<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or 240.14a-12
</TABLE>
THE CRONOS GROUP
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[LOGO]
THE CRONOS GROUP
SOCIETE ANONYME
, 1999
Dear Shareholders:
It is our pleasure to invite you to the annual meeting of shareholders of
The Cronos Group (the "Company"), which will be held at 10 a.m. (local time) on
Tuesday, October 26, 1999 at the Hotel Le Royal, 12 Boulevard Royal, Luxembourg.
At the meeting, we will ask you to confirm the appointment of two directors
who currently sit on the Board and to elect three new directors, to approve the
grant of a stock option to an executive officer of the Company, to adopt stock
and equity incentive plans for our employees and non-employee directors, and to
conduct such other business as is described in the Notice of Annual Meeting of
Shareholders and Proxy Statement accompanying this letter.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, WE URGE YOU TO SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE IN
ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE MEETING. The
vote of each shareholder is important and your cooperation in promptly returning
your executed proxy would be appreciated. Each proxy is revocable and will not
affect your right to vote in person. Therefore, even if you execute a proxy, you
may still attend the annual meeting of shareholders and vote your shares in
person.
We appreciate the continuing interest and support of our shareholders and
look forward to seeing many of you at the meeting.
Sincerely,
Dennis J. Tietz
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
[LOGO]
THE CRONOS GROUP
SOCIETE ANONYME
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
<TABLE>
<S> <C>
DATE: Tuesday, October 26, 1999
TIME: 10:00 a.m.
PLACE: Hotel Le Royal
12 Boulevard Royal
Luxembourg
</TABLE>
MATTERS TO BE VOTED UPON:
1. Confirmation and election of two existing directors and election of
three new directors.
2. Approval of the grant of a stock option to an executive officer.
3. Approval of the Company's 1999 Stock Option Plan.
4. Approval of the Company's Non-Employee Directors' Equity Plan.
5. Appointment of Deloitte & Touche LLP as the Company's independent
auditors for the year ending December 31, 1999 for both the consolidated
and unconsolidated accounts and grant of authorization to the Board of
Directors to fix the compensation of the independent auditors.
6. Approval of the consolidated and unconsolidated financial statements of
the Company for the year ended December 31, 1998.
7. Discharge of certain directors pursuant to Article 74 of Luxembourg's
Company Law from the execution of their mandate for the year ended
December 31, 1998.
8. Allocation of the profit/loss reported by the Company for the year ended
December 31, 1998.
9. Any other matter properly brought before the shareholders at the annual
meeting or any adjournment thereof.
The address of the Company's registered office is 16, Allee Marconi, L-2120
Luxembourg and its telephone number is 352 453 145. The Company is organized in
Luxembourg as a Societe Anonyme with registrar number RCS LUX B27.489.
On Behalf of the Board of Directors,
Dennis J. Tietz
Chairman of the Board
And Chief Executive Officer
September , 1999
<PAGE> 4
[LOGO]
THE CRONOS GROUP
SOCIETE ANONYME
16, ALLEE MARCONI
L-2120, LUXEMBOURG
------------------------
PROXY STATEMENT
Your vote at the annual meeting is important to us. Please vote your shares
of Common Stock by completing the enclosed proxy card and returning it to us in
the enclosed envelope. This Proxy Statement has information about the annual
meeting and was prepared by the Company's management for the Board of Directors.
This Proxy Statement was first mailed to shareholders on , 1999.
CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information About Voting............................ 2
Proposals 1. Election of Five Directors................. 4
2. Approval of Grant of Stock Option To
Executive Officer......................................... 6
3. Approval of 1999 Stock Option Plan......... 7
4. Approval of Non-Employee Directors' Equity
Plan...................................................... 9
5. Appointment of Deloitte & Touche LLP as
Independent Auditors...................................... 12
6 - 9. Proposals for Submission to the
Shareholders under Luxembourg Law......................... 14
Committees of the Board of Directors........................ 14
Compensation of Executive Officers.......................... 15
Certain Relationships and Related Transactions.............. 19
Board Compensation Committee Report On Executive
Compensation.............................................. 21
Performance Graph........................................... 23
Beneficial Stock Ownership.................................. 23
Other Matters............................................... 25
Shareholder Proposals for 2000 Annual Meeting............... 25
Other Information........................................... 25
</TABLE>
1
<PAGE> 5
GENERAL INFORMATION ABOUT VOTING
WHO IS SOLICITING YOUR VOTE?
These proxy materials are furnished in connection with the solicitation by
the Board of Directors of the Company of proxies to be voted at the Company's
1999 annual meeting and at any meeting following an adjournment thereof.
WHO CAN VOTE?
You can vote your shares of Common Stock if our records show that you owned
the shares on September 10, 1999. A total of 9,158,378 shares of Common Stock
can vote at the annual meeting. You get one vote for each share of Common Stock.
The enclosed proxy card shows the number of shares you can vote.
WHO ARE THE PROXYHOLDERS?
The persons named in the enclosed proxy are directors and/or officers of
the Company. A shareholder has the right to appoint a person (who need not be a
shareholder of the Company) as proxy to attend and act on such shareholder's
behalf at the annual meeting.
HOW DO I VOTE BY PROXY?
Follow the instructions on the enclosed proxy card to vote on each proposal
to be considered at the annual meeting. Sign and date the proxy card and mail it
back to us in the enclosed envelope. The shares of Common Stock represented by
any valid proxy in favor of management's nominees named in the accompanying
proxy will be voted for, against, or withheld from voting (abstain) on all
matters specified in the form of proxy, in accordance with any specification or
instruction made by a shareholder on the proxy. In the absence of any such
specification or instruction, such shares of Common Stock will be voted for,
against, or withheld from voting (abstain) on all of the matters specified in
the form of proxy as the proxyholder shall determine, in his discretion.
The accompanying proxy for the annual meeting confers discretionary
authority upon the persons named therein with respect to amendments or
variations to matters identified in this notice and proxy statement and with
respect to such other business or matters which may properly come before the
annual meeting or any adjournment.
WHAT IF OTHER MATTERS COME UP AT THE ANNUAL MEETING?
The matters described in this proxy statement are the only matters we know
of that will be voted on at the annual meeting. If other matters are properly
presented at the meeting, the proxyholders will vote your shares as they see
fit.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. At any time before the vote on a proposal, you can change your vote
either by giving the Company's secretary a written notice revoking your proxy
card or by signing, dating, and returning to us a new proxy card. We will honor
the proxy card with the latest date.
CAN I VOTE IN PERSON AT THE ANNUAL MEETING RATHER THAN BY COMPLETING THE PROXY
CARD?
Although we encourage you to complete and return the proxy card to ensure
that your vote is counted, you can attend the annual meeting and vote your
shares in person.
WHAT DO I DO IF MY SHARES ARE HELD IN "STREET NAME"?
If your shares are held in the name of your broker, a bank, or other
nominee, that party should give you instructions for voting your shares.
HOW ARE VOTES COUNTED?
Under Luxembourg law, actions requiring the approval of shareholders can
generally be taken by approval of the holders of a simple majority of shares
present or represented, without regard to any minimum quorum requirements. Two
exceptions are (i) to amend the Articles of Incorporation ("Articles") and (ii)
any action for which Luxembourg law or the Articles require more than a majority
vote or require a specified quorum.
The Company's Common Stock is 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 percent of the outstanding shares of the company's common
voting stock. The Company will observe this requirement in holding its annual
meeting, and accordingly a quorum of at least one-third of the outstanding
shares of the Company's Common Stock entitled to vote at the annual meeting,
represented in person or by proxy, will be necessary to convene the annual
meeting.
2
<PAGE> 6
The Company's Articles require the approval of the holders of a simple
majority of the outstanding shares of the Common Stock of the Company for the
election of directors to the Board. Therefore, with respect to Proposal No. 1,
if you do not sign and return your proxy card, your shares will be counted as
abstentions and will have the effect of a negative vote.
The affirmative vote of the holders of a majority of the shares of Common
Stock of the Company present in person or represented by proxy and entitled to
vote is required to approve the other matters to be acted upon at the annual
meeting. Abstentions and broker non-votes are each included in the determination
of the number of shares present and voting. A broker "non-vote" occurs when a
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received instructions from the beneficial
owner. Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders or with respect to the election of directors, whereas
broker non-votes are not counted for purposes of determining whether a proposal
has been approved or a nominee has been elected.
WHO PAYS FOR THIS PROXY SOLICITATION?
We do. In addition to sending you these materials, some of our employees
may contact you by telephone, by mail, or in person. None of these employees
will receive extra compensation for doing this. We have retained Corporate
Investor Communications, Inc. to assist us in soliciting your proxy for a fee of
$2,500, plus reasonable out-of-pocket expenses.
3
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF FIVE DIRECTORS
The Company's Articles provide that it is to be managed by a Board of
Directors composed of at least three members who need not be shareholders of the
Company and who shall be elected by the holders of a simple majority of the
outstanding shares of the Common Stock for a term of three years and until their
successors are elected. The terms of the directors are staggered so that the
terms of approximately one-third of the total number of directors expire in each
year.
Presently, the Board of Directors is composed of Ernst-Otto Nedelmann,
Maurice Taylor, Charles Tharp, and Dennis J. Tietz (Chairman). Mr. Nedelmann's
term is due to expire at the close of the 1999 annual meeting. Mr. Nedelmann
will not stand for re-election. Mr. Taylor was elected to the Board of Directors
at the 1998 annual meeting for a two-year term expiring at the conclusion of the
annual meeting in 2000 and is therefore not standing for election at this annual
meeting. The Board appointed Messrs. Tietz and Tharp to fill the vacancies
created by the resignations of Directors Rudolf J. Weissenberger and Axel
Friedberg (who resigned as directors on March 30 and 31, 1999, respectively). If
elected, Mr. Tietz will serve as director and Chairman of the Board until the
conclusion of the annual meeting in 2001 and the election of his successor, and
Mr. Tharp will serve as a director until the conclusion of the annual meeting in
2000 and the election of his successor. We have further nominated Peter J.
Younger, Robert M. Melzer, and Stephen Nicholas Walker to serve terms of two
years, three years, and three years, respectively. Each of the nominees has
agreed to be named in this Proxy Statement and to serve as a director if elected
by the shareholders. Should any nominee unexpectedly not be available for
election, then the Board would propose a substitute nominee.
If the full slate of nominees is elected, then the composition of our Board
of Directors would be as follows:
<TABLE>
<CAPTION>
DIRECTOR CLASS TERM EXPIRATION
-------- ----- -------------------
<S> <C> <C>
Maurice Taylor................................... I 2000 Annual Meeting
Charles Tharp.................................... I 2000 Annual Meeting
Dennis J. Tietz.................................. II 2001 Annual Meeting
Peter J. Younger................................. II 2001 Annual Meeting
Robert M. Melzer................................. III 2002 Annual Meeting
S. Nicholas Walker............................... III 2002 Annual Meeting
</TABLE>
WE RECOMMEND THAT YOU VOTE FOR ALL FIVE OF THE NOMINEES.
VOTE REQUIRED. Election of each of the five nominees requires the approval
of the holders of a simple majority of the outstanding shares of Common Stock of
the Company.
A. RATIFICATION OF TWO DIRECTORS APPOINTED BY THE BOARD
We are asking you to confirm the appointment as directors of Dennis J.
Tietz and Charles Tharp, who were appointed by the Board as directors on March
30, 1999 (Mr. Tietz) and March 31, 1999 (Mr. Tharp).
Dennis J. Tietz
Mr. Tietz, age 46, was elected Chief Executive Officer of the Company on
December 11, 1998, and Chairman of the Board of Directors on March 30, 1999 to
fill the vacancies created by Mr. Weissenberger's resignations as CEO and
Chairman of the Board. If elected, Mr. Tietz will serve as a Class II Director
until the annual meeting in 2001 and his successor is elected. From 1986 until
his election as CEO of the Company, Mr. Tietz was responsible for the
organization and marketing of investment programs managed by Cronos Capital
Corp. ("CCC"), a subsidiary of the Company. From 1981 to 1986, Mr. Tietz
supervised container lease operations in both the United States and Europe.
Prior to joining CCC in 1981, Mr. Tietz was employed by Trans Ocean Leasing
Corporation, San Francisco, California, a container leasing company, as regional
4
<PAGE> 8
manager based in Houston, with responsibility for leasing and operational
activities in the U.S. Gulf. Mr. Tietz holds a B.S. degree in Business
Administration from San Jose State University.
Charles Tharp
Mr. Tharp, age 49, was appointed to the Board of Directors of the Company
as an outside director on March 31, 1999, to fill the vacancy created by the
resignation of Dr. Friedberg. If elected, Mr. Tharp will serve as a Class I
Director until the annual meeting in 2000 and his successor is elected. Mr.
Tharp is based in Washington D.C. and has for the last five years acted as a
consultant to pension funds and foundations on international investment policy,
fiduciary issues, and financial management. Mr. Tharp is a director of The
Info/Change Foundation, Washington D.C. He held several positions, including
Executive Director (the Chief Executive Officer) of the Pension Benefit Guaranty
Corporation, a federal agency, from 1982 to 1985. Mr. Tharp has served on the
boards of insurance companies, pension funds, and real estate holding companies
in California, Ohio, and Bermuda. Mr. Tharp holds a B.A. degree in History from
Yale University and an M.A. in Jurisprudence from Oxford University, England.
B. ELECTION OF THREE NEW DIRECTORS TO THE BOARD
At the annual meeting, we will nominate Messrs. Younger, Melzer, and Walker
to serve as directors. Mr. Younger currently serves as the Chief Financial
Officer of the Company. If elected, Mr. Younger will serve as a Class II
Director until the annual meeting in 2001 and his successor is elected. Messrs.
