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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CBI INDUSTRIES, INC.
(NAME OF SUBJECT COMPANY)
CBI INDUSTRIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $2.50 PER SHARE
(AND ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(TITLE OF CLASS OF SECURITIES)
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124800 10 3
(CUSIP NUMBER OF CLASS OF SECURITIES)
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CHARLES O. ZIEMER, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
CBI INDUSTRIES, INC.
800 JORIE BOULEVARD
OAK BROOK, ILLINOIS 60521-2268
(708) 572-7000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF
OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
RICHARD D. KATCHER, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ
51 WEST 52ND STREET
NEW YORK, NEW YORK 10019-6150
(212) 403-1000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is CBI Industries, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 800 Jorie Boulevard, Oak Brook, Illinois 60521-2268. The title of
the class of equity securities to which this Statement relates is the Company's
Common Stock, par value $2.50 per share (the "Common Stock"), and the associated
Preferred Stock Purchase Rights (the "Rights" and, together with such shares of
Common Stock, except where the context otherwise requires, the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer made by PX Acquisition Corp. ("P
Sub"), a Delaware corporation and a wholly owned subsidiary of Praxair, Inc., a
Delaware corporation ("Praxair"), to purchase all outstanding shares of Common
Stock, including the associated Rights issued pursuant to the Amendment and
Restatement dated August 8, 1989 of a Rights Agreement dated as of March 4,
1986, between the Company and First Chicago Trust Company of New York, as Rights
Agent (as amended to date, the "Rights Agreement"), at a price of $32.00 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated November 3, 1995 (the "Praxair Offer to
Purchase") and the related Letter of Transmittal (which together constitute the
"Praxair Offer"), as disclosed in a Tender Offer Statement on Schedule 14D-1
filed by P Sub and Praxair with the Securities and Exchange Commission (the
"Commission") on November 3, 1995, as amended by Amendment No. 1, dated November
7, 1995 and Amendment No. 2, dated November 8, 1995 (as so amended, the "Praxair
Schedule 14D-1"). The address of the principal executive offices of P Sub and
Praxair, according to the Praxair Schedule 14D-1, is 39 Old Ridgebury Road,
Danbury, Connecticut 06810-5113.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
(b) Except as described herein or in Annex A hereto, to the knowledge of
the Company, as of the date hereof there are no material contracts, agreements,
arrangements or understandings (other than in the ordinary course of business),
or any actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company, its executive officers, directors, or
affiliates, or (ii) Praxair, P Sub or their executive officers, directors or
affiliates.
Certain contracts, agreements, arrangements and understandings between the
Company or its affiliates and certain of its executive officers, directors and
affiliates and between the Company and Praxair are described in Annex A hereto,
which description is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation. The Company's Board of Directors (the "Board") met on
November 6, November 8 and November 14, 1995 to consider the Praxair Offer and
related matters. During those meetings, the Board considered the Company's
business, financial condition, current business strategy and future prospects,
recent and historical market prices for the Common Stock, the terms and
conditions of, and potential alternatives to, the Praxair Offer and other
matters, including presentations by management and by the Company's financial
and legal advisors. After taking into account these matters, the Board
determined by unanimous vote that the Praxair Offer is inadequate and not in the
best interests of the Company's stockholders, and that such interests would be
best served if the Company were to actively explore alternatives to maximize
stockholder value. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS REJECT THE PRAXAIR OFFER AND NOT TENDER ANY OF THEIR SHARES
PURSUANT THERETO. The Board has directed management and the Company's advisors
to explore strategic alternatives and to report back to the Board promptly with
respect thereto.
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At the November 14, 1995 meeting, the Board declined the requests of
Praxair with respect to the Rights and unanimously determined not to redeem the
Rights or amend the Rights Agreement to make the Rights inapplicable to the
Praxair Offer and the merger (the "Second Step Cash Merger") proposed by Praxair
to be consummated after the consummation of the Praxair Offer pursuant to which
all Shares not tendered and purchased pursuant to the Praxair Offer or otherwise
(other than Shares owned by P Sub or Praxair or any of their subsidiaries,
Shares held in the treasury of the Company and Shares owned by stockholders who
perfect dissenters' rights under the Delaware General Corporation Law (the
"DGCL")) would be converted into the right to receive an amount in cash equal to
the price per Share paid pursuant to the Praxair Offer. The Board also
unanimously declined a request by P Sub and Praxair that the Board adopt a
resolution approving and recommending the Praxair Offer and the Second Step Cash
Merger for purposes of Section 203 of the DGCL. The Board also unanimously
declined a request by P Sub and Praxair that the Board adopt a resolution
approving and recommending the Second Step Cash Merger pursuant to the Article
Tenth and Article Fifteenth of the Company's Restated Certificate of
Incorporation (the "Certificate"). Pursuant to such Articles, supermajority
votes would be required to approve the Second Step Cash Merger, in the case of
Article Tenth, unless the Board has recommended the transaction, and, in the
case of Article Fifteenth, unless the transaction is either approved by a
majority of the Continuing Directors (as defined therein) or certain price and
procedural requirements are met.
A copy of the letter to the Company's stockholders communicating the
Board's recommendation and the press release relating thereto are filed as
Exhibits 21 and 22, respectively, to this Schedule 14D-9 and are incorporated
herein by reference.
(b) Reasons for the Recommendation. In addition to the factors set forth
above and considered by the Board in reaching its conclusions with respect to
the Praxair Offer described in Item 4(a) above, the Board considered a number of
factors, including, but not limited to, the following:
(i) the Company's business, financial condition, results of
operations, current business strategy and future prospects, including the
nature of the markets in which the Company operates, the Company's position
in such markets and the historical and current market prices for the Common
Stock;
(ii) presentations by the Company's management relating to the
Company's financial performance and future prospects and the opinion of the
Company's management that the proposed consideration in the Praxair Offer
is inadequate;
(iii) the fact that the Company has had preliminary discussions with
other parties who have indicated their potential interest in an
extraordinary transaction with the Company;
(iv) presentations by Lehman Brothers Inc. ("Lehman Brothers") and
Merrill Lynch & Co. ("Merrill Lynch"), financial advisors to the Company
(the "Financial Advisors"), concerning the financial aspects of the Praxair
Offer;
(v) the written opinions of Lehman Brothers and Merrill Lynch that, as
of the date of such opinions, the consideration of $32.00 per Share offered
to the stockholders of the Company (other than Praxair) pursuant to the
Praxair Offer is inadequate from a financial point of view; the full texts
of such opinions, dated November 14, 1995, which set forth the assumptions
made and matters considered and limitations set forth by Lehman Brothers
and Merrill Lynch, are included as Annexes B-1 and B-2 hereto and should be
read in their entirety;
(vi) the Board's perception that Praxair is primarily interested in
the Company's gas business and may be significantly undervaluing the
Company's non-gas businesses;
(vii) the Board's belief, based in part on the factors referred to
above, that the $32.00 per Share price pursuant to the Praxair Offer does
not reflect the current value inherent in the Company and that the
stockholders' interests would be best served if the Company were to
actively explore alternatives to maximize stockholder value;
(viii) the conditional nature of the Praxair Offer; the Praxair Offer
is conditioned upon, among other things, the matters referred to in
paragraph (ix) and upon there not being any threat of a change in
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the results of operations or prospects of the Company or any of its
subsidiaries that, in the sole judgment of P Sub, may be materially adverse
to the Company or any of its subsidiaries, or P Sub having become aware of
any fact that, in the sole judgment of P Sub, has or may have material
adverse significance with respect to the value of the Shares to P Sub; and
(ix) the Board's belief, based on advice received from outside
counsel, that there are antitrust issues relating to a combination of the
Company and Praxair, both domestically and internationally, which issues
create significant uncertainty as to whether the conditions of the Praxair
Offer will be met; in that regard, the Board noted that the Praxair Offer
is conditioned on there not being threatened or instituted any action by
any domestic or foreign governmental entity or by any other person seeking
to impose any limitations upon the ownership or operation by Praxair of any
portion of the business or assets of the Company.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Praxair
Offer, the Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determinations and recommendation. In addition, individual members of the
Board may have given different weight to different factors.
