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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
(AMENDMENT NO. 9)
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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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This Amendment No. 9 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission
(the "Commission") on November 16, 1995, and as subsequently amended (as so
amended, the "Schedule 14D-9"), by CBI Industries, Inc., a Delaware corporation
(the "Company" or "CBI"), relating 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 as of 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, at a price of $33.00 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, as amended and supplemented by the Supplement
to the Offer to Purchase dated December 28, 1995 and the related revised Letter
of Transmittal (which together constitute the "Amended Praxair Offer"). Unless
otherwise indicated, all capitalized terms used but not defined herein shall
have the meanings ascribed to them in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER.
The description under Item 2 is hereby amended and supplemented by adding
the following information:
This Statement relates to the tender offer by P Sub to purchase all
outstanding Shares at a price of $33.00 per Share, net to the seller in cash,
without interest thereon, on the terms and subject to the conditions set forth
in the Amended Praxair Offer.
The Amended Praxair Offer is being made pursuant to an Agreement and Plan
of Merger, dated as of December 22, 1995, among Praxair, P Sub and the Company
(the "Merger Agreement"). The Merger Agreement provides that following
consummation of the Amended Praxair Offer, subject to the other conditions
contained in the Merger Agreement, including, if required by law, obtaining the
necessary vote of the Company's stockholders in favor of the Merger Agreement
and the merger of P Sub with and into the Company, P Sub will be merged with and
into the Company (the "Merger") and each outstanding Share (other than Shares
owned by Praxair, P Sub or their subsidiaries, and other than any Shares held by
stockholders who perfect their dissenters' rights under Delaware law) will be
converted into the right to receive $33.00 in cash. The Merger Agreement also
provides for the payment of a $43.5 million fee to Praxair under certain
circumstances if the Merger Agreement is terminated. A summary of the Merger
Agreement is contained in Section 7 of the Supplement to the Offer to Purchase
dated December 28, 1995, which is filed as Exhibit 28 to Praxair's Schedule
14D-1; a copy of which is enclosed with this Schedule 14D-9, and such summary is
incorporated herein by reference. Such summary should be read in its entirety
for a more complete description of the terms and provisions of the Merger
Agreement. The foregoing description of certain terms of the Merger Agreement
and the summary referred to above are qualified by reference to such Exhibit and
to the Merger Agreement, which is attached as Exhibit 37 to the Schedule 14D-9
and is incorporated herein by reference.
Pursuant to the Merger Agreement, the CBI Restricted Stock Award Plan
(1978), the CBI 1983 Restricted Stock Award Plan, the CBI 1989 Restricted Stock
Award Plan and the CBI 1994 Restricted Stock Award Plan (the "Restricted Stock
Plans") will terminate following the purchase of Shares pursuant to the Amended
Praxair Offer. Under the terms of the Restricted Stock Plans, all restrictions
on Shares granted under such plans will lapse following a termination of such
plans after a Change in Control (as defined). The acquisition by Praxair of
beneficial ownership of 10% or more of the Shares will constitute a Change in
Control for purposes of the Restricted Stock Plans.
The Compensation Committee of the Board has approved certain awards under
the CBI 1994 Restricted Stock Award Plan (the "1994 Restricted Stock Plan")
effective immediately prior to the termination of the 1994 Restricted Stock
Plan. Specifically, the Committee resolved that 94.1% of each award based on
1995 performance will be deemed earned and will be paid in cash upon termination
of the 1994 Restricted Stock Plan, and all awards based on performance for
fiscal years 1996 and 1997 will be awarded as if payable in full and will be
paid in cash.
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ITEM 3. IDENTITY AND BACKGROUND.
The description under Item 3 is hereby amended and supplemented by adding
the following information:
On December 19, 1995, Praxair announced that it had made a proposal to the
Company to increase the price per Share to be paid in the Praxair Offer from
$32.00 to $33.00. Praxair said that if the Company's Board of Directors did not
accept its proposal and sign a merger agreement by 5:00 p.m. Eastern time on
December 21, 1995, it would withdraw the offer and continue with the $32.00 per
Share Praxair Offer. On December 21 and 22, 1995, the Board met to discuss the
Amended Praxair Offer and related matters. On December 22, 1995, the Board
determined that the Amended Praxair Offer and the Merger are fair to and in the
best interests of the Company and its stockholders. On December 22, 1995, the
Merger Agreement was executed by the parties thereto and Praxair and the Company
issued a press release announcing the execution of the Merger Agreement. See
also Item 2 above.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
The description under Item 4 is hereby amended and supplemented by adding
the following information:
At a meeting of the Board on December 22, 1995, the Board determined that
the Amended Praxair Offer and the Merger are fair to and in the best interests
of the Company and its stockholders. THE BOARD RECOMMENDS THAT THE COMPANY'S
STOCKHOLDERS ACCEPT THE AMENDED PRAXAIR OFFER AND TENDER THEIR SHARES PURSUANT
TO THE AMENDED PRAXAIR OFFER.
