SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant: [ X ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[ X ] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by Rule
[ ] Soliciting Materials Pursuant to Section 14a-6(e)(2))
240.14a-11(c) or Section 240.14a-12
Valhi, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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computed pursuant to Exchange Act Rule 0-11 (Set forth amount
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[ ] Check box if any part of the fee is offset as provided by Exchange
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statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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4) Date Filed:
[LOGO GOES HERE]
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
March 31, 2001
To Our Stockholders:
You are cordially invited to attend the 2001 Annual Meeting of
Stockholders of Valhi, Inc., which will be held on Thursday, May 10, 2001, at
1:30 p.m., local time, at Valhi's corporate offices at Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas. The matters to be acted upon at the
meeting are described in the attached Notice of Annual Meeting of Stockholders
and Proxy Statement.
Whether or not you plan to attend the meeting, please complete, date,
sign and return the enclosed proxy card or voting instruction form in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes. Your vote, whether given
by proxy or in person at the meeting, will be held in confidence by the
inspector of election as provided in Valhi's bylaws.
Sincerely,
Harold C. Simmons
Chairman of the Board and
Chief Executive Officer
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 10, 2001
To the Stockholders of Valhi, Inc.:
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders
(the "Meeting") of Valhi, Inc., a Delaware corporation ("Valhi"), will be held
on Thursday, May 10, 2001, at 1:30 p.m., local time, at the corporate offices of
Valhi at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas for
the following purposes:
(1) To elect seven directors to serve until the 2002 Annual
Meeting of Stockholders and until their successors are duly
elected and qualified or their earlier removal, resignation or
death; and
(2) To transact such other business as may properly come before
the Meeting or any adjournment or postponement thereof.
The board of directors of Valhi set the close of business on March 23,
2001 as the record date (the "Record Date") for the Meeting. Only holders of
Valhi's common stock, par value $0.01 per share, at the close of business on the
Record Date are entitled to notice of, and to vote at, the Meeting. Valhi's
stock transfer books will not be closed following the Record Date. A complete
list of stockholders entitled to vote at the Meeting will be available for
examination during normal business hours by any stockholder of Valhi, for
purposes related to the Meeting, for a period of ten days prior to the Meeting
at Valhi's corporate offices located at the address set forth above.
You are cordially invited to attend the Meeting. Whether or not you
plan to attend the Meeting in person, please complete, date and sign the
accompanying proxy card or voting instruction form and return it promptly in the
enclosed envelope to ensure that your shares are represented and voted in
accordance with your wishes. You may revoke your proxy by following the
procedures set forth in the accompanying proxy statement. If you choose, you may
still vote in person at the Meeting even though you previously submitted your
proxy.
In accordance with Valhi's bylaws, your vote, whether given by proxy or
in person at the Meeting, will be held in confidence by the inspector of
election for the Meeting.
By Order of the Board of Directors,
A. Andrew R. Louis, Secretary
Dallas, Texas
March 31, 2001
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement and the accompanying proxy card or voting
instruction form are being furnished in connection with the solicitation of
proxies by and on behalf of the board of directors (the "Board of Directors") of
Valhi, Inc., a Delaware corporation ("Valhi"), for use at the 2001 Annual
Meeting of Stockholders of Valhi to be held on Thursday, May 10, 2001 and at any
adjournment or postponement thereof (the "Meeting"). The accompanying Notice of
Annual Meeting of Stockholders (the "Notice") sets forth the time and place and
the purposes of the Meeting. The Notice, this proxy statement, the accompanying
proxy card or voting instruction form and Valhi's Annual Report to Stockholders,
which includes Valhi's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 (the "Annual Report"), are first being mailed to the holders
of Valhi's common stock, par value $0.01 per share ("Valhi Common Stock"), on or
about April 6, 2001. Valhi's executive offices are located at Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
QUORUM, VOTING RIGHTS AND PROXY SOLICITATION
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of and to vote at the Meeting was the close of
business on March 23, 2001 (the "Record Date"). As of the Record Date, there
were 114,692,317 shares of Valhi Common Stock issued and outstanding. Each share
of Valhi Common Stock entitles its holder to one vote on all matters to be acted
on at the Meeting. The presence, in person or by proxy, of the holders of a
majority of the shares of Valhi Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum for the conduct of business at the Meeting.
Shares of Valhi Common Stock that are voted to abstain from any business coming
before the Meeting and broker/nominee non-votes will be counted as being in
attendance at the Meeting for purposes of determining whether a quorum is
present.
If a quorum is present, a plurality of the affirmative votes of the
outstanding shares of Valhi Common Stock represented and entitled to be voted at
the Meeting is necessary to elect a director of Valhi. The accompanying proxy
card or voting instruction form provides space for a stockholder to withhold
authority to vote for any or all of the nominees of the Board of Directors.
Neither shares as to which the authority to vote on the election of directors
has been withheld nor broker/nominee non-votes will be counted as affirmative
votes to elect director nominees to the Board of Directors. However, since
director nominees need only receive the vote of a plurality of the shares
represented at the Meeting and entitled to vote, a vote withheld from a
particular nominee will not affect the election of such nominee.
Except as applicable laws may otherwise provide, the approval of any
other matter that may properly come before the Meeting will require the
affirmative vote of a majority of the shares represented and entitled to vote at
the Meeting. Shares of Valhi Common Stock that are voted to abstain from any
other business coming before the Meeting and broker/nominee non-votes will not
be counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Meeting "FOR" the election of the nominees for director and, to the extent
allowed by the federal securities laws, in the discretion of the agents on any
other matter that may properly come before the Meeting.
Contran Corporation ("Contran") and certain related persons and
entities held approximately 94% of the outstanding shares of Valhi Common Stock
as of the Record Date and have indicated their intention to have such shares
represented at the Meeting and voted "FOR" the election of each of the nominees
for director of the Board of Directors. If such shares are represented and voted
as indicated at the Meeting, a quorum will be present and all the nominees for
director will be elected as directors of Valhi.
Computershare Investor Services, L.L.C. or its successor
("Computershare"), the transfer agent and registrar for Valhi Common Stock as of
the Record Date, has been appointed by the Board of Directors to ascertain the
number of shares represented, receive proxies and ballots, tabulate the vote and
serve as inspector of election at the Meeting. All proxies, ballots and voting
instructions delivered to Computershare that identify the vote of a particular
stockholder shall be kept confidential by Computershare in accordance with the
terms of Valhi's bylaws. Each holder of record of Valhi Common Stock giving the
proxy enclosed with this proxy statement may revoke it at any time prior to the
voting of such stock at the Meeting by delivering to Computershare a written
revocation of the proxy, delivering to Computershare a duly executed proxy
bearing a later date or by voting in person at the Meeting. Attendance by a
stockholder at the Meeting will not in itself constitute the revocation of such
stockholder's proxy.
This proxy solicitation is being made by and on behalf of the Board of
Directors. Valhi will pay all expenses related to the solicitation, including
charges for preparing, printing, assembling and distributing all materials
delivered to stockholders. In addition to solicitation by mail, directors,
officers and regular employees of Valhi may solicit proxies by telephone or in
person for which such persons will receive no additional compensation. Upon
request, Valhi will reimburse banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries for their reasonable out-of-pocket expenses
incurred in distributing proxy materials and voting instructions to the
beneficial owners of Valhi Common Stock held of record by such entities.
ELECTION OF DIRECTORS
The bylaws of Valhi provide that the Board of Directors shall consist
of not less than five and not more than nine persons, as determined from time to
time by the Board of Directors in its discretion. The number of directors is
currently set at seven. The directors elected at the Meeting will hold office
until the 2002 Annual Meeting of Stockholders and until their successors are
duly elected and qualified or their earlier removal, resignation or death.
All of the nominees are currently directors of Valhi whose terms will
expire at the Meeting. All of the nominees have agreed to serve if elected. If
any nominee is not available for election at the Meeting, a proxy will be voted
"FOR" an alternate nominee to be selected by the Board of Directors, unless the
stockholder executing such proxy withholds authority to vote for such nominee.
The Board of Directors believes that all of its present nominees will be
available for election at the Meeting and will serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. The following information has been provided by
the respective nominees for election as directors of Valhi for terms expiring at
the 2002 Annual Meeting of Stockholders.
Thomas E. Barry, age 57, has served as a director of Valhi since
October 2000. Dr. Barry is vice president for executive affairs at Southern
Methodist University and has been professor of marketing in the Edwin L. Cox
School of Business at Southern Methodist University since prior to 1996. Dr.
Barry is also a director of Keystone Consolidated Industries, Inc., a steel
fabricated wire products, industrial wire and carbon steel rod company
affiliated with Valhi ("Keystone"). Additionally, he serves as a member of
Valhi's audit committee and management development and compensation committee
(the "MD&C Committee").
Norman S. Edelcup, age 65, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1975. Since February 2001, Mr. Edelcup has
served as senior vice president of Florida Savings Bancorp. He also serves as a
trustee for the Baron Funds, a mutual fund group. Mr. Edelcup served as senior
vice president of Item Processing of America, Inc., a processing service bureau
("IPA"), from 1999 to 2000 and as chairman of the board of IPA from prior to
1996 to 1999. Additionally, he serves as chairman of Valhi's audit committee and
MD&C Committee.
Edward J. Hardin, age 58, has served as a director of Valhi since
February 2000. Since 1997, Mr. Hardin has served as a director of CompX
International Inc. ("CompX"), a majority owned indirect subsidiary of Valhi that
manufactures ergonomic computer support systems, precision ball bearing slides
and security products. Mr. Hardin has been a partner of the law firm of Rogers &
Hardin LLP since its formation in 1976. Mr. Hardin serves as a director of
Westrup, Inc., a manufacturer of seed processing machinery, and as chairman of
the board of the Harvard Center for the Study of World Religions. Additionally,
he serves as a member of Valhi's audit committee.
Glenn R. Simmons, age 73, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1980. Mr. Simmons has been vice chairman
of the board of Valhi and Contran, a diversified holding company, since prior to
1996. Mr. Simmons is a director of Valhi's majority owned subsidiary, NL
Industries, Inc. ("NL"), a titanium dioxide pigments company; chairman of the
board of CompX; chairman of the board of Keystone; a director of Titanium Metals
Corporation ("TIMET"), a company engaged in the titanium metals industry of
which Tremont Corporation ("Tremont") owns approximately 39%; and a director of
Tremont, Valhi's majority owned indirect subsidiary that in addition to its
holdings in TIMET owns approximately 20% of NL and interests in land development
entities. Mr. Simmons has been an executive officer and/or director of various
companies related to Valhi and Contran since 1969. Mr. Simmons serves as a
member of Valhi's executive committee and is a brother of Harold C. Simmons.
