SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant: [X]
Filed by a Party other than the Registrant: [ ]
Check the appropriate box:
[ ] Preliminary Proxy [ ] CONFIDENTIAL, FOR USE OF
Statement THE COMMISSION ONLY (AS
[ ] Definitive Proxy PERMITTED BY RULE 14A-6(E)(2))
Statement
[X] Definitive Additional
Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section240.14a-
12
VALHI, INC.
- -----------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
(Valhi Logo goes here)
VALHI, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
March 29, 1996
To Our Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders of
Valhi, Inc., which will be held on Friday, May 10, 1996, at 10:00 a.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, President and
Chief Executive Officer
VALHI, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 10, 1996
To the Stockholders of Valhi, Inc.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders (the
"Meeting") of Valhi, Inc., a Delaware corporation (the "Company"), will be held
on Friday, May 10, 1996, at 10:00 a.m., local time, at the corporate offices of
the Company at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
for the following purposes:
(1) To elect five directors to serve until the 1997 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 the Company set the close of business on March 22,
1996 as the record date (the "Record Date") for the Meeting. Only holders of
the Company's common stock, $0.01 par value per share, at the close of business
on the Record Date are entitled to notice of, and to vote at, the Meeting. The
Company'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 the Company,
for purposes related to the Meeting, for a period of ten days prior to the
Meeting at the Company'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 the Company'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,
Steven L. Watson, Secretary
Dallas, Texas
March 29, 1996
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" or the "Company"), for use at the 1996 Annual
Meeting of Stockholders of the Company to be held on Friday, May 10, 1996 and at
any adjournment or postponement thereof (the "Meeting"). The Meeting will be
held at the time and place and for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders (the "Notice"). 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, 1995 (the "Annual Report"), are first
being mailed to the holders of Valhi's common stock, $0.01 par value per share
("Valhi Common Stock"), on or about April 4, 1996. 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, 1996 (the "Record Date"). As of the Record Date, there
were 114,089,814 shares of Valhi Common Stock issued and outstanding. Each
share of Valhi Common Stock will entitle the holder thereof 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.
At the Meeting, directors of the Company will be elected by a plurality of the
affirmative vote of the outstanding shares of Valhi Common Stock represented and
entitled to be voted. 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 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.
Unless otherwise specified, the agents designated in the proxy will vote the
shares represented thereby at the Meeting "FOR" the election of the nominees of
the Board of Directors named below and in the discretion of the agents on any
other matter that may properly come before the Meeting.
Society National Bank ("Society"), the transfer agent and registrar for Valhi
Common Stock, 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 Society that identify the vote of a particular
stockholder shall be kept confidential by Society in accordance with the terms
of the Company'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 thereof at the Meeting by (i) delivering to Society a written revocation
of the proxy, (ii) delivering to Society a duly executed proxy bearing a later
date or (iii) 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. The Company will pay all expenses related thereto, 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 the Company may solicit proxies by telephone or in person
for which such persons will receive no additional compensation. Upon request,
the Company 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 the Company 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 five. The directors elected at the Meeting will hold office
until the 1997 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 the Company 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 the election of
directors. The Board of Directors believes that all of its present nominees
will be available for election at the Meeting and will serve if elected.
Contran Corporation ("Contran") and certain related entities held
approximately 91% 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 to vote such shares "FOR" the election of all of the nominees
for director as set forth in this Proxy Statement. If such shares are
represented and voted as indicated at the Meeting, a quorum will be present and
all such nominees will be elected as directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
FOR DIRECTOR SET FORTH BELOW.
NOMINEES FOR DIRECTOR. The following information has been provided by the
respective nominees for election as directors of the Company for terms expiring
at the 1997 Annual Meeting of Stockholders.
NORMAN S. EDELCUP, age 60, has served as a director of Valhi and/or certain of
Valhi's predecessors since 1975. Mr. Edelcup has served as Chairman of the
Board of Item Processing of America, Inc., a processing service bureau, since
prior to 1991. Mr. Edelcup also serves as a director of Artistic Greetings,
Inc., a mail-order stationery products company, and as a trustee for the Baron
Asset Fund, a mutual fund. Additionally, he serves as Chairman of the Company's
Audit Committee and Management Development and Compensation Committee (the "MD&C
Committee").
KENNETH R. FERRIS, age 47, 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 1991. Dr. Ferris held various
instructor and administrative positions at the Cox School of Business, Southern
Methodist University until 1991 and has also conducted a private business
consulting practice since prior to 1991.
GLENN R. SIMMONS, age 68, has served as a director of Valhi and/or certain of
Valhi's predecessors since 1980. Mr. Glenn Simmons has been Vice Chairman of the
Board of Valhi and Contran, a diversified holding company, since prior to 1991.
Mr. Glenn Simmons is a director of Valhi's majority owned subsidiary, NL
Industries, Inc. ("NL"), a chemicals company; Vice Chairman of the Board and a
director of Valhi's wholly owned subsidiary, Valcor, Inc. ("Valcor"), a company
that is engaged in the building products, hardware products and fast food
industries; Chairman of the Board, Chief Executive Officer and a director of
Contran's majority owned subsidiary, Keystone Consolidated Industries, Inc.
("Keystone"), a steel rod, wire and wire products company; and a director of
Contran's less than majority owned affiliate, Tremont Corporation ("Tremont"), a
titanium metals company. Mr. Glenn Simmons has been an executive officer and/or
director of various companies related to Valhi and Contran since 1969. Mr.
Glenn Simmons serves as a member of the Company's Executive Committee and is a
brother of Harold C. Simmons.
HAROLD C. SIMMONS, age 64, has served as a director of Valhi and/or certain of
Valhi's predecessors since 1980. Mr. Harold Simmons has been Chairman of the
Board and Chief Executive Officer of Valhi and Contran since prior to 1991 and
has been President of Valhi and Contran since 1994. Mr. Harold Simmons is
Chairman of the Board and a director of NL; a director of Tremont; and Chairman
of the Board, President, Chief Executive Officer and a director of Valcor. Mr.
Harold Simmons has been an executive officer and/or director of various
companies related to Valhi and Contran since 1968. Mr. Harold Simmons serves as
Chairman of the Company's Executive Committee and is a brother of Glenn R.