In reaching its conclusions with respect to the Amended Praxair Offer, the
Board considered a number of factors, including the following:
(1) The terms and conditions of the Amended Praxair Offer and the Merger
Agreement, including the price to be paid in the Amended Praxair Offer and the
Merger;
(2) The written opinions of Lehman Brothers Inc. and Merrill Lynch & Co.
that, as of the date of such opinions, the $33.00 per Share to be offered to the
stockholders of the Company pursuant to the Amended Praxair Offer and the Merger
is fair to such stockholders from a financial point of view (copies of such
opinions setting forth the assumptions made and matters considered and
limitations set forth by Lehman Brothers Inc. and Merrill Lynch & Co. are
included as Annexes A and B hereto, respectively, and stockholders are urged to
read such opinions in their entirety);
(3) The recommendation of management of the Company that the Amended
Praxair Offer and the Merger be approved;
(4) The directors' knowledge of the Company's business, financial
condition, results of operations, current business strategy and future
prospects, the nature of the markets in which the Company operates, the
Company's position in such markets, and the efforts by the Company's management,
with the advice and assistance of its legal and financial advisors, to explore
other possible transactions involving the Company; and
(5) the historical and current market prices for the Shares.
The Board also considered communications from a third party indicating an
interest in discussing an acquisition of the Company's industrial gas business
for $2.05 billion, which amount would include the assumption of debt. Such party
indicated it was interested only in pursuing an acquisition of such business and
not an acquisition of any of the Company's other businesses or the Company as a
whole. The Board considered the responses to its search for potential buyers of
the Company's non-gas businesses and the possibility of distributing such
businesses to the Company's stockholders by means of a dividend, including the
views of its financial advisors with respect to the range of potential market
values of such businesses. The Board determined to recommend the Amended Praxair
Offer after taking into account the foregoing, the fact that there was no
assurance that a definitive agreement with such third party for the disposition
of the industrial gas business could have been negotiated, as well as the
uncertainties, costs and delays associated with a disposition of the Company's
businesses in separate transactions, including the uncertainty related to the
value at which the securities of the non-gas businesses would trade following
the public distribution thereof.
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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 Amended
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 determination. In addition, individual members of the Board may
have given different weights to different factors.
At the December 22, 1995, meeting of the Board, the Board also approved the
Amended Praxair Offer and the Merger for the purposes of eliminating the
application of Section 203 of the DGCL, and also approved the Amended Praxair
Offer and the Merger for purposes of Article Tenth and Article Fifteenth of the
Certificate. The Board also took certain actions with respect to the Rights as
described below under Item 8.
A copy of the letter to the Company's stockholders communicating the
Board's recommendation is filed as Exhibit 38 to the Schedule 14D-9 and is
incorporated herein by reference.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
The description under Item 6 is hereby amended and supplemented by adding
the following information:
To the best of the Company's knowledge, except to the extent such action
could subject them to liability pursuant to the federal securities laws or
except to the extent restricted by the terms of the plans under which such
Shares were issued, all of its executive officers, directors or affiliates
currently intend to tender any Shares which are held of record or beneficially
owned by such persons pursuant to the Amended Praxair Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
The description under Item 7 is hereby amended and supplemented by adding
the following information:
On December 22, 1995, the Company entered into the Merger Agreement with
Praxair and P Sub. Reference is made to the information set forth under Items 2
and 3 above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The description under Item 8 is hereby amended and supplemented by adding
the following information:
Litigation. Pursuant to the Merger Agreement, the Company, Praxair and P
Sub agreed to dismiss immediately, with each party bearing its own costs and
litigation expenses, all proceedings pending between themselves and their
affiliates and to sign and deliver such further papers as may be necessary in
connection with such dismissals.
The Rights Agreement. At its meeting on December 22, 1995, the Company's
Board of Directors authorized an amendment to the Rights Agreement, (the "Rights
Plan Amendment") to amend the definition of "Permitted Tender Offer" such that a
"Permitted Tender Offer" is any offer which the Board, in its sole discretion
and subject to any conditions the Board deems proper, determines to be a
Permitted Tender Offer. The Board further determined that, so long as the Merger
Agreement has not been terminated, the Amended Praxair Offer is a Permitted
Tender Offer, no "Distribution Date" (as defined in the Rights Agreement) will
occur and Section 11.1(b) of the Rights Agreement will not be triggered, in each
case as a result of the announcement, commencement or consummation of the
Amended Praxair Offer or the execution and delivery of the Merger Agreement,
with the effect that none of such events will trigger the exercisability of the
Rights or the separation of the Rights from the certificates to which they are
attached.
Information Statement. The Information Statement attached as Schedule I
hereto is being furnished in connection with the possible designation by
Praxair, pursuant to the Merger Agreement, of certain persons to be appointed to
the Board other than at a meeting of the Company's stockholders.
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ITEM 9. MATERIAL TO BE FILED ON EXHIBITS
Item 9 is hereby amended and supplemented by adding thereto the following:
Exhibit 37 Agreement and Plan of Merger, dated as of December 22, 1995, by and among
Praxair, Inc., PX Acquisition Corp. and CBI Industries, Inc.