Harold C. Simmons, age 69, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1980. Mr. Simmons has been chairman of the
board and chief executive officer of Valhi and Contran since prior to 1996 and
was president of Valhi and Contran from prior to 1996 to 1998. Mr. Simmons is
chairman of the board of NL and a director of Tremont. Mr. Simmons has been an
executive officer and/or director of various companies related to Valhi and
Contran since 1961. Mr. Simmons serves as chairman of Valhi's executive
committee and is a brother of Glenn R. Simmons.
J. Walter Tucker, Jr., age 75, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1982. Mr. Tucker has been the president,
treasurer and a director of Tucker & Branham, Inc., a mortgage banking,
insurance and real estate company, and vice chairman of the board and a director
of Keystone since prior to 1996. Mr. Tucker has been an executive officer and/or
director of various companies related to Valhi and Contran since 1982.
Steven L. Watson, age 50, has served as a director of Valhi since 1998.
Mr. Watson has been president of Valhi and Contran, and a director of Contran,
since 1998. Mr. Watson is also a director of CompX, Keystone, NL, TIMET and
Tremont. From prior to 1996 to 1998, Mr. Watson served as vice president and
secretary of Valhi and Contran. Mr. Watson has served as an executive officer
and/or director of various companies related to Valhi and Contran since 1980.
Mr. Watson serves as a member of Valhi's executive committee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings and took action by written
consent in lieu of meetings on seven occasions in 2000. Each of the directors
participated in all of such meetings and of the meetings of the committees on
which they served at the time they served.
The Board of Directors has established and delegated authority to the
following standing committees.
Audit Committee. The principal responsibilities of the audit committee
are to serve as an independent and objective party to review the corporation's
auditing, accounting and financial reporting processes. The responsibilities of
the audit committee are more specifically set forth in the audit committee
charter attached as Exhibit A to this proxy statement. For further information
on the role of the audit committee, see "Independent Auditor Matters--Audit
Committee Report." The current members of the audit committee are Norman S.
Edelcup (chairman), Edward J. Hardin and Dr. Thomas E. Barry. The audit
committee held two meetings in 2000.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve grants of stock
options and other awards under the Valhi, Inc. 1997 Long-Term Incentive Plan
(the "1997 Plan"), to review and administer the Valhi, Inc. 1987 Stock
Option--Stock Appreciation Rights Plan, as amended (the "1987 Plan"), and the
1997 Plan and to review and administer such other compensation matters as the
Board of Directors may direct from time to time. For further information on the
role of the MD&C Committee, see "Report on Executive Compensation." The current
members of the MD&C Committee are Norman S. Edelcup (chairman) and Dr. Thomas E.
Barry. The MD&C Committee held one meeting and took action by written consent in
lieu of a meeting on one occasion in 2000.
Executive Committee. The principal responsibilities of the executive
committee are to take such actions as are required to manage Valhi, within the
limits provided by Delaware statutes and the Board of Directors. The current
members of the executive committee are Harold C. Simmons (chairman), Glenn R.
Simmons and Steven L. Watson. The executive committee did not hold any meetings
in 2000.
The Board of Directors does not have a nominating committee or any
committee performing a similar function. All matters that would be considered by
such a committee are acted upon by the full Board of Directors. The Board of
Directors will consider recommendations by stockholders of Valhi with respect to
the election of directors if such recommendations are submitted in writing to
the secretary of Valhi and received not later than December 31 of the year prior
to the next annual meeting of stockholders. Such recommendations should be
accompanied by a full statement of qualifications and confirmation of the
nominee's willingness to serve.
It is anticipated that the members of the standing committees will be
elected at the annual meeting of the Board of Directors immediately following
the Meeting. The Board of Directors has previously established, and from time to
time may establish, other committees to assist it in the discharge of its
responsibilities.
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current
executive officers of Valhi. Each executive officer serves at the pleasure of
the Board of Directors. Biographical information with respect to Harold C.
Simmons, Glenn R. Simmons and Steven L. Watson is set forth under "Election of
Directors--Nominees for Director."
Name Age Position(s)
- ------------------------------------ ------ -------------------------------------------------
Harold C. Simmons................... 69 Chairman of the Board and Chief Executive Officer
Glenn R. Simmons.................... 73 Vice Chairman of the Board
Steven L. Watson.................... 50 President
William J. Lindquist................ 43 Senior Vice President
Bobby D. O'Brien.................... 43 Vice President and Treasurer
J. Mark Hollingsworth............... 49 Vice President and General Counsel
Gregory M. Swalwell................. 44 Vice President and Controller
Eugene K. Anderson.................. 65 Vice President and Assistant Treasurer
A. Andrew R. Louis.................. 40 Secretary
Kelly D. Luttmer.................... 37 Tax Director
William J. Lindquist has served as senior vice president of Valhi and
Contran, and a director of Contran, since 1998. From prior to 1996 to 1998, Mr.
Lindquist served as vice president and tax director of Valhi and Contran. Mr.
Lindquist has served as an executive officer and/or director of various
companies related to Valhi and Contran since 1980.
Bobby D. O'Brien has served as vice president of Valhi and Contran
since 1996 and treasurer of Valhi and Contran since 1997. Mr. O'Brien has served
in financial and accounting positions with various companies related to Valhi
and Contran since 1988.
J. Mark Hollingsworth has served as vice president of Valhi and Contran
since 1998 and as general counsel of Valhi and Contran since 1996. From prior to
1997, Mr. Hollingsworth served as senior counsel or legal counsel for Valhi and
Contran. Mr. Hollingsworth has served as legal counsel of various companies
related to Valhi and Contran since 1983.
Gregory M. Swalwell has served as vice president of Valhi and Contran
since 1998 and controller of Valhi and Contran since 1996. From prior to 1997,
Mr. Swalwell served as assistant controller of Valhi and Contran. Mr. Swalwell
has served in accounting positions with various companies related to Valhi and
Contran since 1988.
Eugene K. Anderson has served as vice president and assistant treasurer
of Valhi and Contran since prior to 1996. Mr. Anderson has served as an
executive officer of various companies related to Valhi and Contran since 1980.
A. Andrew R. Louis has served as secretary of Valhi and Contran since
1998. From prior to 1996 to 1998, Mr. Louis served as corporate counsel of Valhi
and Contran. Mr. Louis has served as legal counsel of various companies related
to Valhi and Contran since 1995.
Kelly D. Luttmer has served as tax director of Valhi and Contran since
1998. Since prior to 1996 to 1998, Ms. Luttmer served as assistant tax manager
of Valhi and Contran. Ms. Luttmer has served in tax accounting positions with
various companies related to Valhi and Contran since 1989.
SECURITY OWNERSHIP
Ownership of Valhi and Its Parents. The following table and footnotes
set forth as of the Record Date the beneficial ownership, as defined by
regulations of the Securities and Exchange Commission (the "SEC"), of Valhi
Common Stock held by each person or group of persons known to Valhi to own
beneficially more than 5% of the outstanding shares of Valhi Common Stock, each
director of Valhi, each executive officer of Valhi named in the Summary
Compensation Table below (a "named executive officer") and all directors and
executive officers of Valhi as a group. See footnote (4) below for information
concerning individuals and entities that may be deemed to own indirectly and
beneficially those shares of Valhi Common Stock directly held by Contran,
National City Lines, Inc. ("National") and Valhi Group, Inc. ("VGI"). Except as
set forth below, no securities of Valhi's parent companies are beneficially
owned by any director or executive officer of Valhi. All information is taken
from or based upon ownership filings made by such persons with the SEC or upon
information provided by such persons.
Valhi Common Stock
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Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
- ------------------------ ------------------------------- --------------
Contran Corporation and subsidiaries:
Contran Corporation (3)...................................... 2,449,800 (4)(5) 2.1%
National City Lines, Inc. (3)................................ 10,891,009 (4) 9.5%
Valhi Group, Inc. (3)........................................ 93,739,554 (4) 81.7%
Thomas E. Barry.................................................. 1,000 *
Norman S. Edelcup................................................ 26,000 (6) *
Edward J. Hardin................................................. 4,000 (6) *
Glenn R. Simmons................................................. 353,183 (4)(6)(7) *
Harold C. Simmons................................................ 580,383 (4)(5)(6)(8) *
J. Walter Tucker, Jr............................................. 240,750 (4)(6)(9) *
Steven L. Watson................................................. 318,635 (4)(6) *
William J. Lindquist............................................. 257,000 (4)(6) *
Bobby D. O'Brien................................................. 172,000 (4)(6) *
All directors and executive officers as a group (14 persons)..... 2,282,563 (4)(5)(6)(7)(8)(9) 2.0%
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares of Valhi Common
Stock set forth opposite their names. The number of shares and
percentage of ownership of Valhi Common Stock for each person or group
assumes the exercise by such person or group (exclusive of others) of
stock options that such person or group may exercise within 60 days
subsequent to the Record Date.
(2) The percentages are based on 114,692,317 shares of Valhi Common Stock
outstanding as of the Record Date. For purposes of calculating the
outstanding shares of Valhi Common Stock as of the Record Date,
1,186,200 shares of Valhi Common Stock held by a subsidiary of NL, a
majority owned subsidiary of Valhi, and 1,000,000 shares of Valhi
Common Stock held by Valmont Insurance Company, a wholly owned
subsidiary of Valhi ("Valmont"), are excluded from the amount of Valhi
Common Stock outstanding. Pursuant to Delaware corporate law, Valhi
treats these excluded shares as treasury stock for voting purposes.
(3) The business address of Contran, National and VGI is Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
(4) National, NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding")
are the direct holders of approximately 73.3%, 11.4% and 15.3%,
respectively, of the outstanding common stock of VGI. Contran and NOA
are the direct holders of approximately 85.7% and 14.3%, respectively,
of the outstanding common stock of National. Contran and Southwest
Louisiana Land Company, Inc. ("Southwest") are the direct holders of
approximately 49.9% and 50.1%, respectively, of the outstanding common
stock of NOA. Dixie Rice Agricultural Corporation, Inc. ("Dixie Rice")
is the direct holder of 100% of the outstanding common stock of Dixie
Holding. Contran is the holder of 100% of the outstanding common stock
of Dixie Rice and approximately 88.9% of the outstanding common stock
of Southwest. Substantially all of Contran's outstanding voting stock
is held by trusts established for the benefit of certain children and
grandchildren of Harold C. Simmons (the "Trusts"), of which Mr. Simmons
is the sole trustee. As sole trustee of the Trusts, Mr. Simmons has the
power to vote and direct the disposition of the shares of Contran stock
held by the Trusts. Mr. Simmons, however, disclaims beneficial
ownership of any Contran shares that the Trusts hold.
Harold C. Simmons is the chairman of the board and chief executive
officer of VGI, National, NOA, Dixie Holding, Dixie Rice, Southwest and
Contran. By virtue of the holding of the offices, the stock ownership
and his service as trustee, all as described above, Mr. Simmons may be
deemed to control such entities, and Mr. Simmons and certain of such
entities may be deemed to possess indirect beneficial ownership of the
shares of Valhi Common Stock directly held by certain of such other
entities. Mr. Simmons, however, disclaims beneficial ownership of the
shares of Valhi Common Stock beneficially owned, directly or
indirectly, by any of such entities, NL or Valmont.
