1
EXHIBIT 1
ing compensation for certain other officers; administers the Company's stock
option plans and restricted stock award plans; and makes determinations as to
which key officers of the Company or its subsidiaries should be offered
employment and/or termination agreements.
The Nominating Committee, which held two meetings in 1994, establishes
criteria regarding the size and composition of the Board and its Committees,
recommends criteria relating to tenure and eligibility, identifies, reviews and
recommends prospective Board members, recommends candidates for the position of
Chief Executive Officer and Chief Financial Officer, and approves the nominees
for new positions on the Board and vacancies on the Board. It will consider
nominees for the Board recommended by shareholders. Pursuant to the Company's
by-laws, recommendations must be submitted in writing and addressed to the
Chairman of the Nominating Committee, c/o Secretary of the Company, Charlotte C.
Toerber, CBI Industries, Inc., 800 Jorie Boulevard, Oak Brook, IL 60521-2268 not
less than sixty days prior to the first anniversary of the date of the last
meeting of shareholders called for the election of directors and set forth the
name, age, business and residential address, principal occupation, number of
shares of Common Stock owned and such other information concerning the nominee
as may be required by the Federal securities laws with respect to an individual
nominated as a director for whom proxies are solicited.
The Environmental and Safety Committee, which was established, but did not
meet, in 1994, reviews and makes recommendations concerning the environmental
and safety philosophies and standards of the Company and its operating
subsidiaries, reviews existing compliance programs and monitors environmental
and safety compliance of the Company and its subsidiaries.
COMMON STOCK OWNERSHIP BY
CERTAIN PERSONS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to each
person known to the Company to be the beneficial owner of more than 5% of any
class of the Company's outstanding stock.
TITLE NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF CLASS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
-------- ------------------- -------------------- --------
Common Stock LaSalle National Trust, N.A. 7,063,258(1) 16.30%
135 South LaSalle Street
Chicago, IL 60603
Common Stock The Capital Group Companies, Inc. 3,642,710(2) 9.57%
333 South Hope Street
Los Angeles, CA 90071
Common Stock Putnam Investments, Inc. 2,088,700(3) 5.5%
One Post Office Square
Boston, MA 02109
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(1) According to an amended Schedule 13G dated February 13, 1995, these shares
are held by LaSalle National Trust, N.A. in its capacity as Trustee of the
CBI Salaried Employee Stock Ownership Plan (1987) (the "ESOP"). It has
shared power to vote the shares and sole power to dispose of the shares.
Includes 859,082.464 shares of Common Stock and 2,115,318.001 shares of
Series C Preferred Stock (which are convertible into 3,172,977.002 shares of
Common Stock) which are not allocated to accounts of ESOP participants, and
868,798.536 shares of Common Stock and 1,441,599.999 shares of Series C
Preferred Stock (which are convertible into 2,162,399.999 shares of Common
Stock) which are allocated to accounts of ESOP participants.
(2) According to an amended Schedule 13G dated February 6, 1995 filed by The
Capital Group Companies, Inc. and its subsidiaries, Capital Guardian Trust
Company and Capital Research and Management Company, it had sole power to
vote 2,572,610 shares and sole power to dispose of 3,642,710 shares.
(3) According to an amended Schedule 13G dated January 23, 1995 filed by Putnam
Investments, Inc. and its subsidiaries, Putnam Investment Management, Inc.
and The Putnam Advisory Company, Inc., it had shared power to dispose of
2,088,700 shares.
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on February 15, 1995, by each director and
nominee, each named executive officer and by all directors and executive
officers as a group.
SHARES OF COMMON STOCK PERCENT OF
NAME OF BENEFICIALLY OWNED OUTSTANDING
BENEFICIAL OWNER AS OF FEBRUARY 15, 1995(1) COMMON STOCK
- ---------------- --------------------------- ------------
John E. Jones 71,776(2) *
Lewis E. Akin 28,957(2) *
Wiley N. Caldwell 1,500 *
E. Hubert Clark, Jr. 1,350 *
Robert J. Daniels 23,327(2) *
Robert J. Day 1,650 *
John T. Horton 1,536,439(3) 4.2%
Gary E. MacDougal 4,650 *
Stephanie Pace Marshall 200 *
Edward J. Mooney 1,950 *
John F. Riordan 1,100 *
George L. Schueppert 40,682(2) *
Robert T. Stewart 1,100 *
Robert G. Wallace 1,650 *
Charles O. Ziemer 26,600(2) *
All directors and
executive officers as a group
(18 in number) 1,766,053(2) 4.6%
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*Beneficially owns less than one percent of the Company's outstanding shares
of Common Stock.
(1) Share amounts for individual directors and officers and all directors and
officers as a group include shares awarded pursuant to the CBI restricted
stock award plans for which restrictions have not lapsed, shares of Common
Stock held pursuant to the CBI Salaried Employee Stock Ownership Plan (1987)
and shares owned by spouses and certain other immediate family members.
