<PAGE> 1
AS FILED WITH SECURITIES EXCHANGE COMMISSION ON NOVEMBER 24, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
THE CRONOS GROUP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
-------------------------
<TABLE>
<S> <C>
LUXEMBOURG NOT APPLICABLE
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
16, ALLEE MARCONI, BOITE POSTALE 260,
L-2120 LUXEMBOURG
TELEPHONE: 352 453145
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------------
<TABLE>
<S> <C>
DENNIS J. TIETZ COPY TO:
THE CRONOS GROUP
444 MARKET STREET JAMES F. FOTENOS, ESQ.
SAN FRANCISCO, CALIFORNIA 94111 FOTENOS & SUTTLE, P.C.
(415) 677-8990 50 CALIFORNIA STREET, SUITE 700
[email protected] SAN FRANCISCO, CALIFORNIA 94111
(NAME, ADDRESS, INCLUDING ZIP CODE, [email protected]
AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time-to-time, pursuant to Rule 415, after the Registration Statement
becomes effective.
If the only securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with a dividend or
interest reinvestment plan, please check this box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] __________ .
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] __________ .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] __________ .
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
Common stock, par value $2.00 per $5.50 $2,750,000
share........................... 500,000 shares $765
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In addition, pursuant to Rule 416(a) under the Securities Act of 1933, this
Registration Statement also covers an indeterminate number of shares of
common stock of the Registrant which may become issuable pursuant to the
Warrant Agreement described herein. No additional registration fee is
required.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457 under the Securities Act of 1933. The maximum
aggregate offering price was computed by multiplying 500,000 shares by the
last sale price of the stock on November 19, 1999, as reported on NASDAQ.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1999
PRELIMINARY PROSPECTUS
[CRONOS LOGO]
500,000 Shares
THE CRONOS GROUP
Common Shares
-------------------------
This Prospectus is part of a Registration Statement that we have filed with the
SEC using a "shelf" registration process. This means:
- The selling shareholders may each offer and sell the common shares
covered by this Prospectus from time-to-time;
- We will provide a Prospectus Supplement each time a selling shareholder
sells the common shares covered hereby; and
- The Prospectus Supplement will provide specific information about the
terms of the offering and also may add, update, or change information
contained in this Prospectus.
The Cronos Group's common shares trade on the NASDAQ National Market under the
symbol "CRNS."
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
-------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
WHERE YOU CAN FIND MORE INFORMATION......................... 4
THE COMPANY................................................. 4
THE SELLING SHAREHOLDERS.................................... 4
FORWARD-LOOKING STATEMENT................................... 5
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 12
PRICE RANGE OF COMMON SHARES................................ 12
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF
SEPTEMBER 30, 1999........................................ 12
SELLING SHAREHOLDERS........................................ 12
PLAN OF DISTRIBUTION........................................ 14
DESCRIPTION OF COMMON SHARES................................ 14
TAX CONSIDERATIONS.......................................... 17
LEGAL MATTERS............................................... 21
EXPERTS..................................................... 21
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 22
</TABLE>
2
<PAGE> 4
ENFORCEABILITY OF CIVIL LIABILITIES
The Cronos Group is a holding company incorporated under the laws of
Luxembourg. Two of the four directors of Cronos are residents of countries other
than the United States, and all or a substantial portion of the assets of such
persons are located outside of the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon such persons to enforce against them judgments of courts of the United
States predicated upon the civil liability provisions of the Federal or state
securities laws of the United States. The Company has been advised by its
Luxembourg counsel, Elvinger, Hoss & Prussen, that there is doubt (a) whether a
judgment of a United States court predicated solely upon the civil liability
provisions of the Federal or state securities laws would be enforceable in
Luxembourg against Cronos or such persons, and (b) whether an action could be
brought in Luxembourg against Cronos or such persons in the first instance on
the basis of liability predicated solely upon the provisions of the Federal or
state securities laws.
-------------------------
We have not taken any action to permit a public offering of the common
shares covered hereby outside of the United States or to permit the possession
or distribution of this Prospectus outside of the United States. Persons outside
of the United States who come into possession of this Prospectus must inform
themselves about and observe any restrictions relating to the offering of the
common shares and the distribution of this Prospectus outside of the United
States.
In this Prospectus, "Cronos," "Company," "we," "us," and "our" refer to The
Cronos Group.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT. WE HAVE NOT AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT MAKING AN
OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN ON THE FRONT OF THESE
DOCUMENTS.
3
<PAGE> 5
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement on Form S-3 registering
the common shares offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all of the information in the
Registration Statement or the exhibits that are part of the Registration
Statement. For further information with respect to Cronos and the common shares,
please see the Registration Statement and the exhibits that are part of the
Registration Statement.
You may read and copy any document we file at the SEC's public reference
rooms in Washington, D.C., New York, New York, and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information about the public
reference rooms. Our SEC filings are also available to the public from the SEC's
Website at http://www.SEC.gov.
We are subject to the information and periodic reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As
required by the Exchange Act, we file periodic reports, proxy statements, and
other information with the SEC. These periodic reports, proxy statements, and
other information will be available for inspection and copying at the SEC's
public reference rooms and the Website of the SEC referred to above.
THE COMPANY
We are one of the world's leading lessors of intermodal marine containers.
Through an extensive global network of offices and agents, Cronos leases both
its own and other owners' containers to over 400 ocean carriers and transport
operators, including to the 20 largest ocean carriers. Cronos, through its
predecessor companies, has been in the container leasing business since November
1978. Cronos is a limited liability company (societe anonyme) organized in
Luxembourg, with register number RCS LUX B 27489. Cronos conducts its container
leasing business through operating subsidiaries. Cronos first offered its common
shares to the public in December 1995. Our registered offices are located at 16,
Allee Marconi, Boite Postale 260, L-2120 Luxembourg, and our telephone number is
352-453145.
THE SELLING SHAREHOLDERS
The common shares covered by this Prospectus are shares owned or that may
be acquired upon the exercise of warrants by MeesPierson N.V., a Dutch financial
institution ("MeesPierson") and First Union National Bank, a national banking
association ("FUNB") (MeesPierson and FUNB are referred to collectively as the
"Selling Shareholders"). The Selling Shareholders, each of whom is a lender to
the Company, each acquired 150,000 of our common shares and warrants to acquire
an additional 100,000 each of our common shares in August 1999 in connection
with a $50,000,000 loan made by the Selling Shareholders to a subsidiary of the
Company. This Prospectus covers the common shares owned and to be acquired by
the Selling Shareholders under the warrants issued to them.
4
<PAGE> 6
FORWARD-LOOKING STATEMENT
An investment in our common shares involves a high degree of risk. In
addition to the other information contained in this Prospectus, you should
carefully consider the risk factors identified below before investing in our
common shares. All statements, trend analyses, and other information contained
in this Prospectus regarding the markets for our container leasing services and
net revenue, profitability, and anticipated expense levels, and any statements
containing the words "anticipate," "believe," "plan," "estimate," "expect,"
"intend," or other similar expressions constitute forward-looking statements.
These forward-looking statements are subject to business and economic risks. Our
actual results of operations may differ materially from those contained in the
forward-looking statements. The cautionary statements made in this Prospectus
apply to all forward-looking statements wherever they appear in this Prospectus.
5
<PAGE> 7
RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this Prospectus before investing in our common shares.
Investing in our common shares involves a high degree of risk. Any of the
following factors could harm our business and could result in a partial or
complete loss of your investment.
OUR BUSINESS IS CYCLICAL
Demand for leased containers and container leasing rates depend largely
upon levels of world trade. Recessionary business cycles and worldwide
oversupplies of containers can negatively impact our operating results. During
economic downturns, ocean carriers tend to lease fewer containers and rely on
their own fleets to satisfy a greater percentage of their requirements. Thus, a
decrease in the volume of world trade could adversely affect our financial
results.
Our industry has experienced cyclical downturns during the last fifteen
years. Since 1996, the container leasing industry has experienced declines in
container utilization and daily container rental rates due to the
rationalization in the global shipping industry. While we have observed an
improvement in terms of world trade since the second quarter of 1999, as the
economies of Asia and Latin America recover from the financial crises that
affected them in 1997, and while we have seen indications that containerized
trade volumes from North America and Europe to Asia may be increasing, these
positive signs have yet to have a positive impact upon Cronos' operating
performance. At September 30, 1999, the combined utilization of our container
fleet (based on original equipment cost) stood at 77%, and our average container
daily rental rate (based on value TEUs) was $1.23. (A "TEU" means a 20-foot
equivalent unit, the standard unit of physical measurement in the container
industry. A 20-foot container is therefore one TEU and a 40-foot cargo container
is two TEUs. A "value TEU" ("VTEU") is a cost equivalent unit (also known as a
CEU). VTEU assigns a value to each container type based on its cost. VTEU values
range from 1.0 for a 20-foot cargo container and 1.6 VTEU for a 40-foot cargo
container to 6.5 VTEU for a 20-foot refrigerated container, 8.0 VTEU for a
40-foot refrigerated container, and 8.5 VTEU for a tank container). While these
figures represent an improvement over the comparable figures at the end of the
first two calendar quarters of 1999, each is still below our combined
utilization and average daily rental rates throughout 1998.
Other factors that affect the demand for leased containers and utilization
and per-diem rental rates include the supply and pricing of new and used
containers, economic conditions in the shipping industry, the availability of
financing, fluctuations in interest rates, currency valuations, import-export
restrictions, quotas, tariffs, exchange restrictions, other governmental
regulations, and other factors that are inherently unpredictable and beyond the
control of Cronos.
DEPENDENCE ON FINANCING
We are heavily dependent upon third parties to supply us with the capital
needed to acquire containers. Our operations require significant capital on an
ongoing basis to expand the size of our fleet and to replace our existing fleet
of containers. We have historically funded container fleet expansion through a
combination of secured debt financings, capital leases, management of containers
for third-party container owners, and the sponsorship of public limited
partnerships in the United States.
All of the containers owned by Cronos are pledged to secure borrowings.
Additional financing will be necessary if we are to continue to increase the
rate of expansion of our fleet. We may not be able to obtain such financing when
needed or on terms favorable to us. Furthermore, delays in
6
<PAGE> 8
obtaining financing for containers Cronos has ordered from container
manufacturers could require Cronos to reduce or curtail future orders, resulting
in a reduction in the expansion of our container fleet.
As of September 30, 1999, approximately 34% of our total container fleet
had been financed by United States public limited partnership offerings. During
1996, 1997, and 1998, approximately 31%, 34%, and 40%, respectively, of our
gross lease revenue was generated by containers managed by Cronos for third
parties, and approximately 45%, 38%, and 35%, respectively, of our gross lease
revenue was generated from containers owned by public limited partnerships. We
have not offered a public limited partnership since 1997. While we intend to
offer a limited partnership to the public in the year 2000, there can be no
assurance that we will be successful in doing so or that the financing of our
container fleet through the offering of public limited partnerships will be a
source of financing for us in the future.
As of September 30, 1999, we had total borrowings of $113.9 million, of
which $34.5 million (30%) bore interest at fixed rates and the remaining $79.4
million (70%) bore interest at variable rates. All of the variable rate
borrowings bear interest at a margin over an established market rate (e.g.,
LIBOR) or over the lender's own base rate. An increase of 1% in these base rates
would increase our interest expense on the borrowings outstanding at September
30, 1999, by $796,000 annually.
WE FACE STIFF COMPETITION
We compete for lessees of our containers with several large container
leasing companies that have substantially greater financial and other resources
than we do. Competition among container leasing companies is based upon several
factors, including the location and availability of inventory, lease rates,
service, and the quality of containers. The industry has been in a period of
consolidation since 1993. As of September 30, 1999, the two largest container
leasing companies had fleets totaling approximately 2.2 million TEUs, or 43% of
the worldwide leased container fleet. Our larger competitors might be able to
exploit their greater financial resources and economies of scale and reduce
per-diem rates to enhance their market share. In addition, an increase in the
availability of capital or sustained low rates of interest could provide an
incentive for ocean carriers to purchase containers rather than to lease them
from the container leasing industry.
DEFAULTS BY LESSEES
We are dependent upon our lessees continuing to make lease payments for
their containers. A default by a lessee under a lease may cause us to lose
revenues for past services as well as future revenues. In addition, the
equipment may be returned to us in a location where we may be unable to arrange
efficiently for the re-leasing or the sale of such equipment, in which event we
could incur additional operating expenses. Consequently, defaults may prevent us
from being able to recover our investment in such equipment. In addition, due to
a variety of factors, repossession from defaulting lessees may be difficult in
certain jurisdictions.
In each of the last five years, Cronos' write-offs for specific doubtful
accounts have been less than 2% of annual gross lease revenue, although no
assurance can be given that the level of lessee defaults will remain at this
level or not increase to an extent that would materially affect our results of
operations or financial condition.
7
<PAGE> 9
DISPUTE WITH THE CONTRIN GROUP
We manage containers for investment entities sponsored or affiliated with
Contrin Holding S.A., a Luxembourg holding company (collectively "Contrin").
