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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:
| | Preliminary Proxy Statement
| | Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
|X| 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.
| | 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
|X| 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:
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CORPORATE RENAISSANCE GROUP, INC.
1185 AVENUE OF THE AMERICAS
18TH FLOOR
NEW YORK, NEW YORK 10036
NOTICE OF SPECIAL STOCKHOLDERS MEETING
TO BE HELD DECEMBER 1, 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. (the "Company" or "CREN") shall be held at the
offices of M. D. Sass, 1185 Avenue of the Americas, 18th Floor, New York, New
York, on December 1, 1999, at 10:00 a.m. for the following purposes:
1. 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.
2. To consider and vote upon a proposal to approve an amendment
to the Financial Advisory Agreement between the Company and
M.D. Sass Investors Services, Inc. (the "Investment Adviser").
Stockholders of record on October 18, 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.
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PROXY STATEMENT
CORPORATE RENAISSANCE GROUP, INC.
1185 AVENUE OF THE AMERICAS
18TH FLOOR
NEW YORK, NEW YORK 10036
SPECIAL STOCKHOLDERS MEETING
TO BE HELD DECEMBER 1, 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 December 1, 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 November 8,
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 and to consider and vote
upon an amendment to the Financial Advisory Agreement between M.D. Sass
Investors Services, Inc. (the "Investment Advisor") and CREN, as amended, dated
October 24, 1994 (the "Financial Advisory Agreement"). The cost of this
solicitation will be paid for by CREN.
CREN's Board of Directors has selected October 18, 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 and on the amendment to the Financial
Advisory Agreement.
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. Approval of the amendment
to the Financial Advisory Agreement requires the affirmative vote of a majority
of the shares of Common Stock outstanding on the Record Date. The officers and
members of the Board of Directors of CREN holding an aggregate of 124,100 shares
of Common Stock of have informed the Company that they will vote to approve the
Plan and the amendment to the Financial Advisory Agreement.
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
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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 and "FOR" the approval to the amendment to the
Financial Advisory Agreement. 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 and the proposal to approve the amendment to the Financial Advisory
Agreement are considered "non-discretionary" proposals, which means that brokers
who hold CREN's shares in street name for customers are not authorized to vote
on such proposals 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 proposals, 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 and proposal to
approve the amendment to the Financial Advisory Agreement may be acted upon at
the Meeting.
In the event that sufficient votes in favor of the proposal to approve
the Plan or to approve the amendment to the Financial Advisory Agreement 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 QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1999 ACCOMPANY THIS PROXY STATEMENT. THE QUARTERLY UNAUDITED FINANCIAL
REPORT FOR THE QUARTER ENDED JUNE 30, 1999 IS ATTACHED AS EXHIBIT A TO THIS
PROXY STATEMENT. THERE ARE NO REPORTS, OPINIONS OR APPRAISALS IN CONNECTION WITH
THE LIQUIDATION APART FROM THE QUARTERLY REPORT. IF YOU WOULD LIKE TO RECEIVE
ADDITIONAL COPIES OF SUCH REPORT OR A COPY OF CREN'S ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998, 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 B to this Proxy
Statement. If the Plan is approved by the stockholders, the investment
securities and other liquid assets of CREN will be
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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.
There may be material federal income consequences to stockholders as
well as possible state or local tax consequences. Certain tax consequences are
discussed below (see "Federal Income 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.
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 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 the Financial Advisory Agreement to identify,
negotiate, manage and liquidate investments for the Company. The Company invests
only in transactions recommended by the
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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. ("Seaman"), 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.
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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, 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.
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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"). There are no federal or state regulations to be
complied with and the approval of any federal or state authorities is not
required for CREN to voluntarily dissolve and completely liquidate, apart from
the requirements and approvals listed herein. 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 the completion of the
sale and final distribution of the Company's assets is referred to herein as the
"Liquidation Period".
After the Effective Date, CREN will promptly seek to convert all of its
liquid investment securities and other assets into cash. CREN anticipates that
stockholders will receive an initial liquidating distribution 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, after which CREN will be dissolved.
To the extent CREN cannot dispose of any assets during the Liquidation
Period, principally its interests in CVSI and Seaman, 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 to .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
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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 Seaman,
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.
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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 will 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
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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.
APPROVAL OF THE AMENDMENT
TO THE FINANCIAL ADVISORY AGREEMENT
The Company has retained the Investment Adviser to continue to serve as
the CREN Liquidating Trust's Investment Adviser with respect to liquidation of
the CREN Liquidating Trust's assets. The Financial Advisory Agreement will, with
shareholder approval, be amended to provide that the Investment Advisor will
receive an annual fee equal to two percent of the Liquidating Trust's net asset
value payable in the same manner as the fee under the existing Financial
Advisory Agreement and continue to serve as the Company's Investment Advisor. In
addition, upon disposition of the Company's interests in CVSI and Seaman, the
Investment Advisor 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, payable
in the same manner as the fee under the existing Financial Advisory Agreement.
The incentive fee mirrors the incentive fee in the Financial Advisory Agreement
and the two percent fee replaces the base fee of $170,000 per annum currently
paid to the Investment Advisor. The Financial Advisory Agreement is attached
as Exhibit C to this Proxy Statement and the proposed amendment to the Financial
Advisory Agreement is attached
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as Exhibit D to this Proxy Statement. At the October 19, 1999, meeting of CREN's
Board of Directors, the independent directors of CREN unanimously approved the
proposed amendment to the Financial Advisory Agreement.
This following describes the fees and expenses that you may pay if you
buy and hold shares of CREN:
The Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Reinvested Dividends 0%
Maximum Deferred Sales Charge (Load) 0%
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends [and other Distributions] 0%
Redemption Fee 0%
Exchange Fee 0%
Maximum Account Fee 0%
The Annual Fund Operating Expenses (expenses that are deducted from
CREN's assets)
Management Fees 2.36%
Distribution [and/or Service] (12b-1) Fees 0%
Other Expenses 3.04%
Total Annual Fund Operating Expenses 5.4%
The following example is intended to help you compare the cost of
investing in the CREN, a closed-end investment company, with the cost of
investing in mutual funds or other closed-end investment companies.
The example assumes that you invest $10,000 in CREN for the time
periods indicated and then redeem all of your shares at the end of those
periods. The example also assumes that your investment has a 5% return each
year, the current Financial Advisory Agreement is in effect and that CREN's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your cost would be:
1 year 3 years 5 years 10 years
--------------- ------------- ------------- --------------
$9,960 $9,880 $9,802 $9,609
12
<PAGE>
You would pay the following expenses if you did not redeem your shares:
1 year 3 years 5 years 10 years
--------------- ------------- ------------- --------------
$540 $1,614 $2,678 $5,301
The following example is intended to help you compare the possible
changes in the investment advisory fee if the amendment to the Financial
Advisory Agreement is approved:
<TABLE>
<S> <C>
The aggregate amount of the investment adviser's fee during the last year: $172,244
The amount that the adviser would have received under the amendment: $147,544
The difference between the aggregate amounts above: -14.03%
</TABLE>
Recommendation of the Board of Directors
The Board of Directors recommends that stockholders vote "FOR" the
amendment to the Financial Advisory Agreement.