(2) Excludes shares which are subject to presently exercisable stock options as
follows: John E. Jones, 165,500 shares; Lewis E. Akin, 52,800 shares; Robert
J. Daniels, 75,500 shares; George L. Schueppert, 78,450 shares; Charles O.
Ziemer 40,200 shares; and directors and executive officers as a group,
436,250 shares, and excludes shares of Series C Preferred Stock held
pursuant to the CBI Salaried Employee Stock Ownership Plan (1987) as
follows: John E. Jones, 5,317 shares; Lewis E. Akin, 4,750 shares; Robert J.
Daniels, 4,896 shares; George L. Schueppert, 4,946 shares; Charles O.
Ziemer, 3,887 shares; and directors and executive officers as a group,
28,461 shares.
(3) Includes 1,534,140 shares owned by Mr. Horton as co-trustee of twenty-one
trusts of which he has a one-sixth beneficial interest.
SECTION 16(A) REPORTING DELINQUENCIES
Under rules adopted by the Securities and Exchange Commission effective
May 1, 1991, the Company is required to report certain information about any
director, officer, beneficial owner of more than ten percent of its Common Stock
or its Preferred Stock, or any other person subject to Section 16 of the
Securities Exchange Act of 1934 that failed to file on a timely basis the
reports required by Section 16(a) of the Exchange Act (the "Reports") during the
last fiscal year. Based upon information furnished to the Company, including the
Reports in question, as contemplated by the rules, it appears that Mr. MacDougal
filed one Form 4 late with regard to one sale transaction and that two officers,
Mr. Duffy, Vice President-Human Resources, and Mr. Schneider, Vice President and
Controller, each filed one Form 5 late with regard to reporting transactions
under the Company's Dividend Reinvestment Plan.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company.
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- -------------------------------------------
(a) (b) (c) (d) (f) (g) (i)
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/ COMPEN-
BONUS AWARDS SARS SATIONS
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2)(3) (#SHARES)(4) ($)(5)
- --------------------------- ---- --------- ------- ---------- ------------ ---------
John E. Jones
Chairman of the Board, 1994 530,000 552,497 137,000 31,000 115,042
President, Chief Executive 1993 530,000 77,000 515,250 28,000 133,222
Officer and Director 1992 495,000 456,667 0 28,000 78,395
Lewis E. Akin,
Executive Vice President 1994 290,000 210,189 48,020 14,000 96,045
and Director, President of 1993 290,000 35,000 200,375 12,000 76,575
Chicago Bridge & Iron
Company 1992 275,000 201,822 0 13,500 42,428
Robert J. Daniels
Executive Vice President 1994 265,000 193,507 48,020 14,000 89,021
and Director, President
of Liquid Carbonic 1993 265,000 43,515 171,750 11,000 67,456
Industries Corporation 1992 252,000 148,057 0 12,000 40,191
George L. Schueppert
Executive Vice President, 1994 305,000 261,591 48,020 14,000 105,848
Chief Financial Officer 1993 305,000 35,000 200,375 12,000 87,047
and Director 1992 290,000 218,895 0 13,500 46,156
Charles O. Ziemer 1994 195,000 101,056 20,580 7,000 63,725
Senior Vice President 1993 192,000 25,000 85,875 6,500 48,064
and General Counsel 1992 185,000 86,589 0 7,000 30,634
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(1) The amounts were earned in the stated year and paid in the following year
pursuant to annual incentive bonus opportunities described under the caption
"Compensation Committee Report on Compensation Awards."
(2) Amounts earned in 1994 (but awarded in 1995) were pursuant to the CBI 1994
Restricted Stock Award Plan (see description under the caption "Long Term
Incentive Plans" and "Compensation Committee Report on Compensation Awards")
and reflects restricted stock earned pursuant to 50% of the target awards
granted in 1994 for which performance is measured at the end of 1994.
Restrictions on these shares expire January 1, 1999. Amounts awarded in 1993
were pursuant to the CBI 1989 Restricted Stock Award Plan.
(3) Restricted Stock Awards are valued at the closing price on the date of
grant. Participants receive dividends on the Restricted Stock reported in
this column. The number and value of the aggregate restricted stock holdings
at the end of the last completed fiscal year, based on the NYSE composite
closing price of $25.625 per share on 12/31/94, for each named executive
officer are: John E. Jones 60,750, $1,556,719; Lewis E. Akin 20,275,
$519,547; Robert J. Daniels 16,125, $413,203; George L. Schueppert 24,250,
$621,406; and Charles O. Ziemer 12,900, $330,562.
(4) It is the present policy of the Compensation Committee not to award SARs
either at the time of grant or during the term of the option.
(5) The compensation reported represents (a) contributions pursuant to the CBI
Salaried Employee Stock Ownership Plan (1987)(the "ESOP") for shares
allocated to the executive officer's account, (b) the cost of stock
allocated in the form of units to each executive officer's account in an
irrevocable trust under the CBI Benefit Restoration Plan (described under
the caption "Pension and other retirement benefits") for allocations
pursuant to the ESOP which otherwise exceed the maximum limit imposed upon
such plan by the Internal Revenue Code (the "Code"), and (c) the dollar
value of split-dollar life insurance benefits. Those three amounts,
expressed in the same order identified above, for each named executive
officer are as follows: John E. Jones, $57,048, $19,375, $38,619; Lewis E.