Simmons.
J. WALTER TUCKER, JR., age 70, has served as a director of Valhi and/or certain
of Valhi's predecessors since 1982. Mr. Tucker has been the President,
Treasurer and a director of Tucker & Branham, Inc., a mortgage banking,
insurance and real estate company, and Vice Chairman of the Board and a director
of Keystone since prior to 1991. Mr. Tucker is a director of Columbian Mutual
Life Insurance Company and SunTrust Banks, Inc. Mr. Tucker has been an
executive officer and/or director of various companies related to Valhi and
Contran since 1981.
For information concerning legal proceedings to which certain director nominees
are parties and other matters, see "Certain Litigation and Other Matters" and
"Certain Relationships and Transactions."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings and took action by written consent in
lieu of meetings on ten occasions in 1995. Each of the directors participated in
all of such meetings and all 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 the selection of the Company's independent auditors and to make its
recommendation with respect to such selection to the Board of Directors; 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 and took no action by written consent in 1995.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE. The principal
responsibilities of the MD&C Committee are to review and approve certain matters
involving executive compensation, including making recommendations to the Board
of Directors regarding compensation matters involving the Chief Executive
Officer; to review and approve grants of stock options and awards of restricted
stock under the Company's incentive plan; and to review and administer 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 two meetings and took action by written consent in lieu of meetings on two
occasions in 1995.
EXECUTIVE COMMITTEE. The principal responsibilities of the Executive Committee
are to take such actions as are required to manage the Company, within the
powers provided by Delaware statutes and except as otherwise limited by the
Board of Directors. The current members of the Executive Committee are Harold
C. Simmons (Chairman) and Glenn R. Simmons. The Executive Committee did not
hold any meetings and did not take any action by written consent in 1995.
The Board of Directors does not have a nominating committee or any committee
performing a similar function and, therefore, 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 the
Company with respect to the election of directors if such recommendations are
submitted in writing to the Corporate Secretary of the Company 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.
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 and
Glenn R. Simmons is set forth under "Election of Directors-Nominees for
Director."
NAME AGE POSITION(S)
- ---- --- -----------
Harold C. Simmons 64 Chairman of the Board, President
and Chief Executive Officer
Glenn R. Simmons 68 Vice Chairman of the Board
Eugene K. Anderson 60 Vice President and Assistant
Treasurer
Joseph S. Compofelice 46 Executive Vice President
William J. Lindquist 38 Vice President and Tax Director
J. Thomas Montgomery, Jr. 49 Vice President and Controller
Robert W. Singer 59 Vice President
William C. Timm 51 Vice President-Finance and
Treasurer
Steven L. Watson 45 Vice President and Secretary
EUGENE K. ANDERSON has served as Vice President and Assistant Treasurer of Valhi
since 1994. Mr. Anderson has served as Vice President of Contran since prior to
1991 and as Assistant Treasurer of Contran since 1994. Mr. Anderson has served
as an executive officer of various companies related to Valhi and Contran since
1980.
JOSEPH S. COMPOFELICE has served as Executive Vice President of Valhi since
1994. Mr. Compofelice has also been the Vice President and Chief Financial
Officer of NL and Tremont since 1994 and a director of NL since 1995. In
February 1996, he was elected as Vice President, Chief Financial Officer and a
director of Titanium Metals Corporation ("TIMET"), Tremont's principal operating
subsidiary. From prior to 1991 to 1993, Mr. Compofelice was the Vice President
and Chief Financial Officer of Baroid Corporation, a company engaged in the
petroleum services industry that Dresser Industries, Inc. acquired in 1994.
WILLIAM J. LINDQUIST has served as Vice President and Tax Director of Valhi and
Contran since 1991. Mr. Lindquist served as Corporate Tax Manager of Valhi,
Contran and various companies related to Valhi and Contran from 1980 to 1991.
J. THOMAS MONTGOMERY, JR. has served as Vice President and Controller of Valhi
and Contran since prior to 1991. Mr. Montgomery has served as an executive
officer of various companies related to Valhi and Contran since 1982.
ROBERT W. SINGER has served as Vice President of Valhi and Contran since prior
to 1991. Mr. Singer has also served as President and Chief Operating Officer of
Keystone since prior to 1991. Mr. Singer has served as an executive officer
and/or director of various companies related to Valhi and Contran since 1982.
WILLIAM C. TIMM has served as Vice President-Finance of Valhi and Contran since
prior to 1991 and as Treasurer of Valhi and Contran since 1991. Mr. Timm has
served as an executive officer and/or director of various companies related to
Valhi and Contran since 1981.
STEVEN L. WATSON has served as Vice President and Secretary of Valhi and Contran
since prior to 1991. Mr. Watson has served as an executive officer and/or
director of various companies related to Valhi and Contran since 1980.
SECURITY OWNERSHIP
OWNERSHIP OF VALHI AND ITS PARENTS. The following table and notes 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 (i) each person or group of persons known to Valhi to own beneficially
more than 5% of the outstanding shares of Valhi Common Stock, (ii) each director
of Valhi, (iii) each executive officer of Valhi named in the Summary
Compensation Table below (a "named executive officer") and (iv) 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 held by Contran,
National City Lines, Inc. ("National") and Valhi Group, Inc. ("VGI"), as
reported in the table below. 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.
<TABLE>
<CAPTION>
VALHI COMMON STOCK
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AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) CLASS(1)(2)
------------------------ ------------------------ -----------
<S> <C> <C> <C>
Contran Corporation and subsidiaries:
Contran Corporation (3) 7,102,158 (4)(5) 6.2%
National City Lines, Inc. (3) 11,491,009 (4) 10.1%
Valhi Group, Inc. (3) 85,644,496 (4) 75.1%
Norman S. Edelcup 20,000 (6) *
Kenneth R. Ferris 8,000 (7) *
Glenn R. Simmons 647,833 (4)(8) *
Harold C. Simmons 730,383 (4)(9) *
J. Walter Tucker, Jr. 236,750 (10) *
Joseph S. Compofelice 20,000 (11) *
William C. Timm 358,050 (4)(12) *
Steven L. Watson 210,635 (4)(13) *
All directors and executive officers
as a group (12 persons) 2,788,325 (4)(5)(6)(7)(8) 2.4%
(9)(10)(11)(12)
(13)(14)
</TABLE>
[FN]
- ----------
* 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 that shares of
Valhi Common Stock issuable upon the exercise of stock options to such person or
group (exclusive of others) within sixty days subsequent to the Record Date are
outstanding.