Background. During the course of 1994, a series of conversations were held
between officers of the Company and officers of Praxair regarding a possible
joint venture involving the combination of certain hydrogen and carbon monoxide
assets in a particular geographic location. On December 10, 1994, Mr. John E.
Jones, the Chairman, President and Chief Executive Officer of the Company,
contacted Mr. H. William Lichtenberger, the Chairman and Chief Executive Officer
of Praxair, to advise him that the Company was not interested in pursuing
discussions about the project at that time. Later in December, the Company
disclosed that it had received an unsolicited proposal from a third party
interested in acquiring the Company's industrial gas business. Thereafter, Mr.
Jones was contacted by Mr. Lichtenberger, among others, asking whether the
Company was interested in pursuing a transaction involving the Company's
industrial gas business. Mr. Jones said he would let Mr. Lichtenberger know if
the Company developed an interest.
Several months later Mr. Lichtenberger contacted Mr. Jones to arrange a
meeting. On May 19, 1995, Mr. Jones and Mr. Lichtenberger met in Chicago. At
that meeting, Mr. Lichtenberger said he wanted to explore whether the Company
had any interest in pursuing any of several possible business transactions,
including the previously discussed joint venture project involving certain
hydrogen and carbon monoxide assets and also including a combination of the two
companies. Mr. Jones said that, notwithstanding that it was the Company's desire
to pursue its business plan as an independent company, the Board would of course
consider any proposal that was made to it in light of the best interests of the
Company's stockholders. Mr. Jones said that he would be back in touch with Mr.
Lichtenberger regarding the joint venture project after the Company had a chance
to study it further.
Mr. Lichtenberger called Mr. Jones on August 28, 1995. During that
conversation, Mr. Jones informed Mr. Lichtenberger that he was not interested in
pursuing the joint venture project or any of the other transactions Mr.
Lichtenberger had raised at the May meeting. Mr. Lichtenberger requested a
meeting and Mr. Jones agreed.
On August 31, 1995, Mr. Lichtenberger and Mr. John A. Clerico, Vice
President and Chief Financial Officer of Praxair, met with Mr. Jones and Mr.
A.J. Schneider, Chief Financial Officer of the Company. Mr. Lichtenberger and
Mr. Clerico presented certain financial data and background data, discussed the
general business strategies of Praxair and presented their conception of the
bases upon which a business combination of the Company and Praxair might
proceed.
At the end of September 1995, Mr. Lichtenberger called Mr. Jones and told
him that the Praxair Board of Directors had authorized him to enter into
discussions with the Company regarding a possible business combination involving
an exchange of shares on a pooling basis. Mr. Jones said he would discuss the
matter with the Board.
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At a meeting of the Board on October 11, the Board considered Mr.
Lichtenberger's invitation to enter into negotiations and directed Mr. Jones to
tell Mr. Lichtenberger that the Company was not for sale and was not interested
in negotiating with Praxair. Mr. Jones so advised Mr. Lichtenberger on October
20, 1995.
On October 27, 1995, Mr. Lichtenberger submitted to Mr. Jones an
unsolicited written proposal for the acquisition of the Company by Praxair (the
"Praxair Proposal"). Mr. Lichtenberger's letter read in full as follows:
October 27, 1995
Mr. John E. Jones
Chairman, President and Chief
Executive Officer
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60522-7001
Dear John:
As you know, over the past six months you and I have had several
discussions regarding a possible transaction to effect a merger of our
respective companies. Based on our conversations, I think we both realize that
significant benefits could be realized by both our companies from such a
transaction. Therefore, I was greatly disappointed when you told me on October
20 that you had decided not to continue our discussions.
As I told you during that telephone conversation, in recent weeks we at
Praxair have continued to carefully study the dynamics and potential advantages
of a business combination of Praxair and CBI. As a result, we now feel even more
strongly that such a business combination would result in significant strategic
benefits for both our companies and our respective shareholders. In light of
your current position which you communicated to me on October 20, and given what
we continue to view as the compelling rationale for a business combination, we
have decided that the best way to proceed is for Praxair to submit a specific
proposal to your Board of Directors for its formal consideration.
Accordingly, on behalf of the Board of Directors of Praxair, I am pleased
to propose herewith the merger of Praxair and CBI pursuant to which your
shareholders would receive $32.00 for each share of CBI common stock, which we
would propose to pay in either cash or Praxair common stock. Our proposal to
effect a merger of Praxair and CBI is subject to the negotiation of a mutually
satisfactory definitive merger agreement containing customary terms and closing
conditions.
I hope that you will recognize the powerful business logic behind our
proposal and that you will promptly submit it to your Board of Directors for its
consideration with a favorable recommendation from you. It is our hope that,
after appropriate consideration by your Board of Directors, your Board will
authorize proceeding with the negotiation of the definitive merger agreement on
the terms we have proposed.
The price per share in our merger proposal is based on our present
knowledge of CBI, which is limited to public information. It is our view that
the price we are proposing would be both fair and highly attractive to your
shareholders. Our proposal offers your shareholders a significant premium over
the current market value of CBI.
The transaction we propose represents a clearly attractive opportunity for
Praxair to combine the leading industrial gases supplier in North and South
America and the premier world supplier of carbon dioxide. The combined
enterprise will be strongly positioned to maximize our marketing, engineering
and technological skills as it expands its operations further into major global
markets. It will also be able to develop significant new applications for a wide
range of products and advanced technologies to enable our customers to improve
their productivity, product quality and environmental performance. Together,
Praxair's and CBI's business portfolios and synergies will provide the
enterprise with considerable opportunities to support strong future sales and
earnings growth.
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We are prepared to move promptly in connection with our proposal. We would
be happy to meet with you and other members of your Board of Directors and
senior management as soon as practicable to discuss our proposal in detail and
to answer any questions you or they may have. We realize that your Board of
Directors will want to carefully consider our proposal, but we do ask that the
Board respond to us as soon as possible, and in any event by noon, on November
1, 1995.
While we would very much prefer that a business combination of our
companies be effected pursuant to the negotiation of a merger on the terms we
have proposed, you and your Board should appreciate that if your Board rejects
our proposal to negotiate a merger, we reserve the right to propose directly to
the shareholders of CBI a cash offer for CBI by Praxair.
We look forward to hearing the response of your Board of Directors after it
has reviewed our merger proposal.
Sincerely,
/s/ H.W. LICHTENBERGER
On October 29, 1995, Praxair publicly announced that it had delivered the
above letter to the Company, and the Company announced that the Board would
consider the Praxair Proposal in due course.
On October 30, 1995, Praxair filed the lawsuit described below under Item
8.
On October 31, 1995, Mr. Jones telephoned Mr. Lichtenberger to inform him
that while the Company would give consideration to Praxair's acquisition
proposal, the Company would not respond by Praxair's deadline of November 1,
1995 and would respond in due course.
On November 1, 1995, Praxair announced that it intended to commence the
Praxair Offer on Friday, November 3, 1995 and on November 3 Praxair commenced
the Praxair Offer.