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>
<CAPTION>
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) from operations............ .15 (1.66) (2.70)
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
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C>
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>
<CAPTION>
Percentage Premium
Net Asset Value(s) Market Price(s) 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>
<CAPTION>
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 *
</TABLE>
14
<PAGE>
<TABLE>
<S> <C> <C>
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%
</TABLE>
- --------------------
*Less than 1%
(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
15
<PAGE>
EXHIBIT A
CORPORATE RENAISSANCE GROUP, INC.
STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
A-1
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1.
Statements of Assets and Liabilities as of June 30, 1999 and September 30, 1998................................ 3
Statements of Operations and Changes in Net Assets for the Quarters ended June
30, 1999 and June 30, 1998 and for the
Nine Months ended June 30, 1999 and June 30, 1998.............................................................. 4
Statements of Cash Flows for the Nine Months ended June 30,
1999 and June 30, 1998......................................................................................... 5
Schedule of Investments, June 30, 1999......................................................................... 6
Notes to Financial Statements.................................................................................. 7
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................................ 12
</TABLE>
PART II - OTHER INFORMATION
F-1
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
STATEMENTS OF ASSETS AND LIABILITIES
(Unaudited)
<TABLE>
June 30, 1999 September 10, 1998
------------- ------------------
<S> <C> <C>
ASSETS
Investments in securities, at market value
(cost $1,446,325 and $2,458,725 respectively)........... 5,068,649 2,514,213
Cash...................................................... 4,041,414 4,238,260
Income taxes receivable................................... -- 183,841
Accrued interest receivable............................... 4,262 5,852
Accrued dividend receivable............................... 6,902 --
Other assets.............................................. 14,885 3,917
---------- ----------
Total assets.............................................. 9,136,112 6,946,083
LIABILITIES
Income taxes payable...................................... 1,124,613 --
Accounts payable and accrued expenses..................... 11,462 12,324
---------- ----------
Total liabilities......................................... 1,136,075 12,234
---------- ----------
Net assets................................................ $8,000,037 $6,933,759
========== ==========
NET ASSETS
Common stock, (par value $.01 per share 20,000,000 shares
authorized: 940,350 shares issued and 825,150
outstanding at 9/30/98, and 658,750 shares issued and
outstanding at 6/30/99)................................. $6,588 $9,404
Additional paid-in capital................................ 5,842,084 7,690,280
Treasury stock, at cost (115,200 shares at 9/30/98)....... -- (730,050)
Accumulated income (losses):
Accumulated net operating loss before
security transactions................................... (991,656) (888,260)
Accumulated net realized gains from sale of investments... 874,621 910,961
Net unrealized appreciation of investments................ 2,268,400 (58,576)
---------- ----------
2,151,365 (35,875)
---------- ----------
Net assets................................................ $8,000,037 $6,933,759
========== ==========
Net asset value per share of common stock outstanding..... $12.14 $8.40
========== ==========
</TABLE>
See notes to financial statements
F-2
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<CAPTION>
For the Quarter For the Quarter For the Quarter For the Nine
Ended Ended Ended Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Income:
Dividend.................................. $6,902 $-- $6,902 $830,967
Fee....................................... -- 8,954 -- 26,861
Interest.................................. 41,407 36,882 124,690 83,620
---------- ---------- ---------- ----------
Total income.................................. 48,309 45,836 131,592 941,448
---------- ---------- ---------- ----------
Expenses:
Financial advisory........................ 42,500 50,000 129,744 150,000
Investment banking........................ 37,500 -- 37,500 --
Professional.............................. 19,500 12,300 59,643 36,900
Insurance................................. 10,262 11,750 31,330 35,250
Board of directors........................ 10,000 12,500 30,000 37,500
Other operating........................... 4,142 12,247 11,087 18,747
---------- ---------- ---------- ----------
Total expenses........................ 123,904 98,797 299,304 278,397
---------- ---------- ---------- ----------
Operating income/(loss) before income tax
benefit....................................... (75,595) (52,961) (167,712) 663,051
Income tax (expense)/benefit.................. 927 (12,900) 69,032 (40,994)
---------- ---------- ---------- ----------
Net operating income/(loss) before
security transactions......................... (74,668) (65,861) (98,680) 622,057
---------- ---------- ---------- ----------
NET REALIZED AND UNREALIZED GAINS FROM
INVESTMENTS:
Net realized gains/(losses) from sales
of investments............................ 379,233 -- (36,340) 284,297
Change in net unrealized
appreciation/(depreciation) of
Investments............................... 2,176,484 (310,661) 3,566,835 312,946
Income tax (expense)/benefit arising
from net realized gains/(losses) and
net unrealized appreciation/
(depreciation) of investments............. (911,684) 141,268 (1,244,575) (337,489)
---------- ---------- ---------- ----------
Net realized and unrealized
gains/(losses) on investments......... 1,644,033 (169,393) 2,285,920 259,754
---------- ---------- ---------- ----------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS..................... $1,569,365 $(235,254) $2,187,240 $881,811
---------- ---------- ---------- ----------
Net assets at beginning of period............. $6,430,672 $8,458,222 $6,933,759 $7,548,957
Net decrease in net assets resulting from
treasury stock purchases................. -- (83,500) (1,120,962) (291,300)
---------- ---------- ---------- ----------
Net assets at end of period................... $8,000,037 $8,139,468 $8,000,037 $8,139,468
========== ========== ========== ==========
Per Share Data:
Net operating gains/(loss) before
security transactions..................... $ (.11) $(.07) $(.15) $.68
Net realized and unrealized
gains/(losses) on Investments............. 2.50 (.18) 3.47 .26
Net gain/(loss) on treasury stock
Transactions.............................. (.01) .01 .42 .09
---------- ---------- ---------- ----------
</TABLE>
F-3
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
<TABLE>
<CAPTION>
For the Quarter For the Quarter For the Quarter For the Nine
Ended Ended Ended Months Ended
June 30, 1999 June 30, 1998 June 30, 1999 June 30, 1998
--------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Net increase in net asset value
resulting from operations................. 2.38 (.24) 3.74 1.03
---------- ---------- ---------- ----------
Net asset value per common share at
beginning of the period................... 9.76 9.30 8.40 8.03
---------- ---------- ---------- ----------
Net asset value per common shares at
end of the period......................... $12.14 $9.06 $12.14 $9.06
========== ========== ========== ==========
</TABLE>
See notes to financial statements
F-4
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net increase in net assets resulting from operations................. $2,187,240 $881,811
Adjustments to reconcile net increase in net assets resulting from
operations to net cash (used in)/provided by operating activities:
Change in net unrealized (appreciation) of investments......... (3,566,835) (312,945)
Realized (gains)/losses from sale of investments............... 36,340 (284,297)
Deferred income tax provision.................................. 1,169,023 --
(Increase)/decrease in operating assets:
Income taxes receivable........................................ 138,533 9,755
Accrued interest receivable.................................... 1,590 (2,264)
Accrued dividend receivable.................................... (6,902)
Other assets................................................... (10,968) (11,750)
Increase/(decrease) in operating liabilities:
Deferred liability............................................. -- (26,860)
Income taxes payable........................................... 898 234,657
Accounts payable and accrued expenses.......................... (862) (24,375)
---------- ----------
Net cash flows (used in)/provided by operating activities............ (51,943) 463,732
---------- ----------
Cash Flows from Investing Activities:
Purchase of securities......................................... (119,624) (796,561)
Proceeds from recapitalized investment......................... -- 2,018,107
Proceeds from sale of securities............................... 1,095,683 383,426
---------- ----------
Net cash flows provided by investing activities................ 976,059 1,604,972
---------- ----------
Cash Flows from Financing Activities:
Purchase of treasury stock..................................... (1,120,962) (291,300)
Net cash flows (used in) financing activities........................ (1,120,962) (291,300)
Net increase/(decrease) in cash...................................... (196,846) 1,777,404
Cash at the beginning of the period.................................. 4,238,260 950,692
---------- ----------
Cash at the end of the period........................................ $4,041,414 $2,728,096
========== ==========
Supplemental disclosure (cash transactions):
Income taxes paid/(refunded), net.............................. $(132,013) $130,273
========== ==========
Supplemental disclosure (non-cash transactions): The company retired 281,600
shares of common stock previously held as treasury stock having a total cost
of $1,851,012.