Exhibit 38 Letter to CBI Industries, Inc.'s stockholders dated December 28, 1995*
Exhibit 39 Opinion of Lehman Brothers Inc. dated December 22, 1995 (included as Annex A
to Amendment No. 9 to the Schedule 14D-9)*
Exhibit 40 Opinion of Merrill Lynch & Co. dated December 22, 1995 (included as Annex B to
Amendment No. 9 to the Schedule 14D-9)*
Exhibit 41 Form of Letter to Restricted Stock Plan Participants
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* Included in copy mailed to stockholders.
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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.
Dated: December 28, 1995 By: /s/ John E. Jones
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John E. Jones
Chairman, President and
Chief Executive Officer
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SCHEDULE I
CBI INDUSTRIES, INC.
800 JORIE BOULEVARD
OAK BROOK, ILLINOIS 60521-2268
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 28, 1995,
as part of Amendment No. 9 to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (as heretofore amended, the "Schedule 14D-9"), to
the holders of record of Shares at the close of business on December 26, 1995.
You are receiving this Information Statement in connection with the possible
election of persons designated by Praxair to a majority of the seats on the
Board of Directors of the Company (the "Board"). The Merger Agreement requires
the Company, at the request of Praxair, to take all actions necessary to cause
Praxair designees (the "Praxair Designees") to be elected or appointed to the
Board under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. See
"BOARD OF DIRECTORS -- Right to Designate Directors; The Praxair Designees."
Unless the context otherwise requires, capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the Schedule 14D-9.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, Praxair amended the Praxair Offer on
December 28, 1995. The Amended Praxair Offer is scheduled to expire at 12:00
Midnight, New York City time, on Thursday, January 11, 1996, at which time, upon
the expiration of the Amended Praxair Offer, if all conditions of the Amended
Praxair Offer have been satisfied or waived, pursuant to the Merger Agreement
Praxair has agreed that P Sub will purchase all Shares validly tendered pursuant
to the Amended Praxair Offer and not withdrawn.
The information contained in this Information Statement concerning Praxair
and P Sub has been furnished to the Company by Praxair and P Sub, and the
Company assumes no responsibility for the accuracy or completeness of such
information.
GENERAL
The Company Common Stock and the Company's Convertible Voting Preferred
Stock, Series C (the "Series C Preferred Stock") vote together as a class. Each
share of Common Stock entitles the record holder thereof to one vote on each
matter submitted to a vote. Pursuant to the Certificate of Designations for the
Series C Preferred Stock, each share of the Series C Preferred Stock entitles
the record holder thereof to one and one half votes on each matter submitted to
a vote. As of December 22, 1995, there were 38,701,569 Shares outstanding and
3,429,842 shares of Series C Preferred Stock outstanding. The Company's
Certificate provides that the Board is to consist of 12 directors, or such other
number, not less than 9 nor more than 18, as may from time to time be determined
by a resolution of the Board, divided into three classes, with members of each
class serving a three year term. The Board is currently comprised of 12
directors. Each director holds office until his or her successor is duly elected
and qualified, or until his or her earlier death, resignation or removal.
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BOARD OF DIRECTORS
RIGHT TO DESIGNATE DIRECTORS; THE PRAXAIR DESIGNEES
The Merger Agreement provides that promptly upon the purchase of and
payment for any shares by Purchaser pursuant to the Amended Praxair Offer which
represent at least a majority of the Shares (on a fully diluted basis) and from
time to time thereafter, Praxair and P Sub shall be entitled to designate
members of the Board such that Praxair and P Sub, subject to compliance with
Section 14(f) of the Exchange Act, will have a number of representatives on the
Board, rounded up to the next whole number equal to the product of (x) the total
number of directors on the Board multiplied by (y) the percentage of the
outstanding Shares beneficially owned by P Sub or its affiliates; provided,
that, any action to be taken prior to the Effective Time (as defined in Section
2.3 of the Merger Agreement) by the Board shall be approved by a majority of
those directors of the Company who have not been designated by Praxair or P Sub.
Notwithstanding the foregoing, until the Effective Time, the Merger Agreement
provides that the Company and Praxair shall use all reasonable efforts to retain
as members of the Board at least two directors who at the time are neither
officers of Praxair or the Company (or any of their respective affiliates), nor
designees of P Sub (or any of its affiliates), nor shareholders or affiliates of
P Sub (or any respective affiliate) (the "Disinterested Directors"). The Merger
Agreement also requires the Company to, upon request by Praxair or Purchaser,
promptly increase the size of the Board to the extent permitted by the Company's
Certificate and, to the extent required to comply with Section 1.3 of the Merger
Agreement, secure the resignations of such number of directors as is necessary
to enable Praxair's designees to be elected to the Board and shall cause
Praxair's designees to be so elected.