Melzer and Walker are not employed by the Company. If elected, Messrs. Melzer
and Walker will serve as Class III Directors until the annual meeting in 2002
and their successors are elected.
Peter J. Younger
Mr. Younger, age 42, was appointed Controller of the Company in 1991 and
its Chief Financial Officer in March 1997. Mr. Younger joined CCC (then called
Intermodal Equipment Associates) in 1987 as its vice president and director of
accounting and controller. Prior to 1987, Mr. Younger was a certified public
accountant and a principal with the accounting firm of Johnson, Glaze and Co. in
Salem, Oregon. Mr. Younger holds a B.S. degree in Business Administration from
Western Baptist College, Salem, Oregon.
Robert M. Melzer
Mr. Melzer, age 58, served as President and Chief Executive Officer of
Property Capital Trust, Inc., a publicly-traded real estate investment trust
("REIT"), from 1992 until 1999 when the company completed its plan to dispose of
its investments and distributed the proceeds to its shareholders. Mr. Melzer
serves as a director of Genesee & Wyoming, Inc., a short-line railroad holding
company, a director of Beacon Capital Partners, Inc., a REIT, a trustee of MGI
Properties, a REIT, a trustee of Beth Israel Deaconess Medical Center and a
director of CareGroup, Inc., the parent of six not-for-profit hospitals in
Eastern Massachusetts. Mr. Melzer holds a B.A. degree in Economics from Cornell
University and an M.B.A. from the Harvard Business School.
Stephen Nicholas Walker
Since 1995, Mr. Walker, age 45, has served as Senior Vice President of
Investments of PaineWebber Inc. From 1982 to 1995, he served as Senior Vice
President of Investments of Prudential Securities Inc. Mr. Walker holds an M.A.
degree in Jurisprudence from Oxford University, England.
C. CONTINUING DIRECTOR
Maurice Taylor
Mr. Taylor is serving a two-year term expiring at the conclusion of the
annual meeting in 2000, and is therefore not standing for election at this
annual meeting. Mr. Taylor, age 38, based in Geneva, Switzerland, is an
independent consultant in international trade finance. He serves on the boards
of numerous privately-held
5
<PAGE> 9
trading companies in Europe. Mr. Taylor holds a B.A. degree in Mathematical
Economics from Brown University.
PROPOSAL NO. 2
APPROVAL OF GRANT OF STOCK OPTION TO EXECUTIVE OFFICER
At the annual meeting, you will be asked to approve the grant of a stock
option to Peter J. Younger, the Chief Financial Officer of the Company. In
December 1998, the Board approved the appointment of Dennis J. Tietz to serve as
Chief Executive Officer of the Company. At that time, the Board granted to Mr.
Tietz an option to purchase 300,000 shares of the Company's Common Stock as part
of a compensation package to induce Mr. Tietz to assume the responsibilities of
Chief Executive Officer of the Company. The option fully vested upon grant, but
Mr. Tietz has agreed, should the stock option to Mr. Younger be approved by the
shareholders, to a three-year vesting schedule similar to that that will apply
to Mr. Younger's option. (For the terms of Mr. Tietz Employment Agreement, see
"Compensation of Executive Officers -- Employment Agreements" herein.)
At the time that Mr. Tietz was appointed Chief Executive Officer of the
Company, Mr. Tietz and the Board also concluded that it was important to retain
the services of Mr. Younger as the Company's Chief Financial Officer. The Board
therefore agreed, in order to induce Mr. Younger to remain with the Company, and
subject to shareholder approval, to grant to him an option to purchase 200,000
shares of the Company's Common Stock at the same price as the exercise price of
the shares subject to Mr. Tietz' option -- $4.375 per share, the closing price
of the Common Stock of the Company, as reported on the NASDAQ National Market,
for December 11, 1998, the date of Mr. Tietz' appointment.
The effectiveness of the grant of the stock option to Mr. Younger is
subject to shareholder approval. If approved, the term of Mr. Younger's option
will run for ten years from the date of grant (June 3, 1999). Mr. Younger's
stock option vests and becomes exercisable over three years, with one-third of
the shares subject to option exercisable on each of the first three
anniversaries of the date of grant, conditional upon Mr. Younger's continued
employment by the Company. If Mr. Younger's employment terminates by reason of
death, permanent disability, removal (other than for cause), termination
following a change of control of the Company, or by reason of a breach by the
Company of Mr. Younger's Employment Agreement or a reduction in his title,
position, duties and/or authority, then Mr. Younger's option will vest in full.
Should the shareholders approve the grant of the stock option to Mr. Younger,
then Mr. Tietz has agreed to a modification of his stock option to provide for a
vesting schedule identical to that set forth in Mr. Younger's stock option, but
with the date of grant defined as December 11, 1998, the date the Board granted
Mr. Tietz his stock option.
Payment for the shares under Mr. Younger's stock option is to be by cash,
the surrender of shares of Company Common Stock already owned by the option
holder (valued at their fair market value on the date of surrender), or an
alternate form of payment as may be approved by the Compensation Committee. The
number and price of the shares subject to option will be adjusted in the event
of any stock split, declaration of a stock dividend, or like changes in the
capital stock of the Company. The options are not transferable other than by
will or the laws of descent and distribution. Mr. Younger will have no rights as
a shareholder until such time as he purchases shares under the option.
The Company, as a Luxembourg holding company, does not pay U.S. income tax.
Under Luxembourg law, the Company will pay a 1% capital duty on the exercise
price of any shares purchased by Mr. Younger under his stock option. As a
Luxembourg holding company the Company also pays a tax of 0.2% on its "capital,"
defined as the average aggregate market value of its outstanding shares of
Common Stock for the year. Shares purchased by Mr. Younger under his stock
option will increase the number of outstanding shares of Common Stock of the
Company and therefore the capital base of the holding company tax.
VOTE REQUIRED. If the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy at the annual meeting are
voted for approval of the stock option grant to Mr. Younger, the grant will be
approved.
THE BOARD RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE STOCK OPTION GRANT
TO MR. YOUNGER.
6
<PAGE> 10
PROPOSAL NO. 3
APPROVAL OF 1999 STOCK OPTION PLAN
At the annual meeting, you will be asked to approve the Company's 1999
Stock Option Plan (the "Stock Option Plan"), which was approved by the Board of
Directors on June 3, 1999. The Stock Option Plan will replace the Company's
Management Equity Investment Plan ("MEIP"). See our discussion of the MEIP under
"Report on Executive Compensation" below. The text of the proposed Stock Option
Plan is included in this Proxy Statement as Appendix A.
WE RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE STOCK OPTION PLAN.
VOTE REQUIRED. If the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy at the annual meeting
vote for the Company's Stock Option Plan, the Stock Option Plan will be
approved.
SUMMARY OF THE STOCK OPTION PLAN. The following is a summary of the Stock
Option Plan and should be read together with the full text of the plan:
PURPOSE AND ELIGIBILITY....... The purposes of the Stock Option Plan are to
attract, motivate and retain key employees, to
compensate them for their contributions to our
growth and profits and to encourage them to own
the Company's Common Stock.
SHARES AVAILABLE.............. A total of 500,000 shares of Common Stock are
authorized for issuance under the Stock Option
Plan. We will adjust the number of shares
available for issuance under the Stock Option
Plan if there are changes from any split-up,
combination or exchange of shares,
consolidation, spin-off or recapitalization of
shares or any like capital adjustment or the
payment of any stock dividend.
INDIVIDUAL EMPLOYEE LIMIT..... The aggregate number of stock options that may
be awarded to any eligible employee over the
term of the Plan is limited to 100,000 shares.
ADMINISTRATION................ The Compensation Committee of the Board of
Directors will administer the Stock Option
Plan, select participants from among eligible
employees, and determine the form, terms and
conditions of awards.
AWARDS........................ The Stock Option Plan authorizes the grant of
incentive stock options and nonqualified stock
options.
Generally, an option will become exercisable
over a period of four years, with one-fourth
( 1/4) of the shares subject to option
exercisable on or after each of the first four
anniversaries of the date of grant, conditional
upon the participant's continued employment by
the Company.
In the event of a merger or the sale of
substantially all of the assets of the Company,
each outstanding option will be assumed or an
equivalent option will be substituted by the
successor company. In the event that the
successor company does not agree to assume the
option or to substitute an equivalent option or
right, the Compensation Committee will provide
the employee with the right to exercise the
option as to all of the optioned shares,
including shares as to which it would not
otherwise be exercisable.
7
<PAGE> 11
TERMINATION................... The Stock Option Plan terminates on December
31, 2002. No awards will be made after December
31, 2002.
STOCK OPTIONS................. Stock options may be either nonqualified or
incentive stock options. The exercise price of
an incentive stock option will be determined by
the Compensation Committee, but will not be
less than 100% of the fair market value of the
shares at the time such option is granted. Fair
market value means the closing sales price of
the Common Stock on the NASDAQ National Market
(or other market on which our Common Stock is
traded). The exercise price at which shares may
be purchased upon exercise of a nonqualified
stock option will also not be less than 100% of
the fair market value of the shares, but the
Compensation Committee has the discretion to
determine the date at which or the period of
time over which the fair market value of the
shares subject to the option will be
determined.
The exercise price of a stock option may be
paid in cash or previously owned stock or both.
The Compensation Committee will set the term of
each option, but no incentive stock option will
be exercisable more than 10 years after the
date such option is granted and, to the extent
the aggregate fair market value of Common Stock
with respect to which incentive stock options
granted to a particular employee become
exercisable for the first time during any
calendar year exceeds $100,000, such options
shall be treated as a nonqualified stock
option.
AMENDMENT..................... We may amend or terminate the Stock Option Plan
at any time. However, we must obtain
stockholder approval:
- to increase the maximum number of shares
issuable in the aggregate or to any one
individual, or
- if such approval is required to comply with
Section 422 of the Internal Revenue Code with
respect to incentive stock options or for
purposes of Section 162(m) of the Internal
Revenue Code.
PLAN BENEFITS. As of the date of this Proxy Statement, we have made no
awards under the Stock Option Plan. The Board's grant of a stock option to Mr.
Younger, described in the previous section of this Proxy Statement, was not made
under the Stock Option Plan and the number of shares of Common Stock of the
Company subject to the option granted to Mr. Younger will not be counted against
the limit on the number of shares to be subject to options granted under the
Stock Option Plan. It is not possible at this time to determine the benefits or
amounts that will be received by any particular employee or group of employees
at the Company.
LUXEMBOURG TAX CONSEQUENCES. Under Luxembourg law, the Company will pay a
capital duty equal to 1% of the exercise price of all shares purchased by
employees under the Stock Option Plan. As a Luxembourg holding company, the
Company also pays a tax of 0.2% on its "capital," defined as the average
aggregate market value of its outstanding shares of Common Stock for the year.
Shares issued pursuant to the exercise of options under the Stock Option Plan
will therefore increase the capital base on which this tax is assessed. The
Company will not otherwise be subject to any Luxembourg tax on the grant or
exercise of options granted under the Stock Option Plan, or on the disposal of
shares acquired under the Plan, nor will the Company be entitled to any
deduction under Luxembourg law with respect to the grant or exercise of options.
8
<PAGE> 12
FEDERAL INCOME TAX CONSEQUENCES. The Company is a Luxembourg holding
company that conducts its container leasing business through subsidiaries of the
Company. The following summarizes the United States federal income tax
consequences of issuing and exercising stock options under the Stock Option Plan
with respect to grants made to employees of the Company's primary United States
operating subsidiary, Cronos Capital Corp. ("CCC"):
NONQUALIFIED STOCK OPTIONS.... The grant of a nonqualified stock option has no
immediate federal income tax effect: the
employee will not recognize taxable income and
CCC will not receive a tax deduction.
When the employee exercises the option, the
employee will recognize ordinary income in an
amount equal to the excess of the fair market
value of the Common Stock on the date of
exercise over the exercise price. CCC is
required to withhold tax on the amount of
income recognized. CCC will also have the right
to require the employee to remit such tax to
CCC. CCC will receive a tax deduction equal to
the amount of income recognized by CCC's
employee in respect of the options exercised.
When the employee sells Common Stock acquired
from exercising a nonqualified stock option,
any gain or loss will be taxed as a capital
gain or loss (long-term or short-term,
depending on how long the shares have been
held). Certain additional rules apply if the
exercise price for an option is paid in shares
previously owned by the employee.
INCENTIVE STOCK OPTIONS....... When an employee is granted an incentive stock
option, or when the employee exercises the
option, the employee will generally not
recognize taxable income (except for purposes
of the alternative minimum tax) and CCC will
not receive a tax deduction.
If the employee holds the shares of Common
Stock for at least two years from the date of
grant, and one year after the date of exercise,
then any gain or loss will be treated as
long-term capital gain or loss. If, however,
the shares are disposed of during this period,
the option will be treated as a nonqualified
stock option. CCC will only receive a tax
deduction if the shares are disposed of during
this period. The deduction will be equal to the
amount of taxable income the employee
recognizes.
This is only a summary of the federal income tax consequences of the grant
and exercise of options under the Stock Option Plan to employees of the
Company's United States operating subsidiary, CCC. It is not a complete
statement of all tax consequences. In particular, we have not discussed the
income tax laws of any city, state or foreign country where a participant
resides.
PROPOSAL NO. 4
APPROVAL OF NON-EMPLOYEE DIRECTORS' EQUITY PLAN
At the annual meeting, you will be asked to approve the Company's
Non-Employee Directors' Equity Plan (the "Directors' Equity Plan"), which was
approved by the Board of Directors on August 4, 1999. The text of the proposed
Directors' Equity Plan is included in this Proxy Statement as Appendix B.
WE RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE DIRECTORS' EQUITY PLAN.
9
<PAGE> 13
VOTE REQUIRED. If the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy at the annual meeting
vote for the Company's Directors' Equity Plan, the Directors' Equity Plan will
be approved.