Approximately 1.6% (measured by TEUs) of the fleet of containers we manage for
third parties is owned by members of the Contrin Group. We are in a dispute with
Contrin over funds that Contrin claims to have remitted to Cronos for the
purchase of containers. Contrin claims that in 1994 it transmitted $2,600,000 to
Cronos for the purchase of containers. We believe that these funds were not
received by us but were diverted to an account in the name of and/or controlled
by our former chairman, Stefan M. Palatin, and that this was known or should
have been known by Contrin. We also believe that the bank that received the
funds is at fault. Contrin's counsel has advised us that Contrin will institute
proceedings for the recovery of the $2,600,000 against Cronos, together with
accrued interest. While we believe that we have meritorious defenses to
Contrin's claims, if a proceeding is instituted, we could lose and be obligated
to pay Contrin the money it is demanding.
THE SEC'S NOVEMBER 15, 1999 CEASE AND DESIST ORDER
On November 15, 1999, we consented to the entry by the SEC of an
administrative cease and desist order (the "Order"). Without admitting or
denying the findings made by the SEC in the Order, we agreed to cease and desist
from committing or causing any future violation of Section 17(a) of the
Securities Act of 1933, Sections 10(b), 13(a), 13(b)(2)(A), and 13(b)(2)(B) of
the Securities Exchange Act of 1934, and Exchange Act Rules 10b-5, 12b-20,
13a-1, 13a-6, and 13b2-1. The SEC's investigation of the Company began in
February 1997, and was triggered by the actions of our former chairman, Stefan
M. Palatin. Cronos' Board removed Mr. Palatin as CEO in May 1998 and, in July
1998, Mr. Palatin resigned from our Board. While Mr. Palatin is no longer an
officer or director of the Company, he continues to control approximately 20% of
our outstanding shares of Common Stock.
The SEC makes certain findings of fact by its Order. We neither admitted
nor denied the findings made by the SEC. The SEC found that Cronos, under the
domination and control of Mr. Palatin, misrepresented, through affirmative
misstatements and omissions in its public statements and filings with the SEC,
transactions it had with Mr. Palatin for the period from December 1995 through
1997, including that Mr. Palatin had intercepted payments between Cronos and one
of its major customers (which Mr. Palatin also controlled); that Cronos had paid
him millions of dollars in the year 1994 before we first sold our shares of
Common Stock to the public in 1995; that Mr. Palatin sold shares in our initial
public offering through another entity which he controlled; that Cronos failed
to disclose additional monies paid to Mr. Palatin shortly after the offering;
and that he had pledged assets he did not own as collateral for certain
obligations that he owed to Cronos. In subsequent filings in 1996 and 1997, the
SEC found that Cronos had misrepresented the nature and purpose of other
payments it made to Mr. Palatin as well as the extent to which certain
obligations he owed to the Company were secured by collateral.
While the Order did not impose any fine or penalty against Cronos, we are
unable to predict what impact, if any, it will have on our future business or
whether it will lead to future litigation involving Cronos.
CONTROL BY PRINCIPAL SHAREHOLDERS
Our four largest shareholders or groups of shareholders control
approximately 60% of our outstanding common shares. These shareholders,
individually, or as a group (were they to associate as a group) could have the
ability to elect members of our Board of Directors and to control the
8
<PAGE> 10
outcome of certain matters submitted to a vote of shareholders, such as any
proposed merger or consolidation of Cronos.
Our largest shareholder remains Stefan M. Palatin, our former Chief
Executive Officer and Chairman of the Board. We are in a dispute with Mr.
Palatin over monies he owes to us under promissory notes he signed in favor of
the Company. Mr. Palatin owes us approximately $6.4 million in principal and
accrued interest on these notes, and we have filed a lawsuit to collect these
monies. As a result of this and other disputes between the Company and Mr.
Palatin, we anticipate that Mr. Palatin will vote the common shares that he
exercises control over against the recommendations of management on proposals we
may submit to our shareholders.
LACK OF LIQUIDITY FOR OUR COMMON SHARES
Because of the percentage of our common shares controlled by a few
shareholders or groups of shareholders, the trading volume in our common shares
is low. For 1999, the average daily trading volume in our shares has been 7,955
shares, or less than 0.1% of our outstanding shares as of September 30, 1999.
The effect of limited liquidity can be to make it more difficult to sell our
common shares and can increase the volatility of the price of our common shares.
OUR SHAREHOLDER RIGHTS PLAN MAY LIMIT THE VALUE OF OUR COMMON SHARES
On October 25, 1999, we adopted a shareholder rights plan, commonly
referred to as a "poison pill." We adopted the plan in response to the
unsolicited proposal by one of our competitors, Interpool, Inc., dated September
21, 1999, to acquire the Company by merger with Interpool's 50%-owned
subsidiary, Container Applications International, Inc., for $5.00 per share in
cash for all of our outstanding common shares. On October 8, 1999, our Board of
Directors unanimously rejected the Interpool offer as inadequate and not in the
best interest of Cronos and its shareholders. Cronos has, however, engaged its
financial advisor, First Union Securities, Inc., to assist Cronos in exploring
all strategic alternatives to enhance shareholder value, including the possible
merger or sale of the Company.
Pursuant to the shareholder rights plan, Cronos declared an allocation of
one right to purchase one-tenth of a share of our common stock for each
outstanding share of common stock, payable to our shareholders of record on
October 25, 1999. Each right, when it becomes exercisable, entitles the
registered holder to purchase from Cronos one-tenth of a common share at a price
per whole common share of $16, subject to adjustment. The rights generally
become exercisable when a person or a group of persons acquires the beneficial
ownership of 20% or more of our outstanding common shares, or after the
commencement of or announcement of an intention to make a tender or exchange
offer for our shares that would result in a person or group becoming the
beneficial owner of 20% or more of our shares. The rights would not be triggered
in the event that an acquisition, or a tender or exchange offer, is at a price
and on terms that the Board of Cronos determines to be adequate and in the best
interest of Cronos and its shareholders. The plan is designed to prevent
takeover attempts of the Company, including any such attempt by Interpool,
without the approval of the Company's Board. The plan can also have the effect
of discouraging bidders interested in taking over the Company and of depressing
the price at which our common shares would otherwise trade to reflect this
reduced interest.
SHARES ELIGIBLE FOR FUTURE SALE
We issued 300,000 of our common shares to the Selling Shareholders on
August 2, 1999, and granted to them warrants to acquire an additional 200,000
shares. Upon issuance of these additional
9
<PAGE> 11
200,000 shares, we will have 9,358,378 shares outstanding. Other than for the
shares held by certain of our largest shareholders, virtually all of our
outstanding common shares are available for immediate resale without
restriction. Given the limited liquidity of the market for our common shares,
the sale of the common shares covered hereby in open market transactions, or
sales of common shares by our existing shareholders in substantial amounts,
could depress the market price of our common shares.
WE ARE DEPENDENT UPON KEY MANAGEMENT
Most of our senior executives and other management-level employees have
been with us for over five years and have significant industry experience. The
loss of the services of one or more of them could have a material adverse effect
on our business. We believe that our future success will depend on our ability
to retain key members of our management team and to attract capable management
in the future. There can be no assurance that we will be able to do so. We do
not maintain "key man" life insurance on any of our officers.
FLUCTUATIONS IN FOREIGN EXCHANGE RATES COULD REDUCE OUR PROFITABILITY
Substantially all of our revenues are billed and paid in U.S. dollars, and
approximately 79% of our costs in 1998 were incurred and paid in U.S. dollars.
Of the remaining costs, most are not predictable and individually are of small
amounts and in various denominations, and thus are not suitable for
cost-effective hedging. From time to time we hedge a portion of the expenses
which are predictable and are principally in U.K. pounds sterling. In addition,
almost all of our container purchases are paid for in U.S. dollars. There can be
no assurance that exchange rate fluctuations will not adversely affect our
results of operations and financial condition.
WE MAY BE LIABLE FOR ENVIRONMENTAL CLEANUP AS THE OWNER OF CONTAINERS
Under the state and federal laws of the United Sates and the laws of
certain other countries, the owner of a container may be liable for
environmental damage, cleanup or other costs in the event of actual or
threatened contamination resulting from discharge of material from a container.
There is a possibility that such liability or a portion thereof may be imposed
on a container owner, such as Cronos, even if the owner is not at fault.
Although we maintain insurance against property damage and bodily injury and
generally we require lessees of containers to obtain similar insurance, there
can be no assurance that such insurance will protect us fully against damages
stemming from this risk or that we will be able to avoid liability for
environmental damages or costs relating to the operations of our lessees.
Many countries, including the United States, have taken action, both
collectively and individually, to regulate chlorofluorocarbon compounds
("CFCs"). CFCs historically have been used in the manufacture and operation of
refrigerated containers, including those we purchased prior to June 1993.
Refrigerated containers that we have purchased since that date do not use CFCs
as a refrigerant gas. The possibility exists that at some time in the future
market pressures or possible governmental regulations may require refrigerated
containers using CFCs to be retrofitted with non-CFC refrigerants. Also, there
can be no assurance that the replacement refrigerant used in our new
refrigerated containers will not become subject to similar market pressures or
governmental regulations. We may have to bear all or a substantial portion of
such costs relating to retrofitting the refrigerated containers that we own.
Although no assurance can be given in this regard, we do not believe that any
such further expenses would be material in relation to our financial position
and results of operation. In addition, refrigerated containers that are not
retrofitted may command lower prices in the market for used containers once we
retire these containers from our fleet.
10
<PAGE> 12
THE YEAR 2000 PROBLEM MAY DISRUPT OUR AND OUR LESSEES' AND SUPPLIERS' BUSINESSES
We are aware of the risks associated with the operation of information
technology and non-information technology systems as the year 2000 approaches.
The problem is pervasive and complex and may affect information technology and
non-information technology systems. The year 2000 problem results from the
rollover of the two-digit year value from "99" to "00." Systems that do not
properly recognize such date sensitive information could generate erroneous data
or fail. In addition to our own systems, we rely on external systems of our
lessees, suppliers, creditors, financial organizations, utility providers, and
governmental entities, both domestic and international (which we collectively
refer to as "third parties"). Consequently, we could be affected by disruptions
in the operations of third parties with which we interact.
Our computer systems have undergone modifications in order to render the
systems ready for the year 2000. We have completed a detailed inventory of all
software and hardware systems and have identified all components that need to be
modified. We have completed all of the necessary changes and testing in a
dedicated year 2000 environment. We have tested and have determined our code to
be compliant. We have also contacted our critical business suppliers and have
been advised by them that their systems are year 2000 compliant. We have also
confirmed such compliance through extensive testing.
The expenses that we have incurred in addressing the year 2000 issues are
being recognized as incurred. We do not believe that these expenses will exceed
$500,000. While we do not believe that our business will be negatively impacted
by the year 2000 problem, we cannot be certain that the year 2000 problem will
not negatively affect our business.
CONSEQUENCES OF LUXEMBOURG INCORPORATION
We are organized as a Luxembourg company, and are governed by our Articles
of Incorporation, the Luxembourg Company Act of August 10, 1915, as amended, and
the Luxembourg Law on Holding Companies of July 31, 1929. Luxembourg law differs
in certain respects from the corporate laws of most states of the United States.
Principles of law relating to such matters as corporate procedures, fiduciary
duties of management, and the rights of our shareholders may differ from those
that would apply if we were incorporated in a state of the United States. For
example, our authorized but unissued capital stock is eliminated every five
years unless the shareholders reauthorize it, which is not typically required in
the United States, and shareholders have preemptive rights unless such rights
are suppressed every five years. In addition, Luxembourg law imposes a 1.0% tax
on most new issuances of shares that increase shareholders' equity.
HOLDING COMPANY STRUCTURE
We are a holding company. We derive all of our operating income and cash
flow from our subsidiaries. We rely upon distributions from our subsidiaries and
intercompany borrowings to generate the funds necessary to meet our obligations.
The ability of our subsidiaries to make payments to us is subject, among other
things, to applicable laws of their respective jurisdictions of incorporation
and such restrictions as may be contained in credit agreements or other
financing arrangements entered into by such subsidiaries. Claims of creditors of
our subsidiaries will generally have priority as to the assets of such
subsidiaries over our claims and those of our shareholders.
11
<PAGE> 13
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common shares that
the Selling Shareholders will sell pursuant to this Prospectus.
PRICE RANGE OF COMMON SHARES
Our common shares are quoted on the Nasdaq National Market under the symbol
"CRNS." The following table sets forth, for the periods indicated, the high and
low closing prices per share of our common shares as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
------- ------
<S> <C> <C>
CALENDAR YEAR 1998
First Quarter............................................... $7.25 $ 5.125
Second Quarter.............................................. $7.125 $ 5.00
Third Quarter............................................... $5.969 $ 4.875
Fourth Quarter.............................................. $6.625 $ 3.375
CALENDAR YEAR 1999
First Quarter............................................... $5.9375 $ 4.125
Second Quarter.............................................. $4.875 $ 3.50
Third Quarter............................................... $4.625 $ 3.50
</TABLE>
On November 19, 1999, the last reported closing price of our common shares
on the Nasdaq National Market was $5.50 per share. As of September 30, 1999,
there were approximately 450 shareholders of record of our common shares.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS AS OF SEPTEMBER 30, 1999
For our financial condition and the results of our operations as of
September 30, 1999, we refer you to our quarterly report on Form 10-Q for the
quarter ended September 30, 1999.