(2) The above table is based on 114,089,814 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 NL and 1,000,000 shares of Valhi Common Stock held by
Valmont Insurance Company ("Valmont"), a wholly owned subsidiary of Valhi, 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 holders of approximately 73.3%, 11.4% and 15.3%, respectively, of the
outstanding common stock of VGI. Contran and NOA are the 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 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 holder of 100% of the outstanding common stock of Dixie Holding. Contran
is the holder of approximately 88.7% and 54.3% of the outstanding common stock
of Southwest and Dixie Rice, respectively. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of Harold
C. Simmons' children and grandchildren (the "Trusts"), of which Mr. Harold
Simmons is the sole trustee. As sole trustee of the Trusts, Mr. Harold Simmons
has the power to vote and direct the disposition of the shares of Contran stock
held by the Trusts. Mr. Harold Simmons, however, disclaims beneficial ownership
of such Contran shares.
The Combined Master Retirement Trust (the "Master Trust") holds approximately
0.1% of the outstanding shares of Valhi Common Stock. The Master Trust was
formed to permit the collective investment by trusts that maintain the assets of
certain employee benefit plans adopted by Valhi and related companies. Harold
C. Simmons is the sole trustee of the Master Trust and the sole member of the
Trust Investment Committee for the Master Trust. The trustee and members of the
Trust Investment Committee for the Master Trust are selected by the Board of
Directors. Harold C. Simmons, Glenn R. Simmons, William C. Timm and Steven L.
Watson 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 individual vested beneficial interest in the assets held by the
Master Trust.
Harold C. Simmons is the Chairman of the Board, President and Chief Executive
Officer of VGI, National, NOA, Dixie Holding and Contran. Mr. Harold Simmons is
also the Chairman of the Board and Chief Executive Officer of Dixie Rice and
Southwest. By virtue of the holding of such offices, the stock ownership as
described above and his service as trustee as described above, Mr. Harold
Simmons may be deemed to control such entities, and Mr. Harold Simmons,
National, NOA, Dixie Rice, Dixie Holding, Southwest and Contran may be deemed to
possess indirect beneficial ownership of certain shares of Valhi Common Stock
held by such entities. However, Mr. Harold Simmons disclaims beneficial
ownership of the shares of Valhi Common Stock beneficially owned, directly or
indirectly, by such entities and NL and Valmont.
(5) The shares of Valhi Common Stock shown as owned by Contran include 0.2% of
the outstanding Valhi Common Stock directly held by the Contran Deferred
Compensation Trust No. 2 (the "CDCT No. 2"). NationsBank of Texas, N.A. serves
as trustee of the CDCT No. 2 (the "Trustee"). 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
(i) retains the power to vote the shares held by the CDCT No. 2, (ii) shares
dispositive power over such shares with the Trustee and (iii) may be deemed the
indirect beneficial owner of such shares.
(6) The shares of Valhi Common Stock shown as beneficially owned by Mr. Edelcup
include 8,000 shares that he has the right to acquire upon the exercise within
60 days subsequent to the Record Date of stock options granted pursuant to the
Company's 1990 Non-Employee Director Stock Option Plan (the "Director Plan").
(7) The shares of Valhi Common Stock shown as beneficially owned by Dr. Kenneth
R. Ferris include 7,500 shares held in his retirement account.
(8) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 580,000 shares that Mr. Glenn Simmons has the right to acquire
upon the exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the Company's 1987 Stock Option-Stock Appreciation Rights
Plan, as amended (the "Incentive Plan"), and 6,150 shares of restricted Valhi
Common Stock awarded pursuant to the Incentive Plan. Also included in the
amount shown as beneficially owned by Mr. Glenn Simmons are 4,383 shares held in
his individual retirement account. In addition, included in the amount shown as
beneficially owned by Mr. Glenn Simmons are 18,150 shares held by Mr. Glenn
Simmons' wife, 800 shares held in a retirement account for Mr. Glenn Simmons'
wife and 1,000 shares held by Mr. Glenn Simmons' wife in trust for the benefit
of their daughter, with respect to which Mr. Glenn Simmons disclaims beneficial
ownership.
(9) The shares of Valhi Common Stock shown as beneficially owned by Harold C.
Simmons include 650,000 shares that Mr. Harold Simmons has the right to acquire
upon the exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the Incentive Plan. In addition, included in the amount
shown as beneficially owned by Mr. Harold Simmons are 77,000 shares held by Mr.
Harold Simmons' wife, with respect to which Mr. Harold Simmons disclaims
beneficial ownership.
(10) The shares of Valhi Common Stock shown as beneficially owned by J. Walter
Tucker, Jr. include 8,000 shares that Mr. Tucker has the right to acquire upon
the exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the Director Plan. In addition, included in the amount
shown as beneficially owned by Mr. Tucker are 217,250 shares held by Mr.
Tucker's wife, with respect to which Mr. Tucker disclaims beneficial ownership.
(11) The shares of Valhi Common Stock shown as beneficially owned by Joseph S.
Compofelice include 10,000 shares that Mr. Compofelice has the right to acquire
upon the exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the Incentive Plan. In addition, included in the amount
shown as beneficially owned by Mr. Compofelice are 10,000 shares held by Mr.
Compofelice and his wife as joint tenants.
(12) The shares of Valhi Common Stock shown as beneficially owned by William C.
Timm include 355,000 shares that Mr. Timm has the right to acquire upon the
exercise within 60 days subsequent to the Record Date of stock options granted
pursuant to the Incentive Plan and 3,050 shares of restricted Valhi Common Stock
awarded pursuant to the Incentive Plan.
(13) The shares of Valhi Common Stock shown as beneficially owned by Steven L.
Watson include 192,000 shares that Mr. Watson has the right to acquire upon the
exercise within 60 days subsequent to the Record Date of stock options granted
pursuant to the Incentive Plan and 1,500 shares of restricted Valhi Common Stock
awarded pursuant to the Incentive Plan. In addition, included in the amount
shown as beneficially owned by Mr. Watson are 3,035 shares held in his
individual retirement account.
(14) In addition to the foregoing, the shares of Valhi Common Stock shown as
beneficially owned by the directors and executive officers of Valhi as a group
include 430,000 shares that the remaining executive officers of Valhi have the
right to acquire upon the exercise within 60 days subsequent to the Record Date
of stock options granted pursuant to the Incentive Plan, 4,500 shares of
restricted Valhi Common Stock awarded pursuant to the Incentive Plan, 15,924
shares held by such officers in their individual retirement accounts and 10,000
shares held by such officers in other retirement accounts. Additionally,
included in the shares of Valhi Common Stock beneficially owned by such
remaining executive officers are 5,000 shares held in the individual retirement
accounts of such officers' spouses with respect to which such officers disclaim
beneficial ownership.
OWNERSHIP OF SUBSIDIARY. The following table and notes set forth the
beneficial ownership, as of the Record Date, of the common stock, $0.125 par
value per share, of NL ("NL Common Stock") held by (i) each director of Valhi,
(ii) each executive officer and (iii) all directors and executive
officers of Valhi as a group. Except as set forth below, no securities of
Valhi's subsidiaries are beneficially owned by any director or executive
officer of Valhi. 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.
<TABLE>
<CAPTION>
NL COMMON STOCK
-------------------------------------
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) CLASS (1)(2)
<S> <C> <C> <C>
Norman S. Edelcup -0- -0-
Kenneth R. Ferris 600 (3) *
Glenn R. Simmons 20,800 (4)(5) *
Harold C. Simmons 69,475 (5)(6) *
J. Walter Tucker, Jr. -0- -0-
Joseph S. Compofelice 86,106 (7) *
William C. Timm -0- -0-
Steven L. Watson 9,000 *
All directors and executive officers
of Valhi as a group (12 persons) 229,646 (3)(4)(5) *
(6)(7)(8)
</TABLE>
[FN]
- ----------
* 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 NL Common Stock set
forth opposite their names. The number of shares and percentage of ownership of
NL Common Stock for each person or group assumes that shares of NL Common Stock
issuable upon the exercise of stock options to such person or group (exclusive
of others) within sixty days subsequent to the Record Date are outstanding.
(2) The above table is based on 51,095,820 shares of NL Common Stock
outstanding as of the Record Date.
(3) The shares of NL Common Stock shown as beneficially owned by Kenneth R.
Ferris include 600 shares held by Dr. Ferris in his individual retirement
account.
(4) The shares of NL Common Stock shown as beneficially owned by Glenn R.
Simmons include 6,800 shares held in his retirement account. In addition,
included in the amount shown as beneficially owned by Mr. Glenn Simmons are
1,000 shares held by Mr. Glenn Simmons' wife, with respect to which Mr. Glenn
Simmons disclaims beneficial ownership.
(5) Valhi and Tremont directly and beneficially own 53.8% (27,474,810 shares)
and 17.7% (9,064,780 shares) of the outstanding NL Common Stock, respectively.
VGI, National, Contran, NL, Valmont and the Master Trust are the holders of
approximately 34.6%, 4.6%, 3.1%, 0.5%, 0.4% and 0.1%, respectively, of the
outstanding common stock of Tremont. Contran's ownership percentage of Tremont
common stock includes 2.1% of the outstanding Tremont common stock directly held
by the CDCT No. 2. See footnote (5) to the "Ownership of Valhi and Its Parents"
table above for a description of the CDCT No. 2. See also footnotes (2), (4)
and (5) to the same table for information concerning individuals and entities
that may be deemed to own indirectly and beneficially shares of NL Common Stock
held by Valhi and Tremont. Glenn R. Simmons and Harold C. Simmons disclaim
beneficial ownership of all of the shares of NL Common Stock owned by these
entities.
(6) The shares of NL Common Stock shown as beneficially owned by Harold C.
Simmons consists of 69,475 shares held by Mr. Harold Simmons' wife, with respect
to which Mr. Harold Simmons disclaims beneficial ownership.
(7) The shares of NL Common Stock shown as beneficially owned by Joseph S.
Compofelice include 50,000 shares that Mr. Compofelice has the right to acquire
upon the exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the 1989 Long Term Performance Incentive Plan of NL
Industries, Inc. and 5,106 shares credited to Mr. Compofelice's account under
the Savings Plan for Employees of NL Industries, Inc. (the "NL Savings Plan").
(8) In addition to the foregoing, the shares of NL Common Stock shown as
beneficially owned by the directors and executive officers of Valhi as a group
include 190 shares that the remaining executive officers of Valhi have the right
to acquire upon the exercise within 60 days subsequent to the Record Date of
stock options and 7,700 shares held by such officers in their individual
retirement accounts. Additionally, included in the shares of NL Common Stock
beneficially owned by such remaining executive officers are the following shares
of which such officers disclaim beneficial ownership: 500 shares held in the
individual retirement accounts of such officers' spouses, 275 shares held by
such spouses in other retirement accounts and 20,000 shares held by a profit
sharing trust unaffiliated with Valhi or NL of which one of such officers is a
trustee.
The Company 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 the Company, financial and stock market conditions and other factors deemed
relevant by such entities. The Company may similarly consider acquisitions of
shares of Valhi Common Stock and acquisitions or dispositions of securities
issued by related entities. Neither Contran nor the Company presently intends
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.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. During 1995, directors of Valhi who were not also
employees of the Company or an affiliate of the Company 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 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 committee 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. Current directors
receiving fees during 1995 were Norman S. Edelcup, Dr. Kenneth R. Ferris and J.
Walter Tucker, Jr. (together, the "Non-Employee Directors").
Each Non-Employee Director on February 3, 1995 was granted an option, pursuant
to the Director Plan, to purchase 2,000 shares of Valhi Common Stock at an
exercise price of $7.75 per share, which was equal to the market value of such
shares on the date of grant calculated as the last reported sales price of Valhi
Common Stock on the New York Stock Exchange Composite Tape on such date.
Options granted pursuant to the Director Plan become fully exercisable one year
after the date of grant and expire on the fifth anniversary following the date
of grant. The Director Plan terminated in accordance with its terms on January
1, 1996, after which no further stock options could be granted but outstanding
stock options would continue to be exercisable in accordance with their terms.
Valhi and Contran are parties to an intercorporate services agreement (the
"Contran/Valhi ISA") pursuant to which Contran provided certain services to
Valhi during 1995, including services rendered to Valhi by Glenn R. Simmons and
Harold C. Simmons, each of whom is a director of Valhi. NL and Contran are
parties to an intercorporate services agreement (the "Contran/NL ISA") pursuant
to which Contran provided services rendered by Harold C. Simmons to NL during
1995. See "Certain Relationships and Transactions" below.
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
to or on behalf of Valhi's Chief Executive Officer, each of the four other most
highly compensated individuals during 1995 who were executive officers of Valhi
at December 31, 1995, for services rendered to Valhi and its subsidiaries during
1993, 1994 and 1995. During such periods, Harold C. Simmons' and Glenn R.
Simmons' compensation was paid by Contran and Joseph S. Compofelice's
compensation was paid by NL and Tremont. Valhi paid the remainder of the named
executive officers their compensation during such periods. In December 1994,
Valhi's Board of Directors declared a special dividend distribution of its
interest in Tremont (the "Tremont Dividend"), after which Tremont ceased being a
subsidiary of Valhi. Accordingly, after the Tremont Dividend, Valhi ceased to
report any compensation paid by Tremont or Valhi for services rendered to
Tremont. Valhi, Contran, NL, Tremont and certain related corporations have
entered into certain intercorporate services agreements between each other
(collectively, the "ISAs"). Pursuant to each ISA, the parties to the ISA agreed
to render certain reimbursable services to the other, including executive
officer services rendered to one party by employees of the other. The fees paid
pursuant to the ISAs are based upon the estimated percentage of time individual
employees, including executive officers, devote to matters on behalf of the
recipient of the services. See also "Certain Relationships and Transactions."
The information provided with respect to Joseph S. Compofelice is based in part
on information provided in the NL Proxy Statement for NL's Annual Meeting of
Shareholders to be held on May 8, 1996 (the "NL Proxy Statement").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (2)
NAME AND
PRINCIPAL POSITION YEAR SALARY (3) BONUS (3)
<S> <C> <C> <C> <C> <C>
Harold C. Simmons 1995 $1,368,000 (4) $ -0-
Chairman of the Board, 1994 1,425,015 (4) -0-
President and Chief 1993 1,996,000 (4) -0-
Executive Officer
Glenn R. Simmons 1995 210,308 (5) -0-
Vice Chairman of the 1994 169,116 (5) -0-
Board 1993 150,424 (5) -0-
Joseph S. Compofelice 1995 212,000 (9) 277,500 (9)
(8) 1994 246,482 (9) 250,300 (9)
Executive Vice
President
William C. Timm 1995 165,679 (14) 49,704 (14)
Vice President-Finance 1994 214,869 (14) 213,941 (14)
and Treasurer 1993 199,519 (14) 119,711 (14)
Steven L. Watson 1995 124,268 (16) 53,258 (16)
Vice President and 1994 133,810 (16) 133,809 (16)
Secretary 1993 121,793 (16) 60,897 (16)
</TABLE>
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION (1)
----------------
AWARDS
------
RESTRICTED SHARES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR AWARDS OPTIONS (#) COMPENSATION
<S> <C> <C> <C> <C> <C> <C> <C>
Harold C. Simmons 1995 $ -0- -0- $ -0-
Chairman of the Board, 1994 -0- -0- -0-
President and Chief 1993 -0- -0- -0-
Executive Officer
Glenn R. Simmons 1995 -0- -0- -0-
Vice Chairman of the 1994 -0- 100,000 (6) -0-
Board 1993 99,938 (7) 100,000 (6) -0-
Joseph S. Compofelice (8) 1995 -0- 30,000 (10) 39,042 (11)
Executive Vice President 1994 -0- 50,000 (12) 11,543 (11)
125,000 (10)
25,000 (13)
William C. Timm 1995 -0- -0- 19,266 (15)
Vice President-Finance 1994 -0- 75,000 (6) 21,000 (15)
and Treasurer 1993 50,213 (7) 75,000 (6) 51,500 (15)
Steven L. Watson 1995 -0- -0- 7,020 (15)
Vice President and 1994 -0- 40,000 (6) 21,000 (15)
Secretary 1993 24,863 (7) 40,000 (6) 17,091 (15)
</TABLE>
[FN]
- ----------
(1) No payouts were made to the named executive officers pursuant to long-term
incentive plans during the last three years. Therefore, the column for such
compensation has 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.
Therefore, the column for other annual compensation has been omitted.
(3) The amounts shown in the table as compensation for Mr. Harold Simmons and
Mr. Glenn Simmons represent the portion of the fees paid to Contran pursuant to
the ISAs with respect to services Mr. Harold Simmons and Mr. Glenn Simmons
rendered to Valhi and its subsidiaries, plus the amount of director fees paid to
Mr. Harold Simmons and Mr. Glenn Simmons by NL and, prior to 1995, Tremont. See
also footnotes (4) and (5) below.
NL and Tremont have paid Mr. Compofelice's compensation while he has been an
executive officer of the Company. After the Tremont Dividend, Valhi ceased to
report any compensation paid by Tremont to Mr. Compofelice other than the amount
Valhi credits to Contran (which Contran in turn credits Tremont) for Mr.
Compofelice's services provided to Valhi pursuant to the Contran/Valhi ISA. The
amounts shown as compensation in the table for Mr. Compofelice for 1995
represent the full amount paid by NL for services Mr. Compofelice rendered
during 1995 plus the portion of the fees paid by Valhi to Contran pursuant to
the Contran/Valhi ISA with respect to services Mr. Compofelice rendered to Valhi
in 1995. The amounts shown as compensation in the table for Mr. Compofelice for
1994 represent the full amount paid by NL and Tremont for services Mr.
Compofelice rendered during 1994. See also footnote (9) below.
The amounts shown in the table as compensation for Messrs. Timm and Watson
represent the full amount paid by Valhi for services such individuals rendered
to Valhi during each respective period, less the portion of such compensation
that is attributable to the services such executive officers rendered to Contran
and certain entities related to Contran, for which Contran credited Valhi
pursuant to the Contran/Valhi ISA. The net salary and bonus amounts shown for
each such individual for each such period reflect the reduction for the amount
credited to Valhi by Contran, which has been allocated proportionately between
each individual's base salary and bonus. See also footnotes (14) and (16)
below.
(4) As described in footnote (3), the aggregate amount of compensation shown in
the table for Mr. Harold Simmons consists of (i) fees paid by Valhi pursuant to
the ISAs with respect to services Mr. Harold Simmons rendered to Valhi in the
amount of $950,000, $946,515 and $1,438,016 for 1995, 1994 and 1993,
respectively; (ii) fees paid by NL pursuant to the ISAs with respect to services
Mr. Harold Simmons rendered to NL in the amount of $400,000, $380,000 and
$475,868 for 1995, 1994 and 1993, respectively, and director fees paid by NL to
Mr. Harold Simmons in the amount of $18,000, $17,250 and $18,000 for 1995, 1994
and 1993, respectively; and (iii) fees paid by Tremont pursuant to the ISAs with
respect to services by Mr. Harold Simmons rendered to Tremont in the amount of
$64,000 and $46,116 for 1994 and 1993, respectively, and director fees paid by
Tremont to Mr. Harold Simmons in the amount of $17,250 and $18,000 for 1994 and
1993, respectively.
(5) As described in footnote (3), the aggregate amount of compensation shown in
the table for Mr. Glenn Simmons consists of (i) fees paid by Valhi pursuant to
the ISAs with respect to services Mr. Glenn Simmons rendered to Valhi in the
amount of $192,308, $134,616 and $114,424 for 1995, 1994 and 1993, respectively;
(ii) director fees paid by NL to Mr. Glenn Simmons in the amount of $18,000,
$17,250 and $18,000 for 1995, 1994 and 1993, respectively; and (iii) director
fees paid by Tremont to Mr. Glenn Simmons in the amount of $17,250 and $18,000
for 1994 and 1993, respectively.
(6) On March 30, 1993 and March 10, 1994, stock options were granted to these
named executive officers for the number of shares shown in the table above for
1993 and 1994, respectively. Such options were originally granted with
escalating exercise prices based on the yield for five-year U.S. Treasury Notes
on the date of grant, less the amount of cash dividends paid per share. Such
options were considered variable-priced options under generally accepted
accounting principles, which would have required the Company to expense annually
the excess of the market value of the underlying shares over the adjusted
exercise price of the stock options. On October 26, 1994, a grant of fixed-
priced stock options was approved by the MD&C Committee in exchange for the
variable-priced options previously granted, which eliminated any future annual
expenses related thereto. The exercise prices for the fixed-priced stock
options were set at prices equal to the exercise prices that would have existed
at the vesting dates of each portion of the original variable-priced stock
options, based upon original escalation rates of such stock options and the cash
dividend rate at the time of the exchange. The stock options reported in the
Summary Compensation Table for these executive officers reflect the net stock
options attributable to each year indicated (the year of grant of the replaced
option) with respect to the named executive officers.
Pursuant to an agreement between Contran and Valhi, Contran will pay Valhi an
amount equal to the market value on the date of exercise of any Valhi Common
Stock issued to Mr. Glenn Simmons pursuant to his exercise of stock options that
Valhi has granted to him.
(7) The dollar value of the reported awards of restricted Valhi Common Stock is
based on the last reported sales price per share on the date of the award of
Valhi Common Stock as reported by the New York Stock Exchange Composite Tape.
The total number of shares of restricted Valhi Common Stock awarded in the last
three fiscal years to each named executive officer and the aggregate number and
value of each named executive officer's holdings of restricted Valhi Common
Stock as of December 31, 1995 (at which time the market value was $6.375 per
share based on the last reported sales price per share on such date as reported
by the New York Stock Exchange Composite Tape) were as follows:
<TABLE>
<CAPTION>
TOTAL NUMBER
OF SHARES OF NON-VESTED VALUE OF NON-
RESTRICTED SHARES OF VESTED
VALHI COMMON RESTRICTED RESTRICTED
STOCK AWARDED VALHI VALHI
IN THE COMMON COMMON
NAMED LAST THREE STOCK AS OF STOCK AS OF
EXECUTIVE OFFICER FISCAL YEARS DECEMBER 31, 1995 DECEMBER 31, 1995
<S> <C> <C> <C>
Harold C. Simmons -0- -0- $ -0-
Glenn R. Simmons (a) 20,500 6,150 39,206
Joseph S. -0- -0- -0-
Compofelice
William C. Timm 10,300 3,050 19,444
Steven L. Watson 5,100 1,500 9,563
</TABLE>
[FN]
- ----------
(a) Pursuant to an agreement between Contran and Valhi, Contran will pay Valhi
an amount equal to the market value on the date of vesting of any restricted
Valhi Common Stock issued to Mr. Glenn Simmons.
The reported shares of restricted Valhi Common Stock vest at a rate of
approximately 40% after six months from the date of award, 30% after eighteen
months from the date of the award and 30% after 30 months from the date of the
award, unless vesting is otherwise accelerated by the MD&C Committee. Dividends
on all shares of restricted Valhi Common Stock are paid at the same time and at
the same rate as dividends on unrestricted Valhi Common Stock.
(8) Mr. Compofelice commenced serving as an executive officer of Valhi in July
1994.
(9) As described in footnote (3), Mr. Compofelice's Valhi compensation consists
of (i) for 1995, a base salary and bonus paid by NL of $185,000 and $277,500,
respectively, plus an addition to Mr. Compofelice's 1995 base salary of $27,000
representing an amount that Valhi credited Contran (which Contran in turn
credited Tremont) pursuant to the Contran/Valhi ISA for services Mr. Compofelice
provided Valhi in 1995 and (ii) for 1994, a base salary and bonus paid by NL of
$166,856 and $250,300, respectively, plus a base salary paid by Tremont of
$79,626. All bonuses paid by NL were paid pursuant to NL's Variable
Compensation Plan, formerly known as NL's Share in Performance Incentive Plan.
See "Appendix A-NL Compensation Committee Report on Executive Compensation" for
a discussion of the NL Variable Compensation Plan.
(10) Represents shares of NL Common Stock underlying stock options granted by NL
to Mr. Compofelice.
(11) All other compensation for 1995 and 1994 for Mr. Compofelice consists of
(i) contributions by NL of $9,000 and $9,000, respectively, to Mr. Compofelice's
account under the NL Savings Plan and (ii) term life insurance premiums of
$1,512 and $950, respectively, paid by NL for the benefit of Mr. Compofelice.
All other compensation for Mr. Compofelice also includes an accrual of $28,530
in 1995 by NL in an unfunded account for the benefit of Mr. Compofelice under
the Supplemental Executive Retirement Plan for Executives and Officers of NL and
a retirement contribution made in 1994 by TIMET of $1,593 to Mr. Compofelice's
account under the TIMET Thrift/Retirement Plan.
(12) Represents shares of Valhi Common Stock underlying a fixed-price stock
option granted by Valhi to Mr. Compofelice.
(13) Represents shares of Tremont common stock underlying stock options granted
by Tremont to Mr. Compofelice.
(14) As described in footnote (3), Mr. Timm's Valhi compensation excludes the
amount Contran credited to Valhi for his services pursuant to the Contran/Valhi
ISA, which amounts were $109,617, $72,117 and $80,770 for 1995, 1994 and 1993,
respectively. Mr. Timm's 1994 salary amount includes a reimbursement of $927
for taxes with respect to an accrual for 1994 to an unfunded reserve account for
his benefit.
(15) All other compensation for the last three years for each of the following
named executive officers consisted of contributions to the Company's employee
stock ownership plan (the "ESOP"), the Company's matching contributions pursuant
to the Company's Deferred Incentive Plan (the "DIP") and accruals to unfunded
reserve accounts payable upon the named executive officer's retirement, the
termination of his employment with the Company or to his beneficiaries upon his
death, as follows:
<TABLE>
<CAPTION>
UNFUNDED
ESOP RESERVE
NAMED EXECUTIVE CONTRIBUTION VALHI'S DIP ACCOUNT
OFFICER YEAR (A) CONTRIBUTION ACCRUALS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
William C. Timm 1995 $ -0- $ 7,020 $12,246 $19,266
1994 3,000 18,000 (b) -0- 21,000 (b)
1993 3,773 13,491 34,236 51,500
Steven L. Watson 1995 -0- 7,020 -0- 7,020
1994 3,000 18,000 (b) -0- 21,000 (b)
1993 3,600 13,491 -0- 17,091
</TABLE>
[FN]
- -----------
(a) The Company terminated the ESOP as of March 31, 1995
(b) Pursuant to certain limitations imposed by the Internal Revenue Code of
1986, as amended (the "Code"), the DIP distributed in March 1995 to each of the
above named executive officers $4,560 of such officer's $18,000 1994 DIP
contribution from Valhi.
(16) As described in footnote (3), Mr. Watson's Valhi compensation excludes the
amount Contran credited to Valhi for his services pursuant to the Contran/Valhi
ISA, which amounts were $72,474, $42,381 and $42,310 for 1995, 1994 and 1993,
respectively.
Grants of Stock Options and Stock Appreciation Rights. In 1995, Valhi did not
grant to its executive officers any stock options or stock appreciation rights
("SARs") under the Incentive Plan. See Appendix A for a description of stock
options NL granted Mr. Joseph S. Compofelice in 1995.
Stock Option Exercises and Holdings. The following table provides information,
with respect to the named executive officers, concerning the value of
unexercised stock options held as of December 31, 1995. In 1995, no named
executive officer exercised any stock options. No SARs have been granted under
the Incentive Plan.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 OPTION VALUES
NUMBER OF SHARES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1995 (#) AT DECEMBER 31, 1995 (2)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Harold C. Simmons (1) 650,000 -0- $242,250 $ -0-
Glenn R. Simmons (1) 540,000 160,000 313,600 93,700
Joseph S. Compofelice 10,000 40,000 -0- -0-
William C. Timm 325,000 125,000 255,500 75,350
Steven L. Watson 176,000 64,000 141,590 37,480
</TABLE>
[FN]
- ----------
(1) Pursuant to an agreement between Contran and Valhi, Contran will pay Valhi
an amount equal to the market value on the date of exercise of any Valhi Common
Stock issued to such person pursuant to the exercise of stock options granted to
such person.
(2) The aggregate amount represents the difference between the exercise price
of the individual stock options and the $6.375 per share market value of Valhi
Common Stock on December 31, 1995, calculated as the last reported sales price
per share as reported on the New York Stock Exchange Composite Tape on such
date.
Pension Plan. The Company'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 cash bonus
amounts paid directly by Valhi, including the amount thereof credited by Contran
to Valhi pursuant to the Contran/Valhi ISA. See "Compensation of Directors and
Executive Officers and Other Information-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 1995 does not take into
account a participant's annual earnings in excess of $150,000. As a result, the
compensation eligible to be utilized for purposes of the Pension Plan formula
only includes $150,000 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.
<TABLE>
<CAPTION>
Years of Credited Service
Average Annual
Earnings 5 10 20 30
<S> <C> <C> <C> <C>
$ 80,000 $ 5,317 $10,634 $21,268 $32,902
100,000 7,067 14,134 28,268 42,402
120,000 8,817 17,634 35,268 52,902
140,000 10,567 21,134 42,268 63,402
150,000 11,442 22,884 45,768 68,652
</TABLE>
As of December 31, 1995, William C. Timm and Steven L. Watson were credited with
14 years and 15 years, respectively, of benefit service to Valhi under the
Pension Plan. Harold C. Simmons, Glenn R. Simmons and Joseph S. Compofelice are
not 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) 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 received, Valhi believes that for 1995 its executive officers, directors
and 10% stockholders complied with all applicable filing requirements under
Section 16(a).
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
During 1995, 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 non-employee directors of Valhi. Of those
persons who deliberated on Valhi executive officer compensation at any time in
1995, only Mr. Harold Simmons was an executive officer of Valhi or any of its
subsidiaries.
Mr. Harold Simmons deliberated also on the compensation of the executive
officers of certain entities controlled by or affiliated with him. Other than
Mr. Harold 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
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 the Company. The Company and other entities
that may be deemed to be controlled by or affiliated with Mr. Harold 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. The Company
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 the Company might be a party to one or more of
such transactions in the future. In connection with these activities the
Company may consider issuing additional equity securities or incurring
additional indebtedness. The Company'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. Harold Simmons. It is the policy of the Company to engage in transactions
with related parties on terms, in the opinion of the Company, no less favorable
to the Company 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 1996. 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 the Company 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 owe fiduciary duties of good
faith and fair dealing to all stockholders of the companies for which they
serve.
REPORT ON EXECUTIVE COMPENSATION
During 1995, matters regarding compensation of the Company's executive officers
were administered by the Company's Chief Executive Officer (the "CEO"), the Non-
Employee Directors and the MD&C Committee. This report is submitted by such
individuals in their respective capacities, as set forth below. Joseph S.
Compofelice's NL compensation was determined in accordance with the procedures
described in Appendix A.
The Board of Directors, with directors other than Non-Employee Directors
abstaining, considered and approved the terms of the Contran/Valhi ISA, pursuant
to which the services of Harold C. Simmons, the Company's Chairman of the Board,
President and CEO, and Glenn R. Simmons, the Company's Vice Chairman of the
Board, were provided. The CEO, considering recommendations of management,
determined the cash compensation paid to the Company's employees, including the
Company's other executive officers, and made recommendations to the MD&C
Committee with respect to matters related to awards of restricted stock and
grants of stock options. The MD&C Committee, which is comprised solely of the
Non-Employee Directors, reviewed and approved actions related to awards of
restricted stock and grants of stock options to the Company's executive officers
and other employees pursuant to the Incentive Plan.
It is the Company's policy that employee compensation, including compensation to
executive officers, be at a level that allows the Company to attract, retain,
motivate and reward individuals who have the requisite training and experience
to manage the Company and its business. It is also the Company's policy that a
significant portion of any incentive compensation paid be related to the
performance of the Company's equity securities and have a commonality of
interest with the stockholders of the Company, which objectives are generally
met through the periodic grant of stock options and/or award of restricted
stock, since the value of each is directly dependent on the future value of the
Company's equity securities.
The CEO either does not participate in the Company's compensation and employee
benefit plans or the cost of such participation is credited to the Company by
Contran. The amount of the fee paid by the Company 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 such position 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 the Company's policies and directing strategic transactions
involving the Company and its subsidiaries. Additionally, the Board of
Directors took into account the Company'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 the Company's current or future performance and the level of such fee.
The compensation of the Company's executive officers, other than the CEO,
consists primarily of base salary and incentive compensation. Incentive
compensation consists of bonuses, in the form of cash and/or awards of
restricted stock and grants of stock options. The CEO may be deemed to control
approximately 91% 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 the
Company, have been established on a position-by-position basis. Annual internal
reviews of salary levels are conducted by the Company'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 the
Company, 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 (i) promotions, (ii) increases in responsibility or (iii)
unwarranted discrepancies between job value and the corresponding base salary.
The Company 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 the Company 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 the
Company 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 the Company 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." The
Company's practice has been to provide for greater percentages of such "at risk"
compensation at higher levels of responsibility. Annual bonuses have been paid
in the form of cash and/or awards of restricted stock. Stock options are an
important element of the Company's incentive compensation program and provide a
further commonality of interest with the stockholders of the Company in that the
value of such options depends entirely on the appreciation of the stock into
which the options are exercisable. Therefore, unless the price of the Company's
equity securities increases over the term of the stock options, such portion of
an employee's aggregate compensation will have no value. The size of each
executive's 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.
In the case of awards of restricted stock and grants of stock options, the MD&C
Committee considered the policies and factors set forth herein, the level of
cash compensation paid to each individual, the recommendation of the CEO and the
number of stock options previously granted to each individual. 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 the Company'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 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. The Company's overall performance is typically
measured by the Company'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. No awards of restricted stock or grants of stock options were made to
the Company's executive officers in 1995, based upon the CEO's individual
business judgment after considering recommendations by management and the
aggregate amount of incentive compensation, including prior grants of stock
options.
Section 162(m) of the Code, enacted in 1993, generally disallows a tax deduction
to public companies for compensation over $1 million paid to the company's chief
executive officer and four other most highly compensated executive officers. It
is the Company's policy to structure the performance-based portion of the
compensation of its executive officers in a manner that enhances the Company'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
Non-Employee Director Non-Employee Director
and member of the MD&C and member of the MD&C
Committee Committee
J. Walter Tucker, Jr. Harold C. Simmons
Non-Employee Director Chief Executive Officer
and member of 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 Composite 500 Stock Index and the S & P Conglomerate Index
for the period of five fiscal years commencing December 31, 1990 and ending
December 31, 1995. The graph shows the value at December 31 of each year
assuming an original investment of $100 and 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]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Valhi, Inc. $100 $116 $107 $108 $167 $147
S&P 500 100 130 140 155 157 215
S&P Conglomerate 100 108 134 177 168 218
</TABLE>
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties
- ----------------------------------
The Company 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 1996. See "Compensation of Directors and Executive Officers and Other
Information-Compensation Committee Interlocks and Insider Participation-
Relationships with Related Parties," for a further discussion on these
transactions, management interrelationships and intercorporate relationships.
Contractual Arrangements
- ------------------------
Intercorporate Services Agreements. The Contran/Valhi ISA provides that Contran
will render or provide for certain management, administrative and aircraft
maintenance services to the Company and that the Company will render certain
management and administrative services to Contran. The Company paid Contran net
fees of $164,000 for services rendered under the Contran/Valhi ISA in 1995,
which represented $1,499,000 for services Contran rendered to the Company less
$1,335,000 for services the Company rendered to Contran. In addition, Contran
and the Company credited to the other the out-of-pocket costs incurred in
rendering such services. The Contran/NL ISA provides that Contran will make
available the services of Harold C. Simmons to NL. NL paid Contran fees of
$400,000 for such services rendered in 1995. Each of the ISAs provide for their
extension on a quarter-to-quarter basis, subject to termination upon thirty days
advance notice by either