1999 is referred to herein as the Liquidation Period.
2. Disposition of Assets. Prior to and after the Effective Date the Company
shall use all commercially reasonable efforts to dispose of all of its
investment securities and other assets (other than the Claims referred to in
Section 3 below) as promptly as practicable consistent with realizing full value
thereon and shall hold or reinvest the proceeds thereof in cash and such short-
term fixed income securities as the Company may lawfully hold or invest in. To
the extent the Company cannot dispose of any such asset or assets prior to
expiration of the Liquidation Period, the Company shall contribute such asset or
assets to the Liquidating Trust referred to in Section 7 below.
3. Disposition of Claims. Prior to and after the Effective Date the Company
shall use all commercially reasonable efforts to assert, prosecute, reduce to
judgment, settle and collect all claims (the "Claims") of the Company against
persons other than the Company. To the extent the Company cannot resolve any
Claim prior to expiration of the Liquidation Period, then not later than the
last day of such period the Company shall contribute all such unresolved Claims
to the Liquidating Trust, referred to in Section 7, along with such amounts of
cash and other assets as the Company shall determine might reasonably be
required to resolve such unresolved claims.
4. Transactions. Within the Liquidation Period, the Company shall have the
authority to engage in such other transactions as may be appropriate to its
complete liquidation and dissolution, including without limitation, the
authority to mortgage, pledge, sell, lease, exchange or otherwise dispose of all
or any part of its other assets for cash and/or shares, bonds, or other
securities or property upon such terms and conditions as the Company shall
determine, with no further approvals by the Stockholders except as required by
law.
5. Provisions for Liabilities. Within the Liquidation Period, the Company
shall pay or discharge or otherwise provide for the payment or discharge of, any
liabilities and obligations, including, without limitation, contingent or
unascertained liabilities and obligations determined or otherwise reasonably
estimated to be due either by the Company or a court of competent jurisdiction
(the "Liabilities"). The foregoing may be accomplished by use of one or more
trusts (including a liquidating trust), escrows, reserve funds, plans or other
arrangements as determined by the Company or required by law (collectively, the
"Reserve Funds"), and the Stockholders by adoption of this Plan do constitute
and appoint any agent or trustee under the arrangements provided by the Company
pursuant to this Section 5 as the agent or trustee for the limited purposes
provided in the agreement in which such purposes are set forth.
6. Distributions to Stockholders. Promptly after the Effective Time and from
time to time thereafter, the Company shall distribute to Stockholders of record
as of the Effective Date, cash or other assets (other than cash or other assets
held in the Reserve Funds) and all other properties held by it, by way of pro
rata liquidating distributions to such Stockholders of the Company. Cash and
other assets held in the Reserve Funds (including any income earned thereon) or
the Liquidating Trust, referred to in Section 7, in excess of the amounts
required for the payment or discharge of the Company's liabilities and
obligations shall be distributed to the Stockholders at the time and under the
conditions set forth in the instruments establishing the Reserve Funds and the
Liquidating Trust referred to in Section 7.
7. Liquidating Trust. The Company, as promptly as practicable, but in any
event within the Liquidation Period, shall (i) create and execute with one or
more trustees ("Trustees") selected by the Company, who may be affiliated
persons of the Investment Adviser, a liquidating trust agreement substantially
in the form annexed hereto as Exhibit A, as the same may be amended from time to
time (the "Liquidating Trust Agreement") to establish a liquidating trust (the
"CREN Liquidating Trust"), (ii) grant, assign, and convey to the Trustees of the
CREN Liquidating Trust all rights of ownership of the Reserve Funds and any
other assets not yet distributed to stockholders, subject to all of the
Liabilities and (iii) distribute interests in the CREN Liquidating Trust to its
Stockholders (the transactions contemplated by this Section 7, together with the
Initial Distribution, shall be referred as the "Liquidation").
(a) No distributions of any of the assets held by the Trustees of the CREN
Liquidating Trust shall be made by the Trustees other than as provided by the
express terms and provisions of the Liquidating Trust Agreement, and no assets
held by the Trustees shall ever revert or be distributed to the Company or to
any Stockholder, as such, other than a former Stockholder entitled thereto as
provided in the Liquidating Trust Agreement. Assets held in the CREN
Liquidating Trust shall be distributed to the beneficiaries of the CREN
Liquidating Trust at the time and under the conditions set forth in the express
terms and provisions of the Liquidating Trust Agreement.
(b) It is intended that the assignment of the assets to the Trustees of the
CREN Liquidating Trust shall, subject to the terms and provisions of the
Liquidating Trust Agreement, constitute a final liquidating distribution by the
Company to its Stockholders of their pro rata interests in such assets, and the
Company's Stockholders shall be the owners of the CREN Liquidating Trust within
the meaning of Sections 671 through 679 of the Code.
8. Notice of Liquidation. As soon as practicable after the Effective Date but
in no event later than 20 days prior to the filing of Certificate of Dissolution
as provided in Section 9 below, the Company shall mail notice to all its
creditors and employees that this Plan has been approved by the Board and the
Stockholders as provided in the DGCL.
9. Certificate of Dissolution. As promptly as practicable within the
Liquidation Period and pursuant to the DGCL, the Company shall prepare and file
a Certificate of Dissolution (the "Certificate") with and for acceptance by the
Delaware Secretary of State. Thereafter, the Company shall conduct no business
except as permitted by the DGCL.
10. Termination of Business Development Company Status. At any time after the
Effective Date and consistent with seeking to maximize the net distribution to
Stockholders the Company may terminate its status as a business development
company.
12. Amendment or Abandonment of Plan. The Company may modify or amend this
Plan at any time without Stockholder approval if it determines that such action
would be advisable and in the best interests of the Company and its
Stockholders. If any amendment or modification appears necessary and in the
judgment of the Company will materially and adversely affect the interests of
the Stockholders or delay the time at which distributions of the Company's net
assets will be made, such an amendment or modification will be submitted to the
Stockholders for approval. In addition, the Company may abandon this Plan at
any time prior to the filing of the Certificate of Dissolution if it determines
that abandonment would be advisable and in the best interests of the Company and
its Stockholders and if the Stockholders approve such abandonment in the same
manner as they approved the adoption of this Plan.
13. Powers of Committee and Officers. Except as required by applicable law or
the terms of this Plan, all of the rights and duties of the Company relating to
the Plan and completion of the transactions contemplated thereby, including
modification, amendment or abandonment of the Plan, shall be made solely by or
under the direction of a Committee of the Board of Directors of the Company
whose members shall consist solely of individuals who are not interested persons
of the Company, (as the term "interested person" is defined in the Investment
Company Act of 1940, as amended by the Small Business Incentive Act of 1980 as
if the Company was a registered investment company). Any rights and duties of
the Company relating to the Plan and completion of the transactions contemplated
thereby that are reserved by law or this Plan exclusively to the Stockholders or
the Board of Directors of the Company as a whole shall be exercised by the Board
of Directors or the Stockholders, as the case may be. In addition to exercising
the specific powers granted to the Company by the Plan, such Committee is
authorized to approve such changes to the terms of any of the transactions
referred to herein, to interpret any of the provisions of this Plan, to delegate
the exercise of its rights and duties to Officers or agents of the Company and
to make, execute and deliver or authorize the Officers or agents of the Company
to make, execute and deliver such other agreements, conveyances, assignments,
transfers, certificates and other documents and take such other action as the
Committee deems necessary or desirable in order to carry out the provisions of
this Plan and effect as promptly as practicable the complete liquidation and
dissolution of the Company in accordance with the Plan, the Code and the DGCL.
- -------------------------------------------------------------------------
EXHIBIT A to
Plan of Complete
Liquidation and Dissolution
LIQUIDATING TRUST AGREEMENT
By and Between
CORPORATE RENAISSANCE GROUP, INC.,
as the Grantor,
and
___________________________,
as Trustees
Dated as of ______________, 1999
LIQUIDATING TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST, dated as of____________, 1999, by and
between Corporate Renaissance Group, Inc., a Delaware corporation ("CREN"), and
_________________, as trustees (together with any additional trustees appointed
hereunder, the "Trustees").