The Company has been advised that the Praxair Designees will be selected by
Praxair from among the individuals listed below. The Company has been advised
that each of the Praxair Designees has consented to serve as a director of the
Company if appointed or elected and that none of the Praxair Designees owns any
Shares. In addition, none of the Praxair Designees is a director of, or holds
any position with, the Company. The name, age, present principal occupation or
employment and five-year employment history of each of the Praxair Designees are
set forth below has been supplied by Praxair. The business address for each
individual listed below is 39 Old Ridgebury Road, Danbury, Connecticut
06810-5113.
NAME, AGE AND POSITION WITH PRAXAIR; PRINCIPAL OCCUPATION
BUSINESS ADDRESS OR EMPLOYMENT; 5-YEAR EMPLOYMENT HISTORY
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H. William Lichtenberger (60)........... Director since 1992. Chairman and Chief Executive
Officer of Praxair since 1992. In 1986, Mr.
Lichtenberger was elected a Vice-President of Union
Carbide Corporation and was appointed President of
the Union Carbide Chemicals and Plastics Business
Group, which in 1989 became Union Carbide Chemicals
and Plastics Company Inc. He was elected President
and Chief Operating Officer and a director of Union
Carbide Corporation in 1990. He resigned as an
officer and director of Union Carbide Corporation
upon Praxair's spin-off in 1992. Mr. Lichtenberger
is a member of the Conference Board, and The
Business Roundtable and its Policy Committee. He is
on the Board of Directors of the National
Association of Manufacturers. He is Chairman of
United Negro College Fund's Connecticut Corporate
Campaign and is on the Advisory Board of the
Fairfield County Boy Scouts. Mr. Lichtenberger is
also a director of Olin Corporation and Ingersoll
Rand Company.
John A. Clerico (54).................... Director since 1992. Vice President and Chief
Financial Officer of Praxair since 1992. Mr.
Clerico was elected Vice President and Treasurer of
Union Carbide Corporation in 1986 and Principal
Financial Officer in 1989. In 1988 he was
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also elected Treasurer of Praxair. In 1990 he was
elected to the position of Chief Financial Officer
of Union Carbide Corporation. He resigned as an
officer of Union Carbide Corporation upon Praxair's
spin-off in 1992, assuming his current position. He
was also the Treasurer of Praxair between 1992 and
1994. Mr. Clerico is a member of the International
Treasurer's Association, the National Association
of Corporate Treasurers, the Financial Executives
Institute and the Multiple Sclerosis Society and is
on the Board of Directors of the Danbury Chamber of
Commerce.
Edgar G. Hotard (52).................... Director since 1992. President of Praxair since
1990. Mr. Hotard served as Vice President and
General Manager for Bulk Industrial Gases of
Praxair between 1985 and 1990. Mr. Hotard was
elected a Vice President of Union Carbide
Corporation in 1990. He resigned as an officer of
Union Carbide Corporation upon Praxair's spin-off
in 1992. Mr. Hotard is past Chairman of the Board
of the International Oxygen Manufacturers'
Association and past Chairman of the Compressed Gas
Association. He is a director of the U.S./China
Business Council and a member of the Dean's
Advisory Council of the University of New York at
Buffalo. Mr. Hotard is also a director of Aquarion
Company.
David H. Chaifetz (53).................. Vice President, General Counsel and Secretary of
Praxair. Mr. Chaifetz joined the Union Carbide
Corporation Law Department in 1975. In 1985, he was
appointed Assistant General Counsel of Union
Carbide Corporation. In 1986, he became Group
General Counsel, Industrial Gases/Carbon Products
and, in 1989, he was appointed General Counsel of
Praxair. Mr. Chaifetz assumed his current position
in 1992. Mr. Chaifetz is a member of the American,
Connecticut, Michigan and Corporate Bar
Associations. He is a past president of the
Corporate Bar Association. Mr. Chaifetz is also a
member of the Board of Directors of the Fairfield
County Boy Scouts.
DIRECTORS AND OFFICERS
OF THE COMPANY
The Company's Board is comprised of: E. Hubert Clark, Jr., John T. Horton,
Stephanie Pace Marshall, Robert T. Stewart, John E. Jones, Edward J. Mooney,
Robert G. Wallace, Calvin E. Willoughby, Lewis E. Akin, Wiley N. Caldwell, Gary
E. MacDougal and John F. Riordan. Each director is elected at an annual meeting
of stockholders for a three-year term and until a successor is duly elected and
qualified, or until his or her earlier death, resignation or removal. Four (4)
terms expire in 1996, four (4) terms expire in 1997 and four (4) terms expire in
1998. The Board, which has responsibility for making broad corporate policy and
for the overall management of the Company, held nine meetings in 1994.
DIRECTORS WITH TERMS EXPIRING IN 1998:
E. Hubert Clark, Jr., 68, Chairman of the Board and Chief Executive Officer
of The Friendship Group (investment partnership) since January 26, 1989.
Chairman of the Board of Baker-Hughes Incorporated
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(products and services for the petroleum and mining industries) from April 3,
1987 to his retirement on January 25, 1989, Chairman of the Board of Baker
International Corporation from 1980 to April 3, 1987, and Chief Executive
Officer from 1965 to January 28, 1987. Director of the Company since April 14,
1981. Director of Honeywell, Inc. (electronic and pneumatic controls and
systems); Kerr-McGee Corporation (oil, gas and mining); Beckman Instruments Inc.