Akin $54,866, $17,500, $23,679; Robert J. Daniels $55,635, $14,375, $19,011;
George L. Schueppert $55,586, $19,375, $30,887; Charles O. Ziemer $45,064,
$5,625, $13,036.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants and exercises during the fiscal
year 1994 to and by the executive officers named in the Summary Compensation
Table above, and the value of the options held by such persons at the end of
fiscal 1994. No SARs were granted or exercised during fiscal 1994.
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OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
GRANT
INDIVIDUAL GRANTS DATE VALUE
- ----------------------------------------------------------------------------- -----------
(A) (B) (C) (D) (E) (F)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING SARS EXERCISE
OPTIONS/SARS GRANTED TO OR BASE GRANT DATE
GRANTED EMPLOYEES PRICE EXPIRATION PRESENT
NAME (# SHARES)(2) IN FISCAL YEAR ($/SHARE) DATE VALUE($)(3)
- ---- ------------- -------------- --------- ---------- -----------
John E. Jones 31,000 13.5% 30.125 5/02/04 364,560
Lewis E. Akin 14,000 6.1% 30.125 5/02/04 164,640
Robert J. Daniels 14,000 6.1% 30.125 5/02/04 164,640
George L. Schueppert 14,000 6.1% 30.125 5/02/04 164,640
Charles O. Ziemer 7,000 3.0% 30.125 5/02/04 82,320
(1) It is the present policy of the Compensation Committee not to award SARs
either at the time of grant or during the term of the option.
(2) All options were granted at market value and are subject to a one-year
holding period. Each option will terminate and cease to be exercisable if
the Participant's employment with the Company terminates for any reason
other than death, retirement for disability or retirement under a retirement
plan of the Company.
(3) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black Scholes model in estimating the value
of the options reflected in the above table include the following: (a) an
exercise price of the option of $30.125 equal to the fair market value of
the underlying stock on the date of grant; (b) an interest rate 6.48% that
represents the interest rate on a U.S. treasury security with a maturity
date corresponding to that of the option term; (c) volatility of 33.249%
calculated using daily stock prices for the one-year period prior to the
grant date; (d) dividends at the rate of $0.48 per share, representing the
annualized dividends paid with respect to a share of Common Stock at the
date of grant; (e) an approximately 4.0% reduction to reflect the
probability of forfeiture due to termination prior to vesting and
approximately 12.33% reduction to reflect the probability of a shortened
option term due to termination of employment prior to the option expiration
date; and (f) an option term of ten years. The ultimate values of options
will depend on the future market price of Common Stock, which cannot be
forecast with reasonable accuracy. The actual value, if any, an optionee
will realize upon exercise of an option will depend on the excess of the
market value of the Common Stock over the exercise price on the date the
option is exercised.
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AGGREGATED OPTION/SAR(1) EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(a) (b) (c) (d) (e)
NUMBER VALUE OF
OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED MONEY
OPTION/SARS OPTIONS/SARS
AT FY-END(#) AT FY-END ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE(2)
- ---- --------------- ----------- -------------- ----------------
John E. Jones 0 NA 165,500/31,000 464,710/0
Lewis E. Akin 0 NA 52,800/14,000 0/0
Robert J. Daniels 0 NA 75,500/14,000 231,798/0
George L. Schueppert 0 NA 78,450/14,000 218,158/0
Charles O. Ziemer 0 NA 40,200/ 7,000 107,385/0
(1) It is the present policy of the Compensation Committee not to award SARs
either at the time of grant or during the term of the option.
(2) Value is based on the NYSE composite closing price of $25.625/share on
12/31/94.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Under the Company's 1994 Restricted Stock Award Plan, at the beginning of
each year, the performance goals and target awards are set. Target awards are
allocated 50% to the current year for which the target award was made ("50%
award"), 25% to the first year following ("first year award") and 25% to the
second year following ("second year award"). Target awards are subject to
adjustment based upon measurement of pre-tax operating income as a return on net
assets over a three year period ending with the year in which the measurement of
performance is made. The 50% award is adjusted at the end of the year in which
the target award is made. The first year award is adjusted at the end of the
year in which the target award is made and at the end of the subsequent year.
The second year award is adjusted at the end of the year in which the target
award is made and again at the end of the second year following the year the
target award is made. The target award, as it may be adjusted, will be earned if
100% of the performance goal is achieved. The threshold number of shares will be
earned at the achievement of 75% of the performance goal, and the maximum number
of shares will be earned at the achievement of 125% of the performance goal. No
dividends will be paid during the performance period.
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LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
ESTIMATED FUTURE PAYOUTS UNDER
PERFORMANCE OR NON-STOCK PRICE-BASED PLANS
NUMBER OF OTHER PERIOD UNTIL ---------------------------------
SHARES, UNITS, MATURATION THRESHOLD TARGET MAXIMUM
NAME OR OTHER RIGHTS(#) OR PAYOUT (#) (#) (#)
- -------------------------------------------------------------------------------------------------
John E. Jones 2,500 1992-4, 1993-5 1400 2,800 5,600
2,500 1992-4, 1994-6 1400 2,800 5,600
Lewis E. Akin 875 1992-4, 1993-5 490 980 1,960
875 1992-4, 1994-6 490 980 1,960
Robert J. Daniels 875 1992-4, 1993-5 490 980 1,960
875 1992-4, 1994-6 490 980 1,960
George L. Schueppert 875 1992-4, 1993-5 490 980 1,960
875 1992-4, 1994-6 490 980 1,960
Charles O. Ziemer 375 1992-4, 1993-5 94 420 840
375 1992-4, 1994-6 94 420 840
Actual performance against the performance goal for the three year period
ended December 31, 1994 has been certified by the Compensation Committee and the
restricted stock earned pursuant to the 50% award for 1994 has been allocated.