Glenn R. Simmons, Steven L. Watson and William J. Lindquist are
directors of Contran and all of Valhi's executive officers are
executive officers of Contran. Each of such persons disclaims
beneficial ownership of the shares of Valhi Common Stock that Contran
directly or indirectly beneficially holds.
The Harold Simmons Foundation, Inc. (the "Foundation") directly holds
approximately 0.5% of the outstanding shares of Valhi Common Stock. The
Foundation is a tax-exempt foundation organized for charitable
purposes. Harold C. Simmons is the chairman of the board and chief
executive officer of the Foundation and may be deemed to control the
Foundation. Mr. Simmons, however, disclaims beneficial ownership of any
shares of Valhi Common Stock held by the Foundation.
The Combined Master Retirement Trust (the "Master Trust") directly
holds approximately 0.1% of the outstanding shares of Valhi Common
Stock. Valhi established the Master Trust to permit the collective
investment by master trusts that maintain the assets of certain
employee benefit plans Valhi and related companies adopt. Harold C.
Simmons is the sole trustee of the Master Trust and a member of the
trust investment committee for the Master Trust. J. Walter Tucker, Jr.
is also a member of the trust investment committee for the Master
Trust. The Board of Directors selects the trustee and members of the
trust investment committee for the Master Trust. Harold C. Simmons,
Glenn R. Simmons, Steven L. Watson, William J. Lindquist, Bobby D.
O'Brien and the other Valhi executive officers are participants in one
or more of the employee benefit plans that invest through the Master
Trust. Each of such persons disclaims beneficial ownership of the
shares of Valhi Common Stock held by the Master Trust, except to the
extent of his or her individual vested beneficial interest in the
assets held by the Master Trust.
The business address of NOA, Dixie Holding, the Master Trust and the
Foundation is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700,
Dallas, Texas 75240-2697. The business address of Dixie Rice is 600
Pasquiere Street, Gueydan, Louisiana 70542. The business address of
Southwest is 402 Canal Street, Houma, Louisiana 70360.
(5) The shares of Valhi Common Stock shown as owned by Contran include
approximately 0.4% of the outstanding Valhi Common Stock that is
directly held by the Contran Deferred Compensation Trust No. 2 (the
"CDCT No. 2"). U.S. Bank National Association serves as trustee of the
CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable "rabbi
trust" to assist Contran in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons. If the CDCT No. 2 assets
are insufficient to satisfy such obligations, Contran must satisfy the
balance of such obligations. Pursuant to the terms of the CDCT No. 2,
Contran retains the power to vote the shares held by the CDCT No. 2,
retains dispositive power over such shares and may be deemed the
indirect beneficial owner of such shares. Mr. Simmons, however,
disclaims such beneficial ownership of the shares beneficially owned,
directly or indirectly, by the CDCT No. 2, except to the extent of his
interest as a beneficiary of the CDCT No. 2.
(6) The shares of Valhi Common Stock shown as beneficially owned by such
person or group include the following number of shares such person or
group has the right to acquire upon the exercise of stock options
granted pursuant to the 1987 Plan or 1997 Plan that such person or
group may exercise within 60 days subsequent to the Record Date:
Shares of Valhi Common Stock
Issuable Upon the Exercise
of Stock Options
Name of Beneficial Owner On or Before May 22, 2001
--------------------------------------------------------------------------- ----------------------------
Norman S. Edelcup......................................................... 3,000
Edward J. Hardin.......................................................... 2,000
Glenn R. Simmons.......................................................... 350,000
Harold C. Simmons......................................................... 500,000
J. Walter Tucker, Jr...................................................... 3,000
Steven L. Watson.......................................................... 300,000
William J. Lindquist...................................................... 257,000
Bobby D. O'Brien.......................................................... 172,000
All other executive officers of Valhi as a group (5 persons).............. 327,000
(7) The shares of Valhi Common Stock shown as beneficially owned by Glenn
R. Simmons include 800 shares his wife holds in her retirement account,
with respect to which he disclaims beneficial ownership.
(8) The shares of Valhi Common Stock shown as beneficially owned by Harold
C. Simmons include 77,000 shares his wife holds, with respect to which
he disclaims beneficial ownership.
(9) The shares of Valhi Common Stock shown as beneficially owned by J.
Walter Tucker, Jr. include 200,000 shares his wife holds, with respect
to which he disclaims beneficial ownership, and 17,250 shares held by a
corporation of which he is the sole stockholder.
Valhi understands that Contran and related entities may consider
acquiring or disposing of shares of Valhi Common Stock through open-market or
privately negotiated transactions, depending upon future developments,
including, but not limited to, the availability and alternative uses of funds,
the performance of Valhi Common Stock in the market, an assessment of the
business of and prospects for Valhi, financial and stock market conditions and
other factors deemed relevant by such entities. Valhi may similarly consider
acquisitions of shares of Valhi Common Stock and acquisitions or dispositions of
securities issued by related entities.
Valhi does not presently intend, and understands that Contran does not
presently intend, to engage in any transaction or series of transactions that
would result in Valhi Common Stock becoming eligible for termination of
registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or ceasing to be traded on a national securities exchange.
Ownership of NL and CompX. The following table and footnotes set forth
the beneficial ownership, as of the Record Date, of the common stock, par value
$0.125 per share, of NL ("NL Common Stock") and the class A common stock, par
value $0.01 per share, of CompX ("CompX Class A Common Stock") held by each
director of Valhi, each named executive officer and all directors and executive
officers of Valhi as a group. All information is taken from or based upon
ownership filings made by such persons with the SEC or upon information provided
by such persons.
NL Common Stock CompX Class A Common Stock
--------------------------------------- ----------------------------------
Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3)
- ------------------------ ----------------------- -------------- ---------------------- ---------
Thomas E. Barry................. -0- (4) -0- -0- (5) -0-
Norman S. Edelcup............... -0- (4) -0- 2,000 (5) *
Edward J. Hardin................ -0- (4) -0- 6,300 (5)(6) *
Glenn R. Simmons................ 7,000 (4)(6) * 37,200 (5)(6) *
Harold C. Simmons............... 78,475 (4)(6)(7) * 20,000 (5)(7) *
J. Walter Tucker, Jr............ -0- (4) -0- -0- (5) -0-
Steven L. Watson................ 4,000 (4) * 7,900 (5)(6) *
William J. Lindquist............ -0- (4) -0- 6,000 (5)(6) *
Bobby D. O'Brien................ -0- (4) -0- 6,300 (5)(6) *
All directors and executive
officers of Valhi as a
group (14 persons) ......... 89,975 (4)(6)(7) * 99,700 (5)(6)(8) 1.9%
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares set forth
opposite their names. The number of shares and percentage of ownership
for each person or group assumes the exercise by such person or group
(exclusive of others) of stock options that such person or group may
exercise within 60 days subsequent to the Record Date.
(2) The percentages are based on 50,087,284 shares of NL Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 5,117,280 shares of CompX Class A Common
Stock outstanding as of the Record Date.
(4) Valhi and Tremont are the direct holders of approximately 60.2% and
20.4%, respectively, of the outstanding NL Common Stock. Tremont Group,
Inc. ("TGI") is the holder of approximately 80.0% of the outstanding
common stock of Tremont. Valhi and Tremont Holdings, LLC ("TRE
Holdings") are the direct holders of 80.0% and 20.0%, respectively, of
the outstanding common stock of TGI. NL is the sole member of TRE
Holdings. See footnotes (2), (4) and (5) to the "Ownership of Valhi and
Its Parents" table above for certain information concerning Valhi and
the individuals and entities that may be deemed to own indirectly and
beneficially shares of NL Common Stock that Valhi and Tremont directly
hold. Harold C. Simmons and all other directors and executive officers
of Valhi disclaim beneficial ownership of all of the shares of NL
Common Stock that Valhi and Tremont directly hold.
(5) Valcor, Inc., a wholly owned subsidiary of Valhi ("Valcor"), owns 100%
of the CompX class B common stock, par value $0.01 per share ("CompX
Class B Common Stock" and together with the CompX Class A Common Stock,
the "CompX Common Stock"). Each share of CompX Class B Common Stock
entitles the holder to one vote on all matters except the election of
directors on which each share is entitled to ten votes. Valhi holds
approximately 7.3% of the outstanding CompX Class A Common Stock. As a
result, Valhi holds, directly and indirectly through Valcor,
approximately 68.6% of the combined voting power of the CompX Common
Stock (approximately 95.5% for the election of directors). In certain
instances, shares of CompX Class B Common Stock are automatically
convertible into shares of CompX Class A Common Stock. See footnotes
(2), (4) and (5) to the "Ownership of Valhi and Its Parents" table
above for certain information concerning individuals and entities that
may be deemed to own indirectly and beneficially shares of CompX Common
Stock that Valcor and Valhi hold directly. Harold C. Simmons and all
other directors and executive officers of Valhi disclaim beneficial
ownership of all of the shares of CompX Common Stock that Valhi and
Valcor directly hold.
(6) The shares of NL Common Stock or CompX Class A Common Stock shown as
beneficially owned by such person or group include the following number
of shares such person or group has the right to acquire upon the
exercise of stock options granted pursuant to NL or CompX stock option
plans that such person or group may exercise within 60 days subsequent
to the Record Date:
Shares of NL Common Stock Shares of CompX Class A Common
Issuable Upon the Exercise Stock Issuable Upon the
of Stock Options Exercise of Stock Options
Name of Beneficial Owner On or Before May 22, 2001 On or Before May 22, 2001
------------------------------------------ ----------------------------- -----------------------------
Edward J. Hardin......................... -0- 1,800
Glenn R. Simmons......................... 6,000 31,200
Harold C. Simmons........................ 6,000 -0-
Steven L. Watson......................... -0- 6,400
William J. Lindquist..................... -0- 6,000
Bobby D. O'Brien......................... -0- 6,000
All other executive officers of Valhi
as a group (5 persons)................. -0- 13,800
(7) The shares of NL Common Stock and CompX Common Stock shown as
beneficially owned by Harold C. Simmons include 69,475 and 20,000
shares, respectively, held by his wife, with respect to which shares he
disclaims beneficial ownership.
Ownership of Tremont and TIMET. The following table and footnotes set
forth the beneficial ownership, as of the Record Date, of the common stock, par
value $1.00 per share, of Tremont ("Tremont Common Stock") and the common stock,
par value $0.01 per share, of TIMET ("TIMET Common Stock") held by each director
of Valhi, each named executive officer and all directors and executive officers
of Valhi as a group. All information has been taken from or based upon ownership
filings made by such persons with the SEC or upon information provided by such
persons.
