SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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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)
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computed pursuant to Exchange Act Rule 0-11 (Set forth amount
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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 30, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of
Stockholders of Valhi, Inc., which will be held on Thursday, May 11, 2000, 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 11, 2000
To the Stockholders of Valhi, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders
(the "Meeting") of Valhi, Inc., a Delaware corporation ("Valhi"), will be held
on Thursday, May 11, 2000, 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 2001 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 22,
2000 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 30, 2000
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 2000 Annual
Meeting of Stockholders of Valhi to be held on Thursday, May 11, 2000 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, 1999 (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, 2000. 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 22, 2000 (the "Record Date"). As of the Record Date, there
were 114,628,514 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, any other matter that
may properly come before the Meeting will require the affirmative vote of a
majority of the votes cast at the Meeting for approval. 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.
Harris Trust and Savings Bank or its successor ("Harris"), 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 Harris that identify the vote of a particular
stockholder shall be kept confidential by Harris 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 Harris a written revocation of the
proxy, delivering to Harris 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 2001 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 2001 Annual Meeting of Stockholders.
Norman S. Edelcup, age 64, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1975. Mr. Edelcup has served as senior
vice president of Item Processing of America, Inc., a processing service bureau
("IPA"), since 1999 and served as chairman of the board of IPA from prior to
1995 to 1999. Mr. Edelcup also serves as a trustee for the Baron Funds, a mutual
fund group. Additionally, he serves as chairman of Valhi's audit committee and
management development and compensation committee (the "MD&C Committee").
Kenneth R. Ferris, age 51, has served as a director of Valhi since 1995
and served as a director of certain wholly owned subsidiaries of Valhi from 1986
to 1995. Dr. Ferris has been a Distinguished Professor at the American Graduate
School of International Management since prior to 1995. Dr. Ferris has also
conducted a private business consulting practice since prior to 1995.
Additionally, he serves as a member of Valhi's audit committee and MD&C
Committee.
Edward J. Hardin, age 57, 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.
Glenn R. Simmons, age 72, 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
1995. 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 Contran's less than majority owned affiliate, Keystone Consolidated
Industries, Inc. ("Keystone"), a steel fabricated wire products, industrial wire
and carbon steel rod company; a director of Valhi's indirect less than majority
owned affiliate Titanium Metals Corporation ("TIMET"), a company engaged in the
titanium metals industry; a director of Valhi's majority owned subsidiary,
Tremont Corporation ("Tremont"), a holding company that principally owns
approximately 39% of TIMET and approximately 20% of NL; and a director of CompX.
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 68, 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 1995 and
was president of Valhi and Contran from prior to 1995 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 74, has served as a director of Valhi
and/or certain of Valhi's predecessors since 1982. Since prior to 1995, 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 of Keystone. Mr. Tucker has been an executive officer and/or
director of various companies related to Valhi and Contran since 1982.
Steven L. Watson, age 49, 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. From prior to 1995 to 1998, Mr. Watson served as vice
president and secretary of Valhi and Contran. Mr. Watson serves as a director of
CompX, Keystone and TIMET. Mr. Watson has served as an executive officer and/or
director of various companies related to Valhi and Contran since 1980. Mr.
Watson also 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 1999. Each of the directors
participated in all of such meetings and of the meetings of the committees on
which 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 review and approve the selection of Valhi's independent auditors; to
review with the independent auditors the scope and results of the annual
auditing engagement, the procedures for internal auditing, the system of
internal accounting controls and internal audit results; and to direct and
supervise special audit inquiries. The current members of the audit committee
are Norman S. Edelcup (chairman) and Dr. Kenneth R. Ferris. The audit committee
held two meetings in 1999.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve certain matters
involving executive compensation; to review and approve grants of stock options
and other awards under the Valhi, Inc. 1997 Long-Term Incentive Plan (the "1997
Plan"); and to review and administer the Valhi, Inc. 1987 Stock Option-Stock
Appreciation Rights Plan, as amended (the "1987 Plan"), the 1997 Plan and such
other compensation matters as the Board of Directors may direct from time to
time. The current members of the MD&C Committee are Norman S. Edelcup
(chairman), Dr. Kenneth R. Ferris and J. Walter Tucker, Jr. The MD&C Committee
held one meeting and took action by written consent in lieu of a meeting on one
occasion in 1999.