(See Summary Compensation Table - Restricted Stock). The amounts listed in the
table above under "Number of Shares, Units, or other Rights" indicate the first
year award and second year award that are part of a target award made in 1994.
Amounts listed under "Estimated Future Payouts Under Non-Stock Price Based
Plans" have been adjusted as aforesaid to take into account actual performance
against the performance goal for the three year period ended December 31, 1994.
PENSION AND OTHER RETIREMENT BENEFITS
The CBI Pension Plan (the "Pension Plan") is non-contributory and covers
substantially all salaried employees and certain hourly employees of the Company
and its participating subsidiaries. The following table shows approximate annual
pensions payable to salaried employees, including executive officers, assuming
normal retirement at age 65 and that the current social security tax base
remains unchanged:
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PENSION PLAN TABLE
AVERAGE
ANNUAL YEARS OF SERVICE AT RETIREMENT
EARNINGS 15 20 25 30 35 40
-------- ------- -------- -------- -------- -------- --------
$100,000 $21,540 $ 28,720 $ 35,900 $ 43,080 $ 50,260 $ 57,440
200,000 42,540 56,720 70,900 85,080 99,260 113,440
300,000 63,540 84,720 105,900 127,080 148,260 169,440
400,000 84,540 112,720 140,900 169,080 197,260 225,440
500,000 105,540 140,720 175,900 211,080 246,260 281,440
600,000 126,540 168,720 210,900 253,080 295,260 337,440
700,000 147,540 196,720 245,900 295,080 344,260 393,440
800,000 168,540 224,720 280,900 337,080 393,260 449,440
900,000 189,540 252,720 315,900 379,080 442,260 505,440
1,000,000 210,540 280,720 350,900 421,080 491,260 561,440
1,100,000 231,540 308,720 385,900 463,080 540,260 617,440
1,200,000 252,540 336,720 420,900 505,080 589,260 673,440
Pensions for salaried employees, including Executive Officers, are based on
years of service and the greater of the average of their last thirty-six
consecutive months or any three consecutive full calendar years of salary and
bonuses (excluding profit-sharing, overseas living adjustments, remuneration
related to Company securities, and compensation otherwise constituting qualified
earnings in excess of an annually adjusted limitation imposed by the Internal
Revenue Code.)
Pension benefits are computed on the basis of a single life annuity with a
surviving spouse benefit. Pension Plan benefits shown above are offset by a
portion of primary Social Security benefits. In the case of all the named
executive officers, such reduction would not substantially affect their
benefits. Benefits are also offset by an amount equal to the amount of a monthly
annuity that could have been purchased from an insurance company at the time a
participant retires with one-half the cash value of the participant's ESOP
account up to a maximum of one-half the pension accrued by the participant after
1987.
The Internal Revenue Code limited the annual benefits which may be paid to
any person under the Pension Plan to $120,000 per year in 1994. In addition,
compensation to be used in the determination of benefits was limited by the
Internal Revenue Code to $150,000 for 1994. The Company has adopted the CBI
Benefit Restoration Plan through which it pays retirement benefits otherwise
determined under the Pension Plan formulas but in excess of the maximum limit
imposed upon qualified pension plans by the Internal Revenue Code. Certain
assets have been placed in trust with an independent trustee to support the CBI
Benefit Restoration Plan. The Company may not unilaterally amend such trust
after a defined change in control of the Company and may not revoke the trust in
any event.
The number of years of credited service, as of December 31, 1994, for the
named executive officers are: John E. Jones, 37.7 years; George L. Schueppert,
29.4 years; Lewis E. Akin, 34.3 years; Robert J. Daniels, 28.9 years; and
Charles O. Ziemer, 32.3 years. Pursuant to an agreement between Mr. Jones and
the Company, the years credited to him include years of service with his former
employer, but any pension payable by the Company
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to him will be offset by any pension he receives from his former employer.
Pursuant to an agreement between Mr. Schueppert and the Company the years
credited to him include years of service with a former employer, but any pension
payable by the Company to him will be offset by the amount of accrued and vested
pension to which he was entitled at the former employer.
COMPENSATION OF DIRECTORS
Directors who were not officers of the Company received in 1994 an annual
retainer of $20,000, paid in quarterly installments, plus an amount equal to the
value of 300 shares of Common Stock, valued on the first business day of July,
which each eligible director in 1994 elected to take in the form of shares of
Common Stock, and $1,000 for attendance at each Board meeting. Directors who
were chairpersons of committees received in 1994 an additional retainer of
$4,000. Those who serve on Board Committees receive $1,000 for each Committee
meeting attended. Directors who are not employees of the Company may elect on an
annual basis to defer their fees. Such electing director is credited with
investment units equivalent to the number of shares of Common Stock that could
have been purchased on the open market with the amounts to which the director
was entitled under the standard compensation arrangements, plus credit for
dividends that would have been paid on such shares.