</TABLE>
See notes to financial statements
F-5
<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
SCHEDULE OF INVESTMENTS(1)
JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
TYPE OF ISSUE FAIR OR
SHARES OF AND ORIGINAL MARKET % OF NET
FACE VALUE NAME OF ISSUER COST VALUE ASSETS
---------- -------------- -------- ------- --------
<S> <C> <C> <C> <C>
Reorganized Companies
---------------------------------
Common Stock & Equity Investments
---------------------------------
632,680 CVSI Acquisition Co., L.L.C(2)(3) $632,680 $632,680 12.5%
33,042 Seaman Furniture - Class C(3) 607,223 4,076,061 80.4%
---------- ----------
Total Reorganized Companies 1,239,903 4,708,741
---------- ----------
Other Investments
---------------------------------
Common Stock
---------------------------------
426,396 Signet Group Plc 206,422 359,908 7.1%
---------- ----------
Total Other Investments 206,422 359,908
---------- ----------
Total Investments $1,446,325 $5,068,649
========== ==========
</TABLE>
(1) Notes to Schedule of Investments: The above investments are income
producing except for Seaman Furniture. See note 9.
(2) Represents a beneficial interest in 513,310 shares of CVSI, Inc. and a
line of credit borrowing of $119,370 to CVSI, Inc., which are not
considered to be readily marketable securities. See Note 8.
(3) Not considered to be a readily marketable security.
F-6
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
1. Organization and Operation of the Company
Corporate Renaissance Group, Inc. (the "Company") was incorporated
under the laws of the state of Delaware on June 19, 1992. The Company is a
non-diversified, closed-end investment company which has elected to be treated
as a business development company ("BDC") under the Investment Company Act of
1940, as amended by the Small Business Incentive Act of 1980. The Company offers
investors the opportunity to participate in investments in companies which the
Company believes have viable existing businesses generating substantial revenues
in established markets, and have recently completed or are in the process of
undergoing financial restructuring ("Reorganized Companies") and where, as a
result, the Company can ultimately obtain an equity position at a discount from
market value for comparable companies that are not financially troubled. The
Company's investments are generally not expected to produce meaningful levels of
investment income. It is the Company's objective to select investment
opportunities which the Company believes offer the potential for substantial
capital appreciation.
The Company completed its initial public offering and commenced
operations on November 1, 1994. The Company consummated the initial public
offering (the "Domestic Offering") and an overseas offering (the "Overseas
Placement") of 956,000 shares at $10.00 per share. Pursuant to the Domestic
Offering, 600,000 shares were sold; 356,000 shares were sold in the Overseas
Placement. The net proceeds to the Company of both the Domestic Offering and
Overseas Placement were $7,823,821 after deducting all costs associated with the
registration and offering, resulting in an initial net asset value per share of
$8.18.
On November 25, 1996, the Company's Board of Directors authorized the
implementation of an open market share repurchase program, pursuant to which the
Company, from time to time, may purchase up to an aggregate of 175,000 shares of
its common stock in open market transactions. On November 3, 1998, the Company's
Board of Directors increased the number of shares authorized for repurchase
under the Company's open market share repurchase program to 350,000 shares. The
purpose of the program is to provide stockholders desiring to sell their shares
with enhanced market liquidity. At the same time, the Company believes that
open-market purchases of its shares at a discount from net asset value will
enhance long-term shareholder value. As of June 30, 1999, 297,350 shares have
been repurchased at an average cost of $6.65 per share, of which 15,750 were
retired in fiscal 1997 and 281,600 in fiscal 1999. Subsequent to June 30, 1999,
no additional shares were purchased.
In March 1999, the Company received a proposal from a management-led
group to acquire all of the issued and outstanding shares of the Company's
Common Stock not owned by the group for $8.00 per share. In June 1999, the
Company's management group withdrew its offer and recommended the adoption of a
plan of liquidation (the "Plan") in light of ongoing changes in the Company's
portfolio values. On August 3, 1999, the Board of Directors adopted the Plan,
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
F-7
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
assets to a liquidating trust (the "Trust"). As the Trust disposes the balance
of the assets, it will make one or more liquidating distributions.
2. Significant Accounting Policies
a. Valuation of Securities
The Company's securities which are subject to last-sale reporting are
valued by reference to the market price on a national securities exchange or as
reported on the National Association of Securities Dealers Automated Quotation
("NASDAQ") System. Other unlisted securities are valued at representative "bid"
quotations if held long by the Company and representative "asked" quotations if
held short by the Company. The value of securities for which market quotations
are not readily available and securities as to which the Company believes the
method of valuation set forth above does not fairly reflect market value are
determined by one or more independent third parties selected by the Investment
Adviser.
b. Recognition of Security Transactions and Related Investment
Income
Security transactions are recorded on the date the order to buy or sell
is executed (the trade date). Dividend income is recognized on the ex-dividend
date and interest income is recognized on an accrual basis. The net realized
gains and losses on sales of securities are determined on a first-in, first-out
or specific identification basis.
c. Income Taxes
The Company is not entitled to the special treatment available to
regulated investment companies and is taxed as a regular corporation for federal
and state income tax purposes. The Company has accounted for income taxes in
accordance with FASB Statement No. 109, "Accounting for Income Taxes." The
aggregate cost of securities at June 30, 1999 for federal income tax purposes
and financial reporting purposes was the same.
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes.
3. Income Taxes
The components of income tax expense (benefit) on pre-tax income
$3,362,783 for the nine months ended June 30, 1999, and pre-tax income
$1,260,294 for the nine months ended June 30, 1998 are as follows:
F-8
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
1999 1998
---------- ---------
Federal:
Current $ 10,467 $160,195
Deferred 1,048,788 178,616
---------- ---------
1,059,255 338,811
State and Local:
Current (3,947) (10,092)
Deferred 120,235 49,764
---------- ---------
116,288 39,672
---------- ---------
Total $1,175,543 $ 378,483
========== =========
Deferred income taxes arise from temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. For example, unrealized gains or losses on investments are not
recognized for tax purposes until realized and therefore create a temporary
difference. In addition, the Company has federal and state net-operating losses
which also create a temporary difference. During the nine months ended June 30,
1999, the Company recorded a deferred tax benefit from operations of
approximately $43,000 to reflect the change in the net operating loss
carryforward for federal and state taxes as of September 30, 1998, and
management's expectation with respect to the realization of this deferred tax
asset at June 30, 1999. As of June 30, 1999 and September 30, 1998, there is a
net deferred tax asset/(payable) of $(1,029,221) and $111,136, respectively. A
valuation allowance in the amount of $95,392 in 1999 and $66,725 in 1998 has
been established to offset a portion of the deferred tax assets which more
likely than not will not provide a future benefit.