SUMMARY OF THE DIRECTORS' EQUITY PLAN. The following is a summary of the
Directors' Equity Plan and should be read together with the full text of the
plan:
PURPOSE....................... The purpose of the Directors' Equity Plan is to
attract, motivate and retain non-employee
directors of outstanding ability, and to foster
a greater identity of interest between our
non-employee directors and our shareholders.
ELIGIBILITY................... Only directors of the Company and of
subsidiaries of the Company who are not
employees of the Company or of any of our
subsidiaries may participate in the Directors'
Equity Plan.
TYPES OF AWARDS............... A non-employee director will participate in the
Directors' Equity Plan in two ways: by electing
to receive, in lieu of the cash compensation
otherwise payable to the non-employee director,
an award of "director's stock units," and
through the receipt of non-qualified stock
options to acquire shares of Common Stock of
the Company.
SHARES AVAILABLE.............. A total of 150,000 shares of Common Stock will
be available for issuance under the Directors'
Equity Plan, both to supply shares for the
settlement of director's stock units into
Common Stock of the Company and for issuance
upon the exercise of director's options. We
will adjust the number of shares available for
issuance under the Plan if there is any merger,
consolidation, recapitalization,
reclassification, stock dividend, distribution
of property, special cash dividend or other
change in corporate structure.
DIRECTOR'S STOCK UNITS........ A director may elect to reduce all or part of
the cash compensation otherwise payable for
services to be rendered by him or her as a
director and to receive in lieu thereof
director's stock units.
The number of director's stock units received
by an electing non-employee director shall be
equal to the compensation the non-employee
director elects not to receive, multiplied by
125%, with the resultant product divided by the
fair market value of the Company's Common Stock
as of the date that the deferred compensation
would otherwise have been payable to the non-
employee director. By way of example, should a
non-employee director defer $100 in
compensation, where the Common Stock of the
Company at the time was trading at $5, then the
non-employee director would receive 25
director's stock units ($100 x 125%, divided by
$5).
A director's stock units vest in full on the
third anniversary of the date of grant. If a
director's service on the Board of Directors
terminates by reason of death, disability,
resignation or removal, then the director's
stock units will immediately vest. Directors
may defer the vesting of their directors' stock
units within certain limits.
We will credit director's stock units to a
bookkeeping account that we maintain for each
director. We will also credit a director's
account with an amount equal to any dividends
paid by the
10
<PAGE> 14
Company on a number of shares of Common Stock
corresponding to the number of director's stock
units credited to the account; credits will be
in the form of additional director's stock
units.
As soon as practicable following vesting, we
will settle director's stock units by
delivering to the director the equivalent
number of shares of Common Stock. Prior to
settlement, directors will not have the rights
of a stockholder in any shares corresponding to
the director's stock units.
In its sole discretion, the Board of the
Company may authorize the creation of trusts,
such as a "rabbi trust," or other arrangements,
to meet the Company's obligations created under
the Directors' Equity Plan for the issuance of
director's stock units.
DIRECTOR'S OPTIONS............ A non-employee director who is initially
elected at an annual or special meeting of
shareholders, or appointed to the Board other
than in connection with an annual meeting shall
receive, as of the date of such initial
election or appointment (or August 4, 1999 (the
date the Directors' Equity Plan was approved by
the Board), if later), director's options to
purchase 15,000 shares of Common Stock.
The exercise price of each director's option
will be the fair market value of the Common
Stock on the date of election or appointment
(or August 4, 1999, if later). We define fair
market value as the closing sales price of the
Company's Common Stock as reported on the
NASDAQ National Market (or other market on
which the Common Stock trades).
Director's options will vest and become
exercisable over three years, with one-third of
the director's options exercisable as of each
of the three anniversaries following the date
of grant, assuming, in each instance, that the
director has continued to serve as a member of
the Board until the relevant anniversary. If a
director's service on the Board of Directors
terminates by reason of death, disability,
removal (other than for cause), or resignation
within twelve months of a change in control,
then the director's options will immediately
vest.
Director's options will generally expire on the
date of the annual meeting held in the tenth
calendar year following the date of grant. Upon
termination of a director's service on the
Board, vested director's options generally must
be exercised within sixty days.
ADMINISTRATION................ The Compensation Committee of the Board of
Directors will administer the Directors' Equity
Plan.
AMENDMENT AND TERMINATION..... The Board of Directors will have authority to
amend or terminate the Directors' Equity Plan
at any time. However, the Board of Directors
may not, without your approval:
- increase the number of shares available for
issuance,
- increase the number of director's stock units
that may be issued to an electing
non-employee director, or
- reduce the exercise price of a director's
option.
11
<PAGE> 15
TERM.......................... Unless terminated earlier by the Board of
Directors, the Directors' Equity Plan will
expire at the annual meeting held in 2002.
PLAN BENEFITS. If the Directors' Equity Plan is approved by the
shareholders, then each of our outside directors will automatically receive
options to purchase 15,000 shares of Common Stock of the Company, and each would
be eligible to elect to receive, in lieu of cash compensation for services as a
director, director's stock units. Currently, only director Maurice Taylor
qualifies as a non-employee director of the Company whose term of office will
continue after the 1999 annual meeting. If elected to the Board, each of Charles
Tharp, Robert M. Melzer, and Stephen Nicholas Walker would also qualify as a
non-employee director and be entitled to participate in the Directors' Equity
Plan. In such event, the exercise price of the options granted to Messrs. Taylor
and Tharp, currently outside directors sitting on the Board, would be $4.094 per
share (the closing price of the Company's shares on August 4, 1999, the date the
Directors' Equity Plan was approved by the Board), and the exercise price of the
options granted to Messrs. Melzer and Walker would be the closing price of the
Company's Common Stock as of the date of the annual meeting of shareholders.
LUXEMBOURG TAX CONSEQUENCES. Luxembourg taxes the income earned by
directors of Luxembourg holding companies for their services rendered as
directors, and requires such companies to withhold a portion of the director's
compensation for the payment of such taxes. Directors' compensation includes the
spread between the exercise price of shares under option and the market value of
the shares on date of exercise. As discussed under "Proposal No. 3, Approval of
1999 Stock Option Plan -- Luxembourg Tax Consequences" herein, Luxembourg also
assesses a 1% capital duty on the exercise or subscription price of shares
issued by Luxembourg holding companies and a 0.2% tax on a holding company's
"capital;" shares issued pursuant to the exercise of director's options and in
settlement of director's stock units will increase the capital base on which
this tax is assessed.
FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of the United
States federal income tax consequences of the Directors' Equity Plan with
respect to directors who are residents or citizens of the United States. As the
Company is a Luxembourg holding company, the taxation of the Company with
respect to the grant or exercise of director's stock units and director's
options under the Directors' Equity Plan is determined by Luxembourg law, not
United States tax law, except to the extent that an award of director's stock
units or director's options is made to a non-employee director of a U.S.
subsidiary of the Company in consideration of the director's services rendered
to such subsidiary as a director.
The award of director's stock units to an outside director will have no
immediate federal income tax effect: the non-employee director will not
recognize taxable income as a result of the award. When the director's stock
units vest and the units are settled in shares of Common Stock of the Company,
then the non-employee director will recognize ordinary income in an amount equal
to the fair market value of the Common Stock on the date of vesting.
The federal income tax consequences of issuing and exercising directors'
options under the Directors' Equity Plan may be summarized as follows: (i) the
grant of a director's option has no immediate federal income tax effect: the
director will not recognize taxable income as a result of the grant; (ii) when
the director exercises the director's option, the director will recognize
ordinary income, measured by the difference between the exercise price and the
fair market value of the shares on the date of exercise; and (iii) when the
director sells Common Stock obtained by the exercise of a stock option, any gain
or loss will be taxed as a capital gain or loss (long-term or short-term,
depending on how long the shares have been held).
PROPOSAL NO. 5
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS
For the past three years, Moore Stephens, S.a.r.I. ("Moore Stephens"), has
served as the Company's independent auditors and has provided the Company with
competent and valued audit and accounting services. However, the Board has
selected Deloitte & Touche LLP ("Deloitte & Touche") as the Company's
independent auditors for the fiscal year ending December 31, 1999. The Board has
selected Deloitte & Touche in view of the global reach of the Company's business
and the services that Deloitte & Touche can render to
12
<PAGE> 16
the Company, and not as the result of any disagreement or displeasure with Moore
Stephens. The Company elected to replace Moore Stephens on August 13, 1999, and
appointed Deloitte & Touche as its auditors, subject to shareholder approval, on
August 16, 1999.
The decision to change auditors was made by the Board of Directors of the
Company. The Board has an Audit Committee of two members. At the Board meeting
at which the decision was made to change auditors, the member of the Audit
Committee who was present and participated in the meeting concurred in the
decision to change auditors. The other member of the Audit Committee was not
present at the meeting of the Board and did not participate in the decision.
In the audit report on the Company's 1998 Consolidated Financial
Statements, Moore Stephens drew attention to the fact that the Company was
negotiating the refinancing of certain loans. Moore Stephens advised that these
conditions raised substantial doubt that the Company would be able to continue
as a going concern.
In the audit report on the Company's 1997 Consolidated Financial
Statements, Moore Stephens drew attention to the fact that the Company was
negotiating the refinancing of certain loans and was not in compliance with the
terms of an escrow agreement. Moore Stephens advised that this and other factors
raised substantial doubt that the Company would be able to continue as a going
concern.
In addition, Moore Stephens drew attention to certain notes to the
Company's 1998 and 1997 Consolidated Financial Statements relating to financing
and recomposition expenses, items affecting fourth quarter results of
operations, commitments and contingencies and related party transactions. Moore
Stephens advised that allegations had been made which could result in the
Company becoming a defendant in lawsuits alleging various financial
improprieties in the operation of certain third party Austrian investment
entities and their sponsoring companies.
During the Company's two most recent fiscal years, December 31, 1998 and
1997, and the subsequent interim period preceding the Board's decision to
replace Moore Stephens, there were no disagreements between Moore Stephens and
the Company regarding any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures which would have
caused Moore Stephens to make reference to the subject matter of the
disagreement in connection with its report on the Company's financial
statements.
During the Company's two most recent fiscal years, December 31, 1998 and
1997, internal controls existed to the extent that Moore Stephens was not
required to advise the Company that the internal controls necessary for the
Company to develop reliable financial statements did not exist. No information
came to Moore Stephens' attention that led it to no longer be able to rely on
management's representations, or unwilling to associate with the Company's
financial statements.
During the Company's two most recent fiscal years, December 31, 1998 and
1997, and any subsequent interim period preceding the Board's decision to
replace Moore Stephens, Moore Stephens has advised the Company that there has
been no need to expand the scope of its audit, or that information has come to
its attention that if further investigated, would materially impact the fairness
or reliability of a previously issued audit report or the underlying financial
statements; or cause Moore Stephens to be unwilling to rely on the
representations of the Company's management or be associated with the Company's
financial statements.
During the Company's two most recent fiscal years, December 31, 1998 and
1997 and the subsequent period prior to the Board's decision to engage Deloitte
& Touche, the Company had no consultations with Deloitte & Touche regarding the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements. No written reports or oral advice were
provided to the Company that Deloitte & Touche concluded was an important factor
considered by the Company in reaching a decision as to an accounting, auditing
or financial reporting issue. In addition, there were no matters that were
either the subject of disagreement or a reportable event.
13
<PAGE> 17
WE RECOMMEND THAT YOU VOTE FOR THE APPOINTMENT OF DELOITTE & TOUCHE AS
INDEPENDENT AUDITORS FOR THE COMPANY FOR THE CURRENT YEAR AND TO AUTHORIZE THE
BOARD OF DIRECTORS TO FIX THE COMPENSATION PAYABLE TO THE INDEPENDENT AUDITORS.
In the event that ratification of the Board's selection of auditors is not
approved by a majority of the shares of Common Stock voting thereon, then
management will review its selection of auditors.
Representatives of Moore Stephens, the Company's auditors for 1998, and
Deloitte & Touche are expected to be present at the annual meeting and will have
an opportunity to make a statement if they so desire. The representatives will
also be available to respond to appropriate questions from the shareholders.
PROPOSAL NOS. 6 - 9
PROPOSALS FOR SUBMISSION TO THE
SHAREHOLDERS UNDER LUXEMBOURG LAW
The Board will submit to the shareholders at the annual meeting for their
consideration and approval the following matters as required by Luxembourg's
Company Law:
6. A proposal to approve the reports of the Company's independent auditors
and Board of Directors on the Company's financial statements for the year
ended December 31, 1998;
7. A proposal to approve the Company's consolidated and unconsolidated
financial statements for the year ended December 31, 1998;
8. A proposal to discharge the following directors of the Company from the
execution of their mandate as directors for the year ended December 31,
1998:
[To be supplied]
9. A proposal to approve the allocation of the profit/loss reported by the
Company for the year ended December 31, 1998.
WE RECOMMEND THAT YOU VOTE FOR APPROVAL OF EACH OF THE FOREGOING FOUR
PROPOSALS.
There accompanies this Proxy Statement the Company's annual report for
1998, which includes the Company's consolidated financial statements and its
auditor's report thereon for the year ended December 31, 1998. We are separately
including with this Proxy Statement the Company's financial statements and its
auditor's report thereon for the year ended December 31, 1998, on an
unconsolidated basis.
The proposal to release from their mandate the directors of the Company
listed above who served as such at any time during the 1998 calendar year is
valid only if the Company's balance sheet at December 31, 1998, contains no
omission or false information concealing the true situation of the Company, and,
with regard to any acts carried out which fall outside the scope of the
Company's Articles of Incorporation, only if such matters have been specifically
indicated in the notice of meeting. The Board is not aware of any such ground
for the invalidity of the discharge of directors requested herein.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established Audit, Compensation, and Special Litigation
Committees. No director attended fewer than 75% of the aggregate number of
meetings of the Board and of the committee(s) on which he served while he was in
office.