SELLING SHAREHOLDERS
The Selling Shareholders are MeesPierson N.V., a Dutch financial
institution, and First Union National Bank, a national banking association. The
address of MeesPierson is Coolsingel 93, PO Box 749, 3000 AS Rotterdam, The
Netherlands, and the address of FUNB is One First Union Center, 301 South
College Street, TW-9, Charlotte, North Carolina 28288-0735.
The Selling Shareholders are lenders to the Company. The Selling
Shareholders may sell their shares independently of each other and are not
acting as a partnership, limited partnership, syndicate or group for the purpose
of acquiring, holding, or disposing of any of their shares. On August 2, 1999,
the Selling Shareholders lent a special purpose subsidiary organized by the
Company $50 million, the proceeds of which were used to repay existing
indebtedness of the Company and its subsidiaries. We described this financing in
our quarterly report on Form 10-Q for the quarter ended June 30, 1999.
In connection with the August 1999 refinancing, each of MeesPierson and
FUNB were issued 150,000 of our authorized but unissued common shares (300,000
shares in total), and we entered into a Warrant Agreement with the Selling
Shareholders. We filed a copy of the Warrant Agreement, as amended, as an
exhibit to our quarterly report referred to above.
12
<PAGE> 14
THE WARRANT AGREEMENT
Pursuant to the Warrant Agreement, each of MeesPierson and FUNB was granted
the right to purchase 100,000 of our authorized but unissued common shares, at
an exercise price of $4.41 per share, which was the average of the daily closing
prices of our common shares on the Nasdaq National Market during the 30-day
period preceding August 2, 1999, the date the Selling Shareholders lent us $50
million. The Selling Shareholders may purchase their shares under the Warrant
Agreement at any time prior to August 15, 2004 plus 90 days or, if later, the
date on which we fully repay the monies borrowed from the Selling Shareholders.
The 150,000 shares we issued to each of the Selling Shareholders on August
2, 1999, represents 1.64% of the 9,158,378 common shares we currently have
outstanding. Were both of the Selling Shareholders to exercise their warrants
and purchase all 200,000 shares issuable under the Warrant Agreement, then each
of the Selling Shareholders would own 250,000 of our common shares, representing
2.67% of the number of our common shares that would then be outstanding
(assuming we issue no additional shares).
The number of shares issuable under the Warrant Agreement to the Selling
Shareholders shall be adjusted to take into account any stock dividend,
subdivision of our common shares, or like change. In addition, the number of
shares subject to the Warrant Agreement shall generally be adjusted to protect
the Selling Shareholders in the event that we issue or sell our common shares or
securities convertible into our common shares or rights or warrants to purchase
our common shares at a price per share lower than the price equal to 90% of the
average of the daily closing prices of our common shares on the Nasdaq National
Market during the 30-day period preceding such sale or issuance.
The Selling Shareholders are also entitled to protection under the Warrant
Agreement in the event that we merge or consolidate with another entity or sell
all of our assets. In any such event, the Selling Shareholders shall be entitled
to receive from the surviving entity the securities or other property (including
cash) to which the Selling Shareholders would have been entitled to if the
Selling Shareholders had exercised their right to purchase our common shares
prior to consummation of the transaction.
Under the Warrant Agreement, we have a right of first refusal to purchase
the warrants issued to a Selling Shareholder, in the event of a proposed
transfer of the warrants by the Selling Shareholder, at the same price and terms
offered to the Selling Shareholder by the third party. This restriction applies
only to the proposed transfer of the warrants, not to the common shares issuable
to the Selling Shareholder under the Warrant Agreement.
Until exercise of the warrants issued to a Selling Shareholder, a Selling
Shareholder has no rights as a shareholder of the Company with respect to the
common shares issuable under the warrants.
We have filed the Registration Statement of which this Prospectus is a part
pursuant to the Warrant Agreement, which obligates us to register the 300,000
shares issued to the Selling Shareholders on August 2, 1999, and the 200,000
shares issuable under the Warrant Agreement. We further agreed to bear the
expenses of the registration, including the SEC filing fee and the expenses of
our counsel and our auditors in assisting us to register the common shares
covered hereby.
We have further agreed with the Selling Shareholders to indemnify them
against any expenses or liabilities they may incur in connection with the use of
this Prospectus in the event that it contains any untrue statement or alleged
untrue statement of any material fact or omits to state a material fact required
to be stated therein or necessary to make the statements in this Prospectus not
misleading
13
<PAGE> 15
(with the exception of written information furnished to us by the Selling
Shareholders for inclusion in this Prospectus).
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the common shares offered hereby through
underwriting syndicates or by one or more underwriters, in each case as
specified in a Supplement to this Prospectus. The Prospectus Supplement will set
forth the terms of the offering, including the name or names of the
underwriters, and either (i) the public offering price, the discounts and
commissions to the underwriters and any discounts or concessions allowed or
reallowed to certain dealers, or (ii) the method by which the price at which the
underwriters will sell the common shares will be determined.
The common shares may be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. If so indicated in the Prospectus Supplement,
the Selling Shareholders will authorize the underwriters or other persons acting
as the Selling Shareholders' agent to solicit offers by certain institutions to
purchase the common shares on such terms and subject to such conditions as so
specified.
The Selling Shareholders may also sell the common shares offered hereby by
means of the related Prospectus Supplements from time to time directly to
purchasers in negotiated transactions or otherwise, at prices determined at the
time of sale. The Selling Shareholders may effect such transactions by selling
common shares to or through dealers and such dealers may receive compensation in
the form of underwriting discounts, concessions or commissions from the Selling
Shareholders and any purchasers of common shares for whom they may act as
agents.
The place and time of delivery for the common shares in respect of which
this Prospectus is delivered will be set forth in the related Prospectus
Supplement.
DESCRIPTION OF COMMON SHARES
GOVERNING LAW
Cronos is a Luxembourg company and its affairs are governed by its Articles
of Incorporation (the "Articles"), the Luxembourg Company Act of August 10,
1915, as amended (the "Company Act"), and the Luxembourg Law on Holding
Companies of July 31, 1929. A number of the provisions of the Company Act differ
in certain respects from the corporate laws of most states of the United States.
In addition, while the leading United States commercial jurisdictions, such as
California, Delaware and New York, have extensive bodies of case law
interpreting provisions of their respective statutes, the case law in Luxembourg
is less extensive.
We are filing a copy of our Articles as an exhibit to the Registration
Statement of which this Prospectus is a part. The summary that follows is
qualified by reference to the full text of the Articles.
AUTHORIZED SHARES
Cronos' authorized capital consists of 25,000,000 common shares, $2 par
value per share, of which 9,158,378 common shares are presently issued and
outstanding. If the Selling Shareholders exercise all of the warrants we have
issued to them, then the number of our outstanding shares would
14
<PAGE> 16
increase by 200,000 to 9,358,378 common shares outstanding. Our Articles
currently do not authorize the issuance of preferred shares. All of our common
shares are issued in registered form.
Under Luxembourg law, our authorized capital is automatically reduced to
the amount represented by our outstanding shares, unless our shareholders renew
the authorized capital every five years. Our shareholders last renewed our
authorized capital at the special shareholders' meeting held on August 13, 1997.
Accordingly, our authorized capital will automatically be reduced to the amount
represented by our outstanding shares in 2002, on the fifth anniversary of the
shareholders' meeting just referred to, unless the authorized capital is
extended at or before that meeting. The Board of Directors is authorized,
without further shareholder action, to issue additional common shares from time
to time up to the maximum number authorized at the time.
All common shares to be outstanding upon consummation of this offering will
be fully paid and nonassessable.
VOTING RIGHTS
All common shares entitle the holder thereof to cast one vote for each
share held. Under Luxembourg law shareholder action can generally be taken by a
simple majority of shares present or represented, without regard to any minimum
quorum requirements. Two exceptions to the law are (i) to amend the Articles,
which requires (x) a two-thirds vote of the shares present or represented and
(y) a quorum of 50% of the outstanding shares entitled to vote when the meeting
is first convened, and (ii) any action for which the Articles require more than
a majority vote or a quorum.
Our Articles currently provide that Cronos is to be managed by a Board of
Directors composed of at least three members who shall be elected by simple
majority of the outstanding shares for a term of three years and until their
successors are elected. The terms of our directors are staggered so that the
terms of approximately one-third of the total number of Directors expire in each
year. Currently, our Board consists of four members. We are proposing for our
next annual shareholders' meeting that five Directors be elected in addition to
the one Director whose term is to continue until the annual meeting in the year
2000 and his successor is elected.
Our common shares are traded on the Nasdaq Stock Market. Under Nasdaq's
rules, the minimum quorum for any meeting of shareholders of a Nasdaq company is
33 1/3% of the outstanding shares of the company's common voting stock. We
observe this requirement in holding our annual meetings of shareholders.
SHAREHOLDER MEETINGS AND NOTICE
Under the Articles, the Company is required to hold a general meeting of
shareholders at 3:30 p.m. on May 20th of each year at the Company's registered
office in Luxembourg or in another location as designated. In addition, the
Board may call any number of extraordinary general meetings, which may be held
in Luxembourg or elsewhere. The Articles require notice of any general meeting
to be sent by first class mail, postage prepaid, at least 20 days prior to any
such meeting. Shareholders may be represented by written proxy, provided the
written proxy is deposited with the Company at its registered office in
Luxembourg, or with any Director before the opening of the meeting.
DIVIDENDS
Our common shares are entitled to such dividends as may be declared by the
Board of Directors from time to time out of funds legally available therefor. In
general, under Luxembourg law only
15
<PAGE> 17
realized profits on an unconsolidated basis, determined in accordance with
Luxembourg accounting principles, are available for dividends. Interim dividends
can be declared up to three times in any fiscal year (at the end of the second,
third or fourth quarters) by the Board of Directors. Interim dividends can be
paid, but only after our independent auditors have reported to the Board of
Directors that certain conditions have been satisfied. Final dividends are
declared once a year at the annual general meeting by the shareholders; as
specifically authorized by the Articles, both interim and final dividends can be
paid out of any earnings, retained and current, as well as additional paid-in
surplus. Luxembourg law authorizes the payment of share dividends if sufficient
surplus exists to provide for the related increase in stated capital.
Luxembourg law requires that 5% of Cronos' unconsolidated net profits each
year be allocated to a legal reserve before declaration of dividends. This
requirement continues until the reserve is 10% of our stated capital, after
which no further allocations are required until further issuance of shares. The
legal reserve may also be satisfied by a transfer from capital surplus. The
legal reserve is not available for dividends. The Company currently maintains a
legal reserve equal to 10% of its stated capital. Upon issuance of the common
shares covered hereby pursuant to exercise by the Selling Shareholders of their
warrants, we will transfer an amount from additional paid-in surplus sufficient
to maintain our legal reserve equal to 10% of our stated capital.
LIQUIDATION
Under the Articles, in the event of the liquidation, dissolution or winding
up of the Company, all debts and obligations of the Company must first be paid,
and any surplus thereafter remaining will be distributed to the holders of our
common shares.
PREEMPTIVE RIGHTS
As a general rule shareholders are entitled to preemptive rights under
Luxembourg law unless the Articles provide otherwise. The Company's Articles
authorize the Board of Directors to suppress shareholders' preemptive rights,
and the Board has done so with respect to all authorized but unissued common
shares. Upon the expiration of authorized but unissued shares discussed above,
the suppression of preemptive rights will also terminate and shareholders will
be entitled to preemptive rights once again unless the Board recommends and the
shareholders approve suppressing further such rights. Accordingly, the common
shares sold in this offering will not be entitled to preemptive rights at least
until 2002.
SHAREHOLDER RIGHTS PLAN
On October 25, 1999, we adopted a shareholder rights plan (the "Plan"). For
shareholders of record on that date, we declared an allocation of one right to
purchase one-tenth of a share of our common stock. Such rights shall also attach
to each common share issued after October 25th until the "distribution date"
(defined below). Each right, when it becomes exercisable, generally entitles the
holders of our common shares to purchase from Cronos one-tenth of a common share
at a price per whole common share of $16, subject to adjustment. The terms of
the plan are set forth in a Rights Agreement between the Company and BankBoston,
N.A., dated as of October 28, 1999 (the "Rights Agreement"), a copy of which we
filed with the SEC as an exhibit to our Registration Statement on Form 8-A on
October 29, 1999.
Initially, the rights will attach to all certificates representing our
common shares outstanding; no separate rights certificate will be distributed.