Tremont Common Stock TIMET Common Stock
------------------------------------ ------------------------------------
Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3)
- ------------------------ ---------------------- ------------ ----------------------- -----------
Thomas E. Barry................ -0- (4) -0- -0- (5) -0-
Norman S. Edelcup.............. -0- (4) -0- -0- (5) -0-
Edward J. Hardin............... -0- (4) -0- -0- (5) -0-
Glenn R. Simmons............... 534 (4) * 13,000 (5)(6) *
Harold C. Simmons.............. -0- (4) -0- -0- (5) -0-
J. Walter Tucker, Jr........... 525 (4)(7) * -0- (5) -0-
Steven L. Watson............... 4,474 (4) * 13,500 (5)(8) *
William J. Lindquist........... -0- (4) -0- -0- (5) -0-
Bobby D. O'Brien............... -0- (4) -0- -0- (5) -0-
All directors and executive
officers of Valhi as a group
(14 persons)................ 5,533 (4)(7) * 26,600 (5)(6)(8) *
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares set forth
opposite their names. The number of shares and percentage of ownership
for each person or group assumes the exercise by such person or group
(exclusive of others) of stock options that such person or group may
exercise within 60 days subsequent to the Record Date are outstanding.
(2) The percentages are based on 6,424,858 shares of Tremont Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 31,824,905 shares of TIMET Common Stock
outstanding as of the Record Date.
(4) TGI is the holder of approximately 80.0% of the outstanding common
stock of Tremont. Valhi and TRE Holdings are the direct holders of
80.0% and 20.0%, respectively, of the outstanding common stock of TGI.
NL is the sole member of TRE Holdings. Valhi and Tremont are the direct
holders of approximately 60.2% and 20.4%, respectively, of the
outstanding NL Common Stock. See footnotes (2), (4) and (5) to the
"Ownership of Valhi and Its Parents" table above for certain
information concerning Valhi and the individuals and entities that may
be deemed to own indirectly and beneficially shares of Tremont Common
Stock that TGI directly holds. Harold C. Simmons and all other
directors and executive officers of Valhi disclaim beneficial ownership
of all of the shares of Tremont Common Stock any of these entities
directly hold.
(5) Tremont and the Master Trust directly hold approximately 38.6% and
8.5%, respectively, of the outstanding TIMET Common Stock. See footnote
(4) above and footnotes (2), (4) and (5) to the "Ownership of Valhi and
Its Parents" table above for certain information concerning individuals
and entities that may be deemed to own indirectly and beneficially
shares of TIMET Common Stock that Tremont and the Master Trust hold
directly. Harold C. Simmons and all other directors and executive
officers of Valhi disclaim beneficial ownership of all of the shares of
TIMET Common Stock that Tremont and the Master Trust directly hold.
(6) The shares of TIMET Common Stock shown as beneficially owned by Glenn
R. Simmons include 10,000 shares he has the right to acquire upon the
exercise of stock options granted pursuant to a TIMET stock option plan
that he may exercise within 60 days subsequent to the Record Date.
(7) The shares of Tremont Common Stock shown as beneficially owned by J.
Walter Tucker are shares held by a corporation of which he is the sole
stockholder.
(8) The shares of TIMET Common Stock shown as beneficially owned by Steven
L. Watson include 5,000 shares he has the right to acquire upon the
exercise of stock options granted pursuant to a TIMET stock option plan
that he may exercise within 60 days subsequent to the Record Date.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. On May 11, 2000, the Board of Directors
changed the fees paid to directors of Valhi who were not also employees of Valhi
or an affiliate of Valhi. After the change, such nonemployee directors of Valhi
received an annual retainer of $16,000 paid in quarterly installments, plus a
fee of $1,000 per day for attendance at meetings and as a daily rate for other
services rendered on behalf of the Board of Directors and/or the standing
committees thereof. After the change, directors who were members of the audit
committee or MD&C Committee also received an annual retainer of $1,000, paid in
quarterly installments, for each of these committees on which they served.
Before the change on May 11, 2000, such nonemployee directors received
an annual retainer of $10,000 paid in quarterly installments, plus a fee of
$1,000 per day for attendance at meetings and as a daily rate for other services
rendered on behalf of the Board of Directors and/or the standing committees
thereof. Before the change, directors who were members of the audit committee or
MD&C Committee also received an annual retainer of $4,000, paid in quarterly
installments, for each of these committees on which they served.
Directors are also reimbursed for reasonable expenses incurred in
attending meetings and in the performance of other services rendered on behalf
of the Board of Directors and/or its committees. Current directors who received
fees during 2000 were Dr. Thomas E. Barry, Norman S. Edelcup, Edward J. Hardin
and J. Walter Tucker, Jr. (together, the "Nonemployee Directors").
In February 2000, each of the Nonemployee Directors also received his
annual 2000 noncash compensation granted under the 1997 Plan consisting of 1,000
shares of Valhi Common Stock and stock options exercisable for 2,000 shares of
Valhi Common Stock. The annually granted stock options have an exercise price
equal to the closing sales price of Valhi Common Stock on the date of grant,
have a term of 10 years and fully vest on the first anniversary of the date of
grant. Valhi grants the annual Nonemployee Director stock and stock options on
the third business day after Valhi issues a press release reporting its
full-year earnings for the prior year.
Contran and certain of its subsidiaries, including Valhi, have entered
into certain intercorporate services agreements (collectively, the "ISAs")
pursuant to which Contran, among other things, provides the services of Harold
C. Simmons and Glenn R. Simmons, and since July 1, 2000 the services of all of
the named executive officers, to certain of Contran's subsidiaries, including
Valhi and its subsidiaries. For a discussion of these ISAs, see "Compensation
Committee Interlocks and Insider Participation--Relationships with Related
Parties--Intercorporate Services Agreements."
Summary of Cash and Certain Other Compensation of Executive Officers.
The Summary Compensation Table set forth below provides information concerning
annual and long-term compensation paid or accrued by Valhi and its subsidiaries
for services rendered to Valhi and its subsidiaries during 2000, 1999 and 1998
by Valhi's chief executive officer and each of the four other most highly
compensated individuals (based on salary and bonus paid by or charged to Valhi
for 2000) who were executive officers of Valhi at December 31, 2000.
Pursuant to the ISAs, Contran, among other things, provided to Valhi
and certain of Valhi's subsidiaries the services of Harold C. Simmons and Glenn
R. Simmons, and since July 1, 2000 the services of all of the named executive
officers. Additionally, pursuant to the ISAs, Valhi provided to Contran and
certain of its subsidiaries, among other things, the services of its employees,
including the services of Steven L. Watson, William J. Lindquist and Bobby D.
O'Brien through June 30, 2000. On July 1, 2000, Steven L. Watson, William J.
Lindquist and Bobby D. O'Brien became employees of Contran. For a discussion of
these ISAs, see "Compensation Committee Interlocks and Insider
Participation--Relationships with Related Parties--Intercorporate Services
Agreements."
SUMMARY COMPENSATION TABLE
Long Term
Compensation (1)
-----------------
Awards
-----------------
Annual Compensation (2) Shares
Name and ----------------------------------- Underlying All Other
Principal Position Year Salary Bonus Options (#) Compensation
- --------------------------------- ---- --------------- ----------------- -------------- --------------
Harold C. Simmons................ 2000 $2,992,469 (3) $ -0- (3) 2,000 (4) $ -0-
Chairman of the Board and Chief 1999 2,982,563 (3) -0- (3) 2,000 (4) -0-
Executive Officer 1998 2,550,052 (3) -0- (3) 2,000 (4) -0-
Glenn R. Simmons................. 2000 354,478 (3) -0- (3) 2,000 (4) -0-
Vice Chairman of the Board 2,000 (5)
5,000 (6)
1999 270,450 (3) -0- (3) 2,000 (4) -0-
2,000 (5)
5,000 (6)
1998 171,690 (3) 240,056 (3) 50,000 (5) -0-
2,000 (4)
Steven L. Watson................. 2000 862,663 (3) -0- (3) 2,000 (5) 85,337 (7)
President 5,000 (6)
1999 312,322 (3) 694,048 (3) -0- 187,628 (7)
1998 300,703 (3) 953,450 (3)(8) 50,000 (9) 341,647 (7)
10,000 (5)
William J. Lindquist............. 2000 374,000 (3) -0- (3) -0- 62,906 (7)
Senior Vice President 1999 250,615 (3) 448,863 (3) 30,000 (9) 115,628 (7)
1998 218,232 (3) 621,244 (3)(8) 50,000 (9) 246,824 (7)
10,000 (5)
Bobby D. O'Brien................. 2000 373,000 (3) -0- (3) -0- 12,363 (7)
Vice President and Treasurer 1999 175,832 (3) 168,799 (3) 30,000 (9) 39,332 (7)
1998 170,669 (3) 344,876 (3) 50,000 (9) 58,355 (7)
10,000 (5)
- --------------------
(1) No shares of restricted stock were granted to the named executive
officers nor payouts made to the named executive officers pursuant to
long-term incentive plans during the last three years. Therefore, the
columns for such compensation have been omitted.
(2) Other annual compensation for each of the named executive officers
included perquisites, which perquisites were less than the level
required for reporting pursuant to SEC rules. Therefore, the column for
other annual compensation has been omitted.
(3) The amounts shown in the table as salary compensation for Messrs.
Harold and Glenn Simmons represent the portion of the fees Valhi and
its subsidiaries paid to Contran pursuant to the ISAs with respect to
services Messrs. Harold and Glenn Simmons rendered to Valhi and its
subsidiaries, plus director fees paid to Messrs. Harold and Glenn
Simmons by Valhi's subsidiaries.
For 2000, the amounts shown in the table as salary compensation for
Messrs. Watson, Lindquist and O'Brien represent the full amount paid by
Valhi and its subsidiaries for services such individuals rendered to
Valhi during the first half of 2000, less the portion of such
compensation that is attributable to the services such executive
officers rendered to Contran and certain entities related to Contran,
for which Contran credited Valhi pursuant to the ISA between Contran
and Valhi (the "Contran/Valhi ISA"), plus the portion of such
compensation that is attributable to the services such executive
officers rendered to Valhi and its subsidiaries during the second half
of 2000, for which Contran charged Valhi pursuant to the Contran/Valhi
ISA. For 2000, the amount shown in the table as salary compensation for
Mr. Watson also includes director fees paid to him by Valhi's
subsidiaries.
For 1998 and 1999, the amounts shown in the table as compensation for
Messrs. Watson, Lindquist and O'Brien represent the full amount paid by
Valhi and its subsidiaries for services such individuals rendered to
Valhi during each respective period, less the portion of such
compensation that is attributable to the services such executive
officers rendered to Contran and certain entities related to Contran,
for which Contran credited Valhi pursuant to the Contran/Valhi ISA. The
net salary and bonus amounts shown for each such individual for each
such period reflect the reduction for the amount credited to Valhi by
Contran for such individuals, which has been allocated proportionately
between each individual's base salary and bonus (whether or not the
bonus was deferred).
The components of the salary and bonus compensation shown in the table
for each of the named executive officers are as follows.