The Audit Committee consists of Directors Nedelmann and Taylor. The Audit
Committee has general oversight responsibility with respect to the Company's
financial reporting, reviews the results and scope of the audit and other
services provided by the Company's independent auditors, and is responsible for
recommending to the Board the appointment of the Company's independent auditors.
The Compensation Committee is comprised of Messrs. Tharp, Nedelmann, and
Taylor. The Compensation Committee is responsible for establishing and
supervising the compensation and benefit plans for the officers and key
employees of the Company.
14
<PAGE> 18
The Special Litigation Committee is comprised of Messrs. Taylor, Tietz, and
Tharp. This Committee has been established to review transactions between the
Company and present and former management to determine if management engaged in
any misfeasance or improper self dealing. The Committee is also responsible for
supervising the Company's efforts to recover the indebtedness owed to the
Company by its former Chairman, Stefan M. Palatin. The Special Litigation
Committee anticipates completing its investigation by the end of 1999.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables provide information as to compensation for services of
the executive officers of the Company and of its operating subsidiaries who had
the highest combination of salary and bonus in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------------
SECURITIES
ANNUAL COMPENSATION OTHER UNDERLYING ALL
-------------------------- ANNUAL OPTIONS/ OTHER
NAME AND PRINCIPAL SALARY BONUS COMP. SARS COMP.(1)
POSITION YEAR ($) ($) ($) ($) ($)
------------------ ---- ------- ------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
CURRENT OFFICERS:
Dennis J. Tietz(2)................ 1998 237,824 71,435 27,790 300,000 5,000
Chief Executive Officer......... 1997 232,250 59,774 7,220 -- 5,000
1996 246,324 79,873 9,308 -- 5,000
Peter J. Younger(3)............... 1998 205,352 61,443 10,614 -- --
Chief Financial Officer......... 1997 177,963 43,290 9,688 -- --
1996 124,233 105,693 8,919 -- --
</TABLE>
- ---------------
(1) This column represents retirement plan contributions made by the Company on
behalf of the named officer.
(2) Mr. Tietz was elected Chief Executive Officer of the Company on December 11,
1998, and Chairman of the Board on March 30, 1999. The compensation
reflected in the table for Mr. Tietz prior to his election as Chief
Executive Officer represents his compensation as President of Cronos Capital
Corp., a subsidiary of the Company.
(3) Mr. Younger was elected Chief Financial Officer of the Company in March
1997. The compensation in the table for Mr. Younger for periods prior to his
election as Chief Financial Officer represents his compensation as Vice
President and Controller of the Company.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ----------------------
------------------------------------ SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTIONS/ OTHER
SALARY BONUS COMP. SARS COMP.(1)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
--------------------------- ---- ------- ------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
FORMER OFFICERS:
Rudolf J. Weissenberger(2)....... 1998 330,821 -- 9,805 -- --
Former Chief 1997 -- -- -- -- --
Executive Officer 1996 -- -- -- -- --
Stefan M. Palatin(3)............. 1998 237,500 74,944 10,585 -- --
Former Chief 1997 353,075 90,866 19,694 -- --
Executive Officer 1996 342,786 300,709 18,687 -- --
Eivind A. Eriksen(4)............. 1998 290,818 87,038 18,003 -- --
Former Chief 1997 278,443 67,291 18,141 -- --
Operating Officer 1996 223,881 124,921 16,895 -- --
Stephen J. Brocato(5)............ 1998 265,168 73,644 12,067 -- --
Former President of 1997 184,414 44,854 15,288 -- --
Cronos Containers Limited 1996 119,975 103,433 14,319 -- --
</TABLE>
15
<PAGE> 19
- ---------------
(1) This column represents retirement plan contributions made by the Company on
behalf of the named officer.
(2) Mr. Weissenberger served as acting Chief Executive Officer of the Company
from May 20, 1998 until December 11, 1998, when he resigned.
(3) Mr. Palatin served as Chief Executive Officer of the Company through June 8,
1998.
(4) Mr. Eriksen served as Chief Operating Officer of the Company from August 14,
1995 to December 31, 1998, when he resigned.
(5) Mr. Brocato served as President of Cronos Containers Limited, an operating
subsidiary of the Company, from June 1, 1997 until March 31, 1999, when he
resigned.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AND ASSESSED
NUMBER OF OPTIONS/SARS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM
OPTIONS/SARS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------ ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Tietz............... 300,000 100% 4.375 12/08 131,250 262,500
Peter J. Younger.............. -- -- -- -- -- --
Rudolph J. Weissenberger...... -- -- -- -- -- --
Stefan M. Palatin............. -- -- -- -- -- --
Eivind A. Eriksen............. -- -- -- -- -- --
Stephen J. Brocato............ -- -- -- -- -- --
</TABLE>
The option granted to Mr. Tietz to purchase 300,000 shares of Common Stock
of the Company was granted to him at the time he was hired by the Board as Chief
Executive Officer, on December 11, 1998. The option grants Mr. Tietz the right
to purchase up to 300,000 shares of the Company's Common Stock at an exercise
price of $4.375 per share, the closing price of the Common Stock of the Company
on December 11th. The term of Mr. Tietz' option is ten years, and may be
exercised, in whole or in part, at any time from the date of grant (subject to
modification as described below). Payment for the shares under option is to be
by cash, the surrender of shares of Company Common Stock already owned by Mr.
Tietz (valued at their fair market value on the date of surrender), or an
alternate form of payment as may be approved by the Compensation Committee. The
number and price of the shares subject to option will be adjusted in the event
of any stock split, declaration of a stock dividend, or like changes in the
capital stock of the Company. The option is not transferable other than by will
or the laws of descent and distribution. Mr. Tietz has no rights as a
shareholder of the Company until such time as he purchases shares under the
option.
Mr. Tietz has agreed with the Board of Directors of the Company to an
amendment to his stock option, conditional upon the shareholders' approval of
the option grant to Mr. Younger (see Proposal No. 2 herein), whereby the stock
option granted to Mr. Tietz will vest over three years from the date of grant
(December 11, 1998) with the same vesting schedule, and subject to the same
events of acceleration, as are set forth in Mr. Younger's option agreement. See
the discussion of these terms under Proposal No. 2 herein.
The last two columns of the table above, the potential realizable value of
Mr. Tietz' stock option grant, has been calculated under the assumption that the
market price of the Company's Common Stock will appreciate in value from the
date of grant to the end of the term of Mr. Tietz' option (December 10, 2008) at
either 5% per annum or 10% per annum. The actual value, if any, realized by Mr.
Tietz on the exercise of his option will depend on the excess of the fair market
value of the Company's Common Stock over the exercise
16
<PAGE> 20
price on the date the option is exercised, and may be substantially different
from the figures assumed for purposes of preparing the table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis J. Tietz.................. -- -- 321,600 -- -- --
Peter J. Younger................. -- -- 10,800 -- -- --
Rudolf J. Weissenberger.......... -- -- -- -- -- --
Stefan M. Palatin................ -- -- -- -- -- --
Eivind A. Eriksen................ -- -- -- -- -- --
Stephen J. Brocato............... -- -- 10,800 -- -- --
</TABLE>
A. COMPENSATION OF DIRECTORS.
Each outside director received an annual fee of $25,000 for services as a
director during 1998 and $6,000 for each board meeting attended ($1,000 for
attendance by conference telephone). All directors receive reimbursement for
travel and other expenses directly related to their activities as directors. The
Board has revised the fees payable to outside directors for attendance at
meetings to $3,000 per meeting ($1,000 for participation by conference
telephone). Outside directors will also receive $1,500 per calendar quarter for
serving on a committee of the Board (but in no event will payment be made for
participating on more than two committees of the Board). These revisions will be
effective from and after the annual meeting of shareholders.
B. EMPLOYMENT AGREEMENTS
CURRENT OFFICERS. Both Messrs. Tietz and Younger entered into Employment
Agreements with the Company in 1998. Mr. Younger's Employment Agreement has been
revised, effective August 4, 1999. The following are summaries of each
Employment Agreement, as currently in effect.
Dennis J. Tietz. The Company and Mr. Tietz entered into an Employment
Agreement, effective December 11, 1998 (the "Agreement"). The initial term of
the Agreement is until December 31, 2000. The Company may elect to renew the
term for additional one-year terms, subject to the agreement of Mr. Tietz. The
Company may at any time discharge Mr. Tietz from active service, without advance
notice, by providing a notice of termination. Mr. Tietz may terminate the
Agreement at any time upon the occurrence of certain events, such as a change in
his duties or position. The Company will pay Mr. Tietz a base salary ("Base
Salary") of $235,000 a year, increased, effective as of January 1, 1999, to
$300,000 a year, payable in monthly installments. The Base Salary may be
increased in the discretion of the Board of Directors. In any event, Mr. Tietz'
Base Salary for the year 2000 and for each year thereafter shall be increased by
a minimum amount equal to the increase in the consumer price index.
Mr. Tietz will receive bonus compensation at such times, and in such
amounts, as the Board of Directors may determine. In view of Mr. Tietz' role in
the continued management of the U.S. container limited partnerships sponsored by
Cronos Capital Corp., a subsidiary of the company (Mr. Tietz remains President
of CCC), Mr. Tietz is also entitled under the Agreement to receive from CCC
three per cent of the fees and distributions payable by the partnerships to CCC.
Mr. Tietz is entitled to participate in any future share option plans or award
of options or restricted shares, as may be implemented by the Company,
including, if approved by the shareholders at the annual meeting, the 1999 Stock
Option Plan. Mr. Tietz receives additional benefits, including an automobile.
If, at any time, Mr. Tietz' employment is terminated for an event or events
as defined in the Agreement, then Mr. Tietz will be entitled to a severance
payment (the "Severance Payment") from the Company. (The event or events as
defined in the Agreement are as follows: (a) the Company terminates Mr. Tietz'
17
<PAGE> 21
employment without "Cause", (b) Mr. Tietz terminates his employment with the
Company "For Good Reason," and (c) Mr. Tietz resigns following a "Change of
Control"). The Severance Payment will be made in lump sum within thirty days of
Mr. Tietz' last day of active service. It will comprise all accrued obligations
plus the sum of annual salary and a bonus amount multiplied by a fraction (the
numerator of which is number of days remaining to the expiration of the Tietz
Employment Agreement from the last day of paid active service and the
denominator of which is 365) plus a lump sum that represents a pro-rated annual
bonus for the year of termination. In addition, all options and restricted stock
that were granted before the date of termination but have not yet vested shall
vest upon Mr. Tietz' final day of active service and all such options and also
options that previously vested shall remain exercisable in accordance with the
terms, if any, for retirees of the relevant option plan.
The Company also granted Mr. Tietz a stock option to acquire 300,000 shares
of the Company's Common Stock, at an exercise price of $4.375 per share. For a
description of this stock option, see "Compensation of Executive Officers --
Option Grants In Last Fiscal Year" herein.
Peter J. Younger. The Company and Mr. Younger entered into an Employment
Agreement in 1998. At the request of the Board, and for the purpose of
conforming the general provisions of his Employment Agreement with those of Mr.
Tietz, the Company and Mr. Younger entered into a Revised Employment Agreement
as of August 4, 1999 (referred to hereinafter as the "Agreement"). The initial
term of the Agreement is from January 1, 1999 through December 31, 2000. The
Company may elect to renew the term for additional one-year terms, subject to
the agreement of Mr. Younger. The Company may, at any time, discharge Mr.
Younger from active service, without advance notice, by providing a notice of
termination. Mr. Younger may terminate the agreement, at any time, upon the
occurrence of certain events, such as a change in his duties or position. The
Company will pay Mr. Younger a Base Salary ("Base Salary") of $250,000 a year,
payable in monthly installments. The Base Salary may be increased in the
discretion of the Board of Directors. In any event, Mr. Younger's Base Salary
for the year 2000 and for each year thereafter shall be increased by a minimum
amount equal to the increase in the Consumer Price Index.
Mr. Younger will receive bonus compensation at such times, and at amounts,
as the Board of Directors may determine. Mr. Younger is entitled to participate
in any future share option plans or award of options or restricted shares, as
may be implemented by the Company, including, if approved by the shareholders at
the annual meeting, the 1999 Stock Option Plan.
Mr. Younger receives additional benefits, including a "tax equalization"
reimbursement to compensate him for any increased taxes he pays on his
employment income while residing in Great Britain from that that would otherwise
be paid by him as a resident of the State of California. Mr. Younger is also
entitled to reimbursement for his and his family's moving expenses upon his
return to the United States.
If, at any time, Mr. Younger's employment is terminated for an event or
events as defined in the Agreement, then Mr. Younger shall be entitled to a
"severance payment" calculated utilizing the same formula as applies to Mr.
Tietz, described above.
The Company has also granted Mr. Younger a stock option to acquire 200,000
shares of the Company's Common Stock, at an exercise price of $4.375 per share,
conditional upon shareholder approval. For a description of this stock option,
see "Proposal No. 2, Approval of Grant of Stock Option to Executive Officer"
herein.
FORMER OFFICERS. The following summarizes the compensation paid or payable
by the Company to former officers of the Company who resigned in 1998.
Rudolf J. Weissenberger. The Company entered into an agreement on May 20,
1998 with Admico S.A. ("Admico"), a Swiss entity in which Mr. Weissenberger is a
majority shareholder, regarding the appointment of Mr. Weissenberger as interim
Chief Executive Officer. The agreement continued until December 11, 1998 when
Mr. Weissenberger resigned as Chief Executive Officer. Under the agreement with
Admico, the Company paid a monthly fee for Mr. Weissenberger's services as Chief
Executive Officer, plus reimbursement of his travel and related expenses. For
1998, the total payments made by the Company to Admico were $330,821. A final
payment of $40,000 was made to Admico in January 1999.