The Company's effective income tax rate is lower than the U.S. federal
statutory rate due to the benefit from the graduated federal tax rate.
F-9
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
4. Financial Advisory and Investment Banking Fees and
Other Transactions with Affiliates and Related Parties
The Company has retained M.D. Sass Investors Services, Inc. (the
"Investment Adviser") as the Company's investment adviser. The Investment
Adviser is a registered investment adviser under the Investment Advisers Act of
1940, as amended. The Investment Adviser is part of a group of affiliated
investment advisers and other affiliated entities comprising the M.D. Sass
organization ("M.D. Sass"). In November 1998, the Company renewed its Financial
Advisory Agreement with the Investment Adviser, pursuant to which the Investment
Adviser will receive a base fee of $170,000 per annum, for furnishing the
Company with administrative services, including necessary executive,
administrative, internal accounting and support services. In addition to the
base fee, the Investment Adviser will receive an incentive fee for its
investment advisory services equal to 20% of the increase in net asset value of
the Company's shares, as defined in the Financial Advisory Agreement. There were
no incentive fees earned or payable at June 30, 1999.
5. Board of Directors Fees
The Company pays each of its five independent directors an annual fee
of $8,000 for the directors' services as such.
6. Investment Transactions
As of June 30, 1999 the accumulated unrealized appreciation on
investments was $3,622,324.
7. Concentration of Credit Risk and Off-Balance Sheet Risk
The Company engages in security purchase and sale transactions with
regulated broker-dealers. In connection with these transactions, the Company may
be subject to credit risk in the event the counterparty or the Company's
regulated clearing brokers cannot fulfill their contractual obligations.
7. Concentration of Credit Risk and Off-Balance Sheet Risk (continued)
The Company's activities with off balance sheet risk include the
writing of traded stock market index options. The Company is subject to market
risk associated with changes in the value of the underlying stock index. As a
writer of options, the Company receives a premium at the outset and then bears
the risk of unfavorable changes in the price of the stock index underlying the
option. There were no written options outstanding at June 30, 1999.
F-10
<PAGE>
CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
8. Investment in CVSI, Inc.
In July 1997, the Investment Adviser and certain of its affiliates,
including the Company (collectively, the "Buyer"), purchased a majority interest
in the Open Service Solutions business unit ("CVSI") of Computervision
Corporation ("Computervision"), through CVSI Acquisition Co., L.L.C., a newly
formed Delaware limited liability company. In the transaction, the Buyer paid
$7.6 million to Computervision for 76% of CVSI's Class A Voting Stock (the
"Class A Stock"). In addition, CVSI paid Computervision $25.0 million in cash
and issued Computervision a $10.0 million subordinated note (the "Subordinated
Note"). Further, Computervision retained its ownership of 24% of CVSI's Class A
Stock and 100% of CVSI's Class B Non-Voting Stock (the "Class B Stock"). The
Buyer also received options to purchase (i) the Class A Stock held by
Computervision should the Buyer retire the Subordinated Note within one year of
the transaction and (ii) the Class B Stock for $15.0 million. Moreover, if CVSI
does not achieve certain specified levels of product revenues and operating
margins from Computervision-initiated referrals, CVSI will have the option to
purchase, at a nominal price, some or all of the Class A Stock held by
Computervision. In addition, CVSI Acquisition Co., L.L.C. provided CVSI with a
five year $2.5 million line of credit facility to support short-term working
capital needs of CVSI. Interest is accrued at a floating rate of LIBOR plus 3%.
As of June 30, 1999, CVSI has borrowed $2,000,000 in connection with this
facility. The Company along with certain of its affiliates contributed capital
to CVSI Acquisition Co., L.L.C. to satisfy this funding. The Company's
proportionate share of the contribution was $119,370.
In connection with the acquisition of CVSI, the Company received
$89,535 of investment banking fees and $35,814 of consulting fees. The
consulting fees were being amortized over a one-year period. The Investment
Advisor and certain of its clients and affiliates who acquired shares of CVSI
also received investment banking and consulting fees.
On June 30, 1998 CVSI, CVSI Acquisition Co., L.L.C., Computervision and
Computervision's parent Parametric Technology signed an agreement in which CVSI
Acqusition Co., L.L.C. agreed to exercise its option to purchase 1 million
shares held by Computervision, increasing its holdings to 86% of CVSI.
Computervision canceled the $10 million subordinated note and retired its Class
B Non-Voting Stock. In addition, Parametric appointed CVSI, Inc. as a Preferred
Systems Integrator/Platform Technology Service Provider worldwide.
9. Investment in Seaman Furniture Company, Inc.
In August 1997, Seaman Furniture Company, Inc. ("Seamans") entered into
an Agreement and Plan of Merger, as amended on September 4, 1997 (the "Merger
Agreement") with SFC Merger Company ("Newco"), a Delaware corporation formed and
wholly owned by the Investment Adviser and its affiliates (including the
Company), T. Rowe Price Recovery Fund, L.P. ("Price") and Carl Marks Management
Co., L.P. ("Marks," and collectively with the Investment Adviser and Price, the
"Funds"), pursuant to which the Funds will acquire through a merger (the
"Merger") all of the outstanding common stock of Seamans not already owned by
the Funds (the "Public Stock"). Upon consummation of the Merger, Newco merged
with and into
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CORPORATE RENAISSANCE GROUP, INC
STATEMENTS OF OPERATIONS AND CHANGES IN NET ASSETS
(Unaudited)-(Continued)
Seamans and each share of Public Stock (other than dissenting shares) was
converted into the right to receive $25.05 in cash and each existing Seamans
stock option was converted into the right to receive $25.05 in cash per share
purchasable thereunder, less the exercise price with respect thereto, other than
certain options of officers of the Company which will be cancelled and reissued
as options of equivalent or greater value following the Merger. Consummation of
the Merger took place on December 23, 1997.
Following consummation of the Merger, the Funds owned all of the
outstanding shares of Seamans Common Stock of which approximately 38.0% on a
fully-diluted basis was owned by the Investment Adviser and its affiliates,
including 3.3% by the Company. The Funds received a distribution of
approximately $67.0 million on the shares of Seamans held by them, of which
approximately 30% represented a dividend and the balance a distribution in
return of capital. Approximately $2.84 million of this distribution was received
by the Company.
On June 23, 1999, certain affiliates of the Investment Adviser
purchased approximately 12.1% of Seamans Common Stock, on a fully diluted basis,
which resulted in a majority ownership stake in Seamans by the Investment
Adviser and its affiliates.
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<PAGE>
EXHIBIT B
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
Date") 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,
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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 independent trustees ("Trustees") selected by the Company, 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
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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.
11. 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.
12. 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
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<PAGE>
effect as promptly as practicable the complete liquidation and dissolution of
the Company in accordance with the Plan, the Code and the DGCL.
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<PAGE>
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 ______________, _____
LIQUIDATING TRUST AGREEMENT
AGREEMENT AND DECLARATION OF TRUST, dated as of ____________, _____, 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:
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<PAGE>
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.
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<PAGE>
(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.
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<PAGE>
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
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<PAGE>
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.
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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
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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.
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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
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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.
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(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.
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(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.
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(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
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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
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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 __________, _____ 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
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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
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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
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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.