On November 6, 8 and 14, the Board met with its legal and financial
advisors to review the Praxair Offer, resulting in the recommendation set forth
above.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Lehman Brothers and Merrill Lynch as its financial
advisors with respect to the Praxair Offer and other matters arising in
connection therewith, including assisting the Company in exploring alternatives
in light of the Praxair Offer. Pursuant to the letter agreement between Lehman
Brothers, Merrill Lynch and the Company dated November 14, 1995 (the
"Lehman/Merrill Engagement Letter") the Company has agreed to pay each of Lehman
Brothers and Merrill Lynch as follows: (i) a retainer fee of $250,000, payable
to each of Lehman Brothers and Merrill Lynch on January 15, 1996 (such retainer
fee will be credited to other fees, if any, payable under the Lehman/Merrill
Engagement Letter); (ii) if during the term of the Financial Advisors'
engagement under the Lehman/Merrill Engagement Letter, or until the later of (x)
18 months after the date of the Lehman/Merrill Engagement Letter or (y) 12
months after the termination of the Financial Advisors' engagement thereunder,
an Acquisition (as defined below) involving all or substantially all of the
Common Stock or the Company's assets occurs, then the Company shall pay to each
of Lehman Brothers and Merrill Lynch a fee of $5,000,000 plus $500,000 (or
proportion thereof) for each $1.00 per Share (or proportion thereof) above
$32.00 per Share that the Company's stockholders receive, in cash or securities,
in connection with or as a result of such Acquisition; (iii) if during the term
of the Financial Advisors' engagement under the Lehman/Merrill Engagement
Letter, or until the later of (x) 18 months after the date of the Lehman/Merrill
Engagement Letter or (y) 12 months after the termination of the Financial
Advisors' engagement thereunder, an Acquisition or a Restructuring (each as
defined below) occurs other than that described in (ii) above, then the Company
shall pay to each of Lehman Brothers and Merrill Lynch fees to be mutually
agreed upon based on the consideration involved in such Acquisition or
Restructuring and the Financial Advisors' reasonable and customary fees for the
services rendered related to such Acquisition or Restructuring. An "Acquisition"
is defined as any transaction or series
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or combination of transactions, other than in the ordinary course of business,
whereby, directly or indirectly, control of or a material interest in the
Company or any of its businesses, or a material amount of any of their
respective assets, is transferred for consideration, including, without
limitation, by means of a sale or exchange of capital stock or assets, a merger
or consolidation, a tender or exchange offer, a leveraged buyout, a minority
investment, the formation of a joint venture or partnership, or any similar
transaction. A "Restructuring" is defined as any transaction or series or
combination of transactions, other than in the ordinary course of business,
whereby any payment or distribution of cash, securities or other property is
made by the Company to the holders of capital stock of the Company, including,
without limitation, any dividend or other distribution (other than normal
dividends) on, or any repurchase or redemption of, or any exchange of other
securities of the Company or any of its affiliates for, any shares of capital
stock of the Company, or any other similar transaction involving a change in the
capital structure of the Company.
The Company has also agreed to reimburse the Financial Advisors for their
reasonable expenses (including, without limitation, professional and legal fees
and disbursements) incurred in connection with their engagement with respect to
the services to be rendered by them, and to indemnify the Financial Advisors and
certain related persons against certain liabilities in connection with their
engagement, including certain liabilities under the federal securities laws.
The Company has retained MacKenzie Partners, Inc. to distribute information
(including this Statement on Schedule 14D-9) on behalf of the Company in
connection with the Praxair Offer and related matters. The Company has also
retained Abernathy MacGregor Scanlon as public relations advisor in connection
with the Praxair Offer and related matters. Such firms will receive customary
compensation for services rendered and also will be reimbursed for their
out-of-pocket expenses.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders with respect to the Praxair Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, except as set forth on Schedule
I hereto, no transactions in the Shares have been effected within the past 60
days by the Company or by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently do not intend to tender any
Shares which are held of record or beneficially owned by such persons pursuant
to the Praxair Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
At the meetings of the Board held on November 6, November 8 and November
14, 1995, the Board considered and reviewed the feasibility and desirability of
exploring possible alternative transactions to the Praxair Offer. As stated in
Item 4 above, the Board believes that the interests of the Company's
stockholders would be best served if the Company were to actively explore
alternatives to maximize stockholder value. These alternatives could lead to and
involve negotiations which may result in (i) an extraordinary transaction, such
as a merger or reorganization involving the Company or any of its subsidiaries,
(ii) a purchase, sale or transfer of a material amount of the assets of the
Company or any of its subsidiaries, (iii) a tender offer for or other
acquisition of securities by or of the Company or (iv) a material change in the
present capitalization or dividend policy of the Company. In this connection,
the Company is in the preliminary stages of discussion or negotiation concerning
a possible transaction involving the Company of the type described above, having
entered into confidentiality and standstill agreements concerning the furnishing
of confidential information to parties indicating an interest in such a
transaction and having responded to due diligence inquiries. In addition, the
Company has had preliminary discussions with other parties regarding their
potential interest in such a transaction.
In the opinion of the Board, disclosure at this time of the possible terms
of any transaction of the type described above or the parties thereto might
jeopardize the initiation or continuation of such discussions or
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negotiations. Accordingly, the Board, on November 14, 1995, adopted a resolution
instructing management not to disclose the possible terms of any such
transactions, or the parties thereto, unless and until an agreement in principle
relating thereto has been reached.
There can be no assurance that any of the foregoing will result in any
transaction, or that a transaction other than one of the types described herein
will not be authorized or consummated. The initiation or continuation of any of
the foregoing may also be dependent upon the future actions of Praxair with
respect to the Praxair Offer. The proposal, authorization, announcement or
consummation of any transaction of the type referred to in this Item 7 could
adversely affect or result in withdrawal of the Praxair Offer.
Except as described above and under Item 4 above, the Company is not
engaged in any negotiation in response to the Praxair Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization involving the Company or any of its subsidiaries, (ii) a
purchase, sale or transfer of a material amount of the assets of the Company or
any of its subsidiaries, (iii) a tender offer for or other acquisition of
securities by or of the Company or (iv) a material change in the present
capitalization or dividend policy of the Company.
Except as described above and under Item 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Praxair Offer which relate to or would result in one or more of
the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Litigation. On October 30, 1995, Praxair commenced litigation in the
Court of Chancery of the State of Delaware (the "Chancery Court") against the
Company and the Board, alleging that the Board has violated its fiduciary duties
to the Company's stockholders by failing to pursue a possible transaction with
Praxair and employing the Rights Agreement to prevent Praxair from acquiring the
Company. Praxair's complaint seeks (a) injunctive relief requiring the Board to
redeem the Rights or to amend the Rights Agreement so as to make the Rights
inapplicable to any acquisition proposal which equals or exceeds the Praxair
Proposal, (b) injunctive relief enjoining the Company and the Board from taking
any action to interfere with the Praxair Proposal or any other such proposal,
and (c) a declaratory judgment that the Board has breached its fiduciary duties
to the Company's stockholders by continuing to deploy the Rights. The time of
the Company and the Board to respond to Praxair's complaint has not expired.
On October 30, 1995, four purported stockholders of the Company commenced
litigation in the Chancery Court against the Company and the Board, asserting
claims that are similar to the claims asserted by Praxair. Also, on October 30,
one of the four purported stockholders moved to amend a complaint he had filed
against the Company and the Board in December 1994 in order to assert claims
identical to the ones asserted in his newly-filed action; however, counsel for
this stockholder has since advised counsel for the Company and the Board that
the action filed in December 1994 will not be actively prosecuted. Two
additional stockholder complaints were filed October 31 and November 1. Each of
these complaints seeks relief on behalf of a purported class consisting of all
holders of the Common Stock. In addition to injunctive and declaratory relief,
the stockholder plaintiffs seek to recover damages on behalf of the alleged
class and an award of attorneys' fees. The time to respond to these complaints
has not yet expired. It is contemplated that all of the purported stockholder
actions will be consolidated for all purposes. Attached hereto as Exhibits 24
through 30 are copies of each of the aforementioned complaints and the above
descriptions are qualified in their entirety by reference to such exhibits.