The rights will separate from our common shares upon the earliest to occur of
(i) a person or entity or group of affiliated or associated persons having
16
<PAGE> 18
acquired beneficial ownership of 20% or more of our outstanding common shares
(except pursuant to a permitted offer, as defined below), or (ii) ten business
days (or such later date as the Board may determine) following the commencement
of, or announcement of an intention to make, a tender or exchange offer the
consummation of which would result in a person or group becoming an "acquiring
person" (the earliest of such dates referred to in the Plan as a "Distribution
Date"). A person or group whose acquisition of our common shares causes a
Distribution Date is defined under the Plan as an "Acquiring Person." A person
who acquires our common shares pursuant to a tender or exchange offer which is
for all of our outstanding shares at a price and on terms which the Board
determines (prior to the acquisition) to be adequate and in the best interest of
the Company and its shareholders (a "Permitted Offer") will not be deemed to be
an Acquiring Person under the Plan and such person's ownership will not trigger
a Distribution Date. The rights are not exercisable until the Distribution Date
and will expire on the close of business on October 28, 2009, unless earlier
terminated.
In the event that any person becomes an Acquiring Person, then each holder
of rights will generally have the right (a "Flip-In Right") to receive, upon
exercise of such rights, the number of whole common shares having a value
(immediately prior to such triggering event) equal to two times the aggregate
exercise price of such rights. In no event, however, will shares be issued upon
exercise of the Flip-In Rights for a price of less than the par value (currently
$2.00) per common share.
The Plan also has a "Flip-Over Right" that would apply in certain mergers
or other business combinations. In such event, each holder of rights would be
entitled to receive, upon exercise of such rights, common shares of the
acquiring company (or, in certain circumstances, its parent) having a value
equal to two times the aggregate exercise price of the rights.
At any time prior to a person becoming an Acquiring Person, or the
expiration of the rights, the Company may redeem the rights, in whole, but not
in part, at a price of $0.01 per right. The Plan may also be amended by the
Board prior to the Distribution Date; and may be amended after the Distribution
Date, subject to the requirements of applicable law, to cure any ambiguity,
defect, or inconsistency, or to make changes which the Board determines to be in
the best interest of the Company and its shareholders.
Until a right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the rights shall not
be taxable to the shareholders of the Company, the shareholders may, depending
on the circumstances, recognize taxable income should the rights become
exercisable or upon the occurrence of certain events thereafter.
For a complete description of the Plan, prospective purchasers of our
common shares are directed to the Registration Statement on Form 8-A and the
Rights Agreement, which we filed with the SEC on October 29, 1999.
TRANSFER AGENT AND REGISTRAR
We have appointed BankBoston, N.A. as Transfer Agent and Registrar for our
common shares.
TAX CONSIDERATIONS
The following summary of the material Luxembourg, United Kingdom, and
United States Federal tax consequences is not a comprehensive description of all
of the tax considerations that may be relevant to a decision to purchase, own or
dispose of our common shares (the "shares"), and does not deal with the tax
consequences applicable to all categories of investors, some of which may be
17
<PAGE> 19
subject to special rules. Prospective investors therefore should consult their
tax advisors with respect to the Luxembourg, United Kingdom, and United States
and other tax consequences of the purchase, ownership and disposition of Cronos'
shares, including the effect of any foreign, state or local tax laws.
LUXEMBOURG
The following summary of the material Luxembourg tax consequences of the
purchase, ownership and disposition of shares reflects the opinion of Elvinger,
Hoss & Prussen. Under present Luxembourg law, so long as the Company maintains
its status as a holding company, no income tax, withholding tax (including with
respect to dividends), capital gains tax, estate tax, or inheritance tax is
payable in Luxembourg by shareholders in respect of the shares, except for
shareholders domiciled, resident (or, in certain circumstances, formerly
resident), or having a permanent establishment in Luxembourg.
UNITED KINGDOM
The following summary of the United Kingdom tax consequences of the
purchase, ownership and disposition of shares reflects the opinion of Edwin Coe,
English tax counsel to the Company. Under present United Kingdom law, so long as
the Company maintains its status as a company which is not resident in the
United Kingdom for tax purposes and which does not carry on a trade in the
United Kingdom, no income tax, withholding tax (including with respect to
dividends), capital gains tax, or inheritance tax is payable in the United
Kingdom in respect of the shares, by shareholders who are not domiciled (or
deemed to be domiciled), resident or ordinarily resident in the United Kingdom
and who do not carry on a trade in the United Kingdom.
UNITED STATES
The following summary of the material United States Federal tax
consequences resulting from the purchase, ownership and disposition of shares
reflects the opinion of Fotenos & Suttle, P.C., San Francisco, California,
United States counsel to the Company. The summary is limited to holders that
hold shares as capital assets and that hold less than 10% of the voting stock in
the Company.
Non U.S. Holders
A beneficial owner of shares that is, for U.S. Federal income tax purposes,
a nonresident alien individual or a foreign corporation (a "Non U.S. Holder")
will not be subject to U.S. Federal income tax, including withholding taxes, on
dividends paid by the Company or gains recognized on the sale, exchange or
redemption of shares in the Company, unless the dividends or gains are
effectively connected with a U.S. trade or business or, in the case of gains
realized by an individual Non U.S. Holder, the Non U.S. Holder is present in the
United States for 183 days or more in the taxable year of sale, exchange or
redemption and certain other conditions are met.
U.S. Holders
Subject to the discussion of passive foreign investment companies below:
Dividends paid with respect to the shares will be included in the gross
income of a beneficial owner of shares that is, for United States Federal income
tax purposes, (i) a citizen or resident of the United States, (ii) a domestic
corporation, or (iii) a holder otherwise subject to the United States Federal
income taxation on a net income basis in respect of income or gain from the
shares (a "U.S. Holder") as ordinary income to the extent paid out of current or
accumulated earnings and
18
<PAGE> 20
profits of the Company, as determined under United States Federal income tax
principles. Such dividends will not be eligible for the dividends received
deduction allowed a United States corporation.
A distribution not paid out of earnings and profits of the Company will
reduce the basis of the shares, and, to the extent of the excess of such basis,
will constitute taxable gain. Such gain will generally be capital gain and will
be long-term capital gain if the shares have been held for more than one year.
A U.S. Holder will recognize gain or loss upon a sale, redemption or other
taxable disposition of shares measured by the difference between such U.S.
Holder's tax basis in the shares and the amount realized on the disposition,
assuming that the redemption is not treated as a dividend for U.S. Federal
income tax purposes. Such gain or loss will generally be capital gain or loss
and will be long-term capital gain or loss if the shares have been held for more
than one year.
PASSIVE FOREIGN INVESTMENT COMPANY RULES
Under Section 1297 of the Internal Revenue Code of 1986, as amended (the
"Code") and applicable temporary and final Treasury regulations (the
"Regulations"), a foreign corporation is a passive foreign investment company
("PFIC") as to a shareholder who is a citizen or resident of the United States,
a corporation or partnership organized in or under the laws of the United
States, any State thereof or the District of Columbia, an estate the income of
which is subject to United States Federal income tax regardless of its source, a
trust if a court within the United States is able to exercise primary
supervision over the administration of the trust, and one or more United States
persons have the authority to control all substantial decisions of the trust in
foreign countries (a "U.S. Person") if, for any current or prior taxable year of
the foreign corporation during which the U.S. Person owned shares in the foreign
corporation, either (a) at least 75% of the foreign corporation's gross income
was "passive income," or (b) at least 50% of the foreign corporation's gross
assets were "passive assets." Assets under lease and income from leasing
activities generally are not deemed to be "passive" for this purpose if the
income is derived by the foreign corporation or its subsidiaries from the active
conduct of a trade or business. The Treasury Regulations provide that leasing
income will be considered derived from the active conduct of a trade or business
if the lessor maintains and operates a leasing organization that is regularly
engaged in marketing, or marketing and servicing, the leased property and that
is substantial in relation to the leasing income derived from leasing property
as a result of the performance of such marketing functions. Whether the foreign
corporation's leasing organization is substantial is determined based upon all
of the facts and circumstances.
The Company believes that it should not constitute a PFIC because its
leasing organization is substantial and it derives its leasing income from the
active conduct of a trade or business for purposes of the PFIC provisions
described above, as follows: (i) the Company, through its subsidiaries, has more
than 55 employees engaged in leasing activities, the majority of whom are
engaged in sales, marketing and equipment management, (ii) the company directly
incurs a high proportion of the overall expenses related to its leasing
business, and (iii) the Company exercises close and direct supervision over the
performance of services by third parties incurring the remainder of its overall
leasing expenses. This matter is not entirely free from doubt, however, due to
the absence of relevant authority indicating the manner in which the PFIC
provisions should be applied and interpreted in this context, and accordingly
there can be no assurance that the Internal Revenue Service would not assert
that the Company is a PFIC or that there will not be a development or change in
the relevant factual circumstances or legal rules that would cause the Company
to become a PFIC.
19
<PAGE> 21
If the Company were a PFIC, unless a U.S. Person made the election
described in the next paragraph, a special tax regime set forth in Section 1291
of the Code would apply to both (a) any "excess distribution" by the Company
(generally, the U.S. Person's ratable share of distributions in any year that
are greater than 125% of the average annual distributions received by such U.S.
Person in the three preceding years or its holding period, if shorter) and (b)
any gain realized on the sale or other disposition of the shares. Under this
regime, any excess distribution and realized gain would be treated as ordinary
income and would be subject to tax as if (a) the excess distribution or gain had
been realized ratably over the U.S. Person's holding period, (b) the amount
deemed realized had been subject to tax in each year of that holding period at
the highest applicable tax rate, and (c) the interest charge generally
applicable to underpayment of tax had been imposed on the taxes deemed to have
been payable in those years.
If the Company were a PFIC, a U.S. Person could elect, under Code Section
1295, provided the Company complies with certain reporting requirements, to have
the Company treated, with respect to that Person's shareholding, as a "qualified
electing fund," in which case such U.S. Person would include annually in gross
income his pro rata share of the Company's annual ordinary earnings and annual
net realized gains, whether or not such amounts are actually distributed to the
U.S. Person. These amounts would be included by a U.S. Person for its taxable
year in or with which the Company's taxable year ends. If the election were
made, amounts included as income generally could be distributed tax free, and,
to the extent not distributed, would increase the tax basis of the shares.
A shareholder for whom a qualified electing fund election is in effect for
each of the years that are included in the shareholder's holding period for his
shares and for which the Company was determined to be a PFIC would not be
subject to the Code Section 1291 provisions discussed above. If a qualified
electing fund election is not in effect for each of such years, the shareholder
may make an election pursuant to which the shareholder is deemed to have sold
the shares in the PFIC at their fair market value; gain would be realized and
taxed under the Code Section 1291, as discussed above.
As another possible means of avoiding, all or in part, the application of
the Code Section 1291 provisions, in the event the Company were determined to be
a PFIC, a shareholder could make a mark-to-market election under Code Section
1296 (relating to marketable PFIC stock). If this election were made, the
shareholder would include in income each year an amount equal to the excess, if
any, of the fair market value of the PFIC stock as of the close of the tax year
over the shareholder's adjusted basis in the stock. There would be a deduction
for the lesser of the excess, if any, of the adjusted basis of the PFIC stock
over its fair market value as of the close of the tax year or the unreversed
inclusions (i.e., the excess of the mark-to-market gains over the mark-to-market
losses) for previous years.
If the Company were determined to be a PFIC, then the Company would comply
with all requirements necessary to permit shareholders to make a "qualified
electing fund" election under Code Section 1295. Such an election would not,
however, retroactively eliminate adverse PFIC consequences for prior years,
unless the taxpayer satisfies the Treasury Regulation's requirements relating to
retroactive elections in circumstances in which a timely election is not made
because the taxpayer reasonably believed that the Company is not a PFIC. This
may require filing a "Protective Statement" or, in limited circumstances,
requesting IRS consent. However, certain "qualified shareholders" are deemed to
have satisfied the reasonable belief requirement and do not need to file a
"Protective Statement" or request IRS consent in order to make a retroactive
election for any open year in the shareholder's holding period. Generally, a
qualified shareholder must meet the following tests: (a) the shareholder must
own at all times during the tax year, directly, indirectly, or constructively,
less than 2% of the vote and value of each class of the Company's stock, (b)
with respect to the tax year of the Company ending within the shareholder's tax
year, the Company or its U.S. counsel must have indicated, in a public filing,
disclosure statement, or other notice ("filing")
20
<PAGE> 22
provided to U.S. Persons that are shareholders of the Company that the Company
(i) reasonably believes that it is not or should not constitute a PFIC for the
Company's taxable year, or (ii) is unable to conclude that it is not or should
not be a PFIC (due to certain asset valuation or interpretation issues, or
because PFIC status will depend on the income or assets of the Company in the
Company's subsequent taxable years) but reasonably believes that, more likely
than not, it ultimately will not be a PFIC, and (c) the shareholder must not
know or have reason to know that a filing by the Company regarding the Company's
PFIC status was inaccurate or know that the Company was a PFIC for the tax year
of the Company ending with or within such tax year of the shareholder.