(instrumentation for medical and life sciences); and American Mutual Fund (a
mutual fund for public investment). Member: Audit Committee; Nominating
Committee.
John T. Horton, 66, Engineering Consultant. Director of the Company since
November 3, 1959. Director of Beverly Bank (banking) and Director and Chairman
of the Board of Horton Trading Limited (investments and data processing).
Member: Compensation Committee; Nominating Committee.
Stephanie Pace Marshall, 49, Founding Executive Director of the Illinois
Mathematics and Science Academy, in Aurora, IL. Director of the Company since
November 9, 1994. Advisor to the Panel on Education of the President's Council
of Science Advisors; former member of the National Policy Council and the Forum
of Educational Organizational Leaders; member of the Resource Council of the
Metropolitan Planning Council of Chicago, the Northwestern University
President's Advisory Council, and the Illinois Institute of Technology National
Commission; and an associate of the Cambridge Group, an international
corporation specializing in strategic planning for schools, universities and
corporations. Member: Nominating Committee.
Robert T. Stewart, 62, Retired Chairman of the Board and Chief Executive
Officer of Scott Paper Limited, a Canadian corporation (manufacture of sanitary
paper products). Director of the Company since November 11, 1992. Director of
Royal Bank of Canada (banking) and BC Gas Inc. (natural gas utility company).
Member: Compensation Committee; Nominating Committee; Environment and Safety
Committee.
DIRECTORS WITH TERMS EXPIRING IN 1997:
John E. Jones, 60, Chairman of the Board, President and Chief Executive
Officer since May 11, 1989, President and Chief Operating Officer from January
1, 1988 to May 11, 1989, Vice Chairman of the Board from 1985 to January 1,
1988. Director of the Company since April 13, 1976. Director of Allied Products
Corporation (diversified manufacturer); Interlake Corporation (metals, material
handling and packaging); Amsted Industries Incorporated (diversified
manufacturer); Valmont Industries, Inc. (irrigation systems, steel tubing and
electrical products); and NICOR Inc. (utility).
Edward J. Mooney, Jr., 53, Chairman of the Board, President and Chief
Executive Officer of Nalco Chemical Company (specialty chemicals) since 1994,
President from 1990 to 1994. Executive Vice President and Director from 1988 to
1990, and Group Vice President-Petroleum Division from 1986 to 1988. Director of
the Company since December 6, 1988. Member: Compensation Committee (Chairman);
Nominating Committee.
Robert G. Wallace, 68, Retired. Executive Vice President and Director of
Phillips Petroleum Company (petroleum exploration, production, refining and
marketing) from June, 1982 until October, 1988. Director of the Company since
April 17, 1986. Director of Valmont Industries (irrigation systems, steel tubing
and electrical products) and A. Schulman (plastics compounding and sales).
Member: Audit Committee; Nominating Committee (Chairman).
Calvin E. Willoughby, 50, Executive Vice President since June 1, 1995.
President of Liquid Carbonic Industries Corporation since June 1, 1995.
President of Liquid Carbonic, Inc. from 1993 to 1995. President of CBI Services,
Inc. from 1990 to 1993 and Senior Vice President-Administration of CBI
Industries from 1989 to 1990. Director of the Company since June 20, 1995.
DIRECTORS WITH TERMS EXPIRING IN 1996:
Lewis E. Akin, 57, Executive Vice President since August 2, 1988, Senior
Vice President from April, 1988, to August 2, 1988, and Vice President of the
Company from 1986 to 1988. President of Chicago Bridge
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& Iron Company since July 1, 1988 and President of CBI Services, Inc. from 1985
to 1988. Director of the Company since August 2, 1988.
Wiley N. Caldwell, 67, Retired. President of W.W. Grainger, Inc. (national
distributor of industrial and commercial products) from 1984 until he retired on
July 31, 1992. Director of the Company since December 6, 1988. Director of
Consolidated Papers, Inc. (manufacturer of coated paper); Kewaunee Scientific
Corporation (manufacturer of laboratory furniture and equipment); and APS
Holdings, Inc. (second largest distributor of automotive parts and supplies).
Member: Audit Committee (Chairman); Nominating Committee.
Gary E. MacDougal, 58, Chairman of the Governor's Task Force for Human
Services Reform for the State of Illinois and a Trustee General Director of the
New York City Ballet from 1993 to 1994; Chairman of the Board and Chief
Executive Officer of Mark Controls Corporation (building management systems and
flow control products) from 1969 to 1988. Director of the Company since 1981.
Prior to 1990, United States delegate and Alternate Representative to the United
Nations. Director of United Parcel Service of America, Inc. (parcel delivery
service); Bulgarian-American Enterprise Fund; and Union Camp Corporation (forest
products). Member: Compensation Committee, Nominating Committee, Environment and
Safety Committee (Chairman).