(b) Rights Agreement. Currently, two-thirds of a Right is associated with
each share of Common Stock. Each full Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Junior Participating Preferred Stock, $1.00 par value per
share (the "Preferred Stock"), at a price of $75.00 per Unit, subject to
adjustment (the "Purchase Price").
Under the Rights Agreement, until the close of business on the
"Distribution Date," which occurs on the earlier of (i) the tenth day following
a public announcement that a person or group of affiliated or associated persons
("Acquiring Persons") has acquired, or obtained the right to acquire, beneficial
ownership of 10% or
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more of the outstanding shares of Common Stock (the "Stock Acquisition Date"),
or (ii) the tenth business day (or such later date as may be determined by
action of the Board prior to such time as any person becomes an Acquiring
Person) after the date of commencement of, or first public announcement of the
intent to commence, a tender or exchange offer if, upon consummation thereof,
such person could be the beneficial owner of 10% or more of the outstanding
shares of Common Stock, the Rights are represented by and may be transferred
only with the shares of Common Stock. Until the Distribution Date, a share
certificate issued upon the transfer or new issuance of shares of Common Stock
will contain a notation incorporating the Rights Agreement by reference, and the
surrender for transfer of any of such shares of Common Stock also constitutes
the transfer of the Rights associated with the shares of Common Stock
represented by such certificate.
Praxair's public announcement on November 1, 1995 of its intention to
commence the Praxair Offer on November 3, 1995 commenced the running of the
ten-business day period described in clause (ii) of the first sentence of the
immediately preceding paragraph. At a meeting held on November 8, 1995, the
Board resolved that the Distribution Date shall not occur until the earlier of
(x) the date on which an Acquiring Person becomes such and (y) such date as may
be determined by action of the Board prior to the time any person or group
becomes an Acquiring Person.
As soon as practicable following the Distribution Date, if any, Rights
certificates will be mailed to holders of record of the shares of Common Stock
as of the close of business on the Distribution Date, and such separate Rights
certificates alone will evidence the Rights.
At the close of business on the Distribution Date, the Rights will become
exercisable and separate Rights certificates will thereafter be distributed. At
the time Rights certificates are distributed, the Company will make the
necessary and appropriate rounding adjustments so that Rights certificates are
distributed representing only whole numbers of Rights and cash is paid in lieu
of fractional Rights.
Unless the Rights are redeemed earlier, if following a Stock Acquisition
Date the Company consummates a merger or other business combination (in which
the Company does not survive or the shares of Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the assets or
earning power of the Company and its subsidiaries (taken as a whole) are sold or
transferred in one or a series of related transactions, then proper provision
must be made so that each holder of a Right will thereafter have the right to
receive, upon exercise and payment of the Purchase Price, that number of shares
of common stock of the acquiring company which at the time of such transaction
has a market value equal to twice the Purchase Price.
In the event that any person or group becomes an Acquiring Person, other
than pursuant to a tender or exchange offer for all outstanding shares of Common
Stock that the Board, taking into account the long-term value of the Company and
all other factors that the Board considers relevant, determines to be at a price
and on terms that are fair to holders of shares of Common Stock, each Right,
other than Rights that are or were beneficially owned by an Acquiring Person,
will thereafter have the right to receive, upon exercise and payment of the
Purchase Price, in lieu of Preferred Stock, that number of shares of Common
Stock which at the time of such transaction would have a market value equal to
twice the Purchase Price.
At any time after the occurrence of an event triggering the Rights
specified in the preceding paragraphs and prior to the acquisition by an
Acquiring Person of beneficial ownership of 50% or more of the Common Stock, the
Board may exchange the Rights, in whole or in part, at an exchange ratio of one
share of Common Stock per Right.
At any time until 20 days following the Stock Acquisition Date, the Board
may redeem the Rights in whole, but not in part, at a price of $.05 per Right
(the "Redemption Price"). Immediately upon the action of the Board ordering the
redemption of the Rights, the right to exercise the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption Price.
The Rights will expire on March 18, 1996, unless (i) extended or (ii) earlier
redeemed by the Company.
Until a Right is exercised, the holder thereof, as such, has no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends.
8
10
According to the Praxair Offer to Purchase, it is a condition of the
Praxair Offer that the Board redeem the Rights or that P Sub is otherwise
satisfied in its sole discretion that the Rights have been invalidated or are
otherwise inapplicable to the Praxair Offer and the Second Step Cash Merger.
(c) Section 203 of the Delaware General Corporation Law. In general,
Section 203 of the DGCL ("Section 203") provides that a Delaware corporation,
such as the Company, may not engage in any Business Combination (defined to
include a variety of transactions, including a merger) with any Interested
Stockholder (defined generally as a person that, directly or indirectly, owns
15% or more of the corporation's outstanding voting stock), or any affiliate of
an Interested Stockholder, for three years after the date on which the
Interested Stockholder becomes an Interested Stockholder. Section 203 provides
that an "owner" of voting stock includes any person who, individually or
together with any of its affiliates or associates, beneficially owns such stock
directly or indirectly, or has (i) the right to acquire voting stock (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options or otherwise, (ii) the
right to vote such stock pursuant to any agreement, arrangement or
understanding, or (iii) any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of such stock with any other
person that beneficially owns, directly or indirectly, such stock. The
three-year prohibition on Business Combinations with Interested Stockholders
(the "Business Combination Prohibition") does not apply if certain conditions,
described below, are satisfied.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approved
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares held
by (x) persons who are directors and also officers of the corporation and (y)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to the date
the stockholder becomes an Interested Stockholder, the Business Combination is
(a) approved by the board of directors of the corporation and (b) authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation which is not owned by
the Interested Stockholder.
Section 203(b)(6) of the Delaware General Corporation Law provides that the
restrictions contained in Section 203 do not apply to a Business Combination
that is proposed prior to the consummation or abandonment of and following the
announcement or notification of one of certain extraordinary transactions
(including a merger) involving the corporation which transaction (i) is with or
by a person who either was not an Interested Stockholder during the previous
three years or who became an Interested Stockholder with the approval of the
corporation's board of directors and (ii) has been approved or has not been
opposed by a majority of the members of the board of directors then in office
who were directors prior to any person becoming an Interested Stockholder during
the previous three years or were recommended for election or elected to succeed
such directors by a majority of such directors.
(d) Restated Certificate of Incorporation. The Certificate requires a
supermajority vote for certain transactions. Article Tenth of the Certificate
requires the affirmative vote of holders of not less than two-thirds ( 2/3) of
the outstanding Shares entitled to vote and the affirmative vote of not less
than two-thirds ( 2/3) of each series of shares of preferred stock of the
Company entitled to vote as a class on such issue or, where the Board has
recommended such action, the affirmative vote of holders of a majority of the
outstanding Shares entitled to vote and the affirmative vote of a majority of
each series of the outstanding shares of preferred stock of the Company entitled
to vote as a class on such issue to effect, among other things, a merger or
consolidation.
9
11
Currently, the Company does not have any series of shares of preferred
stock entitled by its terms to vote as a class on any matter.
Article Fifteenth of the Certificate requires the affirmative vote by the
holders of at least 80% of the then outstanding Shares entitled to vote and the
affirmative vote of at least 80% of each series of the outstanding shares of
preferred stock of the Company entitled to vote as a class on such issue to
approve Business Combinations involving an Interested Stockholder, unless (i)
the Business Combination is either approved by a majority of the Continuing
Directors or (ii) all of the price and procedural requirements set forth therein
are met.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
**Exhibit 1 -- Pages 5 through 23 of Proxy Statement dated March 24, 1995 relating to the
Company's 1995 Annual Meeting of Shareholders.