WHEREAS, CREN's Board of Directors and Stockholders have adopted a Plan of
Liquidation and Dissolution (the "Plan");
WHEREAS, CREN's Board of Directors anticipates that CREN may not be able to
fully wind up all of its affairs prior to the date by which CREN must dissolve,
and therefore have made specific arrangements for such contingency in the Plan;
WHEREAS, the Plan, among other things, (i) provides for the establishment
of a liquidating trust pursuant to the terms and conditions hereof (the "Trust")
and the establishment of one or more escrow, reserve and other accounts
(collectively, the "Reserve Funds"), (ii) provides the methods by which the
Trustee was selected to serve as agent of the Beneficiaries (as defined below)
and trustee of the Trust, (iii) authorizes and directs CREN to grant, assign and
convey the Retained Assets to the Trustee as agent for the Beneficiaries (as
defined below) all assets of CREN not distributed to Stockholders in
cancellation of the interest of the Stockholders in CREN, and (iv) authorizes
and directs the Trustee to hold and reduce to cash for and on behalf of, and
distribute to, the Beneficiaries the assets of the Trust in accordance with the
terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises, and subject to the terms
and provisions herein, effective as of the close of business on the Record Date,
CREN hereby grants, releases, assigns, conveys and delivers unto the Trustee for
the benefit of the beneficiaries of the Trust (the "Beneficiaries"), all of
CREN's right, title and interest in and to all assets of CREN not distributed to
Stockholders as of the Record Date for the uses and purposes stated herein, and
the Trustee hereby accepts such assets and such Trust:
ARTICLE I
NAME AND DEFINITIONS
1.1 Name. This trust shall be known as the CREN Liquidating Trust.
1.2 Certain Terms Defined. For all purposes of this instrument, unless the
context otherwise requires:
(a) Affiliated Person shall mean a Person (i) who in his individual capacity is
a director, trustee, officer, partner or employee of the Manager or of a Person
who controls, is controlled by or is under common control with the Manager or
(ii) who controls, is controlled by or is under common control with the Manager.
(b) Affiliated Trustee shall mean a Trustee (i) who in his individual capacity
is a director, trustee, officer, partner or employee of the Manager or of a
Person who controls, is controlled by or is under common control with the
Manager or (ii) who controls, is controlled by or is under common control with
the Manager.
(c) Agreement shall mean this instrument as originally executed or as it may
from time to time be amended pursuant to the terms hereof.
(d) Beneficial Interest shall mean each Beneficiary's proportionate share of
the Trust Assets initially determined by the ratio of the number of Shares held
by the Initial Beneficiary on the close of business on the Record Date over the
total number of Shares issued and outstanding on such Record Date and thereafter
each Beneficiaries' proportional beneficial interest in the Trust.
(e) Initial Beneficiary shall mean each of the Stockholders.
(f) Investment Advisor shall mean M.D. Sass Investors Services, Inc.
(g) Manager shall mean such Person or Persons who have been employed by, or who
have contracted with, the Trustees to assist in the management of the Trust.
(h) Person shall mean an individual, a corporation, a partnership, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, any unincorporated organization, or a government or political
subdivision thereof.
(i) Record Date shall mean the date elected by the Board of Directors of CREN
for determination of the Stockholders of CREN entitled to become Beneficiaries,
which shall also be the date on which CREN conveys to the Trust all of the
assets of CREN not previously distributed to Stockholders of CREN.
(j) Shares shall mean the shares of Common Stock, par value $.01 per share, of
CREN.
(k) Stockholders shall mean the holders of record of the outstanding Shares of
CREN at the close of business on the Record Date.
(l) Trust shall mean the Trust created by this Agreement.
(m) Trust Assets shall mean all the property held from time to time by the
Trustees under this Agreement, which initially shall consist of the assets
granted, assigned and conveyed to the Trustee by CREN pursuant to the Plan, and,
in addition, shall thereafter include all dividends, rents, royalties, income,
proceeds and other receipts of, from, or attributable to any assets held by the
Trust, less any of the foregoing utilized by the Trustees to pay expenses of the
Trust, satisfy liabilities of CREN or the Trust or make distributions to the
Beneficiaries.
(n) Trustees shall mean the original Trustee, any Trustees appointed hereunder
after the date hereof, and their successors.
ARTICLE II
NATURE OF TRANSFER
2.1 Purpose of Trust.
(a) The Trust is organized for the sole purpose of winding up CREN's affairs
with no objective to continue or engage in the conduct of a trade or business.
(b) As CREN is required to liquidate and dissolve prior to fully winding up its
affairs, including, but not limited to, its payment of any unsatisfied debts,
claims, liabilities, commitments, suits and other obligations, whether
contingent or fixed, arising from any source whatsoever (the "Liabilities"),
without any established procedure to satisfy such Liabilities, CREN's Board of
Directors and Stockholders each approved the Plan, which calls for the
establishment of the Trust, and sets forth the manner in which the Trustees are
selected, for the purpose of providing a procedure which will enable CREN to
dissolve in a timely manner, and wind up its affairs, by assigning and conveying
to the Trustees pursuant to the terms contained herein all assets of CREN not
previously distributed to Stockholders. The assets granted, assigned and
conveyed to the Trustees will be held in the Trust, and the Trustees will: (i)
further liquidate the Trust Assets if necessary to carry out the purpose of the
Trust and facilitate distribution of the Trust Assets; (ii) allocate, protect,
conserve and manage the Trust Assets in accordance with the terms and conditions
hereof; (iii) complete the winding up of CREN's affairs; (iv) act on behalf of
the Beneficiaries and in the capacity of CREN in connection with any matters and
(v) distribute the Trust Assets in accordance with the terms and conditions
hereof.
(c) It is intended that the granting, assignment and conveyance of the initial
Trust Assets by CREN to the Trustees pursuant hereto shall be treated for
federal and state income tax purposes as if CREN made such distributions
directly to the Stockholders. It is further intended that for federal, state
and local income tax purposes the Trust shall be treated as a liquidating trust
under Treasury Regulation Section 301.7701-4(d) and any analogous provision of
state or local law, and the Beneficiaries shall be treated as the owners of
their respective share of the Trust pursuant to Sections 671 through 679 of the
Internal Revenue Code of 1986, as amended (the "Code") and any analogous
provision of state or local law and shall be taxed on their respective share of
the Trust's taxable income (including both ordinary income and capital gains)
pursuant to Section 671 of the Code and any analogous provision of state or
local law. The Trustees shall file all tax returns required to be filed with
any governmental agency consistent with this position, including, but not
limited to, any returns required of grantor trusts pursuant to Section 1.671-
4(a) of the income tax regulations under the Code (the "Income Tax
Regulations").
2.2 Prohibited Activities. The Trust shall not continue or engage in the
conduct of any trade or business, and the Trustees are expressly prohibited
from, and shall have no power or authority to, continue or engage in the conduct
of any trade or business on behalf of the Trust or the Beneficiaries, and all of
the terms and conditions hereof shall be construed accordingly.
2.3 No Reversion to CREN. In no event shall any part of the Trust Assets
revert to or be distributed to CREN.
2.4 Instruments of Further Assurance. After the dissolution of CREN, such
Persons as shall have the right and power to so act, will, upon reasonable
request of the Trustees, execute, acknowledge, and deliver such further
instruments and do such further acts as may be necessary or proper to carry out
effectively the purposes of this Agreement, to confirm or effectuate the
transfer to the Trustees of any property intended to be covered hereby, and to
vest in the Trustees, their successors and assigns, the estate, powers,
instruments or CRENs in trust hereunder.
2.5 Payment of Liabilities. The Trustees hereby assume all Liabilities.
Should any Liability be asserted against the Trustees as the transferees of the
Trust Assets or as a result of the assumption made in this paragraph, the
Trustees may use such part of the Trust Assets as may be necessary in contesting
any such Liability or in payment thereof, but in no event shall the Trustees,
Beneficiaries or employees or agents of the Trust be personally liable, nor
shall resort be had to the private property of such Persons, in the event the
Trust Assets are not sufficient to satisfy the Liabilities of the Trust.