FOREIGN PERSONAL HOLDING COMPANY RULES
The Company currently believes that it is not a foreign personal holding
company ("FPHC") because no group of five or fewer United States citizens or
residents owns, directly or indirectly, more than 50% of the Company's stock. If
the Company were to become a FPHC in the future (for example by reason of
certain constructive ownership rules or a change in the ownership of its stock)
then, in general, each U.S. Person holding shares on the last day of the
Company's taxable year would be treated as receiving a dividend in an amount
equal to each such U.S. Person's share of the Company's undistributed foreign
personal holding company income for such taxable year.
BACKUP WITHHOLDING
A beneficial owner of shares may, under certain circumstances, be subject
to United States "backup withholding" at the rate of 31% with respect to
dividends paid or the proceeds of a sale, exchange or redemption of shares,
unless such holder (a) is a corporation or is otherwise exempt; (b) is a Non
U.S. Holder who certifies as to its non-U.S. status; or (c) provides an accurate
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules.
LEGAL MATTERS
The validity of the common shares offered hereby will be passed upon for
the Company by Elvinger, Hoss & Prussen, Luxembourg. The summaries of
Luxembourg, United Kingdom, and United States federal tax consequences of an
investment in the common shares, as described under "Tax Considerations" herein,
are based upon the opinions of Elvinger, Hoss & Prussen (Luxembourg tax
consequences), Edwin Coe (United Kingdom tax consequences), and Fotenos &
Suttle, P.C., (United States federal tax consequences).
EXPERTS
The consolidated balance sheet of Cronos as of December 31, 1998 and 1997,
and the consolidated statements of income, shareholders' equity, and cash flows
of Cronos for each of the three years ended December 31, 1998, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report, which includes explanatory paragraphs on Cronos' ability to continue as
a going concern and on the possibility of Cronos' becoming a defendant in
certain lawsuits, of Moore Stephens, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
21
<PAGE> 23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Prospectus incorporates documents by reference which are not presented
in or delivered with it. This means that we can disclose certain information by
referring a reader to certain documents. These documents (other than the
exhibits to such documents unless specifically incorporated by reference) are
available, without charge, upon written or oral request directed to Elinor A.
Wexler, The Cronos Group, at its offices located at 444 Market Street, 15th
Floor San Francisco, California 94111; telephone (415) 677-8990.
The following documents, which have been filed by Cronos with the SEC
pursuant to the Exchange Act (file no. 0-24464) are incorporated in this
Prospectus by reference and shall be deemed to be a part hereof:
(a) Annual Report on Form 10-K for the year ended December 31, 1998;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999, June 30, 1999, and September 30, 1999;
(c) Current Reports on Form 8-K dated March 15, April 1, April 13,
August 20, August 23, August 27, November 3, and November 16, 1999;
(d) All documents filed by Cronos with the SEC pursuant to the
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering made
by this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superceded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is to be deemed to
be incorporated by reference modifies or supercedes such statement. Any such
statement so modified or superceded shall not be deemed, except as so modified
or superceded, to constitute a part of this Prospectus.
22
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following are the expenses, other than underwriting discounts and
commissions, expected to be incurred by the Company in connection with the
issuance and distribution of the securities registered under this Registration
Statement. All amounts are estimated, with the exception of the SEC Registration
Fee and Luxembourg tax on the issuance of the common shares covered by this
Registration Statement:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 765
Luxembourg tax on issuance of capital shares................ 8,820
NASD Filing Fee............................................. 775
Legal Fees and Expenses..................................... 25,000
Accounting Fees and Expenses................................ 15,000
Miscellaneous............................................... 10,000
-------
Total....................................................... $60,360
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subject to certain exceptions and limitations for willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office, every person who is, or has been, a director or
officer of the Company shall be indemnified by the Company to the fullest extent
permitted by the laws of the Grand Duchy of Luxembourg against liability and
against all expenses reasonably incurred or paid by him or her in connection
with any claim, action, suit or proceeding in which he or she becomes involved
as a party or otherwise by virtue of his being or having been such director or
officer and against amounts paid or incurred by him or her in the settlement
thereof. For purposes of this indemnification, the words "claim," "action,"
"suit," or "proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or otherwise, including appeals) actual or threatened and the
words "liability" and "expenses" shall include without limitation attorneys'
fees, costs, judgments, amounts paid in settlement and other liabilities.
The Articles of the Company provide, in Article 15 thereof, for
indemnification of every person who is, or has been, a director or officer of
the Company to the fullest extent permitted by law, against liability and
against all expenses reasonably incurred or paid by him or her in connection
with any claim, action, suit, or proceeding in which he or she becomes involved
as a party or otherwise by virtue of his or her being or having been such
director or officer and against amounts paid or incurred by him or her in the
settlement thereof.
Additionally, the Board of Directors of the Company has adopted
indemnification policies and procedures providing for the indemnification of
present and future officers and directors of the Company. A copy of these
policies and procedures, as adopted by the Board of Directors of the Company on
August 4, 1999, is filed as Exhibit 3.2 hereto.
The Company has obtained insurance for the benefit of the directors and
officers of the Company and its subsidiaries insuring such persons against
certain liabilities, including liabilities under Federal and state securities
law.
II-1
<PAGE> 25
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
3.1 Articles of Incorporation of the Company, as amended on
August 13, 1997, incorporated by reference to Exhibit 1.1 to
the Company's Annual Report on Form 20-F for the year ended
December 31, 1997
3.2 Policies and procedures with respect to the indemnification
of directors and officers of the Company, as adopted by the
Board of Directors on August 4, 1999.
4.1 Warrant Agreement, dated as of July 30, 1999 ("Warrant
Agreement") by and between the Company and MeesPierson N.V.
("MeesPierson") and First Union National Bank ("FUNB")
incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999
4.2 Amendment No. 1 to Warrant Agreement, dated as of August 11,
1999, by and among the Company, MeesPierson, and FUNB,
incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999
4.3 Rights Agreement, dated as of October 28, 1999, between the
Company and BankBoston, N.A., as Rights Agent, incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form 8-A, filed with the SEC on October 29,
1999.
4.4 Letter agreement by and between the Company and MeesPierson
and FUNB, dated October 1999, granting extension until
November 30, 1999 to file Registration Statement under the
Warrant Agreement
5.1 Opinion of Elvinger, Hoss & Prussen as to the validity of
the shares being registered
8.1 Opinion of Elvinger, Hoss & Prussen as to tax matters
(included in Exhibit 5.1)
8.2 Opinion of Edwin Coe as to tax matters
8.3 Opinion of Fotenos & Suttle, P.C. as to tax matters
10.1 Stock Appreciation Rights Agreement by and between the
Company and Peter J. Younger, dated as of October 13, 1999
21.1 List of principal subsidiaries of the Company
23.1 Consent of Luxembourg counsel to the Company (included in
Exhibits 5.1 and 8.1)
23.2 Consent of Edwin Coe, special U.K. counsel to the Company
(included in Exhibit 8.2)
23.3 Consent of Fotenos & Suttle, P.C., counsel to the Company
(included in Exhibit 8.3)
23.4 Consent of Moore Stephens, independent public accountants
(to be filed by amendment)
</TABLE>
ITEM 17. UNDERTAKINGS.
A. Undertaking to Update.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information in the
Registration Statement; and
(iii) include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
II-2
<PAGE> 26
Provided, however, that paragraph (A)(1)(i) and (A)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. Undertaking With Respect to Documents Incorporated by Reference.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Undertaking With Respect to Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. Undertaking With Respect to Pricing Information.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of any prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on the 23rd day
of November, 1999.
The Cronos Group
By: /s/ DENNIS J. TIETZ
------------------------------------
Dennis J. Tietz
Chairman of the Board,
Chief Executive Officer, and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis J. Tietz, Peter J. Younger, and Elinor A.
Wexler, and each of them, any of whom may act without joinder of the others, his
or her true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all pre- and post-effective
amendments and supplements to this Registration Statement, and to file the same,
or cause to be filed the same, with all exhibits thereto and all other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, and each of them, or the substitute or
substitutes of any of them, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DENNIS J. TIETZ Chairman of the Board of November 24, 1999
- --------------------------------------------------- Directors and Chief
Dennis J. Tietz Executive Officer (Principal
Executive Officer)
/s/ PETER J. YOUNGER Chief Financial Officer November 24, 1999
- --------------------------------------------------- (Principal Financial and
Peter J. Younger Accounting Officer)
/s/ STEPHEN NICHOLAS WALKER Director November 22, 1999
- ---------------------------------------------------
S. Nicholas Walker
/s/ MAURICE TAYLOR Director November 20, 1999
- ---------------------------------------------------
Maurice Taylor
/s/ CHARLES THARP Director November 18, 1999
- ---------------------------------------------------
Charles Tharp
</TABLE>
II-4
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 Articles of Incorporation of the Company, as amended on
August 13, 1997, incorporated by reference to Exhibit 1.1 to
the Company's Annual Report on Form 20-F for the year ended
December 31, 1997
3.2 Policies and procedures with respect to the indemnification
of directors and officers of the Company, as adopted by the
Board of Directors on August 4, 1999.
4.1 Warrant Agreement, dated as of July 30, 1999 ("Warrant
Agreement") by and between the Company and MeesPierson N.V.
("MeesPierson") and First Union National Bank ("FUNB")
incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999
4.2 Amendment No. 1 to Warrant Agreement, dated as of August 11,
1999, by and among the Company, MeesPierson, and FUNB,
incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1999
4.3 Rights Agreement, dated as of October 28, 1999, between the
Company and BankBoston, N.A., as Rights Agent, incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement on Form 8-A, filed with the SEC on October 29,
1999.
4.4 Letter agreement by and between the Company and MeesPierson
and FUNB, dated October 1999, granting extension until
November 30, 1999 to file Registration Statement under the
Warrant Agreement
5.1 Opinion of Elvinger, Hoss & Prussen as to the validity of
the shares being registered
8.1 Opinion of Elvinger, Hoss & Prussen as to tax matters
(included in Exhibit 5.1)
8.2 Opinion of Edwin Coe as to tax matters
8.3 Opinion of Fotenos & Suttle, P.C. as to tax matters
10.1 Stock Appreciation Rights Agreement by and between the
Company and Peter J. Younger, dated as of October 13, 1999
21.1 List of principal subsidiaries of the Company
23.1 Consent of Luxembourg counsel to the Company (included in
Exhibits 5.1 and 8.1)
23.2 Consent of Edwin Coe, special U.K. counsel to the Company
(included in Exhibit 8.2)
23.3 Consent of Fotenos & Suttle, P.C., counsel to the Company
(included in Exhibit 8.3)
23.4 Consent of Moore Stephens, independent public accountants
(to be filed by amendment)
</TABLE>
<PAGE> 1
EXHIBIT 3.2
POLICIES AND PROCEDURES WITH RESPECT TO THE
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE
COMPANY, AS ADOPTED BY THE BOARD OF DIRECTORS ON
AUGUST 4, 1999
<PAGE> 2
THE CRONOS GROUP
POLICIES AND PROCEDURES WITH RESPECT TO THE
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following sets forth the policies and procedures ("Indemnification
Policies") of the Cronos Group, a Luxembourg holding company (the "Company")
with respect to the indemnification of present and future directors and officers
of the Company. These Indemnification Policies and procedures were adopted by
the Board of Directors of the Company at its meeting held on August 4, 1999, in
New York, New York.
1. Definitions.
1.1 "Change in Control" means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A (or in response to any similar item on any
similar schedule or form) promulgated under the Securities Exchange Act of 1934
(the "Act"), whether or not the Company is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any "Person" (as such term is
used in Section 13(d) of the Act) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least two
thirds of the members of the Board of Directors in office immediately prior to
such person attaining such percentage interest; (ii) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the Company's stockholders was approved
by a vote of at least two thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
1.2 "Company" refers, for purposes of these Indemnification Policies, to
the Cronos Group and to each company, entity, or enterprise affiliated with the
Cronos Group, with respect to which, at the request of the Board of Directors or
Chief Executive Officer of the Cronos Group, the Indemnitee serves as a
director, officer or fiduciary.
-1-
<PAGE> 3
1.3 "Disinterested Director" means a director of the Company who is not
and was not a party to the Proceeding in respect of which indemnification is
sought by lndemnitee.
1.4 "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the type customarily incurred
in connection with prosecuting, defending, appearing as a witness in, preparing
to prosecute or defend or appear as a witness in, or investigating a Proceeding.
1.5 "Indemnitee" refers to each present and future director and officer
of the Company.
1.6 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or lndemnitee in any action to determine lndemnitee's rights under this
Agreement.
1.7 "Proceeding" means any pending, threatened or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
administrative hearing or any other proceeding whether civil, criminal,
administrative or investigative in which Indemnitee is or may be involved as a
witness, respondent, or defendant by reason of being, having been or having
agreed to become a director or executive officer of the Company, or, at the
request of the Company, being, having been, or having agreed to become a
director, officer or fiduciary of any other entity or enterprise.