John F. Riordan, 59, President of MidCon Corp. (diversified natural gas
company) since 1988 and Chief Executive Officer since 1990, and Executive Vice
President and Director of Occidental Petroleum Corporation (diversified
petroleum, chemical and natural gas company), the parent company of MidCon
Corp., since 1991. Director of the Company since January 13, 1993. Member: Audit
Committee; Nominating Committee; Environment and Safety Committee.
EXECUTIVE OFFICERS
In addition to the executive officers of the Company listed above who are
directors, other executive officers of the Company, their ages and business
experience over the past five years are as follows:
Stephen M. Duffy, 45, Vice President-Human Resources since 1993, prior to
1993 was a Vice President with Sunbeam Appliance Company.
A. J. Schneider, 50, Vice President and Chief Financial Officer since
August 9, 1995, Vice President since May 14, 1992, and Controller from July 1,
1991 to August 9, 1995.
Charles O. Ziemer, 56, Senior Vice President and General Counsel since
June, 1984.
COMMITTEES OF THE BOARD
The Audit Committee, which held three meetings in 1994, is charged with
reviewing the adequacy and effectiveness of the internal auditing, accounting
and financial controls of the Company, and coordinating the annual internal
audit plan with the auditing plan of the independent auditors. The Committee
receives reports from the Company's Internal Audit Department, reviews the
annual report to shareholders and the financial statements contained therein,
reviews the audit performed by the Company's independent auditors and acts as
liaison between the independent auditors and the Board. The Committee makes
recommendations concerning the appointment of the independent auditor of the
Company, the scope of the audit to be performed and the fees to be paid. The
Committee is also authorized to audit and monitor the compliance by the Company
and its subsidiaries with the laws of the various jurisdictions in which the
Company and its subsidiaries conduct business and to report to the Board and
make recommendations with respect to any problems.
The Compensation Committee, which held four meetings in 1994, reviews and
makes recommendations concerning compensation philosophy and guidelines for the
executive and managerial group of the Company; reviews compensation and benefit
programs for employees of the Company and its subsidiaries, compares such
programs and compensation against market data and makes recommendations as to
modifications; reviews recommendations or actions of management concerning
benefit plans, incentive plans, stock option or other
5
12
stock awards and oversees the administration of such plans; reviews compensation
and awards and grants under corporate benefit plans for the Chief Executive
Officer; reviews management recommendations concerning 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 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.
6
13
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.
AMOUNT AND
TITLE NAME AND ADDRESS 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
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
- ---------------
(1) According to an amended Schedule 13G dated February 13, 1995, these shares
are held by LaSalle National Trust, N.A. ("LaSalle") in its capacity as
Trustee of the CBI Salaried Employee Stock Ownership Plan (1987) (the
"ESOP"). 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. The Company was advised by LaSalle that on December 1, 1995
the Trustee caused the ESOP to sell all 1,680,893 shares of Common Stock
then held by the ESOP on the open market for $33.2507 per share. After
giving effect to such disposition, the ESOP would continue to hold
approximately 5.18 million common share equivalents in the form of Series C
Preferred Stock.
(2) According to an amended Schedule 13G dated February 6, 1995 filed by The
Capital Group Companies, 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.
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14
SECURITY OWNERSHIP OF MANAGEMENT OF THE COMPANY*
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on December 26, 1995, by each director and
nominee, each named executive officer and by all directors and executive
officers as a group.
SHARES OF COMMON
STOCK BENEFICIALLY PERCENT OF
NAME OF OWNED AS OF OUTSTANDING
BENEFICIAL OWNER DECEMBER 26, 1995(1) COMMON STOCK
- ------------------------------------------------------- -------------------- ------------
John E. Jones.......................................... 74,283(2) *
Lewis E. Akin.......................................... 25,928(2) *
Wiley N. Caldwell...................................... 1,800 *
E. Hubert Clark, Jr.................................... 1,650 *
Stephen M. Duffy....................................... 4,484 *
John T. Horton......................................... 964,366(3) 2.5%
Gary E. MacDougal...................................... 3,100 *
Stephanie Pace Marshall................................ 500 *
John R. Meier.......................................... 4,128 *
Edward J. Mooney....................................... 2,250 *
John F. Riordan........................................ 1,400 *
Alan J. Schneider...................................... 4,716(2) *
Robert T. Stewart...................................... 1,400 *
Robert G. Wallace...................................... 1,950 *
Calvin E. Willoughby................................... 16,231(2) *
Charles O. Ziemer...................................... 23,950(2) *
All directors and executive officers as a group (16 in 1,132,136(2) 2.9%
number)..............................................
- ---------------
* 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, 196,500 shares; Lewis E. Akin, 66,800 shares; Alan
J. Schneider, 9,000 shares; Calvin E. Willoughby, 29,800 shares; Charles O.
Ziemer, 47,200 shares; and directors and executive officers as a group,
354,300 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, 5,965 shares; Lewis E. Akin, 5,502 shares; Alan J.