2.6 Incidents of Ownership. The Stockholders shall be the Initial
Beneficiaries of the Trust created by this Agreement and the Trustees shall
retain only such incidents of legal ownership as are necessary to undertake the
actions and transactions authorized herein.
2.7 Notice to Unlocated Stockholders. If the Trust holds Trust Assets for
unlocated Stockholders, due notice shall be given to such Stockholders in
accordance with local law.
ARTICLE III
BENEFICIARIES
3.1 Beneficial Interests.
(a) The Initial Beneficial Interest of each former Stockholder as a Beneficiary
hereof shall be determined by the Trustees in accordance with a certified copy
of CREN's Stockholder list as of the Record Date.
(b) CREN will deliver such a certified copy of its Stockholder list to the
Trustees within a reasonable time after such date. For ease of administration,
the Trustees shall express the Beneficial Interest of each Beneficiary in terms
of units ("Units"). Each record owner of shares of Common Stock of CREN at the
Record Date shall be entitled to receive one Unit in cancellation of each such
share. The certificates representing Shares will be deemed to evidence the
number of Units in the Trust owned by each Beneficiary, provided, however, that
upon exchange or transfer of such certificates, the certificates shall be
marked with an appropriate legend, or new certificates in a form approved by the
Trustees shall be issued and shall evidence the number of Units owned.
(c) If any conflicting claims or demands are made or asserted with respect to
the ownership of any Units, or if there should be any disagreement between the
transferees, assignees, heirs, representatives or legatees succeeding to all or
part of the interest of any Beneficiary resulting in adverse claims or demands
being made in connection with such Units, then, in any of such events, the
Trustees shall be entitled, at their sole election, to refuse to comply with any
such conflicting claims or demands. In so refusing, the Trustees may elect to
make no payment or distribution with respect to such Units, or to make such
payment to a court of competent jurisdiction or an escrow agent, and in so doing
the Trustees shall not be or become liable to any of such parties for their
failure or refusal to comply with any of such conflicting claims or demands, nor
shall the Trustees be liable for interest on any CRENs which it may so withhold.
The Trustees shall be entitled to refrain and refuse to act until either (i) the
rights of the adverse claimants have been adjudicated by a final judgment of a
court of competent jurisdiction, (ii) all differences have been adjusted by
valid written agreement between all of such parties, and the Trustees shall have
been furnished with an executed counterpart of such agreement, or (iii) there is
furnished to the Trustees a surety bond or other security satisfactory to the
Trustees, as they shall deem appropriate, to fully indemnify them as between all
conflicting claims or demands.
3.2 Rights of Beneficiaries. Each Beneficiary shall be entitled to participate
in the rights and benefits due to a Beneficiary hereunder according to his
Beneficial Interest. Each Beneficiary shall take and hold the same subject to
all the terms and provisions of this Agreement. The interest of the Beneficiary
hereby is declared and shall be in all respects personal property and upon the
death of an individual Beneficiary, his Beneficial Interest shall pass as
personal property to his legal representative and such death shall in no way
terminate or affect the validity of this Agreement. A Beneficiary shall have no
title to, right to, possession of, management of, or control of, the Trust
Assets except as herein expressly provided. No widower, widow, heir, or devisee
of any person who may be a Beneficiary shall have any right of dower, homestead,
or inheritance, or of partition, or of any other right, statutory or otherwise,
in any property forming a part of the Trust Assets but the whole title to all
the Trust Assets shall be vested in the Trustees and the sole interest of the
Beneficiaries shall be the rights and benefits given to such Persons under the
Agreement.
3.3 Transfer of Interests of Beneficiaries. The Beneficial Interests will be
registered with the Securities and Exchange Commission on Form 8-B. Once the
Trust's Registration Statement on Form 8-B has been declared effective, the
Beneficial Interest of a Beneficiary may be transferred, in accordance with
applicable securities laws, either by the Beneficiary in person or by a duly
authorized agent or attorney, or by the properly appointed legal representatives
of the Beneficiary; provided, however, that if the Trust receives a ruling from
the Internal Revenue Service to the effect that transferability by Beneficiaries
of their Beneficial Interests will adversely affect the Trust's qualification as
a "liquidating trust" for purposes of the Code and Treasury Regulation Section
301.7701-4(d), the Beneficial Interest of a Beneficiary may not be transferred
either by the Beneficiary in person or by a duly authorized agent or attorney,
or by the properly appointed legal representatives of the Beneficiary, nor may a
Beneficiary have authority or power to sell, assign, transfer, encumber, or in
any other manner dispose of his Beneficial Interest; provided, however, that the
Beneficial Interest shall be assignable or transferable by will, intestate
succession, or operation of law and, provided further, that the executor or
administrator of the estate of a Beneficiary may mortgage, pledge, grant a
security interest in, hypothecate or otherwise encumber, the Beneficial Interest
held by the estate of such Beneficiary if necessary in order to borrow money to
pay estate, succession or inheritance taxes or the expenses of administering the
estate of the Beneficiary, upon written notice to the Trustees. The Beneficial
Interests of the Beneficiaries hereunder shall not be subject to attachment,
execution, sequestration or any order of a court, nor shall such interests be
subject to the contracts, debts, obligations, engagements or liabilities of any
Beneficiary, but the interest of a Beneficiary shall be paid by the Trustees to
the Beneficiary free and clear of all assignments, attachments, anticipations,
levies, executions, decrees and sequestrations and shall become the property of
the Beneficiary only when actually received by such Beneficiary.
3.4 Trustees as Beneficiaries. Each Trustee, either individually or in a
representative or fiduciary capacity may be a Beneficiary to the same extent as
if he were not a Trustee hereunder and have all the rights of a Beneficiary,
including, without limitation, the right to vote and to receive distributions,
to the same extent as if he were not a Trustee hereunder.
ARTICLE IV
DURATION AND TERMINATION OF TRUST
4.1 Duration. The existence of this Trust shall terminate upon the earliest of
(i) a termination required by the applicable laws of the State of Delaware, (ii)
the termination due to the distribution of all the Trust Assets as provided in
Section 5.6, or (iii) the expiration of a period of three years from the date of
the creation of the Trust; provided, however, the Trustees, in their discretion,
may extend the existence of this Trust to such later date as they may designate,
if they determine that an extension is reasonably necessary to pay or make
provision for then known liabilities, actual or contingent, and provided
further, however, that the Trust shall not in any event terminate pursuant to
this clause (iii) prior to the date the Trustees are permitted to make a final
distribution in accordance with Section 5.6.
4.2 Other Obligations of Trustees upon Termination. Upon distribution of all
the Trust Assets, the Trustees shall provide for the retention of the books,
records, lists of holders of Units, certificates for Shares and Units and files
which shall have been delivered to or created by the Trustees. At the Trustees'
discretion, all of such records and documents may be destroyed at any time after
seven years from the distribution of all the Trust Assets. Except as otherwise
specifically provided herein, upon the distribution of all the Trust Assets, the
Trustees shall have no further duties or obligations hereunder.
ARTICLE V
ADMINISTRATION OF TRUST ASSETS
5.1 Disposition of Trust Assets. The Trustees may, at such times as they may
deem appropriate, collect, liquidate, reduce to cash, transfer, assign, or
otherwise dispose of all or any part of the Trust Assets as they deem
appropriate at public auction or at private sale for cash, securities or other
property, or upon credit (either secured or unsecured as the Trustees shall
determine).
5.2 Transactions with Related Persons. Notwithstanding any other provisions of
this Agreement, but only to the extent that such transactions have not been
previously approved by the Stockholders as part of the Plan, the Trustees shall
not knowingly, directly or indirectly, sell or otherwise transfer all or any
part of the Trust Assets to, or contract with, (i) any Trustee, employee or
agent (acting in their individual capacities) of this Trust or (ii) any Person
of which any Trustee, employee or agent of this Trust is an affiliate by reason
of being a trustee, director, officer, partner or direct or indirect beneficial
owner of 5% or more of the outstanding capital stock, shares or other equity
interest of such Persons; unless, in each such case, after disclosure of such
interest or affiliation, such transaction is approved by a majority of the
Trustees who are not interested in the transaction and such Trustees determine
that such transaction is on its terms fair and reasonable to the Trust and is in
the best interests of the Beneficiaries, and in no event less favorable to this
Trust than terms available for a comparable transaction with unrelated Persons.