Exhibit 2 -- CBI Industries, Inc. Employment Agreement and addenda for J.E. Jones.
Exhibit 3 -- CBI Industries, Inc. Employment Agreement and addenda for A.J. Schneider.
Exhibit 4 -- CBI Industries, Inc. Employment Agreement and addenda for C.O. Ziemer.
Exhibit 5 -- CBI Industries, Inc. Employment Agreement and addenda for L.E. Akin.
Exhibit 6 -- CBI Industries, Inc. Employment Agreement and addenda for C.E. Willoughby.
Exhibit 7 -- Form of Liquid Carbonic Industries Corporation Employment Agreement and
Form of Addenda.
Exhibit 8 -- Letter Agreement between John E. Jones and the Company dated January 4,
1982, and addenda thereto.
Exhibit 9 -- CBI Industries, Inc. Stock Option Plan.
Exhibit 10 -- CBI Industries, Inc. 1995 Stock Option Plan.
Exhibit 11 -- CBI Restricted Stock Award Plan (1978).
Exhibit 12 -- CBI 1983 Restricted Stock Award Plan.
Exhibit 13 -- CBI 1989 Restricted Stock Award Plan.
Exhibit 14 -- CBI 1994 Restricted Stock Award Plan.
Exhibit 15 -- CBI Salaried Employee Stock Ownership Plan (1987).
*Exhibit 16 -- CBI Employee Stock Purchase and Savings Plan (1987).
Exhibit 17 -- CBI Executive Life Insurance Plan.
Exhibit 18 -- CBI Benefit Restoration Plan.
Exhibit 19 -- CBI Supplemental Survivor's Benefit, Executive Life Insurance and Benefit
Restoration Trust.
Exhibit 20 -- Letter to John E. Jones, the Company's Chairman, President and Chief
Executive Officer, from H. William Lichtenberger, the Chairman and Chief
Executive Officer of Praxair, dated October 27, 1995.
**Exhibit 21 -- Letter to stockholders of the Company dated November 16, 1995.
Exhibit 22 -- Press Release issued by the Company on November 16, 1995.
Exhibit 23 -- Letter to holders of Shares issued pursuant to the Company's Restricted
Stock Plans with respect to tendering Shares of restricted stock dated
November 16, 1995.
Exhibit 24 -- Motion to amend Complaint in Steiner v. CBI Industries, Inc. (Delaware
Chancery Court).
Exhibit 25 -- Complaint in Steiner v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 26 -- Complaint in Kreisberg v. Jones (Delaware Chancery Court).
Exhibit 27 -- Complaint in Lasker v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 28 -- Complaint in Polikoff v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 29 -- Complaint in Rosenberg v. Clark (Delaware Chancery Court).
Exhibit 30 -- Complaint in Lewis v. Jones (Delaware Chancery Court).
- ---------------
* Incorporated by reference to Exhibit A to the Company's 1992 proxy statement
for annual meeting of stockholders.
** Included with the Schedule 14D-9 mailed to stockholders.
10
12
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
CBI INDUSTRIES, INC.
By: /s/ JOHN E. JONES
---------------------------------
John E. Jones
(CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER)
Dated: November 16, 1995
11
13
ANNEX A
Certain contracts, agreements, arrangements and understandings between the
Company or its affiliates and certain of its executive officers, directors, and
affiliates are described under the sections entitled "Executive Compensation,"
"Compensation Committee Report on Executive Compensation" and "CBI Industries,
Inc. - 1995 Stock Option Plan" at pages 5 through 23 of the Company's Proxy
Statement dated March 24, 1995 relating to its 1995 Annual Meeting of
Shareholders (the "1995 Proxy Statement"), which pages are attached as Exhibit 1
hereto and are incorporated by reference. The Company's 1995 Stock Option Plan,
described at pages 20 through 23 of the 1995 Proxy Statement, was approved by
the Company's stockholders at the 1995 Annual Meeting of Shareholders.
The CBI Industries, Inc. Stock Option Plan, as approved by the Company's
shareholders in 1987, and amended through August 1993 (the "1987 Stock Option
Plan") provides for the granting of non-qualified options or options qualifying
as incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code") either alone or with a stock appreciation right
("SAR"). It is administered by the compensation committee of the Board (the
"Compensation Committee"). The maximum number of Shares issuable pursuant to the
grant of options or exercise of rights is 1,200,000 Shares. No more options may
be granted under the 1987 Stock Option Plan. The number of options which were
granted in 1995 to the following named executive officers, all executive
officers as a group, and all employees as a group are: J.E. Jones, 45,000; L.E.
Akin, 18,000; C.E. Willoughby, 12,000; A.J. Schneider, 6,000; C.O. Ziemer,
9,000; all executive officers as a group, 96,000; all employees as a group,
292,400.* All options granted in 1995 were granted on January 11, 1995 and the
exercise price of all options granted on such date is $24.375. For the period
January 1, 1995 through the date of this Schedule 14D-9, no options have been
exercised by the executive officers or the active employees as a group. The
outstanding grants also have "Limited Rights" to receive cash (equal to the
market value of the Common Stock subject to the related option less the exercise
price) upon expiration at the end of the 30 day period following a Change in
Control (as defined in the option grant) in respect of options which have not
been exercised.
Agreements between the Company and each of the executive officers of the
Company named in the following paragraph provide for each executive's continued
employment for a three year period (or to age 65, if earlier) following a Change
in Control of the Company ("Change in Control Agreements"). "Change in Control"
is defined as the occurrence at any time of any of the following events: an
Acquiring Person (as defined below) has become such; or (b) Continuing Directors
(as defined below) cease to comprise a majority of the Board of Directors of the
Company. The term "Acquiring Person" means any Person (as defined) who or which,
together with all Affiliates (as defined) and Associates (as defined) of such
Person, shall be the Beneficial Owner (as defined) of 10% or more of the Shares
then outstanding (subject to certain exceptions), but shall not include an
Exempt Person (as defined). The term "Continuing Director" means any member of
the Board, while such person is a member of the Board, who is not an Acquiring
Person, or an Affiliate or Associate of an Acquiring Person, or a representative
of an Acquiring Person or of any such Affiliate or Associate, and was a member
of the Board prior to March 4, 1986 and means any person who subsequently
becomes a member of the Board, while such person is a member of the Board, who
is not an Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative of an Acquiring Person or of any such Affiliate or
Associate, if (a) such person's nomination for election or election to the Board
is recommended or approved by resolution of a majority of the Continuing
Directors or (b) such person is included as a nominee in a proxy statement of
the Company distributed when a majority of the Board consists of Continuing
Directors.
Compensation and benefits for the three-year period are based generally on
the executive's compensation and benefits before the Change in Control, subject
to stipulated increases, and are payable in a lump sum on a discounted present
value basis upon either (i) termination by the Company of the executive's
employment for any reason other than death, disability or wilful and material
breach of the agreement during such period, or (ii) resignation of the executive
following any of (a) a significant change in the executive's authorities or
duties, (b) a reduction in the executive's total compensation and (c) other
breach of the executive's Change in Control Agreement. Such benefits payable
upon a termination of employment following a Change in
- ---------------
* Information with respect to two of the officers named in the compensation
table in the 1995 proxy statement is not provided herein, because those two
officers are no longer with the Company.