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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:
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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]
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<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
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<PAGE>
EXHIBIT C
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT ("Agreement"), made as of the 24th
day of October, 1994, by and between CORPORATE RENAISSANCE GROUP, INC., a
corporation organized under the laws of Delaware, (the "Company"), and M.D. SASS
INVESTORS SERVICES, INC., a Delaware corporation (the "Investment Adviser");
W I T N E S S E T H :
WHEREAS, the investment objective of the Company is to achieve superior
long-term capital appreciation of its assets by investing in Securities
primarily of Reorganized Companies, all as is more fully described in the
Company's Prospectus dated October 24, 1994 (the "Prospectus"). Terms used
herein and not otherwise defined shall have the meanings as set forth in the
Prospectus.
WHEREAS, the Company will sell shares of Common Stock of the Company
(the "Shares") in an offering as described in the Prospectus;
WHEREAS, the Company desires the Investment Adviser, upon the terms and
conditions set forth herein, to act as Investment Adviser for the Company and to
make investment and trading decisions for the Company with respect to the
Company's assets allocated to the Investment Adviser for management, and the
Investment Adviser desires so to act;
WHEREAS, the Investment Adviser is engaged in the business of making
investment and trading decisions on behalf of investors.
1. Undertakings of the Investment Adviser
(a) The Investment Adviser agrees to make to the Company all
disclosures necessary regarding the Investment Adviser and its affiliates and to
otherwise cooperate with the Company in preparing the Prospectus. In that
regard, the Investment Adviser has delivered to the Company its most recent Form
ADV Part II, filed with the Securities and Exchange Commission.
(b) If, after the Prospectus shall have been first used for
solicitation purposes, the Investment Adviser shall become aware of any
materially untrue or misleading statement of a fact or any omission of a
material fact contained in the Prospectus regarding the Investment Adviser or
its affiliates of the occurrence of any event or change in circumstances which
shall have resulted in there being any such materially untrue or misleading
statement of a material fact or any such omission of a material fact, the
Investment Adviser promptly shall inform the Company and cooperate with the
Company in the preparation of any necessary amendments or supplements to the
Prospectus.
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<PAGE>
(c) During the term of this Agreement, the Investment Adviser
and its affiliates shall be free to advise other investors as to the purchase
and sale of Securities, to manage and trade other investors' accounts, and to
trade for and on behalf of their own proprietary accounts.
2. Duties of the Investment Adviser.
(a) Upon the funding of an account by the Company for the
Investment Adviser, the Investment Adviser shall act as Investment Adviser for
the Company. The Investment Adviser shall have sole and exclusive authority and
responsibility for directing the investment and reinvestment of the Company's
Net Assets pursuant to and in accordance with the Investment Adviser's best
judgment and methodologies, and as refined and modified from time to time in the
future by the Investment Adviser, for the period and on the terms and conditions
set forth herein.
(b) The Investment Adviser shall provide to the Company such
administrative services with respect to the Company's business and with respect
to such other matters as the Company may reasonably request from time to time.
Actual services to be rendered during the Term shall be determined by reference
to the policies and programs adopted by the independent members of the Board of
Directors of the company and shall be subject to the ongoing direction of the
Board. In particular, but without limiting the foregoing, the Investment Adviser
shall provide the following services to the Company, subject to the direction
and control of the independent members of the Company's Board of Directors and
to matters specifically reserved by the Company's Board of Directors pursuant to
Section 2(c) below:
(i) Personnel. The Investment Adviser shall provide to the
Company such support and other staff as the Investment Adviser deems reasonably
necessary to manage the Company's day-to-day activities. The staff assigned by
the Investment Adviser to serve hereunder shall be responsible for implementing
the policies of the Company, as adopted by its Board of Directors. All personnel
assigned by the Investment Adviser to provide services to the Company shall be
employed by or be consultants of the Investment Adviser, which assumes
responsibility for their acts and omissions and for their compensation and terms
of engagement. Subject to the terms of this Agreement and the Investment
Adviser's obligations hereunder, the Investment Adviser expressly reserves the
right to control and direct its employees and consultants and to allocate the
number of employees and hours of their time to be devoted to the affairs of the
Company.
(ii) General Administration. The Investment Adviser shall
provide for the day-to-day operation, management, and administration of the
Company, subject to the oversight of the independent members of the Company's
Board of Directors. In connection therewith, the Investment Adviser shall have
the power to receive, receipt for, and otherwise dispose of and deal in all
securities, checks, money, and other personal, real, and intangible property of
the Company, and to enter into, execute, acknowledge, and deliver any and all
contracts, agreements, and other instruments necessary or appropriate to carry
on the ordinary and usual business affairs of the Company in accordance with the
general policies established by the Company's Board of Directors, all subject to
the requirements of Section (c) below.
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(iii) Meeting Planning. The Investment Adviser shall make
arrangements for all Board of Directors meetings and stockholder meetings,
including, without limitation, meeting room arrangements, food functions, social
functions, registration, program format and preparation, attendance promotion,
on-site coordination, program and materials printing, assistance with obtaining
speakers and entertainment, and preparation of minutes.
(iv) Financial Services. The Investment Adviser shall
manage the Company's financial affairs, including without limitation the
following: (i) development of the Company's budgets (subject to the requirements
of Section (c) below), and oversight of its expenditures in accordance
therewith; (ii) opening and maintenance of appropriate bank and investment
accounts in the name of the Company into which all the Company's cash (and no
others') shall be deposited; (iii) establishment and maintenance of income and
expenditure control, bookkeeping, and records systems, including preparation of
unaudited financial statements on at least a quarterly and annual basis, and
collection of accounts receivable and disbursement of accounts payable, all
under the supervision of one or more bookkeepers or certified public accountants
retained by the Investment Adviser; (iv) coordination with and assistance to the
Company's independent public accountants in connection with audits and the
preparation and filing of tax returns; (v) day-to-day bookkeeping services, with
the assistance of the Company's independent public accountants; (vi) payment of
any and all taxes, charges, and assessments that may be levied, assessed or
imposed upon the Company or any of its assets, unless contested on behalf of the
Company; and (vii) payment of any and all other fees and expenditures that are
necessary or appropriate in connection with the management of the daily
operational affairs of the Company.
(v) Legal Matters. The Investment Adviser shall coordinate
with and assist the Company's attorneys in connection with all legal matters
affecting the Company, including without limitation: (i) all litigation,
arbitration, administrative and other proceedings, (ii) the negotiation of
contracts and agreements, and (iii) the preparation and filing of all reports,
forms, and other documents required under federal securities laws, state "blue
sky" laws, and any other applicable laws of any jurisdiction.
(vi) Office Space and Operation. The Investment Adviser
shall provide sufficient office space to the Company for use as its executive
offices in the Investment Adviser's main offices at 1185 Avenue of the Americas,
New York, New York, or such other location in New York, New York as the
Investment Adviser may choose to relocate its main office. The Investment
Adviser shall provide to the Company for its use sufficient files, furniture,
fixtures, archival storage space, and office supplies and equipment for the
efficient and proper operation of its business. The Investment Adviser shall be
responsible for the Company's general correspondence, telephone answering, and
responses to inquiries of all types, and all required office services,
including, without limitation, the preparation of presentation reports, analysis
reports, and due diligence reports.