The Trustees are entitled to rely in good faith on certificates of the Trustees,
employees and agents of the Trust with respect to their interests in any
transaction.
5.3 Restriction on Trust Assets. The Trust shall not receive transfers of any
assets prohibited by Revenue Procedure 82-58, as the same may be amended,
supplemented or modified including, but not limited to, any listed stocks or
securities, any readily-marketable assets, any operating assets of a going
business, any unlisted stock of a single issuer that represents 80 percent or
more of the stock of such issuer or any general or limited partnership
interests.
5.4 Payment of Claims, Expenses and Liabilities. The Trustees shall pay from
the Trust Assets all claims, expenses, charges, liabilities, and obligations of
the Trust and all Liabilities and obligations which the Trustees specifically
assume and agree to pay pursuant to this Agreement and such transferee
liabilities which the Trustees may be obligated to pay as transferees of the
Trust Assets, including among the foregoing, and without limiting the generality
of the foregoing, interest, penalties, taxes, assessments, and public charges of
every kind and nature and the costs, charges, and expenses connected with or
growing out of the execution or administration of this Trust and such other
payments and disbursements as are provided in this Agreement or which may be
determined to be a proper charge against the Trust Assets by the Trustees.
5.5 Interim Distributions. At such times as may be determined by them, the
Trustees shall distribute, or cause to be distributed, to the Beneficiaries, in
proportion to the number of Units held by each Beneficiary, such cash or other
property comprising a portion of the Trust Assets as the Trustees may in their
sole discretion determine may be distributed without detriment to the
conservation and protection of the Trust Assets; provided, however, that the
Trustees shall distribute, or cause to be distributed, at least annually to the
Beneficiaries any proceeds from the sale of Trust Assets in excess of a
reasonable amount (as determined by the Trustees) to satisfy the claims,
expenses and liabilities described in Section 5.4.
5.6 Final Distribution. If the Trustees determine that the Liabilities and all
other claims, expenses, charges, liabilities and obligations of the Trust have
been paid or discharged, or if the existence of the Trust shall terminate
pursuant to Section 4.1, the Trustees shall, as expeditiously as is consistent
with the conservation and protection of the Trust Assets, distribute the Trust
Assets to the Beneficiaries in proportion to the number of Units held by each
Beneficiary. The Trustees shall hold in the Trust and thereafter make
disposition of all liquidating distributions and other payments due any
Beneficiaries who have not been located, in accordance with Maryland law,
subject to applicable state laws regarding escheat and abandoned property.
5.7 Reports to Beneficiaries and Others. As soon as practicable after the end
of each taxable year of the Trust and after termination of the Trust, the
Trustees shall submit a written report and account to the Beneficiaries showing
(i) the assets and liabilities of the Trust at the end of such taxable year or
upon termination and the receipts and disbursements of the Trustees for such
taxable year or period, certified by an independent certified public accountant,
(ii) any changes in the Trust Assets which they have not previously reported,
and (iii) any action taken by the Trustees in the performance of their duties
under this Agreement which they have not previously reported and which, in their
opinion, materially affects the Trust Assets. The Trustees may submit similar
reports for such interim periods during the taxable year as they deem advisable
or as may be required by the Securities and Exchange Commission. The taxable
year of the Trust shall end on December 31 of each year unless the Trustees deem
it advisable to establish some other date as the date on which the taxable year
of the Trust shall end.
5.8 Federal Income Tax Information. As soon as practicable after the close of
each taxable year, the Trustees shall mail to each Person who was a Beneficiary
at the close of the year, a statement showing on a unit basis the dates and
amounts of all distributions made by the Trustees, the Trust Assets disposed of
by the Trust, if any, income earned on Trust Assets, if any, and such other
information as is reasonably available to the Trustees which may be helpful in
determining the amount of gross income attributable to the Trust that such
Beneficiary should include in such Person's Federal income tax return for the
preceding year. In addition, after receipt of a request in good faith, or in
their discretion without such request or if required by applicable law, the
Trustees shall furnish to any Person who has been a Beneficiary at any time
during the preceding year a statement containing such further information as is
reasonably available to the Trustees which shall be helpful in determining the
amount of taxable income which such Person should include in such Person's
Federal income tax return.
5.9 Employment of Manager and Retention of Investment Advisor.
a) The Trustees shall be responsible for the general policies of the Trust
and for the general supervision of the activities of the Trust conducted by all
agents, employees, advisors or managers of the Trust. However, the Trustees are
not and shall not be required personally to conduct the activities of the Trust,
and consistent with their ultimate responsibility as stated above, the Trustees
shall have the power to appoint, employ or contract with any Person or Persons
(including one or more of themselves or any corporation, partnership, or trust
in which one or more of them may be directors, officers, Stockholders, partners
or trustees) as the Trustees may deem necessary or proper for the transaction of
the activities of the Trust. The Trustees may therefore employ or contract with
such Person or Persons (herein referred to as the "Manager") and may grant or
delegate such authority to the Manager as the Trustees may in their sole
discretion deem necessary or desirable to carry out the purpose of the Trust
without regard to whether such authority is normally granted or delegated by
trustees. The Trustees shall have the power to determine the terms and
compensation of any Person (other than a manager affiliated with the Investment
Advisor) whom they may employ or with whom they may contract, provided, however,
that any determination to employ or contract with any Trustee or other Person
such that a Trustee or other Person would be an Affiliated Trustee or an
Affiliated Person shall be valid only if made, approved or ratified after
disclosure of such interests by the affirmative vote or written consent of a
majority of the Beneficiaries. The Trustees may exercise broad discretion in
allowing the Manager to administer and regulate the operations of the Trust, to
act as agent for the Trust, to execute documents on behalf of the Trustees, and
to make executive decisions which conform to general policies and general
principles previously established by the Trustees.
(b) The Manager or other Persons shall not be required to administer the Trust
as its sole and exclusive function and may have other business interests and may
engage in other activities similar or in addition to those relating to the
Trust, including the rendering of advice or services of any kind to investors or
any other Persons and the management of other investments.
(c) M.D. Sass Investors Services, Inc. will continue to serve as this Trust's
Investment Advisor with respect to liquidation of the CREN Liquidating Trust's
assets. The Investment Advisor will be entitled to receive an annual fee equal
to two percent (2%) of the Trust's net asset value (payable in the same manner
as the existing Investment Advisory Agreement, dated October 24, 1995, as
amended (the "Agreement") between CREN and the Investment Advisor). In
addition, upon disposition of the Trust's interests in CVSI, Inc. and Seaman
Furniture Company, Inc., the Investment Advisor will receive an incentive fee
equal to twenty percent (20%) of the net realized appreciation from total
proceeds distributed in excess of the previous high water mark of $13.29 at
which an incentive fee was paid pursuant to the Agreement.
ARTICLE VI
POWERS OF AND LIMITATIONS ON THE TRUSTEES
6.1 Limitations on Trustees.
(a) The Trustees shall not at any time, on behalf of the Trust or
Beneficiaries, enter into or engage in any trade or business, and no part of the
Trust Assets shall be used or disposed of by the Trustees in furtherance of any
trade or business. The Trustees shall be restricted to the holding and
collection of the Trust Assets and the payment and distribution thereof for the
purposes set forth in this Agreement and to the conservation and protection of
the Trust Assets and the administration thereof in accordance with the
provisions of this Agreement. In no event shall the Trustees take any action
which would jeopardize the status of the Trust as a "liquidating trust" for
federal income tax purposes within the meaning of Treasury Regulation Section
301.7701-4(d). This limitation shall apply regardless of whether the conduct of
any such trade or business is deemed by the Trustees to be necessary or proper
for the conservation and protection of the Trust Assets. The Trustees shall not
invest any of the funds held as Trust Assets, except that the Trustees may
invest any portion of the Trust Assets in (i) direct obligations of the United
States of America or obligations of any agency or instrumentality thereof which
mature not later than one year from the date of acquisition thereof; (ii) money
market deposit accounts, checking accounts, savings accounts, or certificates
of deposit, or other time deposit accounts which mature not later than one year
from the date of acquisition thereof which are issued by a commercial bank or
savings institution organized under the laws of the United States of America or
any state thereof; or (iii) any other investments which may be determined by
the Trustees to be permissible under Revenue Procedure 82-58, as the same may
be amended, supplemented or modified.