A-1
14
Control also include a cash payment equal to (a) the fair market value of any
restricted stock awards which are forfeited as a result of such termination, and
(b) with respect to any stock option that ceases to be exercisable or which
terminates, a payment equal to the excess of the fair market value of the stock
subject to such option over the option exercise price. The Change in Control
Agreement also contains "gross-up" provisions pursuant to which the executive
will be paid additional amounts to reimburse such executive for all excise taxes
payable pursuant to Code Section 4999 with respect to so-called golden
parachutes, which additional payments will also include those amounts necessary
to permit the executive to pay all income and excise taxes payable with respect
to all such additional payments. The benefits payable to the following executive
officers as of November 14, 1995, if a Change in Control had occurred as of such
date and a termination causing payment of the benefits had occurred (not
including payments with respect to shares of restricted stock awarded to the
executive officers under any of the Company's Restricted Stock Plans (as defined
and as described below)) are as follows: J.E. Jones, $9,600,000; L.E. Akin,
$4,300,000; C.E. Willoughby, $3,400,000; A.J. Schneider, $1,700,000; and C.O.
Ziemer, $2,600,000. One other executive officer at the Company has a Change in
Control Agreement of the same type as the named executives.
Pursuant to addenda to their respective Change in Control Agreements with
the Company, L.E. Akin and C.E. Willoughby also entered into Change in Control
Agreements with their current employers, Chicago Bridge & Iron Company ("CBIC")
and Liquid Carbonic Industries Corporation ("LCI"), respectively, wholly owned
subsidiaries of the Company. Messrs. Akin's and Willoughby's Change of Control
Agreements become effective upon either a Change in Control of the Company or a
Change in Ownership of CBIC or LCI, as the case may be. A "Change in Ownership"
of CBIC or LCI means an occurrence of an event pursuant to which the ultimate
right to elect the directors of CBIC or LCI, as the case may be, is not
exercisable by the Company or another entity which directly or indirectly
acquires stock of CBIC or LCI, as the case may be, in a leveraged buyout in
which the senior management of the Company participates. Upon the earlier of a
Change in Control in the Company, or a Change in Ownership of CBIC or LCI, as
the case may be, the executive officer must, within 30 days of such change,
notify both its immediate employer and the Company as to which employment
arrangement the executive wishes to apply to his employment. Eight other
executives have similar arrangements with the wholly owned subsidiary of the
Company by which they are employed.
LCI has entered into employment agreements with six executive officers of
LCI (the "LCI Change in Control Agreements"). The LCI Change in Control
Agreements provide that in the event of a Change in Ownership of LCI, the
executive is entitled to receive a lump sum payout equaling the aggregate salary
(including salary increases and bonuses) which would have been paid to such
executive during the remainder of the employment period, which varies from one
to two years depending upon the executive, and cash equal to the fair market
value of any previously granted restricted stock that is forfeited. "Change in
Ownership" is defined in the LCI Change in Control Agreements to mean: the
occurrence of an event pursuant to which (a) the ultimate right to elect
directors of LCI is not exercisable by the Company or another entity which
directly or indirectly acquires stock of LCI in a leveraged buyout in which the
senior management of the Company participates, or (b) Continuing Directors, as
defined in the Rights Agreement, cease to comprise a majority of the board of
directors of the Company at a time when LCI, directly or indirectly, is a
subsidiary of the Company.
The Company maintains the CBI Employee Stock Purchase and Savings Plan
(1987) (the "1987 Stock Purchase and Savings Plan") in which substantially all
employees of the Company and certain subsidiaries are eligible to participate.
The number of Shares purchased in 1995 under the 1987 Stock Purchase and Savings
Plan and the net value of Shares (market value less 85% of market value on the
date of purchase) for the following named executive officers, all executive
officers as a group, and all employees as a group are, respectively: J.E. Jones,
985 and $3,969.55; L.E. Akin, 1,328 and $5,152.90; C.E. Willoughby, 969 and
$3,682.35; A.J. Schneider, 0; C.O. Ziemer, 0; all executive officers as a group,
3,984 and $15,478.42; all employees as a group, 122,358 and $455,933.44. The
average price per share with respect to all such Shares was $21.117.
A-2
15
The Company restricted stock award plans (the "Restricted Stock Plans")
have been adopted by shareholder votes in 1978, 1983, 1989 and 1994 and such
plans are intended to encourage long-term employment and provide incentive
compensation to participants over an extended period by using specific
longer-term financial goals and/or stock vesting restrictions. The 1994
Restricted Stock Plan provides for awarding a target number of restricted Shares
to an individual recipient, or a percentage thereof, only after the Company
achieves specified performance goals set by the Compensation Committee. Pursuant
to the 1978, 1983 and 1989 Restricted Stock Plans the Compensation Committee
made awards on a discretionary basis to participants. Restricted Stock Plan
participants generally have all the rights of stockholders, with respect to
awarded shares, including the right to vote such Shares; however, Shares awarded
may not be sold, exchanged, pledged or otherwise disposed of until the
restrictions thereon have lapsed. Thus, Shares subject to restrictions tendered
into the Praxair Offer would be forfeited. However, the conversion of Shares in
a merger is deemed not to be a transaction subject to such forfeiture
provisions. Generally, restrictions on 50% of the Shares awarded pursuant to the
1978, 1983 and 1989 Restricted Stock Plans lapse after five years and
restrictions lapse on all other Shares awarded pursuant to such plans upon the
occurrence of death, retirement or termination of employment for reason of
disability. Restrictions on all Shares awarded under the 1994 Restricted Stock
Plans lapse at the beginning of the fifth year following the year for which
performance is measured. Restrictions on Shares awarded under all of the
Restricted Stock Plans lapse during the three year period after a Change in
Control upon the termination of employment (in the case of the 1978 and 1983
plans, by the Company) for any reason (other than wilful and material actions
causing direct and substantial damage to the Company or its Subsidiaries or
affiliates), or (with respect to the 1978 and 1983 Restricted Stock Plans) any
termination of such Restricted Stock Plans. Under the 1989 Restricted Stock
Plan, the Compensation Committee, and under the 1983 Restricted Stock Plan, the
Board, may cause the restrictions to lapse for any participant.
The number of outstanding restricted Shares awarded under all plans as of
November 14, 1995 to the following named executive officers, all executive
officers as a group, and all employees as a group which are still subject to
restrictions are: J.E. Jones, 66,350; L.E. Akin, 22,235; C.E. Willoughby,
10,165; A.J. Schneider, 4,304; C.O. Ziemer, 13,740; all executive officers as a
group, 120,298; all employees as a group, 920,779.
Pursuant to the Executive Life Insurance Plan adopted by the Company in
1992, 23 currently employed executives of the Company are insured under life
insurance contracts established under "split-dollar" arrangements intended to
allow the Company to ultimately recover the insurance premiums it pays with
respect to each insured executive. Under the plan, the executive's
pre-retirement death entitles his beneficiaries to between four and six times
his annual salary at the date of death. If death occurs after retirement, the
executive's beneficiaries are entitled to between two and four times his annual
salary as of the date of the executive's retirement. To the extent that the
insurance in force at the executive's death is not sufficient to pay his
beneficiaries the anticipated death benefit, any shortfall will be paid by the
CBI Supplemental Survivor's Benefit, Executive Life Insurance and Benefit
Restoration Trust (the "Rabbi Trust"). Such shortfall would include all amounts
necessary to pay any income taxes that are due with respect to any life
insurance make-up payments that are made from the Rabbi Trust.