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 1999.
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................... 68 Chairman of the Board and Chief Executive Officer
Glenn R. Simmons.................... 72 Vice Chairman of the Board
Steven L. Watson.................... 49 President
William J. Lindquist................ 42 Senior Vice President
Bobby D. O'Brien.................... 42 Vice President and Treasurer
J. Mark Hollingsworth............... 48 Vice President and General Counsel
Gregory M. Swalwell................. 43 Vice President and Controller
Eugene K. Anderson.................. 64 Vice President and Assistant Treasurer
A. Andrew R. Louis.................. 39 Secretary
Kelly D. Luttmer.................... 36 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 1995 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. Since prior to 1995,
Mr. O'Brien has served as treasurer, vice president-finance or vice president of
Medite Corporation, an indirect wholly owned subsidiary of Valhi that operated
Valhi's former buildings products business. 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 1995 to 1996, 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 1995 to
1996, 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 1995. 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 1995 to 1998, Mr. Louis served as corporate counsel of Valhi and
Contran. In 1995, Mr. Louis served as corporate general counsel for Search
Capital Group, Inc., an automobile finance company. From prior to 1995 to 1995,
Mr. Louis served as an associate at Jenkens & Gilchrist, P.C., a law firm.
Kelly D. Luttmer has served as tax director of Valhi and Contran since
1998. Since prior to 1995 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 "Commission"), 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 Commission 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)...................................... 1,833,100 (4)(5) 1.6%
National City Lines, Inc. (3)................................ 10,891,009 (4) 9.5%
Valhi Group, Inc. (3)........................................ 93,739,554 (4) 81.8%
Norman S. Edelcup................................................ 23,000 (6) *
Kenneth R. Ferris................................................ 18,500 (6) *
Edward J. Hardin................................................. 1,000 *
Glenn R. Simmons................................................. 423,183 (4)(6)(7) *
Harold C. Simmons................................................ 630,383 (4)(6)(8) *
J. Walter Tucker, Jr............................................. 237,750 (4)(6)(9) *
Steven L. Watson................................................. 328,635 (4)(6) *
William J. Lindquist............................................. 241,000 (4)(6) *
Bobby D. O'Brien................................................. 138,000 (4)(6) *
All directors and executive officers as a group (14 persons)..... 2,300,063 (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 114,628,514 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 either 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, or by Mr. Simmons directly. 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.
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"). Boston Safe Deposit and Trust Company 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 21, 2000
--------------------------------------------------------------------------- ----------------------------
Norman S. Edelcup......................................................... 1,000
Kenneth R. Ferris......................................................... 1,000
Glenn R. Simmons.......................................................... 420,000
Harold C. Simmons......................................................... 550,000
J. Walter Tucker, Jr...................................................... 1,000
Steven L. Watson.......................................................... 310,000
William J. Lindquist...................................................... 241,000
Bobby D. O'Brien.......................................................... 138,000
All other executive officers of Valhi as a group (5 persons).............. 256,000
(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 the 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 Commission 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)
- ------------------------ ----------------------- -------------- ---------------------- ------------
Norman S. Edelcup............... -0- (4) -0- 2,000 (5) *
Kenneth R. Ferris............... 3,000 (4) * 1,000 (5) *
Edward J. Hardin................ -0- (4) -0- 4,800 (5)(6) *
Glenn R. Simmons................ 7,800 (4)(6) * 27,120 (5)(6) *
Harold C. Simmons............... 75,475 (4)(6)(7) * -0- (5) -0-
J. Walter Tucker, Jr............ -0- (4) -0- -0- (5) -0-
Steven L. Watson................ 8,000 (4) * 5,000 (5)(6) *
William J. Lindquist............ -0- (4) -0- 4,000 (5)(6) *
Bobby D. O'Brien................ -0- (4) -0- 4,300 (5)(6) *
All directors and executive
officers of Valhi as a
group (14 persons) ......... 94,775 (4)(6)(7) * 57,620 (5)(6) *
- ----------
* 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 50,619,740 shares of NL Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 6,149,380 shares of CompX Class A Common
Stock outstanding as of the Record Date.