6.2. Specific Powers of Trustees.
(a) Subject to the provisions of Section 6.1, the Trustees shall have the
following specific powers in addition to any powers conferred upon them by any
other Section or provision of this Agreement or any statutory laws of the State
of New York; provided, however, that the enumeration of the following powers
shall not be considered in any way to limit or control the power of the Trustees
to act as specifically authorized by any other Section or provision of this
Agreement and to act in such a manner as the Trustees may deem necessary or
appropriate to conserve and protect the Trust Assets or to confer on the
Beneficiaries the benefits intended to be conferred upon them by this
Agreement:
(b) To determine the nature and amount of the consideration to be received with
respect to the sale or other disposition of, or the grant of interests in, the
Trust Assets.
(c) To collect, liquidate or otherwise convert into cash, or such other
property as they deem appropriate, all property, assets and rights in the Trust
Assets, and to pay, discharge and satisfy all other claims, expenses, charges,
Liabilities, and obligations existing with respect to the Trust Assets, the
Trust or the Trustees.
(d) To elect, appoint, engage, retain or employ any Persons as agents,
representatives, employees, or independent contractors (including without
limitation, investment advisors, accountants, transfer agents, attorneys-at-law,
managers, appraisers, brokers, or otherwise) in one or more capacities, and to
pay compensation from the Trust Assets for services in as many capacities as
such Person may be so elected, appointed, engaged, retained or employed, to
prescribe the titles, powers and duties, terms of service and other terms and
conditions of the election, appointment, engagement, retention or employment of
such Persons and, except as prohibited by law, to delegate any of the powers
and duties of the Trustees to any one or more Trustees, agents,
representatives, employers, independent contractors or other Persons.
(e) To retain and set aside such funds out of the Trust Assets as the Trustees
shall deem necessary or expedient to pay, or provide for the payment of (i)
unpaid claims, expenses, charges, Liabilities, and obligations of the Trust or
CREN, (ii) contingencies, and (iii) the expenses of administering the Trust
Assets.
(f) To do and perform any and all acts necessary or appropriate for the
conservation and protection of the Trust Assets, including acts or things
necessary or appropriate to maintain assets held by the Trustees pending sale
or other disposition thereof or distribution thereof to the Beneficiaries.
(g) To hold legal title to property of the Trust in the name of the Trust, or
in the name of one or more of the Trustees, or of any other Person, without
disclosure of the interest of the Trust therein.
(h) To cause any investments of any part of the Trust Assets to be registered
and held in the name of any one or more of their names or in the names of a
nominee or nominees without increase or decrease of liability with respect
thereto.
(i) To institute or defend actions or declaratory judgments or other actions,
arbitrations or mediations and to take such other action, in the name of the
Trust or CREN or as otherwise required, as the Trustees may deem necessary or
desirable to enforce any instruments, contracts, agreements, causes of action or
rights relating to or forming a part of the Trust Assets.
(j) To determine conclusively from time to time the value of and to revalue the
securities and other property of the Trust, in accordance with independent
appraisals or other information as they deem satisfactory.
(k) To cancel, terminate, or amend any instruments, contracts, agreements,
obligations or causes of action relating to or forming a part of the Trust
Assets, except as to any instruments, contracts, agreements, obligations with
the Investment Advisor and to execute new instruments, contracts, agreements,
obligations or causes of action notwithstanding that the terms of any such
instruments, contracts, agreements, obligations or causes of action may extend
beyond the terms of this Trust, provided that no such new instrument, contract,
agreement, obligation or cause of action shall permit the Trustees to engage in
any activity prohibited by Section 6.1.
(l) To vote by proxy or otherwise on behalf of the Beneficiaries and with full
power of substitution all shares of stock and all securities held by the
Trustees hereunder and to exercise every power, election, discretion, option and
subscription right and give every notice, make every demand, and to do every act
or thing in respect to any shares of stock or any securities held by the
Trustees which the Trustees might or could do if they were the absolute owners
thereof.
(m) To undertake or join in any merger, plan of reorganization, consolidation,
liquidation, dissolution, readjustment or other transaction of any
corporation, any of whose shares of stock or other securities, obligations, or
properties may at any time constitute a part of the Trust Assets, and to accept
the substituted shares of stock, bonds, securities, obligations and properties
and to hold the same in trust in accordance with the provisions hereof.
(n) In connection with the sale or other disposition or distribution of any
securities held by the Trustees, to comply with the applicable Federal and
state securities laws, and to enter into agreements relating to sale or other
disposition or distribution thereof.
(o) To authorize transactions between corporations or other entities whose
securities, or other interests therein (either in the nature of debt or equity)
are held by the Trustees as part of the Trust Assets.
(p) To perform any act authorized, permitted, or required under any instrument,
contract, agreement, right, obligation or cause of action relating to or forming
a part of the Trust Assets whether in the nature of an approval, consent, demand
or notice thereunder or otherwise, unless such act would require the consent of
the Beneficiaries in accordance with the express provisions of this Agreement.
ARTICLE VII
CONCERNING THE TRUSTEES,
BENEFICIARIES, EMPLOYEES AND AGENTS
7.1 Generally. The Trustees accept and undertake to discharge the trust created
by this Agreement, upon the terms and conditions thereof on behalf of the
Beneficiaries. The Trustees shall exercise such of the rights and powers vested
in them by this Agreement, and use the same degree of care and skill in their
exercise as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs. No provision of this Agreement shall be construed
to relieve the Trustees from liability for their own negligent action, their own
negligent failure to act, or their own willful misconduct, except that:
(a) No Trustee shall be responsible for the acts or omissions of any other
Trustee if done or omitted without his knowledge or consent unless it shall be
proved that such Trustee was negligent in ascertaining the pertinent facts, and
no successor Trustee shall be in any way responsible for the acts or omissions
of any Trustees in office prior to the date on which he becomes a Trustee.
(b) No Trustee shall be liable except for the performance of such duties and
obligations as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Trustees.
(c) In the absence of bad faith on the part of the Trustees, the Trustees may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Trustees and conforming to the requirements of this Agreement; but in the case
of any such certificates or opinions which are specifically required to be
furnished to the Trustees by any provision hereof, the Trustees shall be under a
duty to examine the same to determine whether or not they conform to the
requirements of this Agreement.
(d) No Trustee shall be liable for any error of judgment made in good faith.
(e) No Trustee shall be liable with respect to any action taken or omitted to
be taken by him in good faith in accordance with the direction of Beneficiaries
having an aggregate Beneficial Interest of more than 50% relating to the time,
method, and place of conducting any proceeding for any remedy available to the
Trustees, or exercising any trust or power conferred upon the Trustees under
this Agreement.
7.2 Reliance by Trustees. Except as otherwise provided in Section 7.1:
(a) The Trustees may rely and shall be protected in acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, or other paper or document believed by them to be genuine and to have
been signed or presented by the proper party or parties.
(b) The Trustees may consult with legal counsel, auditors or other experts to
be selected by them, including firms of which a Trustee may be a member, and the
advice or opinion of such counsel, auditors or other experts shall be full and
complete personal protection to all Trustees, employees and agents of the Trust
in respect of any action taken or suffered by them in good faith and in reliance
on, or in accordance with, such advice or opinion.
(c) Persons dealing with Trustees shall look only to the Trust Assets to
satisfy any liability incurred by the Trustees to such Person in carrying out
the terms of this Trust, and the Trustees shall have no personal or individual
obligation to satisfy any such liability.
(d) As far as practicable, the Trustees shall cause any written instrument
creating an obligation of the Trust to include a reference to this Agreement and
to provide that neither the Beneficiaries, the Trustees nor their agents shall
be liable thereunder and that the other parties to such instrument shall look
solely to the Trust Assets for the payment of any claim thereunder or the
performance thereof; provided, however, that the omission of such provision from
any such instrument shall not render the Beneficiaries, Trustees, or their
agents liable nor shall the Trustees be liable to anyone for such omission.