(c) Matters Reserved to Board. In particular, but without
limitation, the following matters shall be reserved to and shall require the
prior approval of the Company's Board of Directors:
(i) all general policies of the Company;
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(ii) all material contracts, agreements, and commitments
(other than investments), including, without limitation, those involving more
than $100,000 (or such greater amount as may be approved from time to time by
the Company's Board of Directors) or a term in excess of three months;
(iii) the conduct of all material litigation, arbitration,
administrative, and other proceedings, including, without limitation, those
involving a monetary claim or more than $100,000 or a prayer for injunctive or
other equitable relief;
(iv) any borrowing or lending of funds, or other credit or
financing arrangements in excess of 25% of the Company's Net Asset Value;
(v) the appointment of any officer, director or agent of
any portfolio company;
(vi) the selection of the Company's legal counsel and
independent public accountants; and
(vii) the selection of the Company's investment adviser.
Notwithstanding anything else herein contained, the activities of the Investment
Adviser on behalf of the Company, whether pursuant to this Agreement or
otherwise, shall be subject to the supervision of the independent directors of
the Company.
(d) Company Expenses. Other than fees payable under this
Agreement, the Company will bear no operating expenses other than normal
operating expenses, such as legal and ordinary fees, taxes and all direct
expenses related to an investment, including all investment, legal and
accounting expenses.
3. Investment Adviser Independent. For all purposes of this Agreement,
the Investment Adviser shall be deemed to be an independent contractor and,
unless otherwise expressly provided herein or with the prior written
authorization of the Company, the Investment Adviser shall have no authority to
act for or represent the Company, its affiliates, officers, directors or
employees in any way and shall not otherwise be deemed to be an agent of the
Company. Except as shall be specifically provided otherwise in this Agreement,
nothing contained herein shall create or constitute the Investment Adviser or
the Company as members of any partnership, joint venture, association,
syndicate, unincorporated business, or other separate entity, nor shall be
deemed to confer on either of them any express, implied, or apparent authority
to incur any obligation or liability on behalf of any other.
4. Fees.
(a) Base Fee. The Investment Adviser will receive an annual
fee of $170,0001, payable monthly, for providing administrative services
pursuant to Section 2(c) of this Agreement.
- --------
1 This fee was adjusted subsequent to the execution of this Agreement from
$200,000 to $170,000.
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(b) Incentive Fee. The Investment Adviser will receive an
incentive fee equal to 20% of Net New Appreciation, if any, with respect to the
Net Asset Value of the Shares determined over a rolling twelve-month period. No
incentive fee will be paid until the Company's Shares have been outstanding for
at least one year, and then only if there is Net New Appreciation in the value
of the Shares, adjusted for all operating expenses, including accruals for any
tax liabilities on income or realized gains from portfolio transactions. The
first calculation is made when the Shares have been outstanding for one full
year. If the Net Asset Value of the Shares has increased beyond the "initial Net
Asset Value per Share", thus reflecting Net New Appreciation of the Shares, the
Investment Adviser will receive 20% of such Net New Appreciation during the
one-year period. A new calculation is made at the end of each calendar quarter
thereafter, with the Investment Adviser receiving 20% of any Net New
Appreciation occurring during the preceding four calendar quarters. Thus, the
fee is computed and paid on a "rolling quarter" basis.
If the Net Asset Value per Share has previously reached a level at
which an incentive fee was paid (a "previous high peak"), an incentive fee will
be paid only on the incremental appreciation of the Shares over the Shares' Net
Asset Value after payment of the previous incentive fee at such peak. If no
incentive fee previously was paid, an incentive fee will be due with respect
only after the Shares' Net Asset Value appreciates beyond the initial Net Asset
Value at which the Shares were issued.
In no event will an incentive fee be paid for recoupment of losses.
Thus, if the Net Asset Value balance of the Shares falls below the initial Net
Asset Value, or the previous high peak at which the incentive fee was paid (less
the incentive fee paid at such level), no incentive fee will be due the
Investment Adviser. The Investment Adviser will only be entitled to a further
incentive fee if the Net Asset Value of the Shares increases beyond the initial
Net Asset Value, or its Net Asset Value following payment of the incentive fee
at the previous high peak, as appropriate.
The initial Net Asset Value of the Shares shall equal gross proceeds
from the sale of the Shares, less all underwriting discounts, commissions, fees
and expenses related to the sale of the Shares and the amounts from such gross
proceeds allocated for payment of the Company's operating expenses as set forth
in the Prospectus.
The Net Assets of the Company are defined as the total assets of the
Company, including all cash and cash equivalents (valued at cost), accrued
interest, and the market value of all securities, and all other assets of the
Company, less the fees and other transaction costs, if any, that would be
payable with respect to selling, buying or closing each securities position, and
all other liabilities of the Company, including, but not limited to, accrued
legal, accounting, and auditing fees, accrued management and incentive fees, and
any extraordinary expenses, determined in accordance with generally accepted
accounting principles applied under the accrual basis of accounting by the
Directors of the Company in their sole discretion.
The Company's Securities which are widely traded generally will be
valued by reference to the market price thereof on a national securities
exchange or as reported on the National
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Association of Securities Dealers Automated Quotation ("NASDAQ") System. Other
unlisted Securities will be valued at representative "bid" quotations if held
long by the Company and representative "asked" quotations if held short by the
Company. The value of Securities for which market quotations are not readily
available and Securities as to which the Investment Adviser believes the method
of valuation set forth above does not fairly reflect market value will be
determined by the Directors after consultation with the Investment Adviser.
The Company will retain M.J. Whitman, Inc. ("Whitman") as the primary
evaluator of securities under the circumstances described above. Prior to any
valuation date, the Investment Adviser and the Directors will review the
Company's portfolio and identify those securities which, in their view, require
outside valuation under the terms of this Agreement. Whitman will value all such
positions except where it lacks information sufficient to determine a value or
is itself associated with the issuer. To provide for third-party valuations in
cases where the Company cannot serve as evaluator, the Company and the
Investment Adviser will agree on other securities firms as back-up evaluators.
Any incentive fees payable to the Investment Adviser in accordance with
this Agreement shall be paid by the Company to the Investment Adviser within 20
days after the end of each calendar quarter. Any management fee payable to the
Investment Adviser in accordance with this Agreement shall be paid by the
Company to the Investment Adviser within 10 days after the end of each calendar
quarter. In the case of termination of the Investment Adviser under this
Agreement, the incentive and management fees shall be computed as if the
effective date of termination were the last day of the then current quarter and
month, respectively.
Promptly after receipt by the Company of quarterly and monthly
statements from the Company's broker(s), the Company shall forward to the
Investment Adviser a reasonable itemized statement setting forth the calculation
of the amount due to the Investment Adviser in respect of such quarter.
Notwithstanding the foregoing, incentive fees payable to the Investment
Adviser will at all times comply with Section 205(b)(3) of the Investment
Advisers Act of 1940, as amended, as in effect from time to time.
5. Term and Termination
(a) Term and Renewal. This Agreement shall continue in effect
until October 24, 1996. Thereafter, this Agreement shall be renewed
automatically for additional one-year terms, provided such renewal is approved
by a majority of the Company's independent directors, unless either the Company
or the Investment Adviser, upon written notice given not less than 30 days prior
to the original termination date or any extended termination date, shall notify
the other party of its intention not to renew.