The Rabbi Trust is a non-qualified, taxable grantor trust established by
the Company to hold certain assets as the source of the life insurance premiums
and any shortfall in life insurance death benefits as described above, and as
the source of certain make-up payments pursuant to the CBI Benefit Restoration
Plan. Under this plan, any employee of the Company affected by the limits
described below is entitled to retirement benefits ("Excess Benefits") from the
Rabbi Trust equal to the additional retirement benefits they would have received
under the Company's qualified retirement plans if in computing the benefits
thereunder there were no legal limitations on either (a) the amount of salary
that could be considered in determining a participant's benefit or (b) the
amount of benefits payable from any of such qualified retirement plans.
Furthermore, pursuant to an agreement dated January 4, 1982 and amended December
19, 1986 and July 16, 1987 between the Company and Mr. Jones, Mr. Jones's Excess
Benefits amount is determined by including in his years of service for pension
plan benefit calculation purposes service with a prior unrelated employer.
A-3
16
In October 1987, the Board approved and the Company established the CBI
Salaried Employee Stock Ownership Plan (1987) and such plan was amended and
restated as of June 1, 1994 (the "ESOP"). Salaried employees with at least two
years of service with the Company and designated subsidiaries are eligible to
participate. Initial funding of the ESOP came from proceeds of surplus assets in
the terminated CBI Pension Plan (Salaried) and by borrowings on behalf of the
ESOP. Such funds were used to acquire Shares and preferred stock convertible
into Shares at the rate of 1.5 Shares per share of preferred stock which are
held in a trust for annual allocation to eligible employees. Allocations are
based upon a participant's compensation and are fully and immediately vested.
Ongoing funding is provided by Company contributions and by dividends received
on shares held in the trust. The number of shares allocated in 1995 in the ESOP
to the following executive officers, all executive officers as a group, and all
employees as a group and the total number of shares held by the ESOP including
unallocated shares are:
COMMON PREFERRED
------------- -------------
J.E. Jones............................................. 292.536 787.411
L.E. Akin.............................................. 273.234 752.661
C.E. Willoughby........................................ 257.944 643.406
A.J. Schneider......................................... 213.019 500.519
C.O. Ziemer............................................ 267.943 699.869
All executives......................................... 1,504.819 3,784.062
All employees.......................................... 160,105.642 380,405.079
Held by Trustee -- entire plan......................... 1,680,893.000 3,472,189.000
Each participant is entitled to direct the trustee as to how the Company
stock allocated to his or her stock account is to be voted, which includes the
power to direct the trustee to abstain from voting on any issue. In addition,
each participant has the right to instruct the trustee as to the manner in which
the trustee is to respond to a tender offer for any or all of the Company stock
allocated to such participant's stock account. Pursuant to the terms of the
ESOP, the trustee is to tender that portion of unallocated shares which
corresponds pro-rata to the portion of allocated shares for which the trustee
has received instructions to tender. With respect to the remaining unallocated
shares, the trustee may determine based on its determination as to the best
interests of the participants whether or not to tender such shares.
LCI and Praxair are currently in negotiations concerning a proposed joint
venture arrangement, the purpose of which will be to operate a certain hydrogen
pipeline which is owned by Southpaw Leasing Master Trust II and leased to LCI.
It is contemplated that such pipeline will connect a hydrogen plant operated by
LCI in Louisiana with a pipeline system operated by Praxair in Texas. As part of
any such joint venture arrangement it is contemplated that LCI and Praxair will
enter into a hydrogen exchange agreement pursuant to which, among other things,
Praxair, on an ongoing basis, will agree to purchase a minimum volume of
hydrogen (having a current market value of approximately $4,000,000 per year)
under a take or pay provision and could purchase hydrogen in quantities having a
current market value of up to approximately $8,000,000 per year.
A-4
17
SCHEDULE I
RECENT TRANSACTIONS IN SHARES
I. DIRECTORS' DEFERRED FEE PLAN.
The following table sets forth the number of Shares that directors' fees
were converted into based on the selling price of the Common Stock on the date
such director's fees were earned (including dividends on such shares which were
converted into additional Shares):
DIRECTOR DATE EARNED NUMBER OF SHARES PRICE
- ------------------------------------------------- ----------- ---------------- -------
Gary E. MacDougal................................ 9/15/95 10.0286 $24.500
John F. Riordan.................................. 10/01/95 252.6316 $23.750
10/11/95 43.9560 $22.750
10/11/95 43.9560 $22.750
10/12/95 43.9560 $22.750
Robert G. Wallace................................ 10/11/95 43.9560 $22.750
10/11/95 43.9560 $22.750
10/12/95 43.9560 $22.750
10/25/95 210.5263 $23.750
II. ESOP DIVIDENDS.
The following table sets forth the number of Shares credited since
September 15 to the accounts of the following officers in connection with
dividends paid:
OFFICER POSITION NUMBER OF SHARES PRICE
- ------------------------------- --------------------------------- ---------------- ------
John E. Jones.................. Chairman, President and 21.301 $24.50
Chief Executive Officer
Lewis E. Akin.................. Executive Vice President 14.980 $24.50
Calvin E. Willoughby........... Executive Vice President 9.972 $24.50
Charles O. Ziemer.............. Senior Vice President and 13.247 $24.50
General Counsel
Alan J. Schneider.............. Vice President and Chief 4.547 $24.50
Financial Officer
Stephen M. Duffy............... Vice President -- Human Resources .976 $24.50
John R. Meier.................. Controller 5.533 $24.50
III. DIVIDEND REINVESTMENT PLAN.
The following table sets forth the number of Shares purchased for the
accounts of the following directors and officers pursuant to the Dividend
Reinvestment Plan upon distribution of a common stock dividend on September 15,
1995. All Shares were treasury shares.
OFFICER/DIRECTOR POSITION NUMBER OF SHARES
- ----------------------------------------- --------------------------------- ----------------
Stephen M. Duffy......................... Vice President -- Human Resources 4.7710
John T. Horton........................... Director 8.8380
Alan J. Schneider........................ Vice President and Chief 2.0420
Financial Officer
18
IV. OTHER TRANSACTIONS.
Mr. MacDougal sold 1,850 Shares on October 25, 1995 at a price of $19.625
per Share in the open market in a transaction unrelated to the Directors'
Deferred Fee Plan, the ESOP or the Dividend Reinvestment Plan.
Over the course of the past 60 days the Company has in the ordinary course
(i) sold Shares to former executives (or their estates) upon exercise of options
and to employees in connection with the Company's Dividend Reinvestment Plan;
(ii) exchanged Shares for Series C Preferred Stock in connection with ESOP
terminations; and (iii) purchased odd-lot holdings from stockholders, fractional
Shares related to ESOP terminations and restricted Shares in payment of taxes
incurred in connection with the lapse of restrictions.
2
19
ANNEX B-1
LEHMAN BROTHERS
November 14, 1995
Board of Directors
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60521
Dear Members of the Board:
We understand that PX Acquisition Corp., a wholly owned subsidiary of
Praxair, Inc. (together, the "Bidder"), has made a tender offer to the
shareholders of CBI Industries, Inc. (the "Company") to purchase all outstanding
shares of the common stock, par value $2.50 per share, together with certain
associated rights of the Company for consideration of $32.00 net per share in
cash (the "Praxair Offer"). The terms and conditions of the Praxair Offer are
set forth in more detail in the Offer to Purchase dated November 3, 1995 (the
"Offer to Purchase").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the adequacy, from a financial point of view, to the
Company's shareholders of the consideration offered in the Praxair Offer.