TERMINATION AGREEMENTS
Agreements between the Company and each of the named Executive Officers of
the Company provide for each executive's continued employment for a three year
period (or to age 65, if earlier) following a defined change in control of the
Company. Compensation and benefits for such period are based generally on the
executive's compensation and benefits before such defined change in control,
subject to stipulated increases, and are payable notwithstanding termination
(other than by death, disability or wilful and material breach of the agreement)
of the executive's employment during such period.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of outside directors and is responsible for reviewing and
approving compensation practices and benefits, in particular those affecting the
executive and management group of employees of the Company and its subsidiaries,
and including recommendations proposed by management. The Committee determines
compensation and awards and grants under corporate plans for officers of the
Company (subject to review by the Board of Directors), reviews management
recommendations concerning compensation for certain other executives, and
administers the Company's stock option plans, the CBI Officers' Bonus Plan and
the CBI 1994 Restricted Stock Award Plan.
The Committee uses the services of Hewitt Associates LLC, a
nationally-recognized, independent compensation consultant which provides
relevant competitive compensation data, to assist the Committee in making its
decisions. The consultant conducts an annual review of the Company's executive
compensation program and reports its findings to the Committee. This review is
based on a study of the current comparative compensation practices of an
appropriate sample of other large public corporations comparable in size to the
Company. Throughout this report, reference to "competitive data," "market
levels," "market data," etc., is
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reference to the information and values provided by this study. The Company
relies on this array of companies for analysis of executive compensation rather
than the Peer Group chosen for comparing stockholder return in the Performance
Graph because the Committee believes the Company's competition for executive
talent, based on both the Company's geographic location and the industries in
which the Company operates, is better reflected by this array of companies.
OVERALL COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to support the
achievement of corporate performance goals, to attract, retain and motivate
talented people, and to link executive and shareholder interests through
equity-based plans with a long-term perspective. The program consists of short
and long-term incentive plans which emphasize pay for both individual and
corporate performance and stock based incentives. Because the Committee believes
that it is in the best interest of shareholders to operate the business with a
long term perspective and reward those who do so, the program is intended to
more greatly emphasize its longer-term components. Cash compensation, which
includes base salary and bonus, is designed to be at or near competitive market
levels with base salaries approaching market levels and annual target
performance bonus opportunities at market levels. Long-term incentives, which
are a) stock option grants and b) restricted stock awards based on longer-term
corporate performance, are designed to provide opportunity for resulting
compensation from such incentives at or above the median values indicated by the
competitive data and to provide an incentive to an executive which is aligned
with shareholder interests.
The following is a detailed description of the current compensation program.
BASE SALARY
The Committee annually reviews the salaries of the executive officers of the
Company. In determining appropriate salary levels, the Committee primarily
considered (weighing all the factors on a generally equivalent basis) level of
responsibility, experience, individual performance, and competitive pay levels
as reflected in the compensation consultant's study.
ANNUAL INCENTIVES
Through the CBI Officers' Bonus Plan, annual incentive bonus opportunities
are made available to executive officers, including the CEO, to recognize and
reward corporate, business unit, and individual performance. The plan provides
incentives to executive officers of the Company by making cash payments to those
who achieve their business unit and/or Company annual goals and a discretionary
payment for individual performance as described below.
The performance portion of the plan uses income and return on invested
capital performance goals for the Company. Threshold, target and maximum goals
for Company and business unit performances are established at the beginning of
each year. An executive's target bonus depends upon his position,
responsibility, and ability to impact the achievement of the Company's
performance goals. The competitive market data is reviewed annually in
considering appropriate levels of incentive bonus opportunities for individual
employees. The
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Committee annually reviews and approves the plan's target opportunities and
performance goals.
Annual incentive bonus opportunities are made available pursuant to the
discretionary portion of the CBI Officers' Bonus Plan by permitting cash
payments to executive officers for the effort and skill exhibited in supervising
their respective areas of responsibility and the personnel who report to them.
Individual target and maximum amounts payable under this portion of the Plan are
established and approved by the Committee.
In 1994, the Company and its business units' performance goals were
exceeded, and the amounts paid consisted of both a performance portion and a
discretionary portion under the Plan.
STOCK OPTION PLAN AND RESTRICTED STOCK AWARD PLAN
The overall compensation philosophy is to stress long-term stock based
incentives related to shareholder value. Opportunities for such incentives are
provided in the form of stock options and restricted stock at a level targeted
slightly above competitive market levels.
STOCK OPTION PLAN
Stock options are granted under the CBI Stock Option Plan to encourage and
reward long-term corporate financial success, as measured by stock price
appreciation. Under the plan, the Committee annually considers grants to
executives of options to purchase shares of Company stock at the closing market
price on the day of the grant. These grants may be exercised after one year and
up to a maximum of ten years from date of grant. The number of shares granted to
an individual employee is based on, in general order of importance, the
employee's potential impact on the Company's performance based upon the
employee's position and level of responsibility, a qualitative evaluation of the
employee's past performance, a review of the competitive compensation data and
the number of options granted in previous years.