18
<PAGE> 22
Stefan M. Palatin. Mr. Palatin, the former Chief Executive Officer and
Chairman of the Board of the Company, was paid under his employment agreement a
base salary, periodic bonuses, and reimbursement of expenses. For 1998, Mr.
Palatin was paid compensation as set forth in the "Summary of Compensation"
table above. The Board of Directors removed Mr. Palatin as Chief Executive
Officer of the Company on June 8, 1998, and Mr. Palatin resigned as Chairman of
the Board on July 6, 1998. The Company is withholding the payment of
approximately U.S. $240,000 in compensation claimed by Mr. Palatin pending the
outcome of the Special Litigation Committee's investigation, as described under
"Certain Relationships and Related Transactions" below.
Eivind A. Eriksen. Mr. Eriksen served as Chief Operating Officer of the
Company from August 14, 1995 through December 31, 1998, when he resigned. To
terminate Mr. Eriksen's employment agreement and obtain a release of all further
obligations to him, the Company agreed pay to Mr. Eriksen $596,779, $366,779 of
which has been paid, with the balance ($230,000) payable by the end of 1999.
Stephen J. Brocato. From June 1, 1997 through March 31, 1999, Mr. Brocato
served as President of Cronos Containers Limited ("CCL"), a United Kingdom
corporation and one of the Company's primary operating subsidiaries. To
terminate his employment agreement, the Company paid Mr. Brocato L160,000 (U.S.
$256,000).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A. EIVIND A. ERIKSEN
During 1998, an ocean carrier in which Mr. Eriksen, a former Director and
Chief Operating Officer of the Company, was a non-executive director, ceased
doing business. On December 31, 1998, the Company included, in its allowance for
doubtful accounts, $553,000 of the $1,153,000 due from the ocean carrier to the
Company. The Company expects to receive, through insurance proceeds, the amount
owed by the ocean carrier to the Company less the allowance taken.
B. AXEL FRIEDBERG
Dr. Friedberg, a former outside director of the Company, received $150,000
in legal fees from the Company during 1998. Dr. Friedberg has submitted to the
Company a statement for the balance due for legal services rendered to the
Company from November 30, 1997 through December 31, 1998, in the amount of U.S.
$100,000, which is currently being reviewed by the Special Litigation Committee.
C. STEFAN M. PALATIN
Stefan M. Palatin is the former Chairman of the Board and Chief Executive
Officer of the Company. He was terminated as Chief Executive Officer of the
Company on June 8, 1998, and resigned as Chairman of the Board on July 6, 1998.
Based upon the Form 3 Report filed with the SEC on his behalf in April 1999, and
other information available to the Company, the Company believes that Mr.
Palatin currently is the beneficial owner of approximately 20% of the Company's
issued and outstanding Common Stock. As disclosed in previous reports to the
shareholders, Mr. Palatin is indebted to the Company under two promissory notes
(the "Palatin Notes") he executed in favor of a subsidiary of the Company, in
the principal amounts of $5,900,000 and $3,700,000 respectively. The Palatin
Notes bear interest at 9% per annum and matured on December 31, 1997, and
October 31, 1997, respectively. Mr. Palatin has made no payments of principal or
interest under the Palatin Notes, and as of December 31, 1998, the aggregate of
the principal and accrued but unpaid interest due on the two Notes was
$11,096,000.
The Palatin Notes were assigned by the Company to certain of its lenders as
partial security for loans that aggregated, at December 31, 1998, $33,110,000,
together with a pledge of 2,030,303 shares of Common Stock of the Company
purportedly owned by Mr. Palatin. In 1998, Mr. Weissenberger claimed ownership
of 566,667 of the pledged shares. With the consent of the lenders and the
Company, these shares were re-assigned to Mr. Weissenberger on March 24, 1999,
thus leaving 1,463,636 shares of the Company's Common Stock
19
<PAGE> 23
pledged to the lenders. The banks sold these shares on June 21, 1999 for net
proceeds of $5,279,000, which were used to reduce the Company's indebtedness to
the banks and Mr. Palatin's indebtedness to the Company. Accordingly, as of June
30, 1999, the balance of the principal and accrued but unpaid interest due the
Company under the Palatin Notes aggregated $6,208,000.
With the payment of the Company's short term indebtedness through the
establishment of a new credit facility on August 2, 1999, the Company has
received from its former lenders a re-assignment of the Palatin Notes. The
Company is currently exploring its options for collecting the balances due under
the Palatin Notes.
D. CONTRIN HOLDING S.A.
Since 1983, a subsidiary of the Company has managed containers for Austrian
investment entities sponsored by companies owned by Contrin Holding S.A., a
Luxembourg holding company ("Contrin"), and for Contrin itself.
Contrin has alleged that funds may have been remitted to the Company which
were not deposited in a Company bank account and are not reflected in the
Company's accounting records. Specifically, it is alleged that Mr. Palatin
acknowledged receipt of funds in the amount of $2,600,000 during the year ended
December 31, 1995, yet it appears that these funds were received into a
non-Company bank account. Prior to the making of these allegations, the
Company's current management had not been aware of the receipt of the
$2,600,000, nor was it aware of Mr. Palatin's acknowledgement. The Company has
determined that a $400,000 distribution to third party investors was paid by the
Company in December 1994 into the same bank account into which the $2,600,000
was apparently deposited. The Company is negotiating with Contrin with a view to
settling this dispute and related matters. The Company is unable to predict the
outcome of these negotiations.
Contrin investors have also made claims with respect to alleged
transactions between third parties and companies alleged to be connected to Mr.
Palatin, involving the purchase and sale of containers in a manner designed to
secure a tax mitigation advantage to those third parties. It is alleged that
sums remain owing to the third parties by one or more of these companies in
connection with the pre-arranged trading in containers. Current management of
the Company believes that the Company was not involved in these transactions,
that the Company had no access to the records of the alleged transactions and,
so far as the Company has managed the containers, the Company has acted in
accordance with instructions from authorized representatives of the third
parties.
The Special Litigation Committee of the Board is currently investigating
transactions between the Company and Mr. Palatin and entities, including
Contrin, that may be related to Mr. Palatin. The Committee anticipates
completing its investigation by the end of 1999. It has been granted the
authority by the Board to pursue, on behalf of the Company, appropriate remedies
in the event that it concludes that one or more present or former officers or
directors of the Company engaged in misconduct or improper self-dealing that has
damaged the Company.
20
<PAGE> 24
The following report and the performance graph on page 23 do not constitute
soliciting materials and are not considered filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934.
BOARD COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Since the last meeting of shareholders held on October 29, 1998, three of
the five directors who comprised the Board at that time, and all three of the
executive officers identified in last year's proxy statement, have resigned. In
light of the changeover in the senior management ranks of the Company, the
Compensation Committee of the Board has focussed its attention over the past
year on attracting and retaining executives who will guide the Company through
the challenges it confronts. To accomplish this objective, the compensation
philosophy of the Committee has been to provide base income to the Company's
senior executives at a level competitive in the market and to devise incentive
programs to motivate extraordinary efforts by the management of the Company to
meet the challenges confronting the Company.
Mr. Tietz was appointed by the Board as Chief Executive Officer of the
Company on December 11, 1998 (the Board then consisted of Messrs. Weissenberger,
Friedberg, Nedelmann, and Taylor). The Board appointed Mr. Tietz because of his
familiarity with the Company (Mr. Tietz has served as President of the Company's
San Francisco based subsidiary, Cronos Capital Corp., since 1992), his extensive
knowledge of the container leasing business, and his extensive contacts with the
U.S. brokerage industry as a result of CCC's sponsorship of limited partnerships
that have raised over $475,000,000 in public offerings. The objectives of the
Compensation Committee and the Board in negotiating Mr. Tietz's compensation
package, which is described under "Employment Agreements" above, was to attract
an executive of proven competence, experience, and integrity, and to provide Mr.
Tietz with incentive compensation so as to motivate him to lead the Company's
return to profitability and stability.
The other personnel objective of the Compensation Committee since last
year's meeting was to retain Mr. Younger as Chief Financial Officer of the
Company, because of his familiarity with the operations of the Company and its
finances and his role in supervising the refinancing of the Company's
indebtedness. To retain Mr. Younger, the Committee has approved modifications to
his employment and compensation package, described under "Employment Agreements"
above, to increase his base compensation to $250,000 per year, and to grant to
him an option (subject to shareholder approval) to purchase 200,000 shares of
Common Stock.
To enable the Company to attract and retain competent and experienced
officers as it strives to return to profitability, the Compensation Committee
has approved, and is submitting to the shareholders for their approval at the
annual meeting, the 1999 Stock Option Plan. In addition, to provide present and
future outside directors of the Company an incentive to spend the time and
effort supervising the Company's return to profitability, and to more closely
align their interests with those of the shareholders, the Compensation Committee
and the Board have adopted and are submitting for the approval of the
shareholders the Non-Employee Directors' Equity Plan.
In proposing these plans and in its consideration of the compensation and
benefits to be provided to officers and key employees of the Company, the
Compensation Committee intends to establish compensation levels that are
comparable to those of the Company's competitors, and sufficient to attract and
retain experienced container leasing professionals.
While the Committee will take into account the possible tax consequences to
the Company of the compensation programs it develops, including the tax
deductibility by the Company of the compensation it pays to its executives and
key employees, the Committee believes that tax consequences should be secondary
to the overall objectives of the Committee's compensation programs.
The Company currently has in place its management equity investment plan
("MEIP"). The MEIP is currently inactive and no further grants will be made
thereunder if the 1999 Stock Option Plan is approved by the shareholders at the
annual meeting. As of July 31, 1999, options to acquire 118,800 shares of Common
Stock of the Company were outstanding under the MEIP and held by 15 employees of
the Company. Under
21
<PAGE> 25
the MEIP, participants are required to pay for their options, and the 15
employees of the Company holding outstanding options under the MEIP have paid,
in the aggregate, $92,138 to the Company. Because the exercise prices of the
options granted under the MEIP are currently far in excess of the current market
value of the Common Stock of the Company (the exercise prices ranging from
$14.30 per share to $18.20 per share), the Committee intends to review the MEIP
with a view to preserving responsible incentives for those employees who have
paid monies for their options. Any such amendment that would reduce the exercise
price of the options granted thereunder would be submitted to the shareholders
for their approval before being implemented.
Respectfully submitted,
Charles Tharp, Chairman
Ernst-Otto Nedelmann
Maurice Taylor
22
<PAGE> 26
PERFORMANCE GRAPH
The graph below compares cumulative stockholder returns for the Company as
compared with the S&P 500 Stock Index ("S&P 500") and the Dow Jones
Transportation Index ("Dow Index"). The graph assumes the investment of $100 at
the end of 1995 and the investment of all dividends.
The graph covers the period of time beginning December 8, 1995, when the
Company's Common Stock was first traded on NASDAQ (Symbol "CRNS"), through
December 31, 1998.
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN*
AMONG THE CRONOS GROUP, THE S & P 500 INDEX
AND THE DOW JONES TRANSPORTATION AVERAGE INDEX
<TABLE>
<CAPTION>
THE CRONOS GROUP S & P 500 DOW JONES
---------------- --------- TRANSPORTATION
AVERAGE
--------------
<S> <C> <C> <C>
12/8/95 100.00 100.00 100.00
12/95 118.00 100.00 96.00
12/96 70.00 123.00 110.00
12/97 50.00 164.00 163.00
12/98 64.00 210.00 169.00
</TABLE>
* $100 INVESTED ON 12/8/95 IN STOCK OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS,
FISCAL YEAR ENDING DECEMBER 31.
BENEFICIAL STOCK OWNERSHIP
The following table sets forth information as of July 31, 1999, concerning
beneficial ownership of the Company Common Stock by:
- Each person who we know beneficially owns more than 5% of the Common
Stock;
- Each director;
- Each current executive officer named in the Summary Compensation Table on
page 15; and
- The directors and executive officers as a group.
23
<PAGE> 27
BENEFICIAL OWNERSHIP
<TABLE>
<CAPTION>
NUMBER PERCENT
OF SHARES OF SHARES
NAME BENEFICIALLY OWNED OUTSTANDING
---- ------------------ ------------
<S> <C> <C>
Stefan M. Palatin(1)........................................ 1,793,798 19.6%
Blavin Parties(2)........................................... 1,579,136 17.2%
Central Wechsel -- und Creditbank AG(3)..................... 1,075,000 11.7%
Waveland Parties(4)......................................... 1,039,500 11.4%
Rudolf Weissenberger(5)..................................... 578,667 6.3%
Dennis J. Tietz(6).......................................... 321,600 3.5%
Peter J. Younger(7)......................................... 10,800 Less than 1%
Ernst-Otto Nedelmann........................................ -- --
Charles Tharp............................................... -- --
Maurice Taylor.............................................. -- --
All directors and executive officers as a group (5
persons).................................................. 332,400 3.6%
</TABLE>
- ---------------
(1) According to the Form 3, dated April 16, 1999, of Hans-Ulrich Ming,
individually and as trustee for the benefit of Stefan M. Palatin, these
shares are held of record by Klamath Enterprises S.A. ("Klamath"), a
Panamanian company of which Mr. Palatin is known to be a beneficial owner.
(2) According to the Schedule 13G, dated July 2, 1999, of Blavin & Company, Inc.
and Paul W. Blavin, as principal for Blavin & Company, Inc., these shares
are held of record by PWB Value Partners, L.P. and advisory clients of
Blavin & Company, Inc.