1998 1999 2000
----------------------- ---------------------- ---------------
Harold C. Simmons
Contran/Valhi ISA Fee............ $ 1,000,000 $ 1,000,000 $ 1,000,000
NL ISA Fee....................... 980,000 950,000 950,000
Tremont ISA Fee.................. 526,247 (b) 980,000 980,000
NL Cash Directors Fees........... 19,750 20,000 20,000
NL Director Stock (a)............ 13,750 14,563 22,719
Tremont Cash Directors Fees...... 10,305 (b) 18,000 19,750
-------------- ------------- -------------
$ 2,550,052 $ 2,982,563 $ 2,992,469
============== ============= =============
Glenn R. Simmons
Contran/Valhi ISA Fee............ $ 115,385 $ 154,000 $ 231,000
NL Cash Directors Fees........... 19,750 20,000 19,000
NL Director Stock (a)............ 13,750 14,563 22,719
Tremont Cash Directors Fees...... 10,305 (b) 17,250 18,750
TIMET Cash Directors Fees........ -0- 20,050 19,050
TIMET Director Stock (a)......... -0- 3,969 1,969
CompX Cash Directors Fees........ 12,500 32,678 (c) 32,365 (c)
CompX Director Stock (a)......... -0- 7,940 9,625
CompX Bonus Stock (a)............ 240,056 (d) -0- -0-
-------------- ------------- -------------
$ 411,746 $ 270,450 $ 354,478
============== ============= =============
Steven L. Watson
Valhi Salary..................... $ 315,384 $ 337,500 $ 200,000
Valhi Bonus...................... 1,000,000 (e) 750,000 -0-
Net Contran/Valhi ISA Fee........ (61,231) (81,130) 573,000
NL Cash Directors Fees........... -0- -0- 9,500
NL Director Stock (a)............ -0- -0- 22,719
Tremont Cash Directors Fees...... -0- -0- 4,500
TIMET Cash Directors Fees........ -0- -0- 19,350
TIMET Director Stock (a)......... -0- -0- 1,969
CompX Cash Directors Fees........ -0- -0- 22,000
CompX Director Stock (a)......... -0- -0- 9,625
-------------- ------------- -------------
$ 1,254,153 $ 1,006,370 $ 862,663
============== ============= =============
William J. Lindquist
Valhi Salary..................... $ 263,462 $ 279,166 $ 150,000
Valhi Bonus...................... 750,000 (e) 500,000 -0-
Net Contran/Valhi ISA Fee........ (173,986) (79,688) 224,000
-------------- ------------- -------------
$ 839,476 $ 699,478 $ 374,000
============== ============= =============
Bobby D. O'Brien
Valhi Salary..................... $ 185,577 $ 208,333 $ 125,000
Valhi Bonus...................... 375,000 200,000 -0-
Net Contran/Valhi ISA Fee........ (45,032) (63,702) 248,000
-------------- ------------- -------------
$ 515,545 $ 344,631 $ 373,000
============== ============= =============
----------------
(a) These shares are valued based on either the average of the
high and low sales price or the closing price on the New York
Stock Exchange Composite Tape on the date of grant.
(b) The portion of the fees Tremont paid to Contran pursuant to
the ISAs for the services of Mr. Harold C. Simmons and the
director fees Tremont paid Messrs. Harold and Glenn Simmons in
1998 were prorated as of June 19, 1998, the date that Valhi
purchased a controlling interest in Tremont (the "Tremont
Acquisition Date"). The reported amount is the prorated amount
of such fees on and after the Tremont Acquisition Date.
(c) This amount includes $12,678 and $10,365 for 1999 and 2000,
respectively, that are director fees a subsidiary of CompX
paid Mr. Simmons.
(d) This amount represents the value of 16,220 shares of CompX
Class A Common Stock that CompX awarded Mr. Simmons in
February 1998 as a bonus subject to the consummation of
CompX's initial public offering of CompX Class A Common Stock.
These shares were valued based on the shares' fair market
value at the time of the award taking into account their
illiquidity at the time of the award pursuant to Mr. Simmons'
election under section 83(b) of the Internal Revenue Code of
1986, as amended (the "Code").
(e) See footnote (8) to this Summary Compensation Table.
(4) Represents shares of NL Common Stock underlying stock options NL
granted to this named executive officer.
(5) Represents shares of CompX Class A Common Stock underlying stock
options CompX granted to this named executive officer.
(6) Represents shares of TIMET Common Stock underlying stock options TIMET
granted to this named executive officer.
(7) All other compensation for the last three years for each of the
following named executive officers consisted of: matching contributions
pursuant to Valhi's deferred incentive plan (the "DIP"), accruals to
unfunded reserve accounts attributable to certain limits under the Code
with respect to the DIP and Valhi's defined benefit pension plan and
interest accruals on the balance of such accounts, all of which amounts
are payable upon the named executed officer's retirement, the
termination of his employment with Valhi or to his beneficiaries upon
his death; as follows:
Unfunded Reserve Account Accruals
--------------------------------------------
Employer's Accruals Related to Interest Accruals
DIP DIP and Pension Above 120% of the
Named Executive Officer Year Contributions Plan Limitations (a) AFR Rate (b) Total
--------------------------- ----- --------------- --------------------- ----------------- -----------
Steven L. Watson........ 2000 $10,200 $ -0- $ 75,137 $ 85,337
1999 9,600 128,985 49,043 187,628
1998 9,600 319,892 12,155 341,647
William J. Lindquist.... 2000 9,024 -0- 53,882 62,906
1999 9,600 70,209 35,819 115,628
1998 9,600 228,764 8,460 246,824
Bobby D. O'Brien........ 2000 7,524 -0- 4,839 12,363
1999 9,600 27,121 2,611 39,332
1998 9,600 47,583 1,172 58,355
(a) Messrs. Lindquist and Watson had additional deferred income
accruals to their unfunded reserve accounts in 1998 that are
reported in the Summary Compensation Table above as bonus
payments for 1998 (the reported 1998 bonus amounts in the
Summary Compensation Table are equal to the actual amounts
deferred, adjusted as described in footnote (3) to this
Summary Compensation Table).
(b) The agreements providing for these unfunded reserve accounts,
which accounts include the amounts referred to in footnote (a)
above for those particular individuals mentioned, were amended
to provide that the balance of such accounts would accrue
interest at a quarterly rate in effect from time to time equal
on an annualized basis to two percent above the base rate on
corporate loans. Pursuant to the rules of the SEC, the amounts
shown represent the portion of the interest accruals to the
unfunded reserve accounts that exceeds 120% of the applicable
federal long-term rate as prescribed by the Code (the "AFR
Rate"). The AFR Rate used for such computations was the 120%
AFR Rate for quarterly compounding in effect for the month of
the respective quarter that the interest accrual was credited
to the account.
(8) Mr. Watson's and Mr. Lindquist's bonuses in 1998 consisted entirely of
deferred compensation Valhi accrued in an unfunded reserve account as
described in footnote (7) to this Summary Compensation Table.
(9) Represents shares of Valhi Common Stock underlying stock options Valhi
granted to this named executive officer.
Grants of Stock Options. The following table provides information, with
respect to the named executive officers, concerning the grant of stock options
during 2000 under the 1997 Plan and the stock options plans of NL, TIMET and
CompX. Neither Valhi nor any of its parent or subsidiary corporations has
granted any stock appreciation rights ("SARs"). In addition, neither Valhi nor
any of its parent or subsidiary corporations granted any stock options to
Messrs. Lindquist or O'Brien in 2000.
OPTION GRANTS IN 2000
Individual Grants
------------------------------------------------------ Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Shares of Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (1)
Options Employees Base Price Expiration -------------------------------
Name Granted (#) in 2000 (2) Per Share Date 5% 10%
- ----------------------- --------------- -------------- -------------- ------------ --------------- -------------
Harold C. Simmons
NL Stock Options..... 2,000 (3) 0.46% $14.44 (3) 02/01/05 $ 7,980 (4) $ 17,640 (4)
Glenn R. Simmons
NL Stock Options..... 2,000 (3) 0.46% 14.44 (3) 02/01/05 7,980 (4) 17,640 (4)
TIMET Stock Options.. 5,000 (5) 1.80% 3.94 (5) 05/17/10 12,400 (4) 31,400 (4)
CompX Stock Options.. 2,000 (6) 0.69% 19.25 (6) 05/11/10 24,220 (4) 61,360 (4)
Steven L. Watson
TIMET Stock Options.. 5,000 (5) 1.80% 3.94 (5) 05/17/10 12,400 (4) 31,400 (4)
CompX Stock Options.. 2,000 (6) 0.69% 19.25 (6) 05/11/10 24,220 (4) 61,360 (4)
- --------------------
(1) Pursuant to the rules of the SEC, the amounts under these columns
reflect calculations at assumed 5% and 10% appreciation rates and,
therefore, are not intended to forecast future appreciation, if any, of
the respective underlying common stocks. The potential realizable value
to the optionees was computed as the difference between the appreciated
value, at the expiration dates of the stock options, of the applicable
underlying common stock obtainable upon exercise of such stock options
over the aggregate exercise price of such stock options.
The amount of gain to the optionees is dependent on the amount of
increase in the price of the applicable underlying common stock, which
would benefit all the respective stockholders proportionately. These
potentially realizable values are based solely on arbitrarily assumed
rates of appreciation required by applicable SEC regulations. Actual
gains, if any, on stock option exercises are dependent on the future
performance of the applicable common stock, overall market conditions
and the timing of the exercise thereof by each respective optionee.
There can be no assurance that the amounts reflected in the table will
be achieved.
(2) With respect to NL, TIMET and CompX stock options, the percent of total
options granted to employees is based on the number of shares
underlying stock options the respective issuer granted to its employees
and directors in 2000 as shown in the following table.
Shares of the Issuer's Common
Stock Underlying Stock Options
Issuer Granted in 2000 by the Issuer
--------------------------------------------------------------------- --------------------------------
NL................................................................... 433,500
TIMET................................................................ 277,600
CompX................................................................ 289,000
(3) This stock option represents stock options NL annually grants to its
nonemployee directors. This stock option is exercisable for shares of
NL Common Stock and becomes exercisable on the first anniversary of its
date of grant. The exercise price for this stock option can be paid in
already owned shares of NL Common Stock, provided such tendered shares
were held by the optionee for at least six months.
(4) The appreciated value per share on the respective stock option's
expiration date, based on the exercise price as the fair market value
per share of the underlying common stock, would be as follows:
Fair Market Term of 5% Assumed 10% Assumed
Value on Option in Annual Rate of Annual Rate of
Issuer Date of Grant Years Appreciation Appreciation
---------------------------------- --------------- ------------- ----------------- ----------------
NL................................ $14.44 5 $18.43 $23.26
TIMET............................. 3.94 10 6.42 10.22
CompX............................. 19.25 10 31.36 49.93
(5) This stock option represents stock options TIMET annually grants to its
nonemployee directors. This stock option is exercisable for shares of
TIMET Common Stock and becomes exercisable on the first anniversary of
its date of grant.