(4) Valhi and Tremont are the direct holders of approximately 59.5% and
20.2%, respectively, of the outstanding NL Common Stock. Valhi, NL, the
Foundation and the Master Trust are the holders of approximately 59.7%,
8.4%, 3.1% and less than 0.1%, respectively, of the outstanding common
stock of Tremont. See footnotes (2), (4) and (5) to the "Ownership of
Valhi and Its Parents" table above for certain information concerning
Valhi, the Foundation, the Master Trust 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 6.1% of the outstanding CompX Class A Common Stock. As a
result, Valhi holds, directly and indirectly through Valcor,
approximately 64.2% of the combined voting power of the CompX Common
Stock (approximately 94.6% 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 21, 2000 On or Before May 21, 2000
------------------------------------------ ----------------------------- --------------------------------
Edward J. Hardin......................... -0- 800
Glenn R. Simmons......................... 4,000 20,400
Harold C. Simmons........................ 4,000 -0-
Steven L. Watson......................... -0- 4,000
William J. Lindquist..................... -0- 4,000
Bobby D. O'Brien......................... -0- 4,000
All other executive officers of Valhi
as a group (5 persons)................. -0- 9,200
(7) The shares of NL Common Stock shown as beneficially owned by Harold C.
Simmons include 69,475 shares 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 Commission 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)
- ------------------------ ---------------------- ------------ ----------------------- ----------
Norman S. Edelcup.............. -0- (4) -0- -0- (5) -0-
Kenneth R. Ferris.............. -0- (4) -0- 10,000 (5) *
Edward J. Hardin............... -0- (4) -0- -0- (5) -0-
Glenn R. Simmons............... 534 (4) * 7,500 (5)(6) *
Harold C. Simmons.............. 3,747 (4)(7) * -0- (5) -0-
J. Walter Tucker, Jr........... 525 (4)(8) * -0- (5) -0-
Steven L. Watson............... 6,274 (4) * 8,000 (5) *
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)................ 11,080 (4)(7)(8) * 25,600 (5)(6) *
- ----------
* 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 6,415,820 shares of Tremont Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 31,371,405 shares of TIMET Common Stock
outstanding as of the Record Date.
(4) Valhi, NL, the Foundation and the Master Trust are the direct holders
of approximately 59.7%, 8.4%, 3.1% and less than 0.1%, respectively, of
the outstanding common stock of Tremont. Valhi and Tremont are the
direct holders of approximately 59.5% and 20.2%, 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, the Foundation and the Master Trust and
the individuals and entities that may be deemed to own indirectly and
beneficially shares of Tremont Common Stock that Valhi, the Foundation,
NL and the Master Trust directly hold. 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 39.1% and
8.4%, 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 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
(7) The shares of Tremont Common Stock shown as beneficially owned by
Harold C. Simmons are shares his wife holds, with respect to which Mr.
Simmons disclaims beneficial ownership.