(3) According to the Schedule 13D Amendment No. 1, dated March 10, 1998, of
Central Wechsel -- und Creditbank AG, these shares were held of record by
Enavest Holding S.A. ("Enavest"), a Panamanian company of which Stefan M.
Palatin is believed to be the beneficial owner. However, pursuant to the
terms of a pledge agreement between Central Wechsel -- und Creditbank AG and
Enavest following the default of the repayment of a loan by Enavest, these
shares are held of record by Central Wechsel -- und Creditbank AG.
(4) According to their Schedule 13D Amendment No. 2, dated July 8, 1999, these
shares are held of record by Waveland Partners, L.P., Waveland Capital
Management, L.P., Clincher Capital Corporation, Waveland Capital Management,
LLC, Waveland Partners, Ltd., and Waveland International, Ltd.
(5) According to his Form 3, dated December 21, 1998, Mr. Weissenberger is the
record holder of 12,000 shares and indirectly holds 566,667 shares by
Lambert Business Inc.
(6) Mr. Tietz may purchase 21,600 shares by exercising outstanding options
before November 24, 2001, and may purchase an additional 300,000 shares by
exercising outstanding options on or before December 10, 2008.
(7) Mr. Younger may purchase 10,800 shares by exercising outstanding options on
or before November 24, 2001.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENT
Our directors and executive officers must file reports with the SEC
indicating the number of shares of the Company's Common Stock they beneficially
own and any changes in their beneficial ownership. Copies of these reports must
be provided to us. Based solely on written representations from the Company's
directors and executive officers and a review of the copies of beneficial
ownership reports furnished to the Company, the Company believes that all of the
directors, executive officers and 10% shareholders of the Company complied with
such reporting requirements during the last fiscal year, except Messrs.
Weissenberger, Nedelmann and Palatin who each filed a late initial statement on
Form 3 and Mr. Tietz who filed a late Form 4 reporting the grant of a stock
option.
24
<PAGE> 28
OTHER MATTERS
The proxy holders are authorized to vote, in their discretion, upon any
other business that comes before the annual meeting and any adjournment of the
meeting. The Board knows of no other matters which will be presented to the
meeting.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Without prejudice to the statutory rights granted under Luxembourg law to
shareholders who alone or in aggregation with other shareholders control 20% of
the shares of Common Stock of the Company, proposals of shareholders intended to
be presented at the 2000 annual meeting of shareholders must, in addition to
satisfying the other requirements of the Securities and Exchange Commission's
rules and regulations, be received by the Company at its principal executive
offices on or before 2000 [calculate 120 calendar days before the date
of release of this Proxy Statement to shareholders] in order to be considered
for inclusion in the Company's 2000 Proxy Statement.
OTHER INFORMATION
Shareholders are invited to visit the Company's internet website at
http://www.cronos.com for real-time information throughout the year about the
Company and links to Edgar filings of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
DENNIS J. TIETZ
Chairman of the Board and
Chief Executive Officer
Luxembourg
, 1999
25
<PAGE> 29
APPENDIX A
THE CRONOS GROUP
1999 STOCK OPTION PLAN
<PAGE> 30
THE CRONOS GROUP
1999 STOCK OPTION PLAN
1. PURPOSE
(a) The purpose of The Cronos Group 1999 Stock Option Plan (the "Plan") is
to advance the interests of The Cronos Group (the "Company") by providing key
officers and employees of the Company and of subsidiaries of the Company with a
proprietary interest in the Company and by aligning the interests of such
officers and employees with the long-term interests of the stockholders of the
Company.
(b) The Plan replaces The Cronos Group Management Equity Investment Plan
(the "Predecessor Plan"). From and after the effective date of the Plan as
provided in Section 12 below, no further awards shall be made under the
Predecessor Plan.
2. ADMINISTRATION
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Company's Board of Directors (the "Board"). Except for the
terms and conditions explicitly set forth in the Plan, the Committee shall have
the authority, in its sole discretion, to determine all matters relating to
options (hereafter, "Options") granted under the Plan, including selection of
the individuals to be granted Options, the type of Options granted, the number
of the Company's common shares ("Shares"), $2 par value per share (the "Common
Stock") subject to an Option, all terms, conditions, restrictions and
limitations, if any, of an Option, and the terms of any option agreement or
notice. The Plan shall be administered with a view to qualifying the grant of
options under the Plan for the exemptive provisions of Rule 16b-3 promulgated by
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(b) All decisions made by the Committee pursuant to the provisions of the
Plan and all determinations made by the Committee pursuant to such provisions
and related resolutions of the Board shall be final and conclusive.
3. ELIGIBILITY
(a) Options may be granted under the Plan to those officers and employees
of the Company as the Committee from time to time selects. Individuals who are
not employees of the Company may not be granted Incentive Stock Options (as
defined in Section 6 hereof). For purposes of this Section 3, the "Company,"
with respect to all Options under the Plan, other than Incentive Stock Options,
includes any entity that is directly or indirectly controlled by the Company or
any entity in which the Company has a significant equity interest, as determined
by the Committee. With respect to Incentive Stock Options, the "Company"
includes any subsidiary of the Company in accordance with Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Each grant of an option pursuant to the Plan shall be evidenced by a
stock option agreement ("Option Agreement") executed by the officer or employee
to whom the option is granted and the Company (as defined in subsection (a)
above) that is the employer of the officer or employee. Each Option Agreement
shall incorporate such terms and conditions as the Committee, in its discretion,
deems consistent with the terms of the Plan.
4. SHARES SUBJECT TO THE PLAN
(a) The stock offered under the Plan shall be Shares of Common Stock and
may be unissued Shares or Shares now held or subsequently acquired by the
Company as treasury Shares, as the Board may from time to time determine.
Subject to adjustment as provided herein, the aggregate number of Shares that
may be issued under the Plan shall not exceed Five Hundred Thousand (500,000).
The aggregate number of Shares that may be covered by Options granted to any one
individual during the term of the Plan shall not exceed One Hundred Thousand
(100,000).
A-1
<PAGE> 31
(b) Any Shares subject to an Option granted under the Plan that are not
purchased thereunder shall again be available for the granting of Options under
the Plan.
5. ADJUSTMENT OF SHARES AVAILABLE
The aggregate numbers of Shares available for Options under the Plan, the
maximum number of Shares that may be subject to Options granted under the Plan
to any individual under the Plan, and the exercise price per Share (but not the
total price) for Options outstanding under the Plan shall all be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from any split-up, combination or exchange of Shares,
consolidation, spin-off or recapitalization of Shares or any like capital
adjustment or the payment of any stock dividend.
6. GRANT OF OPTIONS
(a) The Committee may grant two types of Options to participants in the
Plan: Incentive Stock Options and Nonqualified Stock Options (as said terms are
defined in subsection (b) below). The Committee may grant one or both types of
Options to a participant (referred to hereinafter as an "Optionee") in the Plan.
(b) The Committee may grant Options, designated as "Incentive Stock
Options," which comply with the provisions of Section 422 of the Code or any
successor statutory provision, or "Nonqualified Stock Options." Nonqualified
Stock Option Agreements between the Company and Optionees shall state that the
Option is not intended to be an Incentive Stock Option. The price at which
Shares may be purchased upon exercise of an Incentive Stock Option shall be
determined by the Committee, but shall not be less than 100% of the Fair Market
Value of such Shares at the time such Option is granted. For purposes of the
Plan, "Fair Market Value" as to a particular day equals the closing sales price
of the Common Stock on the NASDAQ National Market as reported for such day (or,
if there were no sales on such day, 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) as reported in The Wall Street Journal or such
other source as the Committee deems reliable. The exercise price at which Shares
may be purchased upon exercise of a Nonqualified Stock Option shall not be less
than 100% of the Fair Market Value of such Shares, but the Committee shall have
the discretion to determine the date as of which or the period of time over
which the Fair Market Value of such Shares shall be determined. The Committee
shall set the term of each Option, but no Incentive Stock Option shall be
exercisable more than 10 years after the date such Option is granted and, to the
extent the aggregate Fair Market Value (determined as of the date the Option is
granted) of Common Stock with respect to which Incentive Stock Options granted
to a particular Optionee become exercisable for the first time during any
calendar year (under the Plan and all other stock option plans of the Company)
exceeds $100,000 (or such corresponding amount as may be set by the Code), such
Options shall be treated as a Nonqualified Stock Option.
(c) No Incentive Stock Option shall be granted to an Optionee who owns of
record, or is known by the Company to own beneficially, more than 10% of the
total combined voting power of all classes of stock of the Company.
7. OPTION EXERCISE
(a) No Option shall be exercisable unless the Optionee remains in the
Company's employ for at least 12 months after the granting of the Option.
(b) Unless a different schedule is specified by the Committee in the Option
Agreement entered into with an Optionee, an Option granted under the Plan shall
become exercisable over a period of four (4) years, as follows. Conditional upon
the Optionee's continuous employment by the Company following the date of grant
of an Option to the relevant anniversary date, an Optionee shall have the right
to purchase one-quarter (25%) of the Shares subject to the Option granted to the
Optionee (hereinafter the "Optioned Shares") on each of the first four
anniversaries of the date of grant of the Option.
A-2
<PAGE> 32
available for purchase by the Optionee under the terms of his or her Option
Agreement and the provisions of the Plan.
(c) No Optioned Shares shall be delivered pursuant to the exercise of any
Option, in whole or in part, until qualified for delivery under such securities
laws and regulations as may be deemed by the Committee to be applicable thereto,
and until a payment in full of the Option price thereof (in cash or stock as
provided below) is received by the Company. No Optionee, or any legal
representative, legatee, or distributee of an Optionee shall be or be deemed to
be a holder of Optioned Shares unless and until such Shares are issued.
(d) No Option may at any time be exercised with respect to a fractional
Share.
(e) An Optionee may exercise an Option using as the form of payment (i)
cash or a cash equivalent, (ii) stock-for-stock payment (as described below),
(iii) any combination of the above, or (iv) such other means as the Committee
may approve.
(f) An Optionee who owns Common Stock may use such Shares, the value of
which shall be determined as the Fair Market Value of such Shares on the date
the Option is exercised, as a form of payment to exercise Options under the
Plan. The Committee, in its sole discretion, may restrict or rescind this right
by notice to Optionees. An Option may be exercised in such manner only by
tendering (actually or by attestation) to the Company whole Shares of Common
Stock having a Fair Market Value equal to or less than the exercise price. If an
Option is exercised by surrender of Common Stock having a Fair Market Value less
than the exercise price, the Optionee must pay the difference in cash.
8. EXERCISE OF OPTION UPON TERMINATION OF EMPLOYMENT
(a) In the event that an Optionee's status as an employee of the Company
terminates, other than upon the Optionee's death or disability, and other than
upon the Optionee's termination for cause, the Optionee may exercise his or her
Option, but only within thirty (30) days (or such other period of time, not
exceeding ninety (90) days, as is determined by the Committee), and only to the
extent that the Optionee was entitled to exercise the Option at the date of
termination (but in no event later than the expiration of the term of said
Option as set forth in the Optionee's Option Agreement). If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
then the Optioned Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified hereunder or by the Committee, then
the Option shall terminate, and the Shares covered by such Option and not
purchased thereunder shall revert to the Plan. In the event that an Optionee's
status as an employee of the Company is terminated for cause, then all rights of
the Optionee under his or her Option to purchase Optioned Shares shall terminate
on the date of termination of employment. Termination for cause shall include an
Optionee's non-performance of, or willful misconduct in the performance of, his
or her duties to the Company, and may include such other grounds of termination
as are established by the Committee.
(b) If an Optionee's employment terminates for any reason, including death
or disability, within 12 months of the grant date of an Option, such Option
shall expire as of the date of such termination of employment and the Optionee
and the Optionee's legal representative shall forfeit any and all rights
pertaining to such Option.
9. TRANSFERABILITY
(a) The right of any Optionee to exercise an Option granted under the Plan
shall, during such Optionee's lifetime, be exercisable only by such Optionee,
and shall not be assignable or transferable by the Optionee other than by will
or the laws of descent and distribution.
(b) In the event that an Optionee's status as an employee of the Company
terminates as a result of the Optionee's "Disability," the Optionee may exercise
his or her Option at any time within ninety (90) days from the date of such
termination, but only to the extent that the Optionee was entitled to exercise
it at the date of such termination (and in no event later than the expiration of
the term of such Option as set forth in the Optionee's Option Agreement). If, at
the date of termination by reason of Disability, the Optionee is not
A-3
<PAGE> 33
entitled to exercise his or her entire Option, the Optioned Shares covered by
the unexercisable portion of the Option shall revert to the Plan. If, after such
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Optioned Shares covered by
such Option and not purchased by the Optionee shall revert to the Plan.
(c) In the event of the death of an Optionee, the Option may be exercised
at any time within ninety (90) days following the date of death by the personal
representative of the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Optionee was entitled to exercise the Option at the date of death (and in no
event later than the expiration of the term of such Option as set forth in the
Optionee's Option Agreement). If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the Optioned Shares covered by
the unexercisable portion of the Option shall revert to the Plan. If, after
death, the personal representative of the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise the Option within the time specified herein, the Option shall
terminate, and the Optioned Shares covered by such Option and not purchased
thereunder shall immediately revert to the Plan.
10. WITHHOLDING TAXES; OTHER DEDUCTIONS
Whenever the Company proposes to deliver Shares upon an Optionee's exercise
of an Option, or whenever an Optionee disposes of Shares acquired upon exercise
of an Option, the Company shall have the right to require the Optionee who is to
receive the Optioned Shares, or who disposes of the Optioned Shares, to remit to
the Company, prior to the delivery of any certificate or certificates for such
Shares, or upon disposition of Shares, as the case may be, or to withhold from
any payment by the Company to the Optionee, such amounts as the Company deems
necessary to satisfy any Federal, state, local, or foreign withholding tax
requirements, including, but not limited to, income tax, FICA withholding, and
excise tax. The Optionee shall be personally obligated to pay any and all taxes
of any kind which may be imposed on the Optionee or result from the grant of the
Option, the exercise of the Option, and the disposition of Optioned Shares
acquired upon exercise of the Option, or the ownership of the Option (or
Optioned Shares acquired thereunder) during the Optionee's lifetime or at death.