7.3 Liability to Third Persons. No Beneficiary shall be subject to any
personal liability whatsoever, in tort, contract or otherwise, to any Person in
connection with the Trust Assets or the affairs of this Trust; and no Trustee,
employee or agent of this Trust shall be subject to any personal liability
whatsoever, in tort, contract or otherwise, to any Person in connection with the
Trust Assets or the affairs of this Trust, except for his own willful
misconduct, knowingly and intentionally committed in bad faith; and all such
other Persons shall look solely to the Trust Assets for satisfaction of claims
of any nature arising in connection with the affairs of this Trust. The
Trustees shall, at all times, maintain insurance for the protection of the Trust
Assets, its Beneficiaries, Trustees, employees and agents in such amount as the
Trustees shall deem adequate to cover all foreseeable liability to the extent
available at reasonable rates.
7.4 Recitals. Any written instrument creating an obligation of this Trust
shall be conclusively taken to have been executed or done by a Trustee, employee
or agent of this Trust only in his capacity as Trustee under this Agreement or
in his capacity as employee or agent of the Trust.
7.5 Indemnification. Each Trustee and employee of the Trust and each agent of
the Trust and the directors, officers, partners, employees, equity owners and
agents of such agent (each an "Indemnified Person" and collectively, the
"Indemnified Persons") shall be indemnified out of the Trust Assets against all
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees, reasonably incurred
by the Indemnified Persons in connection with the defense or disposition of any
action, suit or other proceeding by the Trust or any other Person, whether civil
or criminal, in which the Indemnified Person may be involved or with which the
Indemnified Person may be threatened (i) in the case of any Trustee or any
employee or agent of the Trust, while in office or thereafter, by reason of his
being or having been such a Trustee, employee or agent, and (ii) in the case of
any director, officer, partner, employee, equity owner or agent of any agent of
the Trust by reason of any such Person exercising or failing to exercise any
right hereunder; provided, however, that the Indemnified Person shall not be
entitled to such indemnification in respect of any matter as to which the
Indemnified Person shall have been adjudicated to have acted in bad faith or
with willful misfeasance, negligence, or in reckless disregard of the
Indemnified Person's duties; and provided, further, however, that, as to any
matter disposed of by a compromise payment by such Indemnified Person pursuant
to a consent decree or otherwise, no indemnification either for said payment or
for any other expenses shall be provided unless the Trustees shall have received
a written opinion from independent counsel approved by the Trustees to the
effect that if the foregoing matters had been adjudicated, such Indemnified
Person would not have been found to have acted in bad faith or with willful
misfeasance, negligence, or in reckless disregard of the Indemnified Person's
duties. The rights accruing to any Indemnified Person under these provisions
shall not exclude any other right to which the Indemnified Person may be
lawfully entitled; provided, however, that no Indemnified Person may satisfy any
right of indemnity or reimbursement granted herein or to which the Indemnified
Person may be otherwise entitled except out of the Trust Assets, and no
Beneficiary shall be personally liable to any person with respect to any claim
for indemnity or reimbursement or otherwise. The Trustees may make advance
payments in connection with indemnification under this Section, provided that
the Indemnified Person shall have given a written undertaking to repay any
amount advanced to the Indemnified Person and to reimburse the Trust in the
event it is subsequently determined that the Indemnified Person is not entitled
to such indemnification. The Trustees may purchase such insurance as they feel,
in the exercise of their discretion, adequately insures that each Indemnified
Person shall be indemnified against any such loss, liability or damage pursuant
to this Section. The rights accruing to any Indemnified Person by reason of the
foregoing shall not be deemed to exclude any other right to which he may legally
be entitled nor shall anything else contained herein restrict the right of the
Trustees to indemnify or reimburse such Indemnified Person in any proper case
even though not specifically provided for herein, nor shall anything contained
herein restrict the right of any such Indemnified Person to contribution under
applicable law. Notwithstanding anything to the contrary in this Paragraph 7.5,
no indemnification shall be provided in excess of that permitted by the
Investment Company Act of 1940, as amended by the Small Business Incentive Act
of 1980 (the "1940 Act") if the provisions of Section 17 thereof apply.
7.6 Rights of Trustees, Employees, Independent Contractors and Agents To Own
Units or Other Property and To Engage in Other Business. Any Trustee, employee,
independent contractor or agent may acquire, own, hold and dispose of Units for
his individual account, and may exercise all rights thereof and thereunder to
the same extent and in the same manner as if he were not a Trustee, employee,
independent contractor or agent. Any Trustee, employee, independent contractor
or agent may, in his personal capacity or in a capacity of trustee, officer,
director, Stockholder, partner, member, advisor, employee of any Person or
otherwise, have business interests and holdings similar to or in addition to
those relating to the Trust. Subject to the provisions of Article V hereof, any
Trustee, employee, independent contractor or agent of the Trust may be a
trustee, officer, director, Stockholder, partner, member, advisor, employee or
independent contractor of, or otherwise have a direct or indirect interest in,
any Person who may be engaged to render advice or services to the Trust, and may
receive compensation from such Person. None of these activities shall be deemed
to conflict with his duties as Trustee, employee, independent contractor or
agent.
ARTICLE VIII
PROTECTION OF PERSONS DEALING WITH THE TRUSTEES
8.1 Action by Trustees. All action required or permitted to be taken by the
Trustees, in their capacity as Trustees, shall be taken (i) at a meeting at
which a quorum is present, having been duly called by one or more of the
Trustees on at least 24 hours prior written or telephonic notice to all of the
Trustees then serving, or (ii) without a meeting, by a written vote, resolution,
or other writing signed by all the Trustees then serving. Notice of a meeting
may be waived in writing by any Trustee either before or after such meeting and
the attendance of a Trustee shall constitute a waiver of notice of such meeting
except where a Trustee attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting has not been
lawfully called or convened. All or any one or more Trustees may participate in
the meeting of the Trustees by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and participation in a meeting pursuant to which
such communications are used by a Trustee shall constitute presence in person at
such meeting. Except where this Agreement otherwise provides, all action taken
at such a meeting shall be by vote or resolution of a majority of such of the
Trustees as are present and shall have the same force and effect as if taken by
all the Trustees. A majority of the Trustees then serving shall constitute a
quorum. Any action taken by the Trustees pursuant to this Section 8.1 may be
implemented by any one Trustee unless otherwise specified by the Trustees
authorizing or approving such action. Such implementation may include, without
limitation, the execution and delivery of documents. Without limiting any of the
foregoing of this Article VIII and subject to the approval of the Trustees as
herein provided, any one Trustee may hold title to, or an interest in, any and
all of the Trust Assets, for and on behalf of the Trust and the Trustees.
8.2 Delegation. An individual Trustee may, at any time and from time to time,
by an instrument in writing delegate any or all of his rights, powers, duties,
authority and privileges, whether or not discretionary, to any other Trustee for
such period or periods of time as may be specified in such written instrument;
provided, however, that any such instrument shall be revocable at any time and
that any Trustee who is granted any discretionary power hereunder may not
delegate such discretionary power to any Trustee who is not granted such
discretionary power.
8.3 Reliance on Statement by Trustees. Any Person dealing with the Trustees
shall be fully protected in relying upon the Trustees' certificate signed by any
one or more of the Trustees that they have authority to take any action under
this Trust. Any Person dealing with the Trustees shall be fully protected in
relying upon the Trustees' certificate setting forth the facts concerning the
calling of any meeting of the Trustees or the Beneficiaries, the giving of
notice thereof, and the action taken at such meeting, including the aggregate
number of Units held by the Beneficiaries taking such action.
ARTICLE IX
EXPENSES OF TRUSTEES
9.1 Expenses. Each Trustee shall be reimbursed from the Trust Assets for all
expenses reasonably incurred by him in the performance of his duties in
accordance with this Agreement.