(8) 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.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. During 1999, directors of Valhi who were not
also employees of Valhi or an affiliate of Valhi 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. In addition,
directors who were members of the audit committee or MD&C Committee received an
annual retainer of $4,000, paid in quarterly installments, for each of these
committees on which they served. Directors were 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. Directors
who received fees during 1999 were Norman S. Edelcup, Dr. Kenneth R. Ferris and
J. Walter Tucker, Jr. (together, the "Nonemployee Directors").
In February 1999, the Board of Directors and the MD&C Committee
approved increases in the noncash compensation of the Nonemployee Directors for
1999. The MD&C Committee, upon the recommendation of the Board of Directors,
approved annual grants under the 1997 Plan to each of the Nonemployee Directors
of 1,000 shares of Valhi Common Stock and stock options exercisable for 1,000
shares of Valhi Common Stock, which options will 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. In May
1999, the MD&C Committee, upon the recommendation of the Board of Directors,
increased the authorization for future annual stock option grants under the 1997
Plan to each of the Nonemployee Directors from stock options exercisable for
1,000 shares to stock options exercisable for 2,000 shares of Valhi Common
Stock.
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 to certain of such 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 1999, 1998 and 1997
by Valhi's chief executive officer and each of the four other most highly
compensated individuals, based on salary and bonus, during 1999 who were
executive officers of Valhi at December 31, 1999. For a discussion of the ISAs,
pursuant to which Contran provides, among other things, the services of Glenn R.
Simmons and Harold C. Simmons to Valhi and certain of Valhi's other subsidiaries
and pursuant to which Valhi provides, among other things, the services of
certain of its executive officers to Contran and certain of its other
subsidiaries, 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 (3) Bonus (3) Options (#) Compensation
- --------------------------------- -------- ------------------ ---------------- ------------------- --------------
Harold C. Simmons................ 1999 $2,982,563 (4) $ -0- 2,000 (5) $ -0-
Chairman of the Board and Chief 1998 2,550,052 (4) -0- 2,000 (5) -0-
Executive Officer 1997 1,468,000 (4) -0- 500,000 (6) -0-
Glenn R. Simmons................. 1999 270,450 (7) -0- 2,000 (5) -0-
Vice Chairman of the Board 2,000 (8)
5,000 (9)
1998 171,690 (7) 240,056 (7) 50,000 (8) -0-
2,000 (5)
1997 210,000 (7) -0- 50,000 (6) -0-
Steven L. Watson................. 1999 312,322 (10) 694,048 (10) -0- 187,628 (12)
President 1998 300,703 (10) 953,450 (10)(11) 50,000 (6) 341,647 (12)
10,000 (8)
1997 218,765 (10) 655,394 (10) 100,000 (6) 110,865 (12)
William J. Lindquist............. 1999 250,615 (10) 448,863 (10) 30,000 (6) 115,628 (12)
Senior Vice President 1998 218,232 (10) 621,244 (10)(11) 50,000 (6) 246,824 (12)
10,000 (8)
1997 157,409 (10) 572,398 (10) 75,000 (6) 88,824 (12)
Bobby D. O'Brien................. 1999 175,832 (10) 168,799 (10) 30,000 (6) 39,332 (12)
Vice President and Treasurer 1998 170,669 (10) 344,876 (10) 50,000 (6) 58,355 (12)
10,000 (8)
1997 108,809 (10) 208,018 (10) 100,000 (6) 32,183 (12)
- ----------
(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 Commission 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 and stock paid to Messrs. Harold and
Glenn Simmons by Valhi's subsidiaries all as further described in
footnotes (4) and (7) below.
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 ISA between Contran and Valhi (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). See also footnote
(10) below.
(4) As described in footnote (3), the aggregate amount of compensation
shown in the table for Mr. Harold Simmons consists of fees Valhi and
its subsidiaries paid pursuant to the ISAs with respect to services Mr.
Simmons rendered to Valhi and its subsidiaries and directors fees (both
cash and stock) Valhi's subsidiaries paid Mr. Simmons, as follows:
1997 1998 1999
--------------------- --------------------- ---------------
Valhi ISA Fee $ 950,000 $1,000,000 $1,000,000
NL ISA Fee 500,000 980,000 950,000
Tremont ISA Fee -0- 526,247 (b) 980,000
NL Cash Directors Fees 18,000 19,750 20,000
NL Director Stock (a) -0- 13,750 14,563
Tremont Cash Directors Fees -0- 10,305 (b) 18,000
--------------- --------------- ---------------
Total $1,468,000 $2,550,052 $2,982,563
=============== =============== ===============
(a) The annual retainer director shares are valued based on the
average of the high and low sales 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 Mr. 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 Mr.