RESTRICTED STOCK AWARD PLAN
The Restricted Stock Award Plan is intended to encourage long-term
employment and provide incentive compensation to Participants over an extended
period by using a combination of specific longer-term financial goals and stock
vesting restrictions. The Plan provides for awarding a target number of
restricted shares to an individual recipient, or a percentage thereof, only
after the Company achieves the performance goals set by the Committee.
Restrictions on shares awarded lapse at the beginning of the fifth year
following the year for which performance is measured. Assignment of a target
award of restricted stock to an individual employee is based on, in general
order of importance, the employee's potential impact on the Company's
performance based upon the employee's position and level of responsibility, a
qualitative evaluation of the employee's past performance, a review of the
competitive compensation data and the number of restricted shares awarded in
previous years. The performance goal is based on pre-tax operating income, as a
return on net assets. The Committee each year also approves the levels of the
target awards. In 1994, the Company exceeded its performance goals under the
Plan.
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CEO COMPENSATION
Mr. John Jones has been Chairman, CEO and President of CBI Industries since
1989. Mr. Jones' 1994 base salary was $530,000, the same as in 1993. In light of
the financial results for 1993, Mr. Jones recommended to the Committee no
adjustment to his salary for 1994, and upon consideration the Committee
accordingly granted no salary increase to him. The amount of Mr. Jones' 1994
base salary remained slightly below the median value as reflected in the
competitive data of the compensation study.
Based on 1994 financial results, Mr. Jones earned an incentive bonus of
$552,497. This amount was up from the $77,000 paid for 1993, which consisted
solely of a bonus paid under the discretionary portion of the Plan. As the
corporate performance goals under the CBI Officers' Bonus Plan were exceeded in
1994, this amount consisted of both a performance-based portion and a
discretionary portion under the Plan. Mr. Jones' bonus target was set as a
percentage of his base salary, taking into consideration the competitive data
for such targets, with most of the amount paid based upon net income and return
on invested capital performance goals for the Company, and a discretionary
portion. The discretionary portion of Mr. Jones' bonus was based on the
Committee's consideration of Mr. Jones' leadership in long-term strategic
planning, his focus on the increasing global market Opportunities for the
Company, and his management ability as the Company undergoes change to adapt to
these conditions. The total amount paid to Mr. Jones could have ranged from a
minimum of 0% to a maximum of 114% of his base pay, depending on the degree of
achievement of net income and return on invested capital performance goals, and
the amount of the discretionary portion under the Plan.
The 1994 stock option grant of 31,000 shares to Mr. Jones was based on his
potential impact on the Company's performance based upon his position and level
of responsibility within the Company, and its consideration of the factors
described above relating to the discretionary bonus. The Committee also
considered the number of options granted in previous years. The potential value
represented by this grant was close to the median value of similar stock option
grants as reflected in the competitive data.
In 1994, the Committee established a target of 10,000 shares for Mr. Jones
under the 1994 CBI Restricted Stock Award Plan. The amount of the target award
was determined separately from the amount of the stock option grant. The
Committee also considered the number of restricted shares awarded under previous
plans in previous years in setting Mr. Jones' 1994 target award under the Plan.
The amount of the target award was slightly above the median value as reflected
in the competitive data of the compensation study. Taken together, the value of
the options granted and the restricted stock target award was slightly above the
median value of total long term incentive compensation as reflected in the
compensation study. Based upon 1994 financial results, Mr. Jones earned a
restricted stock award of 11,200 shares, of which 5,600 shares were awarded
subject to restrictions and 5,600 shares are subject to adjustment based upon
attainment of the performance goals for 1995 and 1996.
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INTERNAL REVENUE CODE LIMITATION ON DEDUCTIBILITY OF COMPENSATION
The Committee has discussed and considered certain provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended, relating to the
deduction of compensation-related expenses in excess of $1,000,000. The
Committee has determined not to take further action at this time with regard to
the Company's executive compensation programs. It will continue to consider
these Code provisions with regard to such programs and any changes to them;
however, the Committee believes the Company's interests are best served by
retaining a flexible approach and that there may be circumstances in which it is
appropriate to pay certain amounts or forms of compensation that will not be
fully deductible under these Code provisions.
The Compensation Committee Report below shall not be deemed incorporated by
reference by a general statement incorporating by reference this proxy statement
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
COMPENSATION COMMITTEE
Edward J. Mooney (Chairman)
Robert J. Day
John T. Horton
Gary E. MacDougal
Robert T. Stewart
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STOCK PERFORMANCE CHART
The Stock Performance Chart below shall not be deemed incorporated by
reference by a general statement incorporating by reference this proxy statement
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this information by reference, and shall not otherwise be deemed filed under
such Acts.
The chart below compares the cumulative total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the S&P 500 Index and the Dow Jones Diversified Industrial Index
for the same period. The comparison assumes $100 was invested in the Company's
Common Stock, the S&P 500 Index and the Dow Jones Diversified Industrial Index
on December 31, 1989, and reinvestment of all dividends.