2. Indemnification and Advances.
2.1 The Company shall advance all Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within fifteen days after the
receipt by the Company of a request therefor, accompanied or preceded by
reasonable evidence of such Expenses and by an undertaking to repay all Expenses
advanced to the extent Indemnitee shall be adjudicated, or determined pursuant
to Section 3.2 or 3.3, to be not entitled to indemnification therefor (which
undertaking shall be accepted by the Company without reference to Indemnitee's
financial ability to repay any such advances).
-2-
<PAGE> 4
2.2 Except as specifically provided in Sections 3.1, 3.2 and 3.3, within
60 days after receipt of a request therefor the Company shall indemnify
Indemnitee to the full extent permitted by law against all Expenses, judgments,
penalties, fines and amounts paid in settlement actually and reasonably incurred
by him or her or on his or her behalf in connection with any Proceeding or any
claim, issue or matter therein. A request for indemnification shall be
accompanied by reasonable evidence of the amount for which indemnification is
requested, and shall indicate a choice of Independent Counsel, if any, to make
any determination pursuant to Section 3.3.
2.3 Notwithstanding any other provision of these Indemnification
Policies, Indemnitee shall be indemnified against all Expenses attributable to
any Proceeding (or any claim, issue or matter relating thereto) which was
adjudicated or determined by a court or other body of competent jurisdiction or
authority, on the merits or otherwise, in Indemnitee's favor or which was
terminated by dismissal or withdrawal with or without prejudice.
3. Exceptions
3.1 No indemnification shall be provided an Indemnitee with respect to
any claim, issue or matter to the extent that Indemnitee has been adjudicated
not to have acted in good faith and in a manner which the Indemnitee believed to
be in, or not opposed to, the best interests of the Company and, with respect to
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not create a presumption that the Indemnitee acted in a manner contrary to
that specified herein.
3.2 If a Change of Control has not occurred, no indemnification shall be
provided to an Indemnitee to the extent that, within 60 days of the receipt by
the Company of a request for indemnification, Indemnitee has been determined
(after investigation) by (a) the Board of Directors of the Company by majority
vote of a quorum of Disinterested Directors, or (b) if such a quorum is not
obtainable, or if directed by majority vote of a quorum of Disinterested
Directors, Independent Counsel (selected by majority vote of the Disinterested
Directors or, if none, by majority vote of the Board of Directors) in a written
opinion, not to have acted in good faith and in a manner which the Indemnitee
believed to be in, or not opposed to, the best interests of the Company, and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful.
3.3. If a Change in Control has occurred, no indemnification shall be
provided an Indemnitee to the extent that, within 60 days of the receipt by the
Company of a request for indemnification, Indemnitee has been determined (after
investigation) by (a) the Independent Counsel specified by Indemnitee in the
request
-3-
<PAGE> 5
for indemnification or (b) if no such specification is made, by a person,
persons or entity who would be entitled to make such a determination pursuant to
Section 3.2 if a Change in Control had not occurred, not to have acted in good
faith and in a manner which the Indemnitee believed to be in, or not opposed to,
the best interests of the Company and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. A person, persons
or entity making a determination pursuant to this Section 3.3 shall presume that
Indemnitee acted so as to be entitled to indemnification, and the Company shall
have the burden of proof in overcoming that presumption.
3.4 Indemnitee shall cooperate with any person, persons or entity making
an investigation pursuant to Section 3.2 or 3.3 to the extent reasonably
requested. Any costs or expenses (including attorneys' fees and disbursements)
incurred by Indemnitee in so cooperating shall be borne by the Company
(irrespective of the determination as to Indemnitee's entitlement to
indemnification), and the Company hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
4. Remedies of Indemnitee
4.1 In the event that (i) a determination is made that Indemnitee is not
entitled to indemnification under these Indemnification Policies, (ii) a
required advancement of Expenses is not timely made, or (iii) payment of any
required indemnification is not timely made within the 60-day period prescribed
in Sections 3.2 and 3.3, Indemnitee shall be entitled to seek an award in
arbitration before the International Chamber of Commerce, if Indemnitee is
resident other than in the United States, or before JAMS/ENDISPUTE if Indemnitee
is resident in the United States. Judgment upon any arbitration award may be
entered in any court having jurisdiction. Any such arbitration shall be
conducted in accordance with the rules and procedures of the arbitral forum.
Indemnitee shall commence a proceeding seeking such an adjudication or an award
in arbitration within 270 days following the date on which Indemnitee first has
knowledge of his right to commence such proceeding. The Company shall not oppose
Indemnitee's right to seek any such adjudication or award in arbitration, and
the Company shall not contest the jurisdiction over it of any of the aforesaid
arbitral forums in any proceeding brought by an Indemnitee under these
Indemnification Procedures.
4.2 In the event that a determination shall have been made pursuant to
these Indemnification Policies that Indemnitee is not entitled to
indemnification, any such judicial proceeding or arbitration shall be conducted
in all respects de novo, on the merits, and Indemnitee shall not be prejudiced
by reason of such adverse determination. If a Change of Control shall have
occurred, in any such arbitration the Company shall have the burden of proving
that Indemnitee is not entitled to
-4-
<PAGE> 6
indemnification or advancement of Expenses, as the case may be, notwithstanding
such adverse determination.
4.3 The Company shall be precluded from asserting in any judicial
proceeding or arbitration that the procedures and presumptions of these
Indemnification Policies are not valid, binding and enforceable and shall
stipulate in any such court or before any such arbitrator that the Company is
bound by all the provisions of these Indemnification Policies.
4.4 In the event that Indemnitee seeks an award in arbitration to
enforce his or her rights under, or to recover damages for breach of, these
Indemnification Policies, Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all expenses
(of the types described in the definition of Expenses) actually and reasonably
incurred by him or her in such arbitration, if he or she prevails therein or if
such recovery is ordered by the arbitrator. If it shall be determined in such
adjudication that Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication or arbitration shall be
appropriately pro-rated.
5. Security. To the extent requested by the Indemnitee and approved by the
Company's Board of Directors, the Company may at any time and from time to time
provide security to the Indemnitee for the Company's obligations hereunder
through an irrevocable bank letter of credit, funded trust or other collateral.
Any such security, once provided to the Indemnitee, may not be revoked or
released without the prior written consent of Indemnitee.
6. Insurance. To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors or executive officers of
the Company (or fiduciaries of any other enterprise), Indemnitee shall be
covered by such policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any director or executive officer
(or fiduciary) under such policy or policies, whether or not Indemnitee is still
a director or executive officer of the Company, or the Company's Affiliates. The
Company shall not be liable under these Indemnification Policies to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
8. General.
8.1 The rights provided by these Indemnification Policies shall not be
exclusive of any other rights to which Indemnitee may at any time be entitled
under
-5-
<PAGE> 7
applicable law, the Company's articles of incorporation or bylaws, any
agreement, a vote of stockholders, or otherwise.
8.2 The indemnification provided to the Indemnitee by these
Indemnification Procedures shall continue until and terminate upon the later of
(a) ten (10) years after the date that Indemnitee shall have ceased to serve as
a director or executive officer of the Company, or as a fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights hereunder and of any proceeding commenced by Indemnitee relating
thereto.
8.3 In the event of any payment to an Indemnitee under these
Indemnification Procedures, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of Indemnitee, who shall take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
8.4 If any provision or provisions of these Indemnification Policies
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
these Policies shall not in any way be affected or impaired thereby: and (b) to
the fullest extent possible, these Policies shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
8.5 Indemnitee agrees promptly to notify the Company in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or matter which may be
subject to indemnification or advancement of Expenses covered hereunder;
provided, however, that the failure to give any such notice shall not disqualify
the Indemnitee from indemnification hereunder.
8.6 All notices, requests, demands and other communications hereunder
shall be in writing and shall have been duly given if (i) actually received, or
(ii) mailed by certified or registered mail, postage prepaid, on the third
business day after the date on which it is so mailed.
9. Effectiveness and Applicability of Indemnification Policies
9.1 These Indemnification Policies shall be effective August 4, 1999,
and shall apply to any claim for indemnification made by an Indemnitee from and
after
-6-
<PAGE> 8
August 4, 1999. These Indemnification Policies may be modified from time to time
to time by the Board of Directors of the Company, but no such modification shall
adversely affect the rights of any Indemnitee that have accrued prior to the
date of the modification of these Indemnification Procedures.
-7-
<PAGE> 1
EXHIBIT 4.4
LETTER AGREEMENT BY AND BETWEEN THE COMPANY AND
MEESPIERSON AND FUNB, DATED OCTOBER 1999, GRANTING
EXTENSION UNTIL NOVEMBER 30, 1999 TO FILE
REGISTRATION STATEMENT
UNDER THE WARRANT AGREEMENT
<PAGE> 2
The Cronos Group
444 Market Street, 15th Floor
San Francisco, California 94111
Attention: Dennis J. Tietz
Chief Executive Officer
Re: Warrant Agreement dated as of July 30, 1999 By and Among The
Cronos Group, MeesPierson N.V., and First Union National Bank
Ladies and Gentlemen:
Reference is made to the Warrant Agreement identified above, as amended
by Amendment No. 1 thereto, dated as of August 11, 1999 (the Warrant Agreement,
as amended, referred to hereinafter as the "Warrant Agreement"). Section 8.1 of
the Warrant Agreement reads, as is here relevant, as follows:
"Subject to the foregoing, the Company [The Cronos Group] shall
prepare and file a registration statement covering the Registerable
Securities so requested to be registered as soon as practicable and
within 60 days after the Closing Date."
The "Closing Date" referred to was August 2, 1999, and, accordingly, the
above-referenced covenant calls for the filing of a registration statement by
The Cronos Group (the "Company") on or before October 4, 1999. The
Warrantholders hereby grant the Company an extension within which to comply with
the Company's obligation to file a registration statement under Section 8.1 of
the Warrant Agreement to November 30, 1999.
-1-
<PAGE> 3
Other than as modified hereby, the Warrant Agreement and each and every
term thereof remains in full force and effect.
MEESPIERSON N.V.
Dated: October 3, 1999 By: /s/ Hans Hanegraaf
---------------------------------
Its: Senior Account Manager
FIRST UNION NATIONAL BANK
Dated: October 1, 1999 By: /s/ Jessica Tisdale
---------------------------------
Its: Vice President
ACCEPTED AND AGREED TO:
THE CRONOS GROUP
By: /s/ DENNIS J. TIETZ
--------------------------------
Dennis J. Tietz
Chief Executive Officer
-2-
<PAGE> 1
EXHIBITS 5.1 AND 8.1
OPINION OF ELVINGER HOSS & PRUSSEN
<PAGE> 2
[ELVINGER, HOSS & PRUSSEN LETTERHEAD]
2, Place Winston Churchill Tel(352)4466440
B.P. 425 Fax(352)442255
L-2014 Luxembourg
The Cronos Group
16, allee Marconi
Bolte Postale 260
L-2120 Luxembourg
(the "Company")
Luxembourg 22nd November 1999
O/Ref.: JH/KP/em
Re:
Dear Sirs,
We have acted as your special Luxembourg counsel in connection with the
issuance of 300,000 Common Shares and warrants to purchase an additional
200,000 Common Shares, as more fully described in the Registration Statement on
Form F-3 to be filed by the Company with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Registration
Statement").
We have examined the Articles of Incorporation of the Company. We have also
examined corporate proceedings relating to the authorisation and issuance of
the presently outstanding Common Shares and the warrants to purchase additional
Common Shares.
Based upon the foregoing and such further examination and inquiries as we have
deemed necessary, we are of the opinion that:
1. The Company is a corporation duly organised and validly existing under the
laws of Luxembourg;
2. The 300,000 Common Shares which are being offered by the Selling
Shareholders pursuant to the Registration Statement, have been duly
authorised and are validly issued, fully paid and non-assessable.
<PAGE> 3
- 2 -
3. The 200,000 Common Shares which may be purchased according to the warrants
and thereafter which may be sold by the Selling Shareholders pursuant to the
Registration Statement have been duly authorised and, when issued, will have
been validly issued and will be fully paid and non assessable.
4. We hereby confirm to you that, subject to the limitations set forth
thereunder, the statements of Luxembourg tax law set forth under the heading
"Tax Considerations" in the Prospectus covering such Common Shares (which is
part of the Registration Statement to which this letter is attached as an
exhibit) are accurate in all material respects.
We hereby consent to the filing of this opinion as an exhibit to the aforesaid
Registration Statement with the Securities and Exchange Commission and the
reference to us under the headings "Enforceability of Civil Liabilities", and
"Tax Consideration" in the Prospectus constituting a part of such Registration
Statement. By giving the foregoing consent, we do not admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act 1933, as amended.