11. MERGER OR SALE OF ASSETS OF THE COMPANY
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, each outstanding
Option shall be assumed or an equivalent option shall be substituted by the
successor corporation or a parent or subsidiary of the successor corporation. In
the event that the successor corporation does not agree to assume the Option or
to substitute an equivalent option or right, the Committee shall, in lieu of
such assumption or substitution, provide the Optionee with the right to exercise
the Option as to all of the Optioned Shares, including Shares as to which it
would not otherwise be exercisable. If the Committee makes an Option fully
exercisable in lieu of its assumption or substitution in the event of a merger
or sale of assets of the Company, the Committee shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and the Option will terminate upon the expiration of such
period. For the purposes of this Section, an Option shall be considered assumed
if, following the merger or sale of assets of the Company, the Option confers
upon the Optionee the right to purchase, for each Share of Optioned Shares
subject to the Option immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock of the Company for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets was not solely common
stock of the successor corporation or its parent, the Committee may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon the exercise of the Option, for each Share of
the Optioned Shares, to be solely common stock of the successor corporation or
its parent equal in Fair Market Value to the per Share consideration received by
holders of Common Stock in the merger or sale of assets of the Company.
A-4
<PAGE> 34
12. STOCKHOLDER APPROVAL AND ADOPTION
The Plan shall be submitted to the stockholders of the Company for their
approval and adoption. The Plan shall not be effective and no Options shall be
granted thereunder unless and until the Plan has been so approved and adopted.
The stockholders shall be deemed to have approved and adopted the Plan only if
it is approved and adopted at a meeting of the stockholders duly held by a vote
taken in the manner required by the laws of Luxembourg.
13. TERM OF THE PLAN
The Plan shall become effective upon its adoption by the stockholders
pursuant to the provisions of Section 12 hereof, and shall remain in full force
and effect through December 31, 2002, unless sooner terminated by the Board.
After the Plan is terminated, no future Options may be granted but Options
previously granted shall remain outstanding in accordance with their applicable
terms and conditions and the Plan's terms and conditions.
14. PLAN AMENDMENT
The Committee or the Board may amend, suspend or terminate the Plan at any
time, provided, however, that no such amendment shall be made without the
approval of the Company's shareholders (a) that would increase the number of
Shares of Common Stock available for issuance in accordance with Section 4
hereof (in the aggregate or to any one individual), or (b) if such approval is
required -- (i) to comply with Section 422 of the Code with respect to Incentive
Stock Options, or (ii) for purposes of Section 162(m) of the Code.
15. BIFURCATION OF THE PLAN
Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to participants who are officers of the
Company subject to Section 16 of the Exchange Act without so restricting,
limiting or conditioning the Plan with respect to other participants.
A-5
<PAGE> 35
APPENDIX B
THE CRONOS GROUP
NON-EMPLOYEE DIRECTORS' EQUITY PLAN
<PAGE> 36
THE CRONOS GROUP
NON-EMPLOYEE DIRECTORS' EQUITY PLAN
1. PURPOSE
The purpose of The Cronos Group Non-Employee Directors' Equity Plan (the
"Plan") is to promote the long-term growth and financial success of the Company
by attracting, motivating and retaining non-employee directors of outstanding
ability and assisting the Company in promoting a greater identity of interest
between the Company's non-employee directors and its stockholders.
2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as follows:
"Annual Meeting" refers to an annual meeting of the Company's stockholders.
"Board" refers to the Board of Directors of the Company.
"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, as of June 30, 1999, was the beneficial owner
of 20% or more of the shares of Common Stock outstanding on such date
unless and until such Person, together with all affiliates and
associates of such Person, becomes the beneficial owner of 25% or more
of the shares of Common Stock then outstanding whereupon a Change in
Control shall be deemed to have occurred; or
(vi) any Person who becomes the Beneficial Owner of 20% or more,
or, with respect to a Person described in clause (v) above, 25% or more,
of the shares of Common Stock 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, or 25% or more, as the case may be, of
the then outstanding shares of Common Stock, acquires beneficial
ownership of additional shares of Common Stock representing 1% or more
of the shares of Common Stock then outstanding, whereupon a Change in
Control shall be deemed to have occurred; or
(b) the situation where individuals who, as of the date this Plan is
approved by the Board, constitute the Board, and subsequently elected
members of the Board whose election is approved or recommended by at least
a majority of such current members or their successors whose election was
so approved or recommended (other than any subsequently elected 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 such Board.
"Committee" refers to the Compensation Committee of the Board, any
successor committee thereto or any other committee appointed by the Board to
administer the Plan.
B-1
<PAGE> 37
"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 12 below.
"Company" refers to The Cronos Group, a Luxembourg holding company, or any
successor to substantially all its business.
"Deferred Compensation" refers to the amount of cash compensation that a
Non-Employee Director elects not to receive but to convert to Director's Stock
Units pursuant to the provisions of Section 6(b) hereof.
"Director's Account" refers to the bookkeeping record established for each
Non-Employee Director. A Director's Account is established only for purposes of
measuring the value of the Company's obligation to a Non-Employee Director in
respect of Director's Stock Units and earnings thereon and not to segregate
assets or to identify assets that may be used to settle Director's Stock Units.
"Director's Option" refers to a right to purchase shares of Common Stock
granted to a Non-Employee Director pursuant to Section 7 hereof.
"Director's Stock Unit" refers to a restricted stock unit granted to a
Non-Employee Director pursuant to Section 6 hereof.
"Effective Date" refers to the effective date of the Plan provided for in
Section 10 below.
"Fair Market Value" refers to the closing sales price of the Common Stock
as reported on the NASDAQ National Market on the applicable valuation date or,
if there were no sales on such valuation 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.
"Non-Employee Director" refers to a member of the Board or of a Subsidiary
Board who is not an employee of the Company or any of its Subsidiaries.
"Permanent Disability" refers to a physical or mental impairment rendering
a Non-Employee Director substantially unable to function as a member of the
Board or a Subsidiary Board, as the case may be, for any period of six
consecutive months. Any dispute as to whether a Non-Employee Director is subject
to a Permanent Disability shall be resolved by a physician mutually acceptable
to the Non-Employee Director and the Company, whose decision shall be final and
binding upon the Non-Employee Director and the Company.
"Person" refers to any individual, firm, corporation, limited liability
company, partnership or other entity.
"Subsidiary" refers to (i) a corporation or other entity with respect to
which the Company, directly or indirectly, has the power, whether through the
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.
"Subsidiary Board" refers to the Board of Directors of a Subsidiary.
3. ADMINISTRATION
(a) ADMINISTRATION BY THE BOARD
The Plan shall be administered by the Compensation Committee of the Board
(the "Committee"). The Committee shall, subject to the provisions of the Plan,
have the power to construe the Plan, to determine all questions arising
thereunder, and to adopt and amend such rules and regulations for the
administration of the Plan as it may deem desirable. Any decision of the
Committee in the administration of the Plan, as described herein, shall be final
and conclusive. The Committee may authorize any one or more of its members or
the secretary of the Committee or any officer or employee of the Company to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done by him or her
or by any other member of the Committee in connection with the Plan, except for
his or her own willful misconduct or as expressly provided by statute.
B-2
<PAGE> 38
(b) AWARD AGREEMENT OR CERTIFICATE
The terms and conditions of each grant of Director's Stock Units and
Director's Options under the Plan shall be embodied in an award agreement or
award certificate which shall incorporate the Plan by reference, and shall
indicate the date on which the Director's Stock Units or Director's Options were
granted and the number of Director's Stock Units or Director's Options granted
on such date.
4. SHARES AVAILABLE
The stock offered under the Plan shall be shares of Common Stock of the
Company. The Common Stock may be unissued shares or shares now held or
subsequently acquired by the Company as treasury shares, as the Board may from
time to time determine. Subject to adjustment as provided herein, the aggregate
number of shares that may be issued under the Plan shall not exceed One Hundred
Fifty Thousand (150,000) shares. Any shares subject to a Director's Option
granted under the Plan that are not purchased thereunder shall again be
available for the granting of Director's Options under the Plan.
5. ELIGIBILITY
Director's Stock Units and Director's Options shall be granted only to
Non-Employee Directors. A Non-Employee Director who is a member of a Subsidiary
Board and not a member of the Board of the Company shall participate in the Plan
solely in the discretion of the Committee.
6. DIRECTOR'S STOCK UNITS
(a) GENERAL
A Director's Stock Unit shall represent the right to receive one share of
Common Stock upon satisfaction of the conditions to vesting and settlement
specified in the Plan. Director's Stock Units will be settled exclusively in
Common Stock.
(b) GRANTS OF DIRECTOR'S STOCK UNITS
Director's Stock Units shall be awarded under the Plan as follows:
(i) A Non-Employee Director may elect to reduce all or part of the
cash compensation otherwise payable for services to be rendered by him or
her as a director (including the annual retainer fee and any fees payable
for services on the Board or any committee thereof) (such reduction in
compensation referred to herein as "Deferred Compensation") and to receive
in lieu thereof Director's Stock Units; provided, however, that if a
Non-Employee Director elects not to receive part of the cash compensation
otherwise payable to him or her, and to receive, instead, Director's Stock
Units, then the election shall not be for less than fifty percent (50%) of
the Non-Employee Director's annual retainer fee as a director. Any such
election shall be made prior to the beginning of, and will be effective
for, the calendar year in which the compensation to the Non-Employee
Director will be paid; provided, however, that for the first year in which
the Plan is in effect, any Non-Employee Director may, at any time within
thirty (30) days of the date the Plan is approved by the stockholders of
the Company, make an election to participate in the Plan with respect to
compensation payable to the Non-Employee Director for the then-current
calendar year not yet paid to the Non-Employee Director; and provided
further, however, that any Non-Employee Director not serving on the Board
prior to the date the Plan is approved by the stockholders of the Company
may, at any time within thirty (30) days of his or her original election to
the Board, make an election to participate in the Plan, effective for the
then-current calendar year. All elections made hereunder shall become
irrevocable as of the last day such election may be made. Unless the Non-
Employee Director notifies the Secretary of the Company otherwise prior to
the beginning of each subsequent calendar year, an election will renew
automatically for an additional calendar year. Any election made hereunder
shall be in writing and shall specify the amount of compensation to be
received in the form of Director's Stock Units.
B-3
<PAGE> 39
(ii) With respect to each Non-Employee Director who elects to receive
a portion of his or her cash compensation in Director's Stock Units
pursuant to Section 6(b)(i) above, the number of Director's Stock Units to
be credited to the Director's Account shall be equal to the quotient
obtained by multiplying the Deferred Compensation by One Hundred
Twenty-Five Percent (125%) and by then dividing the resultant product by
the Fair Market Value of a share of Common Stock of the Company as of the
date that the Deferred Compensation would otherwise have been payable to
the Non-Employee Director had the Director not made the election referred
to in this Section 6.
(c) DIRECTOR'S ACCOUNTS
The Director's Account for each Non-Employee Director who elects to receive
Director's Stock Units in lieu of all or a portion of the Director's cash
compensation, calculated in accordance with paragraph (b)(ii) above, shall be
credited at such times as the Director's Stock Units are awarded to the
Non-Employee Director and by the number of Director's Stock Units awarded to the
Non-Employee Director. In the event that the Company pays any cash or other
dividend or makes any other distribution in respect of its Common Stock, then
each Director's Account will be credited with an additional number of Director's
Stock Units (including fractions thereof) determined by dividing (A) the amount
of cash, or the value (as determined by the Board) of any securities or other
property, paid or distributed in respect of one outstanding share of Common
Stock by (B) the Fair Market Value of a share of Common Stock for the first date
on which the Common Stock of the Company trades "ex-dividend" with respect to
the dividend or distribution made by the Company with respect to its Common
Stock, and multiplying the result of such division by (C) the number of
Director's Stock Units that were credited to the Director's Account immediately
prior to the date of the dividend or other distribution. Credits shall be made
effective as of the date of the dividend or other distribution in respect of the
Common Stock.
(d) VESTING; ACCELERATED VESTING; DEFERRAL
(i) Director's Stock Units granted to a Non-Employee Director, and any
additional Director's Stock Units credited to a Director's Account in respect of
earnings or other distributions on such Director's Stock Units as provided in
Section 6(c), hereof, shall vest on the third anniversary of the date of grant,
and shall be settled as soon as practicable thereafter, provided that the
Non-Employee Director shall have remained a member of the Board continuously
from the date of grant to said date.
(ii) Notwithstanding the provisions of Section 6(d)(i) above, all
Director's Stock Units granted to a Non-Employee Director shall immediately vest
upon the first to occur of (A) a Non-Employee Director ceasing to be a member of
the Board by resignation or removal, or (B) a Non-Employee Director ceasing to
be a member of the Board as a result of death or Permanent Disability.
(iii) Notwithstanding the provisions of Sections 6(d)(i) and 6(d)(ii)
above, a Non-Employee Director may elect to defer settlement of any or all
Director's Stock Units to a date subsequent to the vesting date of such
Director's Stock Units, provided that no such deferral may extend beyond the
earlier of (A) the Non-Employee Director's termination of service on the Board,
or, if later, the Non-Employee Director's 70th birthday, or (B) the Non-Employee
Director's death. Settlement of any deferred Director's Stock Units shall be
made on or as soon as practicable following the date specified by the
Non-Employee Director in the relevant deferral election or, if applicable, the
earlier of the dates specified in clauses (A) or (B) of the preceding sentence.