(6) This stock option represents stock options CompX annually grants to its
nonemployee directors. This stock option is exercisable for shares of
CompX Class A Common Stock and becomes exercisable at a rate of 20% on
each of the first five anniversary dates of the date of grant. The
exercise price for this stock option can be paid in already owned
shares of CompX Class A Common Stock, provided such tendered shares
were held by the optionee for at least six months.
Stock Option Exercises and Holdings. The following table provides
information, with respect to the named executive officers, concerning the value
of unexercised stock options exercisable for Valhi, NL, TIMET Common Stock and
CompX Class A Common Stock held as of December 31, 2000. In 2000, no named
executive officer exercised any stock options. Neither Valhi nor any of its
parent or subsidiary corporations has granted any SARs.
DECEMBER 31, 2000 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Name December 31, 2000 (#) at December 31, 2000 (1)
- ------------------------------------------------- ----------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Harold C. Simmons
Valhi Stock Options............................ 400,000 100,000 $ 2,048,000 $ 512,000
NL Stock Options............................... 4,000 2,000 35,875 19,625
------------ -------------- ----------- ------------
404,000 102,000 2,083,875 531,625
Glenn R. Simmons
Valhi Stock Options............................ 340,000 10,000 1,984,400 51,200
NL Stock Options............................... 4,000 2,000 35,875 19,625
TIMET Stock Options............................ 5,000 5,000 0 14,063
CompX Stock Options............................ 20,400 33,600 0 0
------------ -------------- ----------- -------------
369,400 50,600 2,020,275 84,888
Steven L. Watson
Valhi Stock Options............................ 260,000 60,000 1,366,240 213,600
TIMET Stock Options............................ 0 5,000 0 14,063
CompX Stock Options............................ 4,000 8,000 0 0
------------ -------------- ----------- -------------
264,000 73,000 1,366,240 227,663
William J. Lindquist
Valhi Stock Options............................ 216,000 79,000 1,085,880 188,000
CompX Stock Options............................ 4,000 6,000 0 0
------------ -------------- ----------- -------------
220,000 85,000 1,085,880 188,000
Bobby D. O'Brien
Valhi Stock Options............................ 136,000 74,000 627,660 162,400
CompX Stock Options............................ 4,000 6,000 0 0
------------ -------------- ----------- -------------
140,000 80,000 627,660 162,400
- --------------------
(1) The aggregate amount is based on the difference between the exercise
price of the individual stock options and the closing sales price of
such underlying common stock as reported on the New York Stock Exchange
Composite Tape on December 31, 2000. Such closing sales prices were:
$11.50 per share for Valhi Common Stock, $24.25 per share for NL Common
Stock, $6.75 per share for TIMET Common Stock and $9.94 per share for
CompX Class A Common Stock.
Pension Plan. Valhi's Pension Plan (the "Pension Plan") is a plan
qualified under the Code that provides for a defined benefit upon retirement to
eligible and participating employees of Valhi and certain related companies.
Under the terms of the Pension Plan, the defined benefit for a participant is
formulated on the basis of a 100% joint survivorship annuity between such
participant and such participant's eligible spouse determined by the amount of
such participant's earnings for each year and the number of years of service
credited to such participant. The compensation eligible to be utilized for
purposes of the Pension Plan formula includes the annual salary and bonus
amounts paid directly by Valhi, including the amount thereof credited by Contran
to Valhi pursuant to the Contran/Valhi ISA. See "--Summary of Cash and Certain
Other Compensation of Executive Officers."
The following table lists annual benefits under the Pension Plan for
the average annual earnings and years of credited service shown for a
participant retiring at the normal retirement age of 65 assuming that the social
security wage base remains constant at the current amount. There is no provision
under the Pension Plan providing for benefit reductions for Social Security
payments received by a participant after retirement. Annual compensation for
benefit determination purposes under the Pension Plan for 2000 does not take
into account a participant's annual earnings in excess of $170,000. As a result,
the compensation eligible to be utilized for purposes of the Pension Plan
formula only includes $170,000 of the salary and bonus of the named executive
officer as disclosed in the "Summary Compensation Table." A participant does not
accrue additional benefits under the Pension Plan after thirty years of credited
service.
Years of Credited Service
Average Annual -----------------------------------------------------------------------------
Earnings 5 10 20 30
- --------------------------------- ---------- ----------- ----------- ------------
$ 80,000............ $ 4,905 $ 9,809 $ 19,618 $ 29,427
100,000............ 6,655 13,309 26,618 39,927
120,000............ 8,405 16,809 33,618 50,427
140,000............ 10,155 20,309 40,618 60,927
160,000............ 11,905 23,809 47,618 71,427
170,000............ 12,780 25,559 51,118 76,677
As of December 31, 2000, Steven L. Watson, William J. Lindquist and
Bobby D. O'Brien were credited with 19.5 years, 19.25 years and 10.25 years,
respectively, of benefit service to Valhi under the Pension Plan. Harold C.
Simmons and Glenn R. Simmons are not considered to be employees of Valhi and,
therefore, do not participate in the Pension Plan. Other than as described in
the Summary Compensation Table above and its related footnotes, none of the
executive officers or directors of Valhi participate in any supplementary
nonqualified plans that pay benefits in excess of the above limits.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Valhi's executive officers,
directors and persons who own more than 10% of a registered class of Valhi's
equity securities to file reports of ownership with the SEC, the New York Stock
Exchange, Inc. and Valhi. Based solely on the review of the copies of such forms
and written representations by certain reporting persons received, Valhi
believes that for 2000 its executive officers, directors and 10% stockholders
complied with all applicable filing requirements under section 16(a).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2000, Harold C. Simmons (Valhi's chief executive officer) and
the MD&C Committee deliberated on Valhi executive officer compensation. The MD&C
Committee is currently comprised of Norman S. Edelcup (chairman) and Thomas E.
Barry, each a Nonemployee Director. Of those persons who deliberated on Valhi
executive officer compensation at any time in 2000, only Mr. Simmons was an
executive officer of Valhi or any of its subsidiaries. Mr. Simmons also
deliberated on the compensation of the executive officers of certain entities
that may be deemed to be controlled by or affiliated with him.
Relationships with Related Parties. As set forth under the caption
"Security Ownership," Harold C. Simmons, through Contran, may be deemed to
control Valhi. Valhi and other entities that may be deemed to be controlled by
or affiliated with Mr. Simmons sometimes engage in (a) intercorporate
transactions such as guarantees, management and expense sharing arrangements,
shared fee arrangements, tax sharing agreements, joint ventures, partnerships,
loans, options, advances of funds on open account and sales, leases and
exchanges of assets, including securities issued by both related and unrelated
parties and (b) common investment and acquisition strategies, business
combinations, reorganizations, recapitalizations, securities repurchases and
purchases and sales (and other acquisitions and dispositions) of subsidiaries,
divisions or other business units, which transactions have involved both related
and unrelated parties and have included transactions that resulted in the
acquisition by one related party of a publicly held minority equity interest in
another related party. Valhi continuously considers, reviews and evaluates and
understands that Contran and related entities consider, review and evaluate
transactions of the type described above. Depending upon the business, tax and
other objectives then relevant, it is possible that Valhi might be a party to
one or more of such transactions in the future. In connection with these
activities Valhi may consider issuing additional equity securities or incurring
additional indebtedness. Valhi's acquisition activities have in the past and may
in the future include participation in the acquisition or restructuring
activities conducted by other companies that may be deemed to be controlled by
Mr. Simmons. It is the policy of Valhi to engage in transactions with related
parties on terms, in the opinion of Valhi, no less favorable to Valhi than could
be obtained from unrelated parties.
Each of the executive officers of Valhi is also currently serving as an
executive officer of certain other companies related to Valhi and it is expected
that each will continue to do so in 2001. Such management interrelationships and
intercorporate relationships may lead to possible conflicts of interest. These
possible conflicts may arise from the duties of loyalty owed by persons acting
as corporate fiduciaries to two or more companies under circumstances in which
such companies may have adverse interests.
No specific procedures are in place that govern the treatment of
transactions among Valhi and its related entities, although such entities may
implement specific procedures as appropriate for particular transactions. In
addition, under applicable principles of law, in the absence of stockholder
ratification or approval by directors who may be deemed disinterested,
transactions involving contracts among companies under common control must be
fair to all companies involved. Furthermore, directors of companies owe
fiduciary duties of good faith and fair dealing to all stockholders of the
companies for which they serve.
Intercorporate Services Agreements. Valhi and certain related
corporations have entered into certain ISAs. Pursuant to each ISA, the parties
to the ISA, in exchange for agreed upon fees and reimbursements of costs, agreed
to render certain services to the other, which services may include executive
officer services rendered to one party by employees of the other. The fees paid
pursuant to the ISAs are generally based upon the estimated percentage of time
individual employees, including executive officers, devote to certain matters on
behalf of the recipient of the services. Each of the ISAs automatically extend
on a quarter-to-quarter basis, subject to termination by either party pursuant
to written notice delivered 30 days prior to a quarter-end, and may be amended
by mutual agreement.
Under the Contran/Valhi ISA, Contran renders or provides for certain
management, administrative and aircraft maintenance services to Valhi, including
the services of Harold C. and Glenn R. Simmons for all of 2000 and the services
of Steven L. Watson, William J. Lindquist and Bobby O'Brien for the second half
of 2000, and Valhi renders certain management and administrative services to
Contran, including the services of Steven L. Watson, William J. Lindquist and
Bobby O'Brien for the first half of 2000 and Valhi's other executive officers
for all of 2000. Valhi paid Contran net fees of $1,202,000 for services rendered
under the ISA in 2000, which represented $2,934,000 for services Contran
rendered to Valhi less $1,732,000 for services Valhi rendered to Contran. In
addition, Contran and Valhi credited to the other the out-of-pocket costs
incurred in rendering such services.
The ISA between Contran and Tremont provides that Contran will make
available the services of Harold C. Simmons to Tremont. Tremont paid Contran
fees of $980,000 for such services rendered in 2000. Under the ISA between Valhi
and Tremont, Valhi provides certain management and administrative services to
Tremont. Tremont paid Valhi fees of $204,000 for such services rendered in 2000.
In addition, Tremont credited to Contran and Valhi the respective out-of-pocket
costs Contran or Valhi incurred in rendering such services. Tremont also paid
director's fees and expenses directly to Messrs. Glenn and Harold Simmons and
Mr. Steven L. Watson.
The ISA between Contran and NL provides that Contran will make
available the services of Harold C. Simmons to NL. NL paid Contran fees of
$950,000 for such services rendered in 2000. Under the ISA between Valhi and NL,
Valhi provides certain management and administrative services to NL and NL
provides certain risk management services to Valhi. NL paid Valhi net fees of
$211,000 for services rendered under the ISA in 2000, which represented $313,000
for services Valhi rendered to NL less $102,000 for services NL rendered to
Valhi. In addition, NL credited to Contran and Valhi the respective
out-of-pocket costs Contran or Valhi incurred in rendering such services. NL
also paid director's fees and expenses directly to Messrs. Glenn and Harold
Simmons and Mr. Steven L. Watson.