(b) Termination. Notwithstanding Section 5(a) hereof, this
Agreement shall terminate:
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(i) immediately if the Company shall terminate and be
dissolved in accordance with its Certificate of Incorporation or otherwise; or
(ii) 60 days after receipt by the Company from the
Investment Adviser of written notice of termination; or
(iii) immediately if the Investment Adviser can no longer
effectively implement its investment strategy on behalf of the Company; or
(iv) immediately, at the discretion of the Company, if
either of the following events shall occur: (1) the Investment Adviser shall
become bankrupt or insolvent; or (2) the Investment Adviser shall fail to
perform any of its obligations under this Agreement; or
(v) immediately, at the discretion of the Investment
Adviser, if the Company shall fail to perform any of its obligations under this
Agreement.
(c) Indemnities Survive Termination. The indemnities set forth
in Section 6 of this Agreement shall survive any termination hereof.
6. Standard of Liability and Indemnity
(a) Standard of Liability. The Investment Adviser and its
employees, affiliates, agents, and their respective successors and assigns shall
not be liable to the Company, the Company's stockholders, directors, officers,
employees, principals, affiliates, and agents, and their respective successors
and assigns except for an act, omission, conduct, or activity in respect of the
Company which shall be found by a court of competent jurisdiction upon entry of
final judgment (or, if no final judgment shall be entered, by an opinion
rendered to the Company by independent legal counsel retained by the Company and
acceptable to the Investment Adviser for such purpose) to have constituted
fraud, willful misconduct or gross negligence and to have not been done by any
such person in good faith and in the reasonable belief that such act, omission,
conduct, or activity was in or not opposed to the best interests of the Company.
(b) Company's Agreement to Indemnify. The Company shall
indemnify, hold harmless, and defend the Investment Adviser and its employees,
affiliates and agents, and their respective successors and assigns from and
against any loss, liability, claim, demand, damage, cost, and expense (including
reasonable attorneys' and accountants' fees and expenses), to which an
indemnified party may become subject in respect of the Company (including in
correction with the defense or settlement of claims an in connection with any
administrative proceedings), arising out of or based upon this Agreement or the
Investment Adviser's activities on behalf of the Company, provided that such
loss, liability, claim, demand, damage, cost, and expense did not constitute
fraud, willful misconduct, or gross negligence by the Investment Adviser and was
done by the Investment Adviser and its employees, affiliates and agents in good
faith and in the reasonable belief that it was in or not opposed to the best
interests of the Company.
(c) Investment Adviser's Agreement to Indemnify. The
Investment Adviser and its successors and assigns shall indemnify, hold
harmless, and defend the Company and its
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respective successors and assigns from and against any loss, liability, claim,
demand, damage, cost, and expense, joint and several (including reasonable
attorneys' and accountants' fees and expenses), to which the Company may become
subject in respect of this Agreement or the Investment Adviser's activities on
behalf of the Company (including in connection with the defense or settlement of
claims and in connection with any administrative proceedings), arising out of or
based upon an act, omission, conduct, or activity by the Investment Adviser or
any of its employees, affiliates, agents, or their respective successors or
assigns which constituted fraud, willful misconduct, or gross negligence or was
not done in good faith and in the reasonable belief that such act, omission,
conduct, or activity was in or not opposed to the best interests of the Company.
(d) Indemnity Procedure. Promptly after receipt by an
indemnified party under Sections 6(b) or (c) of notice of the commencement of an
action or claim to which either such Section may apply, the indemnified party
shall notify the indemnifying party in writing of the commencement of such
action or claim if a claim for indemnification in respect of such action or
claim may be made against the indemnifying party under either such Section; but
the omission so to notify the indemnifying party shall not relieve the
indemnifying party from any liability which the indemnifying party may have to
the indemnified party under either such Section (except where such omission
shall have materially prejudiced the indemnifying party) or otherwise. In case
any such action or claim shall be brought against an indemnified party and the
indemnified party shall notify the Indemnifying Party of the commencement of
such action or claim, the indemnifying party shall be entitled to participate in
such action or claim and, to the extent that the indemnifying party may desire,
to assume the defense of such action or claim with counsel selected by the
indemnifying party and approved by the indemnified party. After notice from the
indemnifying party to the indemnified party of the indemnifying party's election
so to assume the defense of such action or claim, the indemnifying party shall
not be liable to the indemnified party for any legal, accounting, and other fees
and expenses subsequently incurred by the indemnified party in connection with
the defense of such action or claim other than reasonable cost of investigation.
Notwithstanding any provision of this Section 6(d) to the contrary, if
in any action or claim as to which indemnity is or may be available an
indemnified party shall determine that its interests are or may be adverse, in
whole or in part, to the interests of the indemnifying party or that there may
be legal defenses available to the indemnified party which are or may be
different from, in addition to, or inconsistent with the defenses available to
the indemnifying party, the indemnified party may retain its own counsel in
connection with such action or claim, in which case the indemnified party shall
be responsible for any legal, accounting, and other fees and expenses reasonably
incurred by or on behalf of it in connection with investigating or defending
such action or claim. In no event shall an indemnifying party be liable for the
fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or claim in connection with separate but similar
or related actions or claims in the same jurisdiction arising out of the same
general allegations. An indemnifying party shall not be liable for a settlement
of any such action or claim effected without its written consent, but if any
such action or claim shall be settled with the written consent of an
indemnifying party or if there shall be final judgment for the plaintiff in any
such action or claim, the indemnifying party shall
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indemnify, hold harmless, and defend an indemnified party from and against any
loss, liability, or expense in accordance with Section 6 by reason of such
settlement of judgment.
7. Representations and Warranties
(a) The Investment Adviser hereby represents and warrants to
the Company as follows:
(i) The Investment Adviser is duly and Properly registered
as an investment adviser under the Investment Advisers Act of 1940, as amended.
(ii) The Investment Adviser has full power and authority
and is permitted by applicable law to enter into and carry out its obligations
under this Agreement and to own its properties and conduct its business as
described in this Agreement.
(iii) The performance of the obligations under this
Agreement by the Investment Adviser will not conflict with, violate the terms
of, or constitute a default under any indenture, mortgage, deed of trust, loan
agreement, management or advisory agreement, or other agreement or instrument to
which the Investment Adviser or its employees or affiliates is a party or by
which any such person is bound or to which any of the property or assets of any
such person is subject, or any order, rule, law, regulation, or other legal
requirement applicable to any such person or to the property or assets of any
such person.
(iv) The Investment Adviser has complied and will continue
to comply with all laws, rules, and regulations having application to its
business, properties, and assets. There are no actions, suits, proceedings, or
investigations pending or threatened against the Investment Adviser or its
principals, at law or in equity or before or by any federal, state, municipal,
or other governmental department, commission, board, bureau, agency, or
instrumentality, any self-regulatory organization, or any exchange other than
those disclosed in the Prospectus that might be material to an investor
investing in the Company.
(v) The Investment Adviser is duly organized and validly
existing under the laws of the State of Delaware.
(vi) The foregoing representations and warranties shall be
continuing during the term of this Agreement and if at any time any event shall
occur which could make any of the foregoing materially incomplete or inaccurate,
the Investment Adviser promptly shall notify the Company of the occurrence of
such event.
(b) The Company hereby represents and warrants to the
Investment Adviser as follows:
(i) The information contained in the Prospectus, other
than information supplied by the Investment Adviser, is true, accurate, and
complete in all material respects and does not contain any misleading or untrue
statement of a material fact or any
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omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(ii) The Company has full power and authority and is
permitted by applicable law to enter into and carry out its obligations under
this Agreement and to own its properties and conduct its business as described
in this Agreement and the Prospectus.