(e) DELIVERY OF SHARE CERTIFICATES
As soon as practicable following the vesting of Director's Stock Units as
provided in Sections 6(d)(i) and 6(d)(ii) above, or the date for deferred
settlement as provided in Section 6(d)(iii) above, Director's Stock Units shall
be settled by delivery to the Non-Employee Director of a share certificate for
the number of shares of Common Stock of the Company corresponding to such
Director's Stock Units. Shares delivered in settlement of Director's Stock Units
shall be free of all such restrictions, except any that may be imposed under
applicable law or the Company's trading policy. As soon as practicable after the
Effective Date, the
B-4
<PAGE> 40
Company shall register the Shares of Common Stock issuable in settlement of the
Director's Stock Units that may be granted under the Plan under the Securities
Act of 1933, as amended (the "Securities Act"), and shall, as required by the
Securities Act, maintain from time to time the effectiveness of such
registration.
(f) NO STOCKHOLDER RIGHTS
The crediting of Director's Stock Units to a Director's Account shall not
confer on the relevant Non-Employee Director any rights as a stockholder of the
Company.
7. GRANT OF DIRECTOR'S OPTIONS
(a) GENERAL
A Director's Option shall entitle a Non-Employee Director to purchase a
specified number of shares of Common Stock of the Company during a specified
period at an exercise price per share of Common Stock determined as provided
below. All Director's Options provided for herein shall have the general terms
and conditions set forth in Section 8 below.
(b) GRANTS OF DIRECTOR'S OPTIONS TO NEW DIRECTORS
A Non-Employee Director who is initially elected at an annual or special
meeting of the stockholders, or appointed to the Board other than in connection
with an Annual Meeting, shall receive, as of the date of such initial election
or appointment or, if later, August 4, 1999 (the date the Plan was approved by
the Board), a Director's Option to purchase 15,000 shares of Common Stock. The
exercise price per share of Common Stock of each Director's Option provided for
in this Section 7(b) shall be the Fair Market Value of one share of Common Stock
on the date of the Non-Employee Director's election or appointment to the Board
or August 4, 1999, if later.
8. GENERAL TERMS AND CONDITIONS OF DIRECTOR'S OPTIONS
(a) OPTION TERM
Each Director's Option shall expire on the date of the Annual Meeting held
in the tenth calendar year following the date of grant, subject to earlier
expiration as provided herein.
(b) VESTING; ACCELERATED VESTING; EFFECT OF TERMINATION OF SERVICE
(i) Vesting Generally. Director's Options shall vest and become exercisable
over three years, with one-third ( 1/3) of the Director's Options exercisable as
of the first anniversary following the date of grant, one-third ( 1/3)
exercisable as of the second anniversary following the date of grant, and
one-third ( 1/3) exercisable as of the third anniversary following the date of
grant, assuming, in each instance, that the Non-Employee Director has continued
to serve as a member of the Board until the date of the relevant anniversary;
provided, however, that all Director's Options awarded to a Non-Employee
Director shall be considered fully vested upon the earlier to occur of (A)
termination of the Non-Employee Director's service on the Board by reason of
removal (unless the removal is "for cause," defined as removal of a Director for
willful misconduct or reckless disregard of his or her duties as a Director);
(B) termination of the Non-Employee Director's service on the Board by reason of
death or Permanent Disability; or (C) resignation from the Board within twelve
(12) months following a Change in Control. If a Non-Employee Director's service
on the Board terminates for any reason other than as aforesaid, then any
unvested Director's Options shall be forfeited to the Company, and the
Non-Employee Director shall have no further right or interest therein.
(ii) Exercise Following Termination of Service. Following termination of a
Non-Employee Director's service on the Board, the former Non-Employee Director
(or the former Non-Employee Director's estate, personal representative or
beneficiary, as the case may be) shall have the right, subject to the other
terms and conditions hereof, to exercise all Director's Options that had vested
as of or in connection with the termination
B-5
<PAGE> 41
of service at any time within sixty (60) days after the date of termination of
service, subject to earlier expiration of the Director's Option pursuant to
Section 8(a) above.
(c) NOTICE OF EXERCISE
Subject to the other terms and conditions of the Plan, a Non-Employee
Director may exercise all or any portion of a vested Director's Option by giving
written notice of exercise to the Company, provided, however, that no fewer than
10 shares of Common Stock may be purchased upon any exercise of a Director's
Option unless the number of shares purchased at such time is the total number of
shares in respect of which the Director's Option is then exercisable, and
provided, further, that in no event shall the Option be exercisable for a
fractional share. The date of exercise of an Option shall be the later of (i)
the date on which the Company receives such written notice, or (ii) the date on
which the conditions provided in Sections 8(d) and 8(e) below are satisfied.
(d) PAYMENT
The exercise price of a Director's Option may be paid in cash or previously
owned shares or a combination thereof or by any other method approved by the
Committee.
(e) LIMITATION ON EXERCISE
A Director's Option shall not be exercisable unless the Common Stock
subject thereto has been registered under the Securities Act, and qualified
under applicable state or foreign securities or "blue sky" laws in connection
with the offer and sale thereof, or the Company has determined that an exemption
from registration under the Securities Act and from qualification under such
securities or "blue sky" laws is available. As soon as practicable after the
Effective Date, the Company shall register the issuance of the shares of Common
Stock issuable upon exercise of the Director's Options, and shall, as required
by the Securities Act, maintain from time to time the effectiveness of such
registration.
(f) ISSUANCE OF SHARES
Subject to the foregoing conditions, as soon as is reasonably practicable
after its receipt of a proper notice of exercise and payment of the exercise
price for the number of shares with respect to which a Director's Option is
exercised, the Company shall deliver to the exercising Non-Employee Director, at
the principal office of the Company or at such other location as may be
acceptable to the Company and the Non-Employee Director, one or more stock
certificates for the appropriate number of shares of Common Stock issued in
connection with such exercise. Such shares shall be fully paid and nonassessable
and shall be issued in the name of the Non-Employee Director. Notwithstanding
the foregoing, the Board in its discretion may, subject to rules and procedures
as it may adopt or proposed from time to time, provide Non-Employee Directors
with the opportunity to defer receipt of shares of Common Stock issuable upon
exercise of Director's Options.
9. TRANSFERABILITY
Director's Stock Units (including interests in a Director's Account) and
Director's Options may not be transferred, pledged, assigned or otherwise
disposed of except by will or the laws of descent and distribution or pursuant
to a domestic relations order, provided, however, that Director's Options may be
transferred to a member or members of a Non-Employee Director's immediate family
(as defined below) or to one or more trusts or partnerships or other entity
established in whole or in part for the benefit of one or more of such immediate
family members (collectively, "Permitted Transferees"), subject to such rules
and procedures as may from time to time be adopted or imposed by the Committee.
If a Director's Option is transferred to a Permitted Transferee, it shall be
further transferable only by will or the laws of descent and distribution or,
for no consideration, to another Permitted Transferee of the Non-Employee
Director. A Non-Employee Director shall notify the Company in writing prior to
any proposed transfer of a Director's Option to a Permitted Transferee and shall
furnish the Company, upon request, with information concerning such Permitted
Transferee's financial condition and investment experience. For purposes of the
Plan, a Non-Employee
B-6
<PAGE> 42
Director's "immediate family" means any child, stepchild, grandchild, spouse,
son-in-law or daughter-in-law and shall include adoptive relationships;
provided, however, that if the Company adopts a different definition of
"immediate family" (or similar term) in connection with the transferability of
employee stock options awarded to employees of the Company, such definition
shall apply, without further action of the Board, to the Plan.
10. TERM
The Effective Date of the Plan shall be the date of the 1999 Annual Meeting
assuming the Plan is approved by the stockholders of the Company at such Annual
Meeting. Prior to stockholder approval, the Committee may grant Director's
Options to Non-Employee Directors in accordance with the provisions of Section
7(b) hereof. If stockholder approval of the Plan is not obtained at the 1999
Annual Meeting, or any adjournment thereof, then the Plan and any awards made
hereunder shall terminate ab initio and be of no further force and effect.
Unless earlier terminated in accordance with Section 11 below, the Plan shall
expire on the date of the Annual Meeting held in 2002. Grants of Director's
Options for newly-elected Non-Employee Directors shall be made in connection
with the Annual Meeting held in 2002, and shall be the last grants made under
the Plan. Expiration of the Plan in connection with the Annual Meeting held in
2002 shall not affect awards of Director's Stock Units and Director's Options
made prior to such Annual Meeting, which awards shall remain outstanding subject
to the terms hereof.
11. AMENDMENTS
The Board may at any time and from time to time alter, amend, suspend or
terminate the Plan in whole or in part, including, without limitation, to amend
the provisions for determining the amount of Director's Stock Units or
Director's Options to be issued to a Non-Employee Director, provided,
however,that:
(a) any amendment which under the requirements of applicable law or
NASDAQ rule must be approved by the stockholders of the Company shall not
be effective unless and until such stockholder approval has been obtained
in compliance with such law or rule; and
(b) except as provided in Section 12 below, the Board may not, without
the approval of the Company's stockholders, increase the number of shares
available for issuance under the Plan pursuant to Section 4 above or the
number of Director's Stock Units to be issued to any Non-Employee Director
pursuant to Section 6 hereof or reduce the exercise price of a Director's
Option.
No termination or amendment of the Plan that would adversely affect a
Non-Employee Director's rights under the Plan with respect to any award of
Director's Stock Units or Director's Options made prior to such action shall be
effective as to such Non-Employee Director unless he or she consents thereto.
12. ADJUSTMENT OF AND CHANGES IN SHARES
In the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, distribution of property, special cash
dividend or other change in corporate structure affecting the Common Stock of
the Company, the Board, in its discretion, may make (i) such proportionate
adjustments as it considers appropriate in the number and kind of shares
authorized for issuance hereunder in order to preserve, but not increase, the
benefits or potential benefits intended to be made available hereunder, and/or
(ii) such other adjustments as it deems appropriate. The Board's determination
as to what, if any, adjustments shall be made shall be final and binding on the
Company and all Non-Employee Directors who receive grants under the Plan.
13. NO RIGHT TO RE-ELECTION
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any of its members for re-election by the Company's
stockholders, nor confer upon any Non-Employee Director the right to remain a
member of the Board for any period of time, or at any particular rate of
compensation.
B-7
<PAGE> 43
14. UNFUNDED PLAN
The Plan is unfunded. Prior to the payment or settlement of any award of
Director's Stock Units or the exercise of any Director's Option, nothing
contained herein shall give any non-Employee Director any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Board may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock with respect to
awards hereunder.
B-8
<PAGE> 44
THE CRONOS GROUP
FORM OF PROXY
1999 ANNUAL MEETING
<PAGE> 45
PRELIMINARY COPY
DETACH HERE
PROXY
THE CRONOS GROUP
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CRONOS GROUP FOR THE ANNUAL MEETING TO BE HELD ON OCTOBER 26, 1999
The undersigned hereby appoints Dennis J. Tietz, Peter J. Younger, and Maurice
Taylor, and each of them, proxies, with full power of substitution, to vote all
shares of Common Stock of the Cronos Group that the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held at Hotel Le Royal, 12
Boulevard Royal, Luxembourg on Tuesday, October 26, 1999 at 10:00 a.m., local
time, and at any adjournment thereof. The proxies have the authority to vote as
directed on the reverse side of this card with the same effect as though the
undersigned were present in person and voting. The proxies are further
authorized in their discretion to vote upon such other business as may properly
come before the Annual Meeting and any adjournment thereof. The undersigned
revokes all proxies previously given to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1
AND THE ADOPTION OF PROPOSALS 2 THROUGH 9.
SEE REVERSE SIDE TO BE SIGNED ON SEE REVERSE SIDE
REVERSE SIDE
<PAGE> 46
Reverse Side
[LOGO]
[X] Please mark votes as in this example
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS YOU DIRECT. IF YOU GIVE NO
DIRECTION, WE WILL VOTE YOUR SHARES OF COMMON STOCK "FOR" ALL PROPOSALS. WE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN, DATE AND RETURN THIS CARD.
THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" ALL PROPOSALS.
1. Elect Five Directors.
The Nominees Are: Dennis J. Tietz, Charles Tharp, Peter J. Younger,
Robert M. Melzer, and Stephen Nicholas Walker
[ ] FOR ALL NOMINEES (EXCEPT AS INDICATED BELOW)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME BELOW)
---------------------------------------------------------
2. Approve the Grant of a Stock Option to Peter J. Younger, Chief Financial
Officer.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approve the Company's 1999 Stock Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approve the Company's Non-Employee Directors' Equity Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Approve the Appointment of Deloitte & Touche LLP as the Independent
Auditors for Fiscal Year 1999 and Authorize the Directors to Fix the
Auditor's Remuneration
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. Approve the Reports of the Independent Auditor and of the Board of
Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. Approve the Company's Consolidated and Unconsolidated Financial
Statements for the Year Ended December 31, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
8. Discharge the Following Members of the Board of Directors Pursuant to
Article 74 of the Company Law (10 August 1915) for the Execution of
Their Mandate for the Year Ended December 31, 1998: [To Be Supplied]
[ ] FOR [ ] AGAINST [ ] ABSTAIN
9. Approve the Allocation of the Profit/Loss Reported by the Company for
the Year Ended December 31, 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
10. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting thereof and at
any adjournment.
Please mark, sign, date, and return this Proxy in the accompanying prepaid
envelope. Please sign exactly as your name appears on this Proxy. When signing
as an attorney, executor, administrator, trustee or guardian, please give full
title as such. If shares are held jointly, both owners should sign.
Signature:______________________________ Date:_______________
Signature:______________________________ Date:_______________