COMPARISON OF TOTAL RETURNS
VALUE FOR EACH ONE HUNDRED DOLLARS INVESTED ON 12/31/89
(GAINS IN STOCK PRICE, DIVIDENDS AND REINVESTED DIVIDENDS)
Measurement Period
(Fiscal Year Covered) CBI S&P 500 PEER Group*
- --------------------- ---- ------- -----------
Measurement Pt. -- 12/31/89 $100 $100 $100
Fiscal Year Ended 12/31/90 127 97 93
Fiscal Year Ended 12/31/91 155 127 115
Fiscal Year Ended 12/31/92 144 136 134
Fiscal Year Ended 12/31/93 150 150 164
Fiscal Year Ended 12/31/94 129 152 150
[FN]
* Dow Jones Diversified Industrial Index
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PROPOSAL 1
CBI INDUSTRIES, INC. 1995 STOCK OPTION PLAN
The Board of Directors recommends that the shareholders approve the CBI
Industries, Inc. 1995 Stock Option Plan (referred to in the following discussion
of Proposal 1 as the "Plan"), which has been approved by the Board. The
description of the Plan set forth below is qualified in its entirety by
reference to the complete text of the Plan as set forth in Exhibit A.
PURPOSE OF THE PLAN
The purpose of the Plan is to aid the Company and its subsidiaries in
securing and retaining key employees of outstanding ability by making it
possible to offer them an increased incentive in the form of a proprietary
interest in the Company, to join or continue in the service of the Company and
to increase their efforts for its welfare.
CREATION OF THE PLAN
The Board of Directors adopted the Plan on January 11, 1995, to be effective
as of January 1, 1995, subject to approval by the shareholders of the Company at
the Annual Meeting on May 11, 1995.
The Plan replaces the CBI Industries, Inc. Stock Option Plan which expires
on May 10, 1995. As of March 1, 1995, 1,000 shares remained reserved under that
plan.
DESCRIPTION OF THE PLAN
The Plan authorizes the granting of incentive stock options qualified under
Section 422A under the Code and non-qualified stock options ("Non-Qualified
Stock Options") to purchase, or stock appreciation rights to receive, a maximum
of 1,700,000 shares of Common Stock. This number is subject to adjustment by the
Committee (described below) to reflect stock dividends, split-ups and other
changes in the capitalization of the Company. The fair market value (as of the
date an option is granted) of the shares for which a participant may exercise
Incentive Stock Options in any calendar year (regardless of the total value of
such options granted) cannot exceed $100,000. This Code limitation may be
amended by the Board of Directors if the Code is amended. Shares subject to
options that expire without exercise will be available again for option under
the Plan. However, the shares subject to Non-Qualified Stock Options that are
cancelled upon exercise of an associated stock appreciation right (as described
below) shall no longer be available for grant.
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"), no member of which shall be
eligible to participate in the Plan or any other stock option plan maintained by
the Company during Committee membership or within one year prior thereto. The
Committee shall administer and interpret the Plan. The designation of the key
employees (defined in the Plan to be any full time employee of the Company,
including officers, who in the opinion of the Committee are or are expected to
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be primarily responsible for the management, growth or protection of some part
or all of the business of the Company), the number of shares that may be
optioned to any such employee and, subject to the limitations of the Plan, the
terms and conditions upon which such options are granted, are entirely within
the discretion of the Committee.
Under the Plan: (a) the option price of all options shall not be less than
fair market value of the Common Stock at the time of grant; (b) an option may be
exercised for ten years after the date of grant unless an earlier expiration
date is provided in the option; (c) payment of the option price shall be made in
full and, in the discretion of the Committee, made either in cash, shares of
Common Stock or by a combination of cash and such shares; (d) no option or stock
appreciation rights shall be granted after the tenth anniversary of shareholder
approval, but options and stock appreciation rights already granted may be
extended beyond that date; (e) during the lifetime of a Participant, an option
or stock appreciation right may only be exercised by the optionee, and, unless
otherwise designated by the Committee, may not be transferred other than by
will, the laws of descent and distribution, or by the provision for the
designation of a beneficiary in accordance with the Plan; and (f) a stock
appreciation right may not be transferred on death except to the transferee of
the related option.
An unexercised option will expire upon termination of employment for other
than death, retirement for disability or retirement under a retirement plan of
the Company. If an optionee dies while employed or retires due to disability, an
Incentive Stock Option will expire at the earlier of ten years from the date of
grant or one year from the date of death or such retirement; if an optionee
retires under a Company plan, other than for disability, then an Incentive Stock
Option will expire at the earlier of ten years from the date of grant or three
months after retirement. A Non-Qualified Stock Option will expire at the
expiration date set forth in the option, if employment terminates due to any
retirement; if employment terminates due to death, then a Non-Qualified Stock
Option will expire at the earlier of ten years from the date of grant or one
year after death. The Plan permits the Committee to extend the expiration date
of an option initially granted for less than ten years, but not beyond ten
years.
The Plan permits the grant of stock appreciation rights in conjunction with
options in the form of "Rights", either at the time of the option grant or
during the option's term. Stock appreciation rights permit an optionee to
receive (a) shares of Common Stock, (b) cash or (c) a combination of such shares
and cash in value equal to the amount by which the fair market value of all
shares subject to the related option exceeds the exercise price of such option.