Very truly yours,
ELVINGER, HOSS & PRUSSEN
By /s/ JEAN HOSS
---------------------------
Jean Hoss
<PAGE> 1
EXHIBIT 8.2
OPINION OF EDWIN COE AS TO TAX MATTERS
<PAGE> 2
[LETTERHEAD OF EDWIN COE]
22 November 1999
Our Ref : DPK/sp/18905001
Your Ref :
Dear Sirs
THE CRONOS GROUP
As English tax counsel for The Cronos Group a societe anonyme organised and
existing under the laws of Luxembourg (the "Company") and in connection with
the proposed offer and sale by the Company and certain selling shareholders of
common shares of the Company ("Common Shares"), we hereby confirm to you that,
subject to the limitations set forth thereunder, the statements of United
Kingdom Tax Law included under the heading "Tax Considerations" included in the
Prospectus covering such Common Shares which is part of the Registration
Statement on form S-3 to be filed by the Company with the Securities and
Exchange Commission ("the Registration Statement"), to which this letter is
attached as an exhibit, are accurate in all material respects.
We hereby consent to the filing with the Securities and Exchange Commission of
this Opinion as an exhibit to the Registration Statement and to the reference
to us under the headings "Tax Considerations" and "Legal Matters" in the
Prospectus.
By giving the foregoing consent we do not admit that we come within the
category of persons whose consent is required under section 7 of the Securities
Act of 1933, as amended.
Yours faithfully
/s/ EDWIN COE
- ------------------
EDWIN COE
<PAGE> 1
EXHIBIT 8.3
OPINION OF FOTENOS & SUTTLE, P.C.
ON CERTAIN TAX MATTERS
<PAGE> 2
[FOTENOS & SUTTLE, P.C. LETTERHEAD]
[email protected]
November 22, 1999
The Cronos Group
16 Allee Marconi
L-2120 Luxembourg
Ladies and Gentlemen:
As United States tax counsel for The Cronos Group, a societe anonyme
organized and existing under the laws of Luxembourg (the "Company"), and in
connection with the proposed offer and sale by the Company and certain selling
shareholders of common shares of the Company (the "Common Shares"), we hereby
confirm to you that, subject to the limitations set forth thereunder, the
statements of the United States federal income tax law set forth under the
heading "Tax Considerations" in the Prospectus covering such Common Shares
(which is a part of the registration statement on Form S-3 to be filed by the
Company with the Securities and Exchange Commission (the "Registration
Statement")), to which this letter is attached as an exhibit, are accurate in
all material respects.
We hereby consent to the filing with the SEC of this opinion as an
exhibit to the Registration Statement and to the reference to us under the
heading "Tax Considerations" and "Legal Counsel" in the Prospectus. By giving
the foregoing consent, we do not admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Respectfully submitted,
FOTENOS & SUTTLE, P.C.
By /s/ JAMES F. FOTENOS
----------------------------------
James F. Fotenos
<PAGE> 1
EXHIBIT 10.1
STOCK APPRECIATION RIGHTS AGREEMENT
BY AND BETWEEN
THE COMPANY AND PETER J. YOUNGER
DATED AS OF OCTOBER 13, 1999
<PAGE> 2
STOCK APPRECIATION RIGHTS AGREEMENT
THIS STOCK APPRECATION RIGHTS AGREEMENT (the "Agreement"), made and
entered into as of this 13th day of October, 1999, by and between The Cronos
Group, a limited liability company organized and existing under the laws of
Luxembourg (the "Company") and PETER J. YOUNGER ("Grantee");
W I T N E S S T H:
WHEREAS, at its meeting held on June 4, 1999 in Hamburg, Germany, the
Compensation Committee of the Board of Directors ("Board") of the Company
resolved to issue to Grantee, who is the Chief Financial Officer of the Company,
an option (the "Stock Option") to purchase Two Hundred Thousand (200,000) shares
of the authorized but unissued Common Stock of the Company, at an exercise price
of $4.375 per share; and
WHEREAS, at its meeting held on August 4, 1999, in New York, the Board
approved the grant of the Stock Option to Grantee, and authorized and directed
that the grant of the Stock Option be submitted to the shareholders of the
Company for their approval at the 1999 annual meeting; and
-1-
<PAGE> 3
WHEREAS the annual meeting of shareholders was scheduled to be held on
October 26, 1999, in Luxembourg; and
WHEREAS, on September 21, 1999, Interpool, Inc. ("Interpool") a
competitor of the Company, transmitted to the Company its proposal, subject to
numerous conditions, to acquire the Company by merger with Interpool's 50%-owned
subsidiary, Container Applications International, Inc., for $5.00 per share in
cash for all of the outstanding shares of Common Stock of the Company; and
WHEREAS, by letter dated October 8, 1999, the Company advised Interpool
that the Board of the Company had unanimously rejected the Interpool proposal as
inadequate and as not in the best interest of the Company or its shareholders;
and
WHEREAS, the Board has engaged First Union Securities, Inc. ("First
Union") to explore the strategic alternatives available to the Company in light
of the Interpool proposal; and
WHEREAS, in light of the importance of Grantee to the management of the
Company, in light of the importance of maintaining stability and continuity in
the management of the Company, and because the grant of the Stock Option to
Grantee has been deferred, the Board has resolved to award
-2-
<PAGE> 4
Grantee stock appreciation rights in lieu of the Stock Option on the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall be
defined as follows:
"Award" refers to the number of Share Units granted to Grantee.
"Award Payment" refers to the cash payment, before withholding,
to be made by the Company to Grantee for Exercised Share Units pursuant to the
provisions of Section 6 hereof.
"Board" refers to the Board of Directors of the Company.
"Cause" refers (i) to the willful non-performance of, or willful
misconduct in the performance of, Grantee's duties to the Company, and/or (ii)
to other willful misconduct constituting moral turpitude.
-3-
<PAGE> 5
"Change in Control" refers to:
(a) The acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act
of 1934, as amended) of 20% or more of the Common Stock then outstanding, but
shall not include any such acquisition by:
(i) The Company;
(ii) Any Subsidiary of the Company;
(iii) Any employee benefit plan of the Company or of any
Subsidiary of the Company;
(iv) Any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such plan;
(v) Any Person who becomes the beneficial owner of 20%
or more of the shares of Common Sock then outstanding as a result of a reduction
in the number of shares of Common Stock outstanding due to the repurchase of
shares of Common Stock by the Company unless and until such Person, after
becoming aware that such Person has become the beneficial owner of 20% or more
of the then outstanding shares of Common Stock, acquires beneficial ownership of
additional shares of Common Stock representing 1% or more of the
-4-
<PAGE> 6
shares of Common Stock then outstanding, whereupon a Change in Control shall be
deemed to have occurred; or
(vi) The situation where individuals who, as of the date
that this Agreement is approved by the Board, and subsequently elected members
of the Board whose election is approved or recommended by at least a majority of
such current Board members or their successors whose election was so approved or
recommended (other than any subsequently elected Board members whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board), cease for any reason to constitute at least a majority of the
Board.
"Committee" refers to the Compensation Committee of the Board,
any successor committee thereto or any other committee appointed by the Board to
supervise this Agreement.
"Common Stock" refers to the Common Stock of the Company, par
value $2 per share, or such other class or kind of shares or other securities as
may be applicable under Section 8 hereof.
-5-
<PAGE> 7
"Company" refers to The Cronos Group, a Luxembourg holding
company, or any successor to substantially all its business. For purposes of
this Agreement, all references to the "Company," where this Agreement calls for
a payment to Grantee, shall refer to the then Subsidiary of the Company that is
Grantee's employer for tax purposes.
"Exercise Date" refers to the date of receipt by the Company of
an Exercise Notice or, if such date is not a business day, then the first
business day occurring after the date of receipt of the Exercise Notice.
"Date of Grant" refers to October 13, 1999.
"Designated Beneficiary" refers to the Person designated, in
accordance with Section 12 hereof, by Grantee to receive payment for Grantee's
Share Units.
"Exercise Notice" refers to a notice substantially in form of
Exhibit A hereto.
"Exercised Share Units" refers to the number of Share Units
submitted for payment by Grantee or an Exercising Party pursuant to Section 5
hereof.
-6-
<PAGE> 8
"Exercising Party" refers to the Designated Beneficiary or, if
there is no Designated Beneficiary, to the executor, administrator, or other
Person or Persons who acquire Share Units from Grantee by will or by the laws of
descent and distribution.
"Fair Market Value" refers to the closing sales price of the
Common Stock as reported on the NASDAQ National Market on the applicable
Exercise Date or, if there were no sales on such Exercise Date, the average of
the highest and the lowest quoted selling prices on said market for the
preceding business day on which sales of Common Stock did occur.
"Grant Price" refers to $4.375.
"Hardship" refers to an emergency or any other unusual or
unexpected situation affecting Grantee's (or, if Grantee has died, the
Exercising Party's) financial affairs, including, but not limited to, illness or
accident involving Grantee or his dependents (or, if the Grantee has died, the
Exercising Party's dependents) which, in the opinion of the Committee, presents
a severe economic hardship to such Persons.
-7-
<PAGE> 9
"Payment Date" refers to the date on which Grantee first becomes
entitled to receive payment for all or any portion of the Share Units as
provided for in Section 7 hereof.
"Permanent Disability" refers to a physical or mental impairment
rendering Guarantee substantially unable to function as an officer of the
Company or a Subsidiary, as the case may be, for any period of six consecutive
months. Any dispute as to whether Grantee is subject to a Permanent Disability
shall be resolved by a physician mutually acceptable to Grantee and the
Committee, whose decision shall be final and binding upon Grantee and the
Company.
"Person" refers to any individual, firm, corporation, limited
liability company, partnership, or other entity.
"Share Unit Account" refers to the account maintained by the
Company with respect to the Award made to Grantee pursuant to Section 3 hereof.
"Share Unit" refers to the equivalent of one share of Common
Stock.
"Subsidiary" refers to (i) a corporation or other entity with
respect to which the Company, directly or indirectly, has the power, whether
through the
-8-
<PAGE> 10
ownership of voting securities, by contract or otherwise, to elect at least a
majority of the members of such corporation's board of directors or analogous
governing body, or (ii) any other corporation or other entity in which the
Company, directly or indirectly, has an equity or similar interest and which the
Committee designates as a Subsidiary for purposes of the Plan.
2. GRANT OF SHARE UNITS
The Company hereby grants to Grantee, effective the Date of
Grant, Two Hundred Thousand (200,000) Share Units. The grant of the Share Units
to Grantee entitles Grantee or an Exercising Party, as the case may be, to
receive cash payments from the Company in amounts and on the terms and
conditions hereinafter set forth.
3. SHARE UNIT ACCOUNT
The Company shall record in a separate account (the "Share Unit
Account") the number of Share Units granted to Grantee. The Company shall debit
Grantee's Share Unit Account from time-to-time with all Exercised Share Units,
effective the Exercise Date of such Exercised Share Units, and shall credit
-9-
<PAGE> 11
or debit, as appropriate, Grantee's Share Unit Account with any adjustments
required pursuant to Section 8 hereof.
4. TIME OF EXERCISE OF AWARD
(a) The Award shall become exercisable over a period of three
(3) years, as follows. Conditional upon Grantee's continuous employment by the
Company or a Subsidiary following the Date of Grant to the relevant anniversary
date, and subject to the following subsections of this Section 4, Grantee shall
have the right to exercise one-third (1/3) of the Award on each of the first
three anniversaries of the Date of Grant. Any portion of the Award that Grantee
has the right to exercise but elects not to exercise shall remain available for
exercise by Grantee under the terms of this Agreement, subject to the provisions
of Section 10 hereof.
(b) Subject to the provisions of subsection (c) below, if
Grantee resigns from the Company or a Subsidiary, then Grantee may exercise the
Award, as to any portion thereof that Grantee has the right to exercise as of
the date of resignation pursuant to the provisions of subsection (a) above,
within ninety (90) days from the date of such resignation. If Grantee does not
exercise
-10-
<PAGE> 12
the Award within the time specified herein, then the Award and the Share Units
granted thereunder shall lapse and terminate.
(c) If Grantee resigns from the Company or a Subsidiary within
twelve (12) months following a Change in Control, then and in such event the
Award shall become fully exercisable. In such event, Grantee may exercise the
Award at any time within ninety (90) days from the date of such resignation. If
Grantee does not exercise the Award within the time specified herein, then the
Award and the Share Units granted thereunder shall lapse and terminate.
(d) If Grantee is terminated by the Company or a Subsidiary
without Cause, then and in such event the Award shall become fully exercisable.
In such event, Grantee may exercise the Award at any time within ninety (90)
days from the date of such termination. If Grantee does not exercise the Award
within the time specified herein, then the Award and the Share Units granted
thereunder shall lapse and terminate.
(e) If Grantee is terminated by the Company or a Subsidiary for
Cause, then and in such event the Award, to the extent Grantee has not exercised
the Award prior to the date of such termination, shall lapse and terminate.