In arriving at our opinion, we reviewed and analyzed: (1) the Offer to
Purchase and the specific terms of the Praxair Offer, (2) such publicly
available information concerning the Company and the Bidder which we believe to
be relevant to our inquiry, (3) financial and operating information with respect
to the business, operations and prospects of the Company furnished to us by the
Company including, without limitation, certain projections prepared by the
Company, (4) a trading history of the Company's common stock and a comparison of
that trading history with those of other companies that we deemed relevant, (5)
a comparison of the historical financial results and present financial condition
of the Company with those of other companies that we deemed relevant, and (6) a
comparison of the financial terms of the Praxair Offer with the financial terms
of certain other transactions that we deemed relevant. In addition, we have
considered various discussions with third parties with respect to such third
parties' potential interest in an acquisition of all or part of the Company or
other strategic transactions involving the Company. We also have had discussions
with the management of the Company concerning its business, operations, assets,
financial condition and prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
LEHMAN BROTHERS INC.
190 S. LASALLE STREET CHICAGO, IL 60603 TELEPHONE 312/609 7200 FACSIMILE 312/609
8562
B-1-1
20
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial forecasts and projections of the
Company, upon advice of the Company we have assumed that such forecasts and
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of the Company as
to the future financial performance of the Company. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of
the Company and have not made or obtained any evaluations or appraisals of the
assets or liabilities of the Company. Our opinion is necessarily based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration offered to
the shareholders of the Company in the Praxair Offer is inadequate to such
shareholders.
We have, in the past, provided financial advisory and financing services to
the Company and are acting as financial advisor to the Company in connection
with the Praxair Offer. In addition, the Company has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. In the
ordinary course of our business, we actively trade in the securities of the
Company and the Bidder for our own account and for the accounts of our customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directions of the
Company. This opinion is not intended to be and does not constitute a
recommendation to any shareholder of the Company as to whether to accept the
consideration offered to such shareholder in the Praxair Offer.
Very truly yours,
LEHMAN BROTHERS
B-1-2
21
ANNEX B-2
Investment Banking Group
5500 Sears Tower
Chicago, Illinois 60606
312 906 6200
FAX 312 906 6262
(LOGO) Merrill Lynch
November 14, 1995
Board of Directors
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60521
Dear Members of the Board:
We understand that PX Acquisition Corp., a wholly owned subsidiary of
Praxair, Inc. (together, the "Bidder"), has made a tender offer to the
shareholders of CBI Industries, Inc. (the "Company") to purchase all outstanding
shares of the common stock, par value $2.50 per share, together with certain
associated rights of the Company for consideration of $32.00 net per share in
cash (the "Praxair Offer"). The terms and conditions of the Praxair Offer are
set forth in more detail in the Offer to Purchase dated November 3, 1995 (the
"Offer to Purchase").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the adequacy, from a financial point of view, to the
Company's shareholders of the consideration offered in the Praxair Offer.
In arriving at our opinion, we reviewed and analyzed: (1) the Offer to
Purchase and the specific terms of the Praxair Offer, (2) such publicly
available information concerning the Company and the Bidder which we believe to
be relevant to our inquiry, (3) financial and operating information with respect
to the business, operations and prospects of the Company furnished to us by the
Company including, without limitation, certain projections prepared by the
Company, (4) a trading history of the Company's common stock and a comparison of
that trading history with those of other companies that we deemed relevant, (5)
a comparison of the historical financial results and present financial condition
with those of other companies that we deemed relevant, and (6) a comparison of
the financial terms of the Praxair Offer with the financial terms of certain
other transactions that we deemed relevant. In addition, we have considered
various discussions with third parties with respect to such third parties'
potential interest in an acquisition of all or part of the Company or other
strategic transactions involving the Company. We have also had discussions with
the management of the Company concerning its business, operations, assets,
financial condition and prospects and undertook such other studies, analyses and
investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information and
have further relied upon the assurances of management of the Company that they
are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial forecasts and projections of the
Company, upon advice of the Company we have assumed that such
B-2-1
22
forecasts and projections have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the management of the
Company as to the future financial performance of the Company. In arriving at
our opinion, we have not conducted a physical inspection of the properties and
facilities of the Company and have not made or obtained any evaluations or
appraisals of the assets or liabilities of the Company. Our opinion is
necessarily based upon market, economic and other conditions as they exist on,
and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration offered to
the shareholders of the Company in the Praxair Offer is inadequate to such
shareholders.
We have, in the past, provided financial advisory and financing services to
the Company and are acting as financial advisor to the Company in connection
with the Praxair Offer. In addition, the Company has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. In the
ordinary course of our business, we actively trade in the securities of the
Company and the Bidder for our own account and for the accounts of our customers
and, accordingly, may at any time hold a long or short position in such
securities.
This opinion is for the use and benefit of the Board of Directors of the
Company. This opinion is not intended to be and does not constitute a
recommendation to any shareholder of the Company as to whether to accept the
consideration offered to such shareholder in the Praxair Offer.
Very truly yours,
MERRILL LYNCH
B-2-2
23
EXHIBIT INDEX
Exhibit 1 -- Pages 5 through 23 of Proxy Statement dated March 24, 1995 relating to the
Company's 1995 Annual Meeting of Shareholders.
Exhibit 2 -- CBI Industries, Inc. Employment Agreement and addenda for J.E. Jones.
Exhibit 3 -- CBI Industries, Inc. Employment Agreement and addenda for A.J. Schneider.
Exhibit 4 -- CBI Industries, Inc. Employment Agreement and addenda for C.O. Ziemer.
Exhibit 5 -- CBI Industries, Inc. Employment Agreement and addenda for L.E. Akin.
Exhibit 6 -- CBI Industries, Inc. Employment Agreement and addenda for C.E. Willoughby.
Exhibit 7 -- Form of Liquid Carbonic Industries Corporation Employment Agreement and Form
of Addenda.
Exhibit 8 -- Letter Agreement between John E. Jones and the Company dated January 4,
1982, amendment thereto dated December 19, 1986, and amendment thereto dated
July 16, 1987.
Exhibit 9 -- CBI Industries, Inc. Stock Option Plan.
Exhibit 10 -- CBI Industries, Inc. 1995 Stock Option Plan.
Exhibit 11 -- CBI Restricted Stock Award Plan (1978).
Exhibit 12 -- CBI 1983 Restricted Stock Award Plan.
Exhibit 13 -- CBI 1989 Restricted Stock Award Plan.
Exhibit 14 -- CBI 1994 Restricted Stock Award Plan.
Exhibit 15 -- CBI Salaried Employee Stock Ownership Plan (1987).
Exhibit 16 -- CBI Employee Stock Purchase and Savings Plan (1987) (incorporated by
reference).
Exhibit 17 -- CBI Executive Life Insurance Plan.
Exhibit 18 -- CBI Benefit Restoration Plan.
Exhibit 19 -- CBI Supplemental Survivor's Benefit, Executive Life Insurance and Benefit
Restoration Trust.
Exhibit 20 -- Letter to John E. Jones, the Company's Chairman, President and Chief
Executive Officer, from H. William Lichtenberger, the Chairman and Chief
Executive Officer of Praxair, dated October 27, 1995.
Exhibit 21 -- Letter to Stockholders of the Company dated November 16, 1995.
Exhibit 22 -- Press Release issued by the Company on November 16, 1995.
Exhibit 23 -- Letter to holders of Shares issued pursuant to the Company's Restricted
Stock Plans with respect to tendering Shares of restricted stock dated
November 16, 1995.
Exhibit 24 -- Motion to amend Complaint in Steiner v. CBI Industries, Inc. (Delaware
Chancery Court).
Exhibit 25 -- Complaint in Steiner v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 26 -- Complaint in Kreisberg v. Jones (Delaware Chancery Court).
Exhibit 27 -- Complaint in Lasker v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 28 -- Complaint in Polikoff v. CBI Industries, Inc. (Delaware Chancery Court).
Exhibit 29 -- Complaint in Rosenberg v. Clark (Delaware Chancery Court).
Exhibit 30 -- Complaint in Lewis v. Jones (Delaware Chancery Court).