Insurance Commissions. Tall Pines Insurance Company ("Tall Pines"),
Valmont and EWI RE, Inc. ("EWI") provide for or broker certain of Valhi's
insurance policies. Tall Pines is a wholly owned captive insurance company of
Tremont. Valmont is a wholly owned captive insurance company of Valhi. Parties
related to Contran own all of the outstanding common stock of EWI. Through
December 31, 2000, a son-in-law of Harold C. Simmons managed the operations of
EWI. Subsequent to December 31, 2000, such son-in-law provides advisory services
to EWI as requested by EWI. Consistent with insurance industry practices, Tall
Pines, Valmont and EWI receive commissions from the insurance and reinsurance
underwriters for the policies that they provide or broker. During 2000, Valhi
and its subsidiaries paid approximately $9.4 million for policies provided or
brokered by Tall Pines, Valmont and/or EWI. These amounts principally included
payments for reinsurance and insurance premiums paid to unrelated third parties,
but also included commissions paid to Tall Pines, Valmont and EWI. In Valhi's
opinion, the amounts that Valhi and its subsidiaries paid for these insurance
policies are reasonable and similar to those they could have obtained through
unrelated insurance companies and/or brokers. Valhi expects that these
relationships with Tall Pines, Valmont and EWI will continue in 2001.
REPORT ON EXECUTIVE COMPENSATION
During 2000 Valhi's chief executive officer (the "CEO"), the
Nonemployee Directors and the MD&C Committee administered matters regarding
compensation of Valhi's executive officers. This report is submitted by such
individuals in their respective capacities, as set forth below.
The board of directors, with directors other than Nonemployee Directors
abstaining, considered and approved the terms of the Contran/Valhi ISA, pursuant
to which Contran provided to Valhi the services of Harold C. Simmons and Glenn
R. Simmons for all of 2000 and Steven L. Watson, William J. Lindquist and Bobby
D. O'Brien for the last six months of 2000. Harold Simmons and Glenn Simmons
were employees of Contran for all of 2000. Messrs. Watson, Lindquist and O'Brien
were employees of Valhi for the first six months of 2000 and employees of
Contran for the second six months of 2000. The amount of the fee Valhi pays
under the Contran/Valhi ISA with respect to each of its executive officers who
provides services to Valhi while employed by Contran represents, in the view of
the board of directors, the reasonable equivalent of "compensation" for such
services.
The CEO, considering recommendations of management, determined the
compensation paid to Valhi's employees, including its employee executive
officers, and made recommendations to the MD&C Committee with respect to matters
related to grants of stock options. The MD&C Committee, which is comprised
solely of the Nonemployee Directors, reviewed and approved actions related to
grants of stock options to Valhi's executive officers and other employees
pursuant to the 1997 Plan.
It is Valhi's policy that employee compensation, including compensation
paid to its employee executive officers, be at a level that allows Valhi to
attract, retain, motivate and reward individuals who have the requisite training
and experience to manage Valhi and its businesses. It is also Valhi's policy
that a significant portion of any incentive compensation paid be related to the
performance of Valhi's equity securities and have a commonality of interest with
the stockholders of Valhi, which objectives are generally met through the
periodic grant of stock options, since the amount realized from options depends
entirely on the appreciation of the stock underlying such options. Therefore,
unless the price of Valhi's equity securities increases over the term of the
stock options, the employee will receive no compensation from the options.
The CEO either does not participate in Valhi's compensation and
employee benefit plans or the cost of such participation is reimbursed to Valhi
by Contran. The Nonemployee Directors, in considering the fee Valhi pays under
the Contran/Valhi ISA with respect to the CEO, took into account the CEO's
unique experience and knowledge. The Nonemployee Directors also considered the
significant role the CEO has in establishing Valhi's policies and directing
strategic transactions involving Valhi and its subsidiaries. Additionally, the
board of directors took into account Valhi's historical financial performance.
No specific formulas, guidelines or comparable positions were considered in
determining the amount of such fee, nor was there any specific relationship
between Valhi's current or future performance and the level of such fee.
The compensation of Valhi's employee executive officers consists
primarily of base salary and incentive compensation. Incentive compensation
consists primarily of discretionary bonuses and grants of stock options. The CEO
may be deemed to control approximately 94% of the outstanding Valhi Common Stock
and as such is considered an effective stockholder advocate in matters
concerning executive compensation, other than his own.
Base salaries for all salaried employees, including Valhi's employee
executive officers, have been established on a position-by-position basis.
Annual internal reviews of salary levels are conducted by Valhi's management in
an attempt to rank base salary and job value to each position. The ranges of
salaries for comparable positions considered by management were based upon
management's general business knowledge and no specific survey, study or other
analytical process was utilized to determine such ranges. Additionally, no
specific companies' or groups of companies' compensation was compared with that
of Valhi, nor was an attempt made to identify or otherwise quantify the
compensation paid by the companies that served as a basis for such individuals'
general business knowledge. Base salary levels are generally not increased
except in instances of promotions, increases in responsibility or unwarranted
discrepancies between job value and the corresponding base salary. Valhi
considers across-the-board base salary increases from time to time when
competitive factors so warrant. All of management's recommendations with respect
to base salaries for employee executive officers of Valhi are submitted to the
CEO for modification and/or approval in his best business judgment. Prior
year-to-year fluctuations in the portion of base salaries applicable to Valhi
with respect to its employee executive officers were partly a result of changes
in the amount of time estimated to be spent by each such officer on behalf of
Contran and Valhi and the resulting changes in allocations under the
Contran/Valhi ISA.
A significant portion of an executive officer's total compensation has
historically been in the form of incentive compensation that is "at risk."
Valhi's practice has been to provide for greater percentages of such "at risk"
compensation at higher levels of responsibility. The size of each employee
executive officer's discretionary bonus and grant of stock options is based upon
the recommendation of management as modified and/or approved by the CEO in his
best business judgment. Annual performance reviews are an important factor in
determining management's recommendation, which is primarily based on each
employee executive's individual performance and to a lesser extent on Valhi's
overall performance. Individual performance is typically measured by the ability
an executive demonstrates in performing, in a timely and cost efficient manner,
the functions of his or her position, including routine corporate activities and
the development and implementation of strategic transactions and policies.
Additionally, an executive's sustained performance, experience and potential for
growth are assessed. No specific financial or budget tests were applied in the
measurement of individual performance. Valhi's overall performance is typically
measured by Valhi's historical financial results and the level of success with
respect to the development and implementation of strategic transactions. No
specific overall performance measures were utilized and there is no specific
relationship between overall performance measures and an executive's incentive
compensation. Additionally, there was no specific weighing of the factors
considered in the determination of incentive compensation paid to executive
officers.
In granting stock options to Valhi's executive officers in 2000, the
MD&C Committee considered the policies and factors set forth in this report, the
level of compensation paid to each individual, the recommendation of the CEO and
the number of unexpired stock options previously granted to each individual. In
2000, the MD&C Committee did not grant any stock options to the CEO.
Section 162(m) of the Code generally disallows a tax deduction to
public companies for compensation over $1.0 million paid to the company's chief
executive officer and four other most highly compensated executive officers. It
is Valhi's general policy to structure the performance-based portion of the
compensation of its executive officers in a manner that enhances Valhi's ability
to deduct fully such compensation.
The foregoing report is submitted by the following individuals in the
capacities indicated:
Norman S. Edelcup Dr. Thomas E. Barry
Nonemployee Director and chairman of Nonemployee Director and member
the MD&C Committee of the MD&C Committee
Edward J. Hardin Harold C. Simmons
Nonemployee Director Chief Executive Officer
J. Walter Tucker, Jr.
Nonemployee Director
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on Valhi Common Stock against the cumulative
total return of the S&P 500 Stock Index and the S&P Manufacturing (Diversified)
Index for the period of five fiscal years commencing December 31, 1995 and
ending December 31, 2000. The graph shows the value at December 31 of each year
assuming an original investment of $100 and the reinvestment of dividends to
stockholders.
[PERFORMANCE GRAPH GOES HERE]
December 31,
---------------------------------------------------------------------------------
1995 1996 1997 1998 1999 2000
------------- ------------- ------------ ------------- ------------ --------
Valhi, Inc................. $100 $ 103 $ 156 $ 192 $ 180 $ 201
S&P 500 Index.............. 100 123 164 211 255 232
S&P Manufacturing
(Diversified) Index...... 100 138 164 190 234 278
INDEPENDENT AUDITOR MATTERS
Independent Auditors. The firm of PricewaterhouseCoopers LLP served as
Valhi's independent auditors for the year ended December 31, 2000. Valhi's audit
committee has appointed PricewaterhouseCoopers LLP to review Valhi's quarterly
unaudited consolidated financial statements to be included in its Quarterly
Reports on Form 10-Q for the first three quarters of 2001. Valhi expects
PricewaterhouseCoopers LLP will be considered for appointment to audit Valhi's
annual consolidated financial statements for the year ending December 31, 2001.
Representatives of PricewaterhouseCoopers LLP are not expected to attend the
Meeting.
Audit Committee Report. The audit committee of the Board of Directors
is composed of three directors, all of whom are independent within the meaning
of New York Stock Exchange listing standards. The audit committee operates under
a written charter the Board of Directors adopted. A copy of the charter is
attached as Exhibit A to this proxy statement. Valhi's management is responsible
for preparing Valhi's consolidated financial statements in accordance with
accounting principles generally accepted in the United States. Valhi's
independent auditors are responsible for auditing Valhi's consolidated financial
statements in accordance with auditing standards generally accepted in the
United States. The audit committee serves as an independent and objective party
to review Valhi's auditing, accounting and financial reporting processes.
The audit committee has reviewed and discussed Valhi's audited
consolidated financial statements for the year ended December 31, 2000 with
Valhi's management and independent auditors. The audit committee discussed with
the independent auditors the matters required by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), received written disclosures from
the independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with the
independent auditors their independence. The audit committee also considered
whether the independent auditors' provision of non-audit services to Valhi and
its subsidiaries is compatible with such auditors' independence. Additionally,
the audit committee discussed with Valhi's management and the independent
auditors such other matters as the committee deemed appropriate. Based on the
audit committee's review of Valhi's audited consolidated financial statements
and the audit committee's discussions with Valhi's management and independent
auditors, the audit committee recommended to the Board of Directors that Valhi's
audited consolidated financial statements for the year ended December 31, 2000
be included in Valhi's Annual Report on Form 10-K for the year ended December
31, 2000, which has been filed with the SEC.