The determination of whether stock appreciation rights will be settled in stock,
cash or a combination will be made by the Committee. To the extent an option is
exercised, in whole or in part, any related stock appreciation right shall
terminate. Likewise, to the extent a stock appreciation right is exercised, the
related option shall terminate. To the extent any stock appreciation right is
not exercised or cancelled, it shall be deemed exercised automatically on the
last day on which its related option may be exercised. It is the present policy
of the Committee not to award Rights either at the time of grant or during the
term of the option.
The Plan also permits the grant of "Limited Rights" in conjunction with the
grant of options, whereby the Committee may specify, as to individual options,
other conditions or circumstances under which options may be terminated by
payment of cash in lieu of the exercise of the related option. Such
circumstances may include automatic termination following a substantial change
in the ownership, control or management of the Company. The exercise of either
the Limited Right or the related option shall pro rata cancel the other.
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The Board of Directors may amend the Plan at any time, but may not change
the Plan without shareholder approval to (a) increase the maximum number of
shares authorized, (b) reduce the minimum option price, (c) extend the period
within which options or stock appreciation rights may be granted, (d) change the
basis upon which shares or cash may be distributed upon exercise of a stock
appreciation right or (e) provide for an option or stock appreciation right
exercisable more than ten years from the date of grant. The terms of any
previously granted option may not be changed to adversely affect the rights of
the holder without the holder's consent.
The Board of Directors may suspend or terminate the Plan at any time, but
any such action shall not affect options or stock appreciation rights then in
effect.
FEDERAL INCOME TAX CONSEQUENCES
Under present laws and regulations, the Federal income tax consequences of
receiving options and purchasing shares under the Plan, and ultimately disposing
of such shares, are as follows:
The grant of an option under the Plan will not, by itself, result in the
recognition of taxable income to the optionee or entitle the Company or any of
its subsidiaries to a deduction at the time of such grant.
The exercise of an Incentive Stock Option within the meaning of Section 422A
of the Code will not, by itself, result in the recognition of taxable income to
the optionee or entitle the Company or any of its subsidiaries to a deduction at
the time of such exercise. The excess of the market value of the shares over the
option price at the time of exercise will be a tax preference item for purposes
of the alternative minimum tax determination of the optionee. The exercise of a
Non-Qualified Stock Option will result in the recognition of ordinary income by
the optionee, and entitle the optionee's employer to a deduction in an amount
equal to the difference between the exercise price and the fair market value of
the shares acquired pursuant to the option. The exercise of a stock appreciation
right (whether a Right or a Limited Right) will result in the recognition of
ordinary income by the optionee in an amount equal to the amount of cash
received and/or the fair market value of the shares acquired pursuant to the
exercise, and entitle the optionee's employer to a deduction equal to the amount
of ordinary income recognized by the optionee at the time the optionee
recognizes it. For these purposes, the tax is imposed and the fair market value
of the shares is determined as of the date of exercise unless the shares are not
then freely transferable due to insider trading restrictions under the
securities laws, in which case the applicable date is six months after the date
of exercise unless the optionee elects to be taxed and have the fair market
value of the shares determined as of the date of exercise.
The optionee will recognize capital gain or loss upon resale of the shares
received upon the exercise of an Incentive Stock Option, provided that the
optionee held such shares for at least one year after transfer of the shares to
the optionee or two years after the grant of the option, whichever is later. The
amount of gain or loss will be the difference between the amount realized by the
seller and the seller's tax basis for the stock (the price paid for the stock if
the option price is paid in cash, the basis in the stock exchanged to the extent
an equal number of shares are received if the option price is paid in shares of
Common Stock, and zero for those shares received in excess of the number of
shares exchanged if the option price is paid in shares of Common Stock).
Generally, if the shares are not held for the requisite period, the optionee
will recognize ordinary income upon disposition in an amount equal to the lesser
of (a) the difference between the exercise price and the fair market
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value on the date of exercise of the shares acquired pursuant to the option or
(b) the excess of the fair market value on the date of disposition over the
exercise price; and the optionee's employer will be allowed a deduction equal to
the amount of ordinary income, if any, recognized by the optionee at such time
as the optionee recognizes it.
NEW PLAN BENEFITS
This plan is substantially the same as the CBI Industries, Inc. Stock Option
Plan which expires May 10, 1995. The following sets forth the number of stock
options granted under the expiring plan in January, 1995, which is the same
number of options each person would have received under the proposed Plan if
options had been granted under the proposed Plan in 1995.
NAMED OFFICERS NUMBER OF STOCK OPTIONS
-------------- -----------------------
John E. Jones 45,000
Lewis E. Akin 18,000
Robert J. Daniels 9,000
George L. Schueppert 18,000
Charles O. Ziemer 9,000
All Current Executive Officers 116,000
Non-Executive Directors or Nominees -0-
Non-Executive Officers -0-
All Employees (excluding Current Executive Officers) 176,400
VOTE REQUIRED
This proposal requires the affirmative vote of the holders of a majority of
the outstanding shares of the Common Stock and the Series C Preferred Stock
voting as a class and represented at the Annual Meeting.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1.
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