Schneider, 2,073 shares; Calvin E. Willoughby, 3,609 shares; Charles O.
Ziemer, 4,588 shares; and directors and executive officers as a group,
24,041 shares.
(3) Includes 961,742 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, then Vice
President and Controller, each filed one Form 5 late with regard to reporting
transactions under the Company's Dividend Reinvestment Plan.
8
15
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables 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. Certain information in this table and in other sections
of this Information Statement concerning Messrs. Daniels and Schueppert, former
employees of the Company, is included solely to comply with applicable
requirements of the Commission.
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------ --------------------------------------------
(A) (B) (C) (D) (F) (G) (I)
SECURITIES
RESTRICTED UNDERLYING
STOCK OPTIONS/ ALL OTHER
NAME AND BONUS AWARDS SARS COMPENSATIONS
PRINCIPAL POSITION YEAR SALARY($) ($)(1) ($)(2)(3) (#SHARES)(4) ($)(5)
- ------------------------------------------ ---- --------- ------- ---------- ----------- -------------
John E. Jones............................. 1994 530,000 552,497 137,000 31,000 115,042
Chairman of the Board, 1993 530,000 77,000 515,250 28,000 133,222
President, Chief Executive 1992 495,000 456,667 0 28,000 78,395
Officer and Director
Lewis E. Akin,............................ 1994 290,000 210,189 48,020 14,000 96,045
Executive Vice President 1993 290,000 35,000 200,375 12,000 76,575
and Director, President 1992 275,000 201,822 0 13,500 42,428
of Chicago Bridge & Iron Company
Robert J. Daniels......................... 1994 265,000 193,507 48,020 14,000 89,021
Executive Vice President 1993 265,000 43,515 171,750 11,000 67,456
and Director, President of 1992 252,000 148,057 0 12,000 40,191
Liquid Carbonic Industries
Corporation
George L. Schueppert...................... 1994 305,000 261,591 48,020 14,000 105,848
Executive Vice President, 1993 305,000 35,000 200,375 12,000 87,047
Chief Financial Officer 1992 290,000 218,895 0 13,500 46,156
and Director
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
- ---------------
(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) ("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
9
16
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,
$13,036.
OPTIONS AND STOCK APPRECIATION RIGHTS
The following tables summarize option grants and exercises during the
fiscal year 1994 to and by the executive officers named in the Summary
Compensation Table above, and the value of the options held by such persons at
the end of fiscal 1994. No SARs were granted or exercised during fiscal 1994.
OPTIONS/SAR(1) GRANTS IN 1994
GRANT
INDIVIDUAL GRANTS DATE VALUE
- ------------------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/
OPTIONS/SARS SARS EXERCISE
GRANTED GRANTED TO OR BASE GRANT DATE
(# OF EMPLOYEES PRICE EXPIRATION PRESENT
NAME SHARES)(2) IN FISCAL YEAR ($/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 assumption 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 of 6.48%
that represents that 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 $0.48 per share, representing
the annualized dividends paid with respect to a share of Common Stock at the
date of grant; (e) an approximately 4.0% reduction to reflect the
probability of forfeiture due to termination prior to vesting and
approximately 12.33% reduction to reflect the probability of a shortened
option term due to termination of employment prior to the option expiration
date; and (f) an option term of ten years. The ultimate values of options
will depend on the future market price of Common Stock, which cannot be
forecast with reasonable accuracy. The actual value, if any, an optionee
will realize upon exercise of an option will depend on the excess of the
market value of the Common Stock over the exercise price on the date the
option is exercised.
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17
AGGREGATED OPTIONS/SAR(1) EXERCISES IN 1994
AND FY-END OPTION/SAR VALUES
(A) (B) (C) (D) (E)
NUMBER VALUE OF
OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-
UNEXERCISED MONEY
OPTIONS/SARS OPTIONS/SARS
AT 1994 FY-END(#) AT 1994 FY-END($)
----------------- -----------------
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 1994
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
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.
LONG-TERM INCENTIVE PLANS -- AWARDS IN 1994
ESTIMATED FUTURE PAYOUTS
PERFORMANCE OR UNDER
OTHER PERIOD NON-STOCK PRICE-BASED PLANS
NUMBER OF UNTIL ----------------------------
SHARES, UNITS, OR MATURATION THRESHOLD TARGET MAXIMUM
NAME 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
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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.
PENSION PLAN TABLE
AVERAGE YEARS OF SERVICE AT RETIREMENT
ANNUAL ---------------------------------------------------------------
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.
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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 to him will be offset by any
pension he receives from his 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 Messrs. Jones, Akin, Willoughby,
Schneider and Ziemer 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 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.
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20
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.
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 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.
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21
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 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
15
22
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.
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.