(iii) The performance of the obligations under this
Agreement by the Company will not conflict with, violate the terms of, or
constitute a default under any indenture, mortgage, deed of trust, loan
agreement, management or advisory agreement, or other agreement or instrument to
which the Company is a party or by which the Company is bound or to which any of
the property or assets of the Company is subject, or any order, rule, law,
regulation, or other legal requirement applicable to the Company or to the
property or assets of the Company.
(iv) The Company has all required governmental and
regulatory registrations and memberships necessary to carry out its obligations
under this Agreement.
(v) The Company has complied and will continue to comply
with all laws, rules and regulations having application to its business,
properties, and assets. Except as set forth in the Prospectus, there are no
actions, suits, proceedings, or investigations pending or threatened against the
Company, at law or in equity or before or by any federal, state, municipal, or
other governmental department, commission, board, bureau, agency, or
instrumentality, any self-regulatory organization, or any exchange.
(vi) The Company is duly organized and validly existing
under the laws of the jurisdiction of its incorporation.
(vii) The foregoing representations and warranties shall
be continuing during the term of this Agreement and if at any time any event
shall occur which could make any of the foregoing incomplete or inaccurate, the
Company shall promptly notify the Investment Adviser of the occurrence of such
event.
8. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein, and
no other agreement, verbal or otherwise, shall be binding as between the parties
unless it shall be in writing and signed by the party against whom enforcement
is sought.
9. Assignment. This Agreement shall automatically terminate in the
event of its assignment, the term "assignment" having the meaning defined in
Section 2(a)(4) of the Investment Company Act of 1940, as amended.
10. Amendment; Waiver. This Agreement shall not be amended except by a
writing signed by the parties hereto. No waiver of any provision of this
Agreement shall be implied from any course of dealing between the parties hereto
or from any failure by either party hereto to assert its or his rights hereunder
on any occasion or series of occasions.
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11. Severability. If any provision of this Agreement, or the
application of any provision to any person or circumstance, shall be held to be
inconsistent with any present or future law, ruling, rule, or regulation of any
court or governmental or regulatory authority having jurisdiction over the
subject matter hereof, such provision shall be deemed to be rescinded or
modified in accordance with such law, ruling, rule, or regulation, and the
remainder of this Agreement, or the application of such provision to persons or
circumstances other than those as to which it shall be held inconsistent, shall
not be affected thereby.
12. Notices. Any notice required or desired to be delivered under this
Agreement shall be in writing and shall be delivered by courier service, postage
prepaid mail, telex, telegram, or other similar means and shall be effective
upon actual receipt by the party to which such notice shall be directed,
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
If to the Company:
Corporate Renaissance Group, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
If to the Investment Adviser:
M.D. Sass Investors Services, Inc.
1185 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
14. Consent to Jurisdiction. The parties hereto agree that any action
or proceeding arising directly, indirectly, or otherwise in connection with, out
of, related to, or from this Agreement, any breach hereof, or any transaction
covered hereby, shall be resolved, whether by arbitration or otherwise, within
the County, City and State of New York. Accordingly, the parties consent and
submit to the jurisdiction of the federal and state courts and any applicable
arbitral body located within the County, City, and State of New York. The
parties further agree that any such action or proceeding brought by either party
to enforce any right, assert any claim or obtain any relief whatsoever in
connection with this Agreement shall be brought by such party exclusively in the
federal or state courts, or if appropriate before any applicable arbitral body,
located within the County, City, and State of New York.
15. Survival. The provisions of this Agreement shall survive the
termination hereof with respect to any matter arising while this Agreement shall
be in effect.
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<PAGE>
16. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
17. Headings. Headings to sections and subsections in this Agreement
are for the convenience of the parties only and are not intended to be a part of
or to affect the meaning or interpretation hereof.
18. No Third Party Beneficiaries. This Agreement is not intended to and
shall not convey any rights to persons not a party to this Agreement.
19. Sales Literature and Reports. No sales literature or reports to
investors describing the Investment Adviser, its trading strategies, personnel,
or performance (other than the performance of the Company) will be distributed
by the Company or its agents without the prior written approval of the
Investment Adviser.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf
of the undersigned as of the day and year first written above.
CORPORATE RENAISSANCE GROUP,
INC.
By: //s// Hugh R. Lamle
-------------------------------------
Name: Hugh R. Lamle
Title: Executive Vice President
M.D. SASS INVESTORS SERVICES,
INC.
By: //s// Hugh R., Lamle
-------------------------------------
Name: Hugh R. Lamle
Title: Executive Vice President
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<PAGE>
EXHIBIT D
AMENDMENT TO THE FINANCIAL ADVISORY AGREEMENT
Section 4(a) and Section 5(b)(i) of the FINANCIAL ADVISORY AGREEMENT
("Agreement"), made as of the 24th day of October, 1994, as amended, by and
between CORPORATE RENAISSANCE GROUP, INC., a corporation organized under the
laws of Delaware, (the "Company"), and M.D. SASS INVESTORS SERVICES, INC., a
Delaware corporation (the "Investment Adviser") is amended to read as follows:
Section 4(a) is eliminated in its entirety and replaced with the
following:
4. Fees.
----
(a) Base Fee. The Investment Advisor will receive an annual
fee equal to two percent of the Liquidating Trust's net asset value, for
providing administrative services pursuant to Section 2(c) of this Agreement.
Section 4(b) is amended to include the following:
Following approval of the complete liquidation of the Company's assets
pursuant to a Plan of Liquidation and Dissolution and upon disposition of the
Company's interests in CVSI, Inc. and Seaman Furniture Company, Inc., the
Investment Advisor 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.
Section 5(b)(i) is eliminated in its entirety and replaced with the
following:
5. Term and Termination
--------------------
(b) Termination. Notwithstanding Section 5(a) hereof, this
Agreement shall terminate:
(i) following the complete liquidation of the Company's
assets pursuant to a Plan of Liquidation and Dissolution; or
IN WITNESS WHEREOF, this Amendment has been executed for and on behalf
of the undersigned as December 1, 1999.
CORPORATE RENAISSANCE GROUP,
INC.
By: //s// Hugh R. Lamle
-------------------------------------
Name: Hugh R. Lamle
Title: Executive Vice President
M.D. SASS INVESTORS SERVICES,
INC.
By: //s// Hugh R. Lamle
-------------------------------------
Name: Hugh R. Lamle
Title: Executive Vice President
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<PAGE>
CORPORATE RENAISSANCE GROUP, INC.
SPECIAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 1, 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, 1185 Avenue of the
Americas, 18th Floor, New York, New York on December 1, 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 AND RECOMMENDS A VOTE FOR THE AMENDMENT
TO THE FINANCIAL ADVISORY AGREEMENT.
<TABLE>
<S> <C> <C> <C> <C>
For Against Abstain
Authority to vote for the --- ------- ------- The undersigned hereby
Plan of Complete acknowledges receipt the Notice of
Liquidation and-of the Special Meeting and Proxy
accompanying Dissolution of Statement for the Special Meeting
CREN: to be Held December 1, 1999.
For Against Abstain Please sign this Proxy Exactly as your
Authority to vote for the --- -------- ------- name appears on the books of CREN. Joint
Amendment to the Financial owners should each sign personally.
Advisory Agreement: 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)
</TABLE>
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