ARTICLE X
TRUSTEES AND SUCCESSOR TRUSTEES
10.1 Number and Qualification of Trustees. Subject to the provisions of Section
10.3 relating to the period pending the appointment of a successor Trustee,
there shall be no fewer than one nor more than five Trustees of this Trust, each
of whom shall be a citizen and resident of or a corporation which is
incorporated under the laws of a state of the United States and, if a
corporation, it shall be authorized to act as a corporate fiduciary under the
laws of the State of Delaware and each of whom shall not have been at anytime
prior to __________, 1999 an "interested person" (as such term is used in the
1940 Act) with respect to CREN as if was an investment company registered under
the 1940 Act. Within the limits set forth in this Section 10.1, the number of
Trustees may be increased or decreased from time to time by the Trustees. If
any corporate Trustee shall ever change its name, or shall reorganize or
reincorporate, or shall merge with or into or consolidate with any other bank or
trust company, such corporate Trustee shall be deemed to be a continuing entity
and shall continue to act as a Trustee hereunder with the same liabilities,
duties, powers, titles, discretions and privileges as are herein specified for a
Trustee.
10.2 Resignation and Removal. Any Trustee may resign and be discharged from the
Trust hereby created by giving written notice thereof to the remaining Trustee
or Trustees and by mailing such notice to the Beneficiaries at their respective
addresses as they appear in the records of the Trustees. Such resignation shall
become effective on the day specified in such notice or upon the appointment of
such Trustee's successor and such successor's acceptance of such appointment,
whichever is earlier. Any Trustee may be removed at any time, with or without
cause, by Beneficiaries having an aggregate Beneficial Interest of at least 75%
of the total Beneficial Interest.
10.3 Appointment of Successor. Should at any time a Trustee resign or be
removed, die, become mentally incompetent or incapable of action (as determined
by a majority of the remaining Trustees in their sole discretion), or be
adjudged a bankrupt or insolvent, a vacancy shall be deemed to exist and a
successor shall be appointed by the remaining Trustees. If and only if such a
vacancy is not filled by the remaining Trustees within 60 days, the
Beneficiaries may, pursuant to Article XII hereof, call a meeting to appoint a
successor Trustee by Beneficiaries holding a majority of the Beneficial Interest
represented at the meeting. Pending the appointment of a successor Trustee, the
remaining Trustees then serving may take any action in the manner set forth in
Section 8.1.
10.4 Acceptance of Appointment by Successor Trustee. Any successor Trustee
appointed hereunder shall execute an instrument accepting such appointment
hereunder and shall deliver one counterpart thereof to each of the other
Trustees and, in case of a resignation, to the retiring Trustee. Thereupon such
successor Trustee shall, without any further act, become vested with all the
estates, properties, rights, powers, trusts and duties of his or its predecessor
in the Trust hereunder with like effect as if originally named therein; but the
retiring Trustee shall nevertheless, when requested in writing by the successor
Trustee or by the remaining Trustees, execute and deliver an instrument or
instruments conveying and transferring to such successor Trustee upon the trust
herein expressed, all the estates, properties, rights, powers and trusts of such
retiring Trustee, and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by him hereunder.
10.5 Bonds. Unless required by the Board of Directors of CREN prior to the
Record Date, or unless a bond is required by law, no bond shall be required of
any original Trustee hereunder. Unless required by a majority vote of the
Trustees prior to a successor Trustee's acceptance of an appointment as such
pursuant to Section 10.4, or unless a bond is required by law and such
requirement cannot be waived by or with approval of the Beneficiaries, no bond
shall be required of any successor Trustee hereunder. If a bond is required by
law, no surety or security with respect to such bond shall be required unless
required by law and such requirement cannot be waived by or with approval of the
Beneficiaries or unless required by the Board of Directors of CREN. If a bond
is required by the Board of Directors of CREN or by a majority vote of the
Trustees, the Board of Directors of CREN or the Trustees, as the case may be,
shall determine whether, and to what extent, a surety or security with respect
to such bond shall be required.
ARTICLE XI
CONCERNING THE BENEFICIARIES
11.1 Evidence of Action by Beneficiaries. Whenever in this Agreement it is
provided that the Beneficiaries may take any action (including the making of any
demand or request, the giving of any notice, consent, or waiver, the removal of
a Trustee, the appointment of a successor Trustee, or the taking of any other
action), the fact that at the time of taking any such action such Beneficiaries
have joined therein may be evidenced (i) by any instrument or any number of
instruments of similar tenor executed by Beneficiaries in person or by agent or
attorney appointed in writing, or (ii) by the record of the Beneficiaries voting
in favor thereof at any meeting of Beneficiaries duly called and held in
accordance with the provisions of Article XII.
11.2 Limitation on Suits by Beneficiaries. No Beneficiary shall have any right
by virtue of any provision of this Agreement to institute any action or
proceeding at law or in equity against any party other than the Trustees upon or
under or with respect to the Trust Assets or the agreements relating to or
forming part of the Trust Assets, and the Beneficiaries do hereby waive any such
right, unless Beneficiaries having an aggregate Beneficial Interest of at least
25% shall have made written request upon the Trustees to institute such action
or proceeding in their own names as Trustees hereunder and shall have offered to
the Trustees reasonable indemnity against the costs and expenses to be incurred
therein or thereby, and the Trustees for 30 days after their receipt of such
notice, request, and offer of indemnity shall have failed to institute any such
action or proceeding.
11.3 Requirement of Undertaking. The Trustees may request any court to require,
and any court may in its discretion require, in any suit for the enforcement of
any right or remedy under this Agreement, or in any suit against the Trustees
for any action taken or omitted by them as Trustees, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and such
court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
provided, however, that the provisions of this Section shall not apply to any
suit or other proceeding by the Trustees.
ARTICLE XII
MEETING OF BENEFICIARIES
12.1 Purpose of Meetings. A meeting of the Beneficiaries may be called at any
time and from time to time pursuant to the provisions of this Article for the
purposes of taking any action which the terms of this Agreement permit a
Beneficiary having a specified aggregate Beneficial Interest to take either
acting alone or with the Trustees.
12.2 Meeting Called by Trustees. The Trustees may at any time call a meeting of
the Beneficiaries to be held at such time and at such place within the State of
New York (or elsewhere if so determined by a majority of the Trustees) as the
Trustees shall determine. Written notice of every meeting of the Beneficiaries
shall be given by the Trustees (except as provided in Section 12.3), which
written notice will set forth the time and place of such meeting and in general
terms the action proposed to be taken at such meeting, and shall be mailed not
more than 90 nor less than 10 days before such meeting is to be held to all of
the Beneficiaries of record not more than 90 days before the date of such
meeting. The notice shall be directed to the Beneficiaries at their respective
addresses as they appear in the records of the Trust.
12.3 Meeting Called on Request of Beneficiaries. Within 30 days after written
request to the Trustees by Beneficiaries having an aggregate Beneficial Interest
of at least 50% to call a meeting of all the Beneficiaries, which written
request shall specify in reasonable detail the action proposed to be taken, the
Trustees shall proceed under the provisions of Section 12.2 to call a meeting of
the Beneficiaries, and if the Trustees fail to call such meeting within such 30-
day period then such meeting may be called by beneficiaries having an aggregate
Beneficial Interest of at least one-third or their designated representative.
12.4 Persons Entitled to Vote at Meeting of Beneficiaries. Each Beneficiary
shall be entitled to vote at a meeting of the Beneficiaries either in person or
by his proxy duly authorized in writing. The vote of each Beneficiary shall be
weighted based on the number of Units held by each Beneficiary in the Trust
Assets. The signature of the Beneficiary on such written authorization need not
be witnessed or notarized.
12.5 Quorum and Vote Required. At any meeting of Beneficiaries, the presence of
Beneficiaries having an aggregate Beneficial Interest sufficient to take action
on any matter for the transaction of which such meeting was called shall be
necessary to constitute a quorum; but if less than a quorum be present,
Beneficiaries having an aggregate Beneficial Interest of more than 50% of the
aggregate Beneficial Interest of all Beneficiaries represented at the meeting
may adjourn such meeting with the same effect and for all intents and purposes
as though a quorum had been present. Except to the extent a higher percentage
is specified for a particular matter or is required by law, the approval of
Beneficiaries having an aggregate Beneficial Interest of more than 50% of the
aggregate Beneficial Interest of all Beneficiaries shall be required for taking
action on any matter voted on by the Beneficiaries.
12.6 Adjournment of Meeting. Any meeting of Beneficiaries may be adjourned from
time to time and a meeting may be held at such adjourned time and place without
further notice.
12.7 Conduct of Meetings. The Trustees shall appoint the Chairman and the
Secretary of the meeting. The vote upon any resolution submitted to any meeting
of Beneficiaries shall be by written ballot. An Inspector of Votes, appointed
by the Chairman of the meeting, shall count all votes cast at the meeting for or
against any resolution and shall make and file with the Secretary of the meeting
their verified written report.
12.8 Record of Meeting. A record of the proceedings of each meeting of
Beneficiaries shall be prepared by the Secretary of the meeting. The record
shall be signed and verified by the Secretary of the meeting and shall be
delivered to the Trustees to be preserved by them. Any record so signed and
verified shall be conclusive evidence of all the matters therein stated.
ARTICLE XIII
AMENDMENTS
13.1 Consent of Trustees and Beneficiaries. At the direction or with the consent
of both the Trustees and Beneficiaries having an aggregate Beneficial Interest
of at least a majority, or such greater percentage as shall be specified in this
Agreement for the taking of an action by the Beneficiaries under the affected
provision of this Agreement, of the total Beneficial Interest, the Trustees
shall promptly make and execute a declaration amending this Agreement for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or amendments thereto; provided, however,
that no such amendment shall permit the Trustees to engage in any activity
prohibited by Section 6.1 hereof or affect the Beneficiaries' rights to receive
their pro rata shares of the Trust Assets at the time of distribution; and
provided further, however, that no consent of the Beneficiaries shall be
required with respect to any amendment made solely for the purpose of
facilitating the transferability by Beneficiaries of Units so long as such
amendment has been approved by all the Trustees or making any other addition,
change or deletion to resolve any ambiguity or inconsistency herein or that does
not materially and adversely affect any Beneficiary's Beneficial Interest.
13.2 Notice and Effect of Amendment. Promptly after the execution by the
Trustees of any such declaration of amendment, the Trustees shall give notice of
the substance of such amendment to the Beneficiaries or, in lieu thereof, the
Trustees may send a copy of the amendment to each Beneficiary. Upon the
execution of any such declaration of amendment by the Trustees, this Agreement
shall be deemed to be modified and amended in accordance therewith and the
respective rights, limitations of rights, obligations, duties, and immunities of
the Trustees and the Beneficiaries under this Agreement shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modification and amendments, and all the terms and conditions of any such
amendment shall be thereby deemed to be part of the terms and conditions of this
Agreement for any and all purposes.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Filing Documents. This Agreement shall be filed or recorded in such office
or offices as the Trustees may determine to be necessary or desirable. A copy of
this Agreement and all amendments thereof shall be maintained in the office of
each Trustee and shall be available at all times during regular business hours
for inspection by any Beneficiary or his duly authorized representative. The
Trustees shall file or record any amendment of this Agreement in the same places
where the original Agreement is filed or recorded. The Trustees shall file or
record any instrument which relates to any change in the office of Trustee in
the same places where the original Agreement is filed or recorded.
14.2 Intention of Parties to Establish Trust. This Agreement is not intended to
create and shall not be interpreted as creating a corporation, association,
partnership, or joint venture of any kind for purposes of Federal income
taxation or for any other purpose.
14.3 Beneficiaries Have No Rights or Privileges as Stockholders of CREN. Except
as expressly provided in this Agreement or under applicable law, the
Beneficiaries shall have no rights or privileges attributable to their former
status as Stockholders of CREN.
14.4 Laws as to Construction. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware. The Trustees, and the
Beneficiaries (by their vote with respect to the Liquidation Plan and/or their
acceptance of any distributions made to them pursuant to this Agreement),
consent and agree that this Agreement shall be governed by and construed in
accordance with such laws.
14.5 Severability. In the event any provision of this Agreement or the
application thereof to any Person or circumstances shall be finally determined
by a court of proper jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Agreement, or the application of such provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.
14.6 Notices. Any notice or other communication by the Trustees to any
Beneficiary shall be deemed to have been sufficiently given, for all purposes,
if deposited, postage prepaid, in a post office or letter box addressed to such
Person at his address as shown in the records of the Trust.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally or sent by
cable, telegram, telecopier or telex to the parties at the following addresses
or at such other addresses as shall be specified by the parties by like notice:
(a) If to the Trustees:
_________________________
_________________________
_________________________
_________________________
Facsimile:
with a copy to:
_________________________
_________________________
_________________________
_________________________
Attention:
Facsimile:
(b) if to CREN:
Corporate Renaissance Group, Inc.
1185 Avenue of the Americas, 18th Floor
New York, New York 10036
Attention: Chairman of the Board
Facsimile: (212) 843-5949
with a copy to:
Broad and Cassel
201 South Biscayne Boulevard
Miami, Florida 33131
Attention: Dale S. Bergman, Esq.
Facsimile: (305) 373-9443
14.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
14.8 Binding. (a) The obligations of CREN are not personally binding upon, nor
shall resort be had to the private property of, any of the directors,
Stockholders, officers, employees or agents of CREN, but only the property of
CREN shall be bound.
(b) The obligations of the Trust are not personally binding upon, nor shall
resort be had to the private property of, any of the Trustees, Beneficiaries,
employees or agents of the Trust, but only the Trust Assets shall be bound.
[SIGNATURES ON FOLLOWING PAGE]
IN WITNESS WHEREOF, CREN has caused this Agreement to be executed by its
President and Chief Executive Officer, and the initial Trustee herein has
executed this Agreement, as trustee and not as an individual, this ___ day of
_______, 1999.
CORPORATE RENAISSANCE GROUP, INC.
/s/ Martin D. Sass
______________________________________
By: Martin D. Sass
Chairman of the Board
and Chief Executive Officer
/s/
______________________________________
Trustee
- -------------------------------------------------------------
CORPORATE RENAISSANCE GROUP, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD OCTOBER ____, 1999
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of Common Stock of CORPORATE RENAISSANCE
GROUP, INC. ("CREN"), a Delaware corporation, hereby appoints Martin D. Sass and
Hugh R. Lamle and each of them, with full power of substitution and revocation,
as proxies to represent the undersigned at the Special Meeting of Stockholders
to be held at the offices of M.D. Sass Investors Services, Inc., 1185 Avenue of
the Americas, 18th Floor, New York, New York on October _____, 1999 at 10:00
a.m. and at any and all adjournments thereof, and thereat to vote all shares of
Common Stock of CREN which the undersigned would be entitled to vote, with all
powers the undersigned would possess if personally present, in accordance with
the following instructions.
If more than one of the proxies, or their substitute, are present at the
Special Meeting or any adjournment thereof, they jointly (or, if only one is
present and voting, then that one) shall have authority and may exercise all
powers granted hereby.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE STOCKHOLDER. IF NO DIRECTION IS GIVEN, THE PROXY WILL BE VOTED
"FOR" THE PROPOSAL DESCRIBED HEREIN.
PLEASE MARK
X VOTES AS IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN OF
COMPLETE LIQUIDATION AND DISSOLUTION
Authority to vote for the
Plan of Complete
Liquidation and-of the
accompanying Dissolution
of CREN: For Against Abstain
________ _________ _________
The undersigned hereby acknowledges
receipt the Notice of Special Meeting and
Proxy Statement for the Special Meeting
to be Held October _____, 1999.
Please sign this Proxy Exactly as your
name appears on the books of CREN. Joint
owners should each sign personally.
Trustees and other Fiduciaries should
Indicate the capacity in which they sign,
and where more than one name appears, a
majority must sign. If a corporation,
this signature should be that of an
authorized officer who should state his
or her title.
PLEASE BE SURE TO SIGN AND DATE
THIS PROXY.
________________________________________
Stockholder signature Date
________________________________________
Co-owner signature Date
(if applicable)