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
16
23
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
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) S&P 500 PEER GROUP* CBI
12/31/89 100 100 100
12/31/90 97 93 127
12/31/91 127 115 155
12/31/92 136 134 144
12/31/93 150 164 150
12/31/94 152 150 129
*DOW JONES DIVERSIFIED INDUSTRIAL INDEX
17
24
ANNEX A
LEHMAN BROTHERS
December 22, 1995
Board of Directors
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60521
Dear Members of the Board:
We understand that CBI Industries, Inc. (the "Company"), Praxair, Inc. (the
"Bidder") and Praxair Acquisition Corp., a wholly-owned subsidiary of the Bidder
("Acquisition Sub"), have entered into an Agreement and Plan of Merger dated as
of December 22, 1995 (the "Merger Agreement") which provides, among other
things, for (i) the tender offer by Acquisition Sub for all outstanding shares
of the common stock, par value $2.50 per share, together with certain associated
rights, of the Company for consideration of $33.00 net per share in cash (the
"Tender Offer"), and (ii) the subsequent merger (the "Merger," and together with
the Tender Offer, the "Transaction") of Acquisition Sub with and into the
Company, pursuant to which each outstanding share of the common stock of the
Company (other than shares held in treasury or held by the Bidder or any of its
affiliates or as to which dissenters' rights are perfected) will be converted
into the right to receive consideration of $33.00 net per share in cash. The
terms and conditions of the Transaction are set forth in more detail in the
Merger Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's shareholders of the consideration to be offered to such shareholders
in the Transaction. We have not been requested to opine as to, and our opinion
does not in any manner address, the Company's underlying business decision to
proceed with or effect the Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the specific terms of the Transaction, (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 Transaction with the financial terms of
certain other transactions that we deemed relevant. In addition, in arriving at
our opinion, we have considered the results of efforts to solicit indications of
interest from third parties with respect to 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.
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
LEHMAN BROTHERS INC.
190 S. LASALLE STREET CHICAGO, IL 60603 TELEPHONE 312/609-7200
FACSIMILE 312/609-8562
25
not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of the Company, upon
advice of the Company we have assumed that such 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 and that the Company will perform substantially in
accordance with such projections. 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 to be
offered to the shareholders of the Company in the Transaction is fair 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 Transaction and will receive a fee for our services, a portion of which
is contingent upon the consummation of the Transaction. 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 Transaction.
Very truly yours,
LEHMAN BROTHERS
26
ANNEX B
Investment Banking Group
5500 Sears Tower
Chicago, Illinois 60606
312 906 6200
FAX 312 906 6262
[Merrill Lynch Logo]
December 22, 1995
Board of Directors
CBI Industries, Inc.
800 Jorie Boulevard
Oak Brook, IL 60521
Dear Members of the Board:
We understand that CBI Industries, Inc. (the "Company"), Praxair, Inc. (the
"Bidder") and Praxair Acquisition Corp., a wholly-owned subsidiary of the Bidder
("Acquisition Sub"), have entered into an Agreement and Plan of Merger dated as
of December 22, 1995 (the "Merger Agreement") which provides, among other
things, for (i) the tender offer by Acquisition Sub for all outstanding shares
of the common stock, par value $2.50 per share, together with certain associated
rights, of the Company for consideration of $33.00 net per share in cash (the
"Tender Offer"), and (ii) the subsequent merger (the "Merger," and together with
the Tender Offer, the "Transaction") of Acquisition Sub with and into the
Company, pursuant to which each outstanding share of the common stock of the
Company (other than shares held in treasury or held by the Bidder or any of its
affiliates or as to which dissenters' rights are perfected) will be converted
into the right to receive consideration of $33.00 net per share in cash. The
terms and conditions of the Transaction are set forth in more detail in the
Merger Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's shareholders of the consideration to be offered to such shareholders
in the Transaction. We have not been requested to opine as to, and our opinion
does not in any manner address, the Company's underlying business decision to
proceed with or effect the Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the specific terms of the Transaction, (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 Transaction with the financial terms of
certain other transactions that we deemed relevant. In addition, in arriving at
our opinion, we have considered the results of efforts to solicit indications of
interest from third parties with respect to 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.
27
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 projections of the Company, upon
advice of the Company we have assumed that such 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 and that the Company will perform substantially in
accordance with such projections. 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 to be
offered to the shareholders of the Company in the Transaction is fair 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 Transaction and will receive a fee for our services, a portion of which
is contingent upon the consummation of the Transaction. 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 Transaction.
Very truly yours,
MERRILL LYNCH
28
EXHIBIT INDEX
Exhibit 37 Agreement and Plan of Merger, dated as of December 22, 1995, by and among
Praxair, Inc., PX Acquisition Corp. and CBI Industries, Inc.
Exhibit 38 Letter to CBI Industries, Inc.'s stockholders dated December 28, 1995
Exhibit 39 Opinion of Lehman Brothers Inc. dated December 22, 1995 (incorporated by
reference to Annex A to Amendment No. 9 of the Schedule 14D-9 filed by CBI
Industries, Inc.)
Exhibit 40 Opinion of Merrill Lynch & Co. dated December 22, 1995 (incorporated by
reference to Annex B to Amendment No. 9 to the Schedule 14D-9 filed by CBI
Industries, Inc.)
Exhibit 41 Form of Letter to Restricted Stock Plan Participants