Simmons' fees on and after the Tremont Acquisition Date.
(5) Represents shares of NL Common Stock underlying stock options NL
granted to this named executive officer.
(6) Represents shares of Valhi Common Stock underlying stock options Valhi
granted to this named executive officer.
(7) As described in footnote (3), the aggregate amount of compensation
shown in the table for Mr. Glenn Simmons consists of fees Valhi paid
pursuant to the ISAs with respect to services Mr. Simmons rendered to
Valhi, directors fees (both cash and stock) Valhi's subsidiaries paid
Mr. Simmons and a stock bonus CompX paid Mr. Simmons in 1998, as
follows:
1997 1998 1999
--------------------- --------------------- ---------------
Valhi ISA Fee $ 192,000 $115,385 $154,000
NL Cash Directors Fees 18,000 19,750 20,000
NL Director Stock (a) -0- 13,750 14,563
Tremont Cash Directors Fees -0- 10,305 (b) 17,250
TIMET Cash Directors Fees -0- -0- 20,050
TIMET Director Stock (a) -0- -0- 3,969
CompX Cash Directors Fees -0- 12,500 32,678 (c)
CompX Director Stock (a) -0- -0- 7,940
CompX Bonus Stock (a) -0- 240,056 (d) -0-
--------------- --------------- ---------------
Total $210,000 $411,746 $270,450
=============== =============== ===============
(a) The annual retainer director shares are valued based on the
average of the high and low sales price on the New York Stock
Exchange Composite Tape on the date of grant.
(b) The reported amount is the prorated amount of Mr. Simmons'
director fees on and after the Tremont Acquisition Date.
(c) This amount includes $12,678 of directors 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").
(8) Represents shares of CompX Class A Common Stock underlying stock
options CompX granted to this named executive officer.
(9) Represents shares of TIMET Common Stock underlying stock options TIMET
granted to this named executive officer.
(10) As described in footnote (3), Mr. Watson's, Mr. Lindquist's and Mr.
O'Brien's Valhi compensation excludes the amount Contran credited to
Valhi for such person's services pursuant to the Contran/Valhi ISA, as
follows:
Amount Contran Credited to Valhi
Name Year Pursuant to Contran/Valhi ISA
------------------------------------------------------- ---------- ---------------------------------
Steven L. Watson....................................... 1999 $ 81,130
1998 61,231
1997 59,495
William J. Lindquist................................... 1999 79,688
1998 173,986
1997 162,692
Bobby D. O'Brien....................................... 1999 63,702
1998 45,032
1997 63,942
(11) 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 (12).
(12) 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
---------------------------------
Accruals
Related to DIP
Employer's and Pension Interest Accruals
DIP Plan Limitations Above 120% of the
Named Executive Officer Year Contributions (a) AFR Rate (b) Total
--------------------------- ----- --------------- ---------------- ----------------- -----------
Steven L. Watson........ 1999 $ 9,600 $ 128,985 $49,043 $187,628
1998 9,600 319,892 12,155 341,647
1997 8,925 101,940 n/a 110,865
William J. Lindquist.... 1999 9,600 70,209 35,819 115,628
1998 9,600 228,764 8,460 246,824
1997 8,925 79,899 n/a 88,824
Bobby D. O'Brien........ 1999 9,600 27,121 2,611 39,332
1998 9,600 47,583 1,172 58,355
1997 8,925 23,258 n/a 32,183
(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 amounts are equal to the
actual amounts deferred, adjusted as described in footnotes
(3) and (10) to this Summary Compensation Table).
(b) Effective as of January 1, 1998, 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 Commission, 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. Prior to January 1, 1998, the interest on the
balance of the unfunded reserve accounts accrued interest at
an annual rate in effect from time to time equal to
actuarially determined assumed rates of return on investments
made by Valhi's defined benefit pension plan.
Grants of Stock Options. The following table provides information, with
respect to the named executive officers, concerning the grant of stock options
during 1999 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").
OPTION GRANTS IN 1999
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 1999 (2) Per Share Date 5% 10%
- ----------------------- --------------- -------------- -------------- ------------ --------------- -------------
Harold C. Simmons
NL Stock Options..... 2,000 (3) 0.49% $12.56 (3) 01/27/04 $ 6,940 (4) $ 15,340 (4)
Glenn R. Simmons
NL Stock Options..... 2,000 (3) 0.49% 12.56 (3) 01/27/04 6,940 (4) 15,340 (4)
CompX Stock Options.. 2,000 (5) 0.79% 15.88 (5) 05/14/09 19,980 (4) 50,620 (4)
TIMET Stock Options.. 5,000 (6) 0.78% 7.94 (6) 05/12/09 24,950 (4) 63,250 (4)
Steven L. Watson
Valhi Stock Options.. -0- 0.00% n/a n/a n/a n/a
William J. Lindquist
Valhi Stock Options.. 30,000 (7) 9.38% 12.00 (7) 05/04/09 226,500 (4) 573,600 (4)
Bobby D. O'Brien
Valhi Stock Options.. 30,000 (7) 9.38% 12.00 (7) 05/04/09 226,500 (4) 573,600 (4)
All Valhi stock-holders'
gain (8)........... n/a n/a n/a n/a 1,179MM (8) 2,592MM (8)
- ----------
(1) Pursuant to the rules of the Commission, 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 Commission 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 Valhi stock options, the percent of total options
granted to employees is based on the number of shares underlying stock
options Valhi granted to its employees in 1999 as shown in the
following table. 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 1999 as shown in the following table.
Shares of the Issuer's Common
Stock Underlying Stock Options
Issuer Granted in 1999 by the Issuer
--------------------------------------------------------------------- --------------------------------
Valhi................................................................ 320,000
NL................................................................... 410,000
TIMET................................................................ 640,200
CompX................................................................ 253,000
(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
---------------------------------- ---------------- ------------ ----------------- ---------------
Valhi............................. $12.00 10 $19.55 $31.12
NL................................ 12.56 5 16.03 20.23
TIMET............................. 7.94 10 12.93 20.59
CompX............................. 15.88 10 25.87 41.19
(5) 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.
(6) 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.
(7) This stock option is exercisable for shares of Valhi 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 Valhi Common Stock,
provided such tendered shares were held by the optionee for at least
six months.
(8) The $1,178,579,000 and $2,592,227,000 amounts shown represent the
cumulative increase in value stockholders would receive on all
outstanding shares of Valhi Common Stock over a ten-year period at the
hypothetical 5% and 10% appreciation rates, respectively, based on the
$12.00 per share market value of the 114,506,014 shares of Valhi Common
Stock outstanding on the close of business May 4, 1999 and the
reinvestment of cash dividends paid at a rate equal to Valhi's cash
dividend policy on May 4, 1999 of $0.05 per share per calendar quarter.
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, 1999. In 1999, no named
executive officer exercised any stock options. Neither Valhi nor any of its
parent or subsidiary corporations has granted any SARs.
DECEMBER 31, 1999 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 1999 (#) at December 31, 1999 (1)
--------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------- ----------- ------------- ----------- -------------
Harold C. Simmons
Valhi Stock Options............................ 450,000 200,000 $ 2,097,000 $ 824,000
NL Stock Options............................... 2,000 2,000 0 5,000
------------ -------------- ------------ -------------
452,000 202,000 2,097,000 829,000
Glenn R. Simmons
Valhi Stock Options............................ 410,000 20,000 2,062,400 82,400
NL Stock Options............................... 2,000 2,000 0 5,000
TIMET Stock Options............................ 0 5,000 0 0
CompX Stock Options............................ 10,000 42,000 0 4,990
------------ -------------- ------------ -------------
422,000 69,000 2,062,400 92,390
Steven L. Watson
Valhi Stock Options............................ 270,000 100,000 1,259,640 287,200
CompX Stock Options............................ 2,000 8,000 0 0
------------ -------------- ------------ -------------
272,000 108,000 1,259,640 287,200
William J. Lindquist
Valhi Stock Options............................ 200,000 120,000 906,380 246,000
CompX Stock Options............................ 2,000 8,000 0 0
------------ -------------- ------------ -------------
202,000 128,000 906,380 246,000
Bobby D. O'Brien
Valhi Stock Options............................ 102,000 110,000 416,740 204,800
CompX Stock Options............................ 2,000 8,000 0 0
------------ -------------- ------------ -------------
104,000 118,000 416,740 204,800
- ----------
(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, 1999. Such closing sales prices were:
$10.50 per share for Valhi Common Stock, $15.0625 per share for NL
Common Stock, $4.50 per share for TIMET Common Stock and $18.375 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. 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 1999 does not take
into account a participant's annual earnings in excess of $160,000. As a result,
the compensation eligible to be utilized for purposes of the Pension Plan
formula only includes $160,000 of the salary and bonus of the named executive
officers 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............ $5,004 $10,007 $20,014 $30,021
100,000............ 6,754 13,507 27,014 40,521
120,000............ 8,504 17,007 34,014 51,021
140,000............ 10,254 20,507 41,014 61,521
160,000............ 12,004 24,007 48,014 72,021
As of December 31, 1999, Steven L. Watson, William J. Lindquist and
Bobby D. O'Brien were credited with 19 years, 19 years and 10 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 Commission, 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 1999 its executive officers, directors and 10% stockholders
complied with all applicable filing requirements under section 16(a).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, 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), Dr. Kenneth R.
Ferris and J. Walter Tucker, Jr., all Nonemployee Directors. Of those persons
who deliberated on Valhi executive officer compensation at any time in 1999,
only Mr. Simmons was an executive officer of Valhi or any of its subsidiaries.
Mr. Simmons deliberated also on the compensation of the executive
officers of certain entities that may be deemed to be controlled by or
affiliated with him. Other than Mr. Simmons, no Valhi executive officer
deliberated on the compensation of executive officers of another entity (as a
member of the other entity's compensation committee, board of directors or
otherwise), one of whose executive officers deliberated on the compensation of
Valhi's executive officers (as a member of the MD&C Committee, the Board of
Directors or otherwise).
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, 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 2000. 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 and officers 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, and Valhi renders certain
management and administrative services to Contran, including the services of
Valhi's executive officers. Valhi paid Contran net fees of $67,000 for services
rendered under the ISA in 1999, which represented $1,438,000 for services
Contran rendered to Valhi less $1,371,000 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 1999. In addition, Tremont
credited to Contran the out-of-pocket costs Contran incurred in rendering such
services. Tremont also paid director's fees and expenses directly to Messrs.
Glenn and Harold Simmons.
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 1999. In addition, NL credited to Contran
the out-of-pocket costs Contran incurred in rendering such services. NL also
paid director's fees and expenses directly to Messrs. Glenn and Harold Simmons.
Insurance Brokerage Commissions. NL Insurance Ltd. of Vermont ("NL
Insurance"), Valmont and EWI RE, Inc. ("EWI") provide for or broker certain of
Valhi's insurance policies. NL Insurance is a wholly owned captive insurance
company of Tremont. Valmont is a wholly owned captive insurance company of
Valhi. Parties related to Contran own 90% of the outstanding common stock of
EWI, and a son-in-law of Harold C. Simmons manages the operations of EWI.
Consistent with insurance industry practices, NL Insurance, Valmont and EWI
receive commissions from the insurance and reinsurance underwriters for the
policies that they provide or broker. During 1999, Valhi and its majority owned
subsidiaries and less than majority owned affiliates paid approximately $6.9
million for policies provided or brokered by NL Insurance, 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
NL Insurance, Valmont and EWI. In Valhi's opinion, the amounts that Valhi and
its majority owned subsidiaries and less than majority owned affiliates 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 NL Insurance, Valmont and EWI will continue in
2000.
Legal Fees. Valhi and its affiliates engaged and paid to Rogers &
Hardin LLP, a law firm of which Valhi's director Edward J. Hardin is a partner,
$75,000 in fees for services Rogers & Hardin LLP rendered to Valhi and its
affiliates in 1999 in connection with general corporate matters. Valhi expects
that it and its affiliates will continue their relationships with Rogers &
Hardin LLP in 2000.
REPORT ON EXECUTIVE COMPENSATION
During 1999 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 the services of Harold C. Simmons, Valhi's chairman of
the board and CEO, and Glenn R. Simmons, Valhi's vice chairman of the board. The
CEO, considering recommendations of management, determined the compensation paid
to Valhi's employees, including Valhi's other 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
to 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 amount of the fee paid by Valhi under the Contran/Valhi ISA with
respect to the CEO represents, in the view of the board of directors, the
reasonable equivalent of "compensation" for the services the CEO provided to
Valhi taking into account the CEO's unique experience and knowledge. In making
such determination, the board of 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 executive officers, other than the CEO,
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 executive officers
of Valhi, 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 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 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 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
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 1999, 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
1999, 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. Kenneth R. Ferris
Nonemployee Director and chairman of Nonemployee Director and member
the MD&C Committee of the MD&C Committee
J. Walter Tucker, Jr. Harold C. Simmons
Nonemployee Director and member of Chief Executive Officer
the MD&C Committee
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, 1994 and
ending December 31, 1999. The graph shows the value at December 31 of each year
assuming an original investment of $100 and the reinvestment of dividends to
stockholders. The February 3, 1995 dividend of 0.03049 of a share of Tremont
common stock for each share of Valhi Common Stock was treated as if such Tremont
shares were sold on the distribution date with the proceeds reinvested in Valhi
Common Stock on such date.
[PERFORMANCE GRAPH GOES HERE]
December 31,
-----------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
------------- ------------- ------------ ------------- ------------ ----------
Valhi, Inc................. $100 $ 89 $ 92 $139 $170 $160
S&P 500 Index.............. 100 138 169 226 290 351
S&P Manufacturing
(Diversified) Index........ 100 141 194 231 268 329
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 2000. 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.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP served as Valhi's primary
independent public accountants for the year ended December 31, 1999 and is
expected to be considered for appointment as such for the year ending December
31, 2000. Representatives of PricewaterhouseCoopers LLP are not expected to
attend the Meeting.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2001
Stockholders may submit proposals on matters appropriate for
stockholder action at Valhi's annual stockholder meetings, consistent with rules
adopted by the Commission. Such proposals must be received by Valhi not later
than December 7, 2000 to be considered for inclusion in the proxy statement and
form of proxy relating to the Annual Meeting of Stockholders in 2001. Proposals
should be addressed to: Corporate Secretary, Valhi, Inc., Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
1999 ANNUAL REPORT ON FORM 10-K
A copy of Valhi's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, as filed with the Commission, 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 30, 2000
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
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 11, 2000
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 2000 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 11, 2000, 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: Norman S. Edelcup, Kenneth R. Ferris, Edward J. Hardin,
Glenn R. Simmons, Harold C. Simmons, J. Walter Tucker,
Jr. and Steven L. Watson
[ ] FOR all nominees
[ ] WITHHOLD AUTHORITY to vote for all nominees
[ ] FOR all nominees (except as marked)
-----------------------------------------------------------------------
(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: Make necessary corrections to the mailing label.)
SIGNATURE(S) DATE
---------------------------------- ------------------
SIGNATURE(S) DATE
---------------------------------- ------------------
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. The undersigned hereby revokes all
proxies heretofore given to vote at said Meeting and any adjournment or
postponement thereof.