-11-
<PAGE> 13
(f) In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, then
and in such event the Award shall become fully exercisable. The Board of
Directors shall provide written notification of such proposed transaction to
Grantee (or, in the event of his death, to the Exercising Party) at least
fifteen (15) days prior to such proposed transaction, and the Award and the
Share Units then in the Share Unit Account, to the extent that the Award is not
fully exercised during such fifteen (15)-day period, shall lapse and terminate
immediately prior to such proposed transaction.
(g) In the event of the proposed dissolution or liquidation of
the Company, then and in such event the Award shall become fully exercisable.
The Board of Directors shall provide written notification of such proposed
transaction to Grantee (or, if he is not then living, to the Exercising Party)
within fifteen (15) days prior to such transaction, and the Award and the Share
Units then in the Share Unit Account, to the extent that the Award is not fully
exercised during such fifteen (15)-day period, shall lapse and terminate
immediately prior to such proposed transaction.
(h) In the event that Grantee becomes subject to a Permanent
Disability while employed by the Company or a Subsidiary, then and
-12-
<PAGE> 14
in such event the Award shall become fully exercisable by Grantee or by his
legal representative at any time within ninety (90) days from the date of
determination that the Grantee is subject to a Permanent Disability. If Grantee
or his legal representative does not exercise the Award within the time
specified herein, then the Award and the Share Units granted thereunder shall
lapse and terminate.
(i) In the event of the death of Grantee while employed by the
Company or a Subsidiary, then and in such event the Award shall become fully
exercisable by the Exercising Party at any time within ninety (90) days from the
date of Grantee's death. If the Exercising Party does not exercise the Award
within the time specified herein, then the Award and the Share Units granted
thereunder shall lapse and terminate.
5. METHOD OF EXERCISE
The Award shall be exercised by the delivery of a written
Exercise Notice, in the form included as Exhibit A hereto, by Grantee, or in the
case of Grantee's death, the Exercising Party, to the Company at its principal
place of business, stating the election to exercise the Award and the number of
Share Units in respect of which the Award is being exercised (the "Exercised
Share Units"). In no event shall the Award be exercised for fewer than 25,000
Share Units or, if
-13-
<PAGE> 15
less, the total number of Share Units then remaining in Grantee's Share Unit
Account.
6. AWARD PAYMENT
The Award Payment shall be the amount determined as follows:
(i) by multiplying the excess, if any, of the Fair Market Value
of a share of Common Stock of the Company on the Exercise Date over the Grant
Price by
(ii) the number of Exercised Share Units.
7. PAYMENT FOR EXERCISED SHARE UNITS
(a) Subject to the following subsections of this Section 7, the
Award Payment shall be made by the Company to Grantee (or the Exercising Party,
as the case may be) within ten (10) business days after the Exercise Date. The
Company shall have the right to withhold from the Award Payment such amounts as
the Company deems necessary or appropriate to satisfy any federal, state, local,
or foreign withholding tax requirement, including, but not limited to,
-14-
<PAGE> 16
income tax, FICA withholding, and excise tax. Grantee shall be obligated to pay
any and all taxes of any kind which may be imposed on Grantee or result from the
exercise of the Award during the Grantee's lifetime or at death.
(b) Grantee may elect to receive his Award Payment in any number
of equal annual installments, not to exceed four (4), commencing on the Payment
Date, as specified by Grantee in the Exercise Notice, provided that such written
election (which shall be irrevocable except as provided in subsection (c) below)
shall be made not later than December 31, 1999.
(c) In the event of a Change in Control, any election pursuant
to Subsection (b) above shall be automatically revoked as to any then unpaid
installments and full payment shall be made within ten (10) business days of the
date of the event giving rise to the Change in Control.
(d) In the event an election is made to receive the Award
Payment in installments, each succeeding installment shall be paid on the
anniversary date of the Payment Date.
(e) Anything to the contrary notwithstanding in this Section 7,
the Committee may, in its sole discretion, at the request of Grantee or an
Exercising Party made after Grantee's death, and in the event of Hardship,
accelerate
-15-
<PAGE> 17
payment of benefits payable to Grantee or the Exercising Party, as the case may
be.
8. ADJUSTMENT OF SHARE UNITS UPON CHANGES IN CAPITALIZATION
The number of Share Units covered by this Agreement and the
Grant Price shall be proportionately adjusted in the event of a subdivision of
the outstanding Common Stock of the Company, a declaration of a dividend payable
in Common Stock of the Company, a declaration of a dividend payable in a form
other than Common Stock of the Company in an amount that has a material effect
on the price of the Common Stock of the Company, a combination or consolidation
of the outstanding Common Stock of the Company (by reclassification or
otherwise) into a lesser number of shares of Common Stock, a recapitalization of
the Company, a spin-off, stock split, reverse stock split, or any other increase
or decrease in the number of issued and outstanding shares of Common Stock of
the Company effected without receipt of consideration by the Company; provided,
however, that the conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration." Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class or securities convertible into shares of stock of any
-16-
<PAGE> 18
class shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of Share Units subject to the Award or the Grant Price.
9. TRANSFER OF SHARE UNITS
Unless sooner terminated pursuant to the provisions of Sections
4 or 10 hereof,
(a) The Award shall be exercisable during Grantee's lifetime
only by Grantee and may not be transferred or assigned;
(b) The Award is transferable by Grantee upon Grantee's death by
will or by the laws of descent and distribution; and
(c) In the event of Grantee's death, the Exercising Party may
exercise any portion of the Award, as permitted by Section 4 hereof, that is
exercisable at the time of Grantee's death and that has not previously been
exercised by Grantee, provided that any such exercise must be made pursuant to
the provisions of Section 5 above.
(d) Other than as explicitly permitted by this Agreement,
Grantee's right to payment for Exercised Share Units shall not be subject in any
-17-
<PAGE> 19
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by creditors of Grantee.
10. TERMINATION OF AWARD
To the extent not earlier terminated by exercise in full in
accordance with this Agreement, the Award and the Share Units granted thereunder
shall terminate on the earliest to occur of the following dates:
(a) October 12, 2009; or
(b) As specified in Section 4 hereof.
11. RIGHTS AS SHAREHOLDER
Neither Grantee nor any Exercising Party will be deemed to be a
holder of any shares of Common Stock or have any rights as a shareholder of the
Company with respect to the Award or the Share Units.
12. DESIGNATION OF BENEFICIARY
-18-
<PAGE> 20
Grantee may at any time designate a beneficiary to receive
payment of his Award in the event of his death. Such designation shall be in
writing, signed by Grantee and delivered to the Company. Such designation may be
revoked at any time in writing by Grantee, in which case, a new designation may
be made.
13. MODIFICATION, EXTENSION AND RENEWAL
The Board may modify, extend, or renew the Award or accept an
exchange of the Award (to the extent not theretofore exercised) for the granting
of a new stock award in substitution therefor. However, notwithstanding the
foregoing provisions of this Section 13 or any other provision of this
Agreement, there shall be no modification, extension, or renewal of the Award
without the written consent of Grantee which would in any way alter or impair
any right of Grantee with respect to the Award or under this Agreement.
14. GRANTEE'S EMPLOYMENT
This Agreement provides Grantee no guarantee of continuing
employment with the Company or any Subsidiary. The terms of Grantee's
-19-
<PAGE> 21
employment with the Company or any Subsidiary are set forth in Grantee's
employment agreement.
15. UNFUNDED OBLIGATION
It is the intention of the Company and Grantee that the
obligation of the Company to make any Award Payment under this Agreement be
unfunded for tax and all other purposes. Grantee has the status of a general
unsecured creditor of the Company with respect to the making of any Award
Payment by the Company to Grantee. Prior to the making of any Award Payment for
any Exercised Share Units by the Company to Grantee under this Agreement,
nothing contained herein shall give Grantee any rights that are greater than
those of a general unsecured creditor of the Company.
16. DISPUTE RESOLUTION
Should any dispute or controversy arising from or related to
this Agreement arise between the parties that the parties are incapable of
resolving themselves through good faith negotiation, then such dispute or
controversy shall be submitted for resolution by J.A.M.S. ("JAMS") in San
Francisco, California,
-20-
<PAGE> 22
or at such other location as is agreed upon by the parties. Any dispute shall
first be submitted to JAMS for mediation pursuant to the mediation services
provided by JAMS. Should the dispute between the parties not be successfully
mediated by JAMS within 90 days of its submission (subject to any extension
agreed to by the parties) then and in such event the dispute shall be submitted
for binding arbitration by JAMS pursuant to the rules and practices of JAMS.
Unless agreed to by the parties, the representative of JAMS who attempts to
mediate any dispute between the parties shall not be the representative of JAMS
who arbitrates the dispute. Judgment upon any award by the arbitrator(s) may be
entered in any court having jurisdiction thereof. It is agreed that the
prevailing party in any such arbitration or other action arising from or
relating to this Agreement shall be entitled to reimbursement of its or his
reasonable costs and expenses, including attorneys' fees. Each party consents to
the exercise over it or him of personal jurisdiction by the arbitrator(s)
selected by JAMS to resolve any dispute hereunder.
17. NOTICES
(a) Any notice, demand or communication required or permitted to
be given by any provision of this Agreement shall be deemed properly given if
given in writing or by electronic mail and either delivered through a
-21-
<PAGE> 23
commercially-recognized overnight delivery service or, if sent by electronic
mail or telecopier, to the party or to an officer of the party to whom the same
is directed, addressed as follows:
(i) If to Cronos, to: The Cronos Group
444 Market Street, 15th Floor
San Francisco, California 94104
Attn: Dennis J. Tietz
Chief Executive Officer
Fax: (415) 677-9196
Email: [email protected]
(ii) If to Grantee, to: Peter J. Younger
The Cronos Group
Orchard Lea, Winkfield Windsor
Berkshire SL44RU England
Fax: 011 44 1344 894 104
Email: [email protected]
(b) Any party identified above may change the address to which
notices are to be given hereunder by giving notice to the other party in the
manner herein provided.
(c) All notices, demands, and requests shall be deemed to have
been given on the business day on which it was delivered by hand or commercial
messenger or air courier service to such party, at his or its address specified
above, or, if sent by facsimile or electronic mail, when electronically
confirmed. Any facsimile transmission or electronic mail not sent on a business
day, or not
-22-
<PAGE> 24
sent during the hours of 8:30 a.m. to 5:00 p.m. on a business day of the
recipient, shall be deemed sent on the next business day.
18. ENTIRE AGREEMENT
This Agreement (with its exhibit) represents the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes in their entirety all prior agreements and undertakings of the
parties with respect to the subject matter hereof, and may not be modified
except by means of a writing signed by a duly authorized representative of the
Company and by Grantee. This Agreement shall be governed by and construed
strictly in accordance with its terms and by the laws of State of California.
19. BINDING AGREEMENT
This Agreement shall be binding on the Company, its successors
and assigns, and Grantee and his executors, administrators, heirs, successors,
and assigns.
20. COUNTERPARTS
-23-
<PAGE> 25
This Agreement may be executed in several counterparts, all of
which together shall constitute one agreement binding upon all parties hereto,
notwithstanding that all parties have not signed the same counterpart.
IN WITNESS WHEREOF, the Company and Grantee have executed this
Agreement as of the day and year first above written.
THE CRONOS GROUP
By /s/ DENNIS J. TIETZ
----------------------------------
Dennis J. Tietz
Chief Executive Officer
And /s/ CHARLES THARP
---------------------------------
Charles Tharp
Director & Chair
Compensation Committee
/s/ PETER J. YOUNGER
-----------------------------
Peter J. Younger
-24-
<PAGE> 1
EXHIBIT 21.1
LIST OF PRINCIPAL SUBSIDIARIES OF THE COMPANY
<PAGE> 2
<TABLE>
<CAPTION>
NAME COUNTRY OF INCORPORATION % SHAREHOLDING
- ---- ------------------------ --------------
<S> <C> <C>
Cronos Containers Ltd UK 100
Cronos Containers N.V. Netherlands Antilles 100
Cronos Containers (Cayman) Ltd Cayman Islands 100
Cronos Equipment S.A. Liberia 100
Cronos Equipment Ltd UK 100
Cronos Containers Inc. USA 100
Cronos Containers PTE Ltd Singapore 100
Cronos Containers Pty Ltd Australia 100
Cronos Containers S.r.I. Italy 100
Cronos Containers (Hong Kong) Ltd Hong Kong 100
Cronos Containers Leasing Gmbh Germany 100
Cronos Containers (Belgium) N.V. Belgium 100
Cronos Capital Corp. USA 100
Cronos Securities Corp. USA 100
Advanced Property Services Ltd UK 100
Cronos Containers Scandinavia AB Sweden 100
Intermodal Leasing AB Sweden 100
Cronos Management N.V. Netherlands Antilles 100
Cronos Equipment (Jersey) Ltd Jersey 100
Cronos Containers Insurance Ltd Guernsey 100
Cronos Equipment (Bermuda) Ltd Bermuda 100
C G Finance B.V. The Netherlands 100
Cronos Holdings / Investments (U.S.), Inc. USA 100
IEA (Europe) Ltd UK 100
Cronos Funding (Bermuda) Ltd Bermuda 100
</TABLE>