Norman S. Edelcup Dr. Thomas E. Barry Edward J. Hardin
Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee
Audit and Other Fees. The following table shows the aggregate fees
PricewaterhouseCoopers LLP has billed or is expected to bill Valhi and its
subsidiaries for services rendered for 2000.
Financial Information
Systems Design and
Entity Audit Fees (1) Implementation Fees All Other Fees
- --------------------------------- ------------------------- ------------------------- --------------------
Valhi, Inc....................... $ 119,500 $ -0- $ -0-
NL Industries, Inc............... 528,611 -0- 195,421
Tremont Corporation.............. 58,350 -0- 6,250
CompX International Inc.......... 153,000 -0- 67,654
Waste Control Specialists LLC.... 35,000 -0- -0-
----------- ------- ---------
Subtotal..................... 894,461 -0- 269,325
----------- ------- ---------
Titanium Metals Corporation (2).. 454,300 -0- 198,000
----------- ------- ---------
Total........................ $ 1,348,761 $ -0- $ 467,325
=========== ======= =========
- --------------------
(1) Includes, without duplication, (a) fees for the audit of the entity's
consolidated financials statements for the year ended December 31,
2000, (b) if applicable, fees for reviews of the unaudited quarterly
financial statements appearing in the corporation's Forms 10-Q for each
of the first three quarters of 2000 and (c) the estimated out-of-pocket
costs PricewaterhouseCoopers LLP incurred in such audits and reviews.
The entity reimburses PricewaterhouseCoopers LLP for such out-of-pocket
costs.
(2) Valhi accounts for its interest in TIMET by the equity method.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Valhi and other entities that may be deemed to be controlled by or
affiliated with Harold C. Simmons sometimes engage in certain transactions that
have involved both related and unrelated parties. Each of the executive officers
of Valhi is also currently serving as an executive officer of certain other
companies related to Valhi and it is expected that each will continue to do so
in 2001. See "Compensation Committee Interlocks and Insider
Participation--Relationships with Related Parties," for a further discussion on
these transactions, management interrelationships and intercorporate
relationships.
OTHER MATTERS
The Board of Directors knows of no other business that will be
presented for consideration at the Meeting. If any other matters properly come
before the Meeting, the persons designated as agents in the enclosed proxy card
or voting instruction form will vote on such matters in accordance with their
best judgment.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2002
Stockholders may submit proposals on matters appropriate for
stockholder action at Valhi's annual stockholder meetings, consistent with rules
adopted by the SEC. Such proposals must be received by Valhi not later than
December 7, 2001 to be considered for inclusion in the proxy statement and form
of proxy relating to the Annual Meeting of Stockholders in 2002. Proposals
should be addressed to: Corporate Secretary, Valhi, Inc., Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
2000 ANNUAL REPORT ON FORM 10-K
A copy of Valhi's Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, as filed with the SEC, is included as part of the annual
report mailed to Valhi's stockholders with this proxy statement. Copies of such
annual report may be obtained without charge by writing: Corporate Secretary,
Valhi, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2697.
VALHI, INC.
Dallas, Texas
March 31, 2001
Exhibit A
VALHI, INC.
AUDIT COMMITTEE CHARTER
May 11, 2000
----------------
ARTICLE I.
PURPOSE
The audit committee assists the board of directors in fulfilling its
oversight responsibilities relating to the financial accounting and reporting
practices of the corporation. The audit committee's primary responsibilities are
to serve as an independent and objective party to review the corporation's
auditing, accounting and financial reporting processes. The audit committee will
primarily fulfill these responsibilities by carrying out the activities
enumerated in Article V of this charter.
ARTICLE II.
RELATIONSHIP WITH THE OUTSIDE AUDITORS
The corporation's outside auditors are ultimately responsible to the
board of directors and the audit committee. The board of directors, acting
through the audit committee, has the ultimate authority and responsibility to
select, evaluate and replace the outside auditors.
Management is responsible for preparing the corporation's financial
statements. The corporation's outside auditors are responsible for auditing the
financial statements. The activities of the audit committee are in no way
designed to supersede or alter these traditional responsibilities.
The corporation's outside auditors and management have more available
time and information about the corporation than does the audit committee.
Accordingly, the audit committee's role does not provide any special assurances
with regard to the corporation's financial statements, nor does it involve a
professional evaluation of the quality of the audits performed by the outside
auditors.
ARTICLE III.
COMPOSITION
The audit committee shall be comprised of three or more directors as
determined by the board. The board of directors shall also designate a
chairperson of the audit committee. Each member of the audit committee shall be
independent of management of the corporation and shall have no relationship that
might, in the business judgment of the board of directors, interfere with the
exercise of his or her independent judgment. The members of the audit committee
shall satisfy at all times the requirements for audit committee membership of
any exchange on which the corporation's securities are listed or of any
applicable law. The board of directors shall determine, in its business
judgment, whether the members of the audit committee satisfy all such
requirements.
ARTICLE IV.
MEETINGS
The audit committee shall meet regularly and as circumstances dictate.
Regular meetings of the audit committee may be held without notice at such time
and at such place as shall from time to time be determined by the chairperson of
the audit committee, the president or the secretary of the corporation. Special
meetings of the audit committee may be called by or at the request of any member
of the audit committee, any of the corporation's executive officers, the
secretary or the outside auditors, in each case on at least twenty-four hours
notice to each member.
If the board of directors, management or the outside auditors desire to
discuss matters in private, the audit committee shall meet in private with such
person or group.
A majority of the audit committee members shall constitute a quorum for
the transaction of the audit committee's business. Unless otherwise required by
applicable law, the corporation's charter or bylaws or the board of directors,
the audit committee shall act upon the vote or consent of a majority of its
members at a duly called meeting at which a quorum is present. Any action of the
audit committee may be taken by a written instrument signed by all of the
members of the audit committee. Meetings of the audit committee may be held at
such place or places as the audit committee shall determine or as may be
specified or fixed in the respective notices or waivers of a meetings. Members
of the audit committee may participate in audit committee proceedings by means
of conference telephone or similar communications equipment by means of which
all persons participating in the proceedings can hear each other, and such
participation shall constitute presence in person at such proceedings
ARTICLE V.
SPECIFIC ACTIVITIES
Subject to Article II and without otherwise limiting the audit
committee's authority, the audit committee shall carry out the following
specific activities.
Section 5.1. Review of Documents and Reports
(a) Review and reassess this charter at least annually.
(b) Review the corporation's Annual Reports on Form 10-K,
including the corporation's year end financial statements,
before its release. Consider whether the information contained
in the Annual Reports on Form 10-K is adequate and consistent
with the members' knowledge about the corporation and its
operations. If determined to be appropriate, recommend that
the audited financial statements be included in the Annual
Report on Form 10-K.
Section 5.2. Outside Auditors
(a) Select the outside auditors, considering independence and
effectiveness and approve the fees and other compensation to
be paid to the outside auditors.
(b) The audit committee shall receive the written disclosures
required by generally accepted auditing standards. On an
annual basis, the audit committee shall require the outside
auditors to provide the audit committee with a written
statement delineating all relationships between the outside
auditors and the corporation. The audit committee shall
actively engage in a dialogue with the outside auditors with
respect to any disclosed relationships or services that may
impact the objectivity and independence of the outside
auditors. The audit committee shall recommend that the board
of directors take appropriate action in response to the
outside auditors' report to satisfy itself of the outside
auditors' independence.
(c) Prior to the annual audit, review with management and the
outside auditors the scope and approach of the annual audit.
(d) After the annual audit, review with management and the outside
auditors their report on the results of the annual audit.
(e) Ensure that the outside auditors inform the audit committee of
any fraud, illegal acts or deficiencies in internal control of
which they become aware and communicate certain required
matters to the audit committee.
(f) Review with the outside auditors their performance and
recommend to the board of directors any proposed discharge of
the outside auditors when circumstances warrant.
(g) Direct and supervise special audit inquiries by the outside
auditors as the board of directors or the audit committee may
request.
Section 5.3. Financial Reporting Processes
(a) Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements or proposed
pronouncements, and understand their impact on the
corporation's financial statements.
Section 5.4. Process Improvement
(a) Ensure that significant findings and recommendations made by
the outside auditors are received and discussed on a timely
basis with the audit committee and management.
(b) Review any significant disagreement among management and the
outside auditors in connection with the execution of the
annual audit or the preparation of the financial statements.
Section 5.5. Reporting Responsibilities
(a) Regularly update the board of directors about audit committee
activities and make appropriate recommendations.
ARTICLE VI.
MISCELLANEOUS
The audit committee may perform any other activities consistent with
this charter, the corporation's charter and bylaws and governing law, as the
audit committee or the board deems necessary or appropriate.
ADOPTED BY THE BOARD OF DIRECTORS
OF VALHI, INC. ON MAY 11, 2000
/s/ A. Andrew R. Louis
---------------------------------
A. Andrew R. Louis, Secretary
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
PROXY PROXY
VALHI, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF VALHI, INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 2001
The undersigned hereby appoints Harold C. Simmons, Glenn R. Simmons and
Steven L. Watson, and each of them, proxy and attorney-in-fact for the
undersigned, with full power of substitution, to vote on behalf of the
undersigned at the 2001 Annual Meeting of Stockholders (the "Meeting") of Valhi,
Inc., a Delaware corporation ("Valhi"), to be held at the offices of Valhi at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Thursday,
May 10, 2001, at 1:30 p.m. (local time), and at any adjournment or postponement
of said Meeting, all of the shares of common stock, par value $0.01 per share,
of Valhi standing in the name of the undersigned or that the undersigned may be
entitled to vote on the proposals set forth, and in the manner directed, on this
proxy.
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE VALHI PROXY
STATEMENT THAT ACCOMPANIED THIS PROXY.
This proxy, if properly executed, will be voted in the manner directed
on this proxy. If no direction is made, this proxy will be voted "FOR" all
nominees for election as directors named in proposal 1 and, to the extent
allowed by federal securities laws, in the discretion of the proxies as to all
other matters that may properly come before the Meeting and any adjournment or
postponement thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE SIDE.
VALHI, INC.
PLEASE MARK YOUR VOTE IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
1. Election of Seven Directors
Nominees: 01-Thomas E. Barry, 02-Norman S. Edelcup, 03-Edward
J. Hardin, 04-Glenn R. Simmons, 05-Harold C. Simmons,
06-J. Walter Tucker, Jr. and 07-Steven L. Watson
[ ] FOR ALL
[ ] WITHHOLD ALL
[ ] FOR ALL EXCEPT*
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*(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name on the space provided
above.)
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment or
postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Address Change [ ]
(Instruction: Please mark in the box and make necessary corrections to the
mailing label.)
SIGNATURE(S) DATE
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SIGNATURE(S) DATE
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NOTE: Please sign exactly as the name that appears on this card. Joint owners
should each sign. When signing other than in an individual capacity,
please fully describe such capacity. Each signatory hereby revokes all
proxies heretofore given to vote at said Meeting and any adjournment or
postponement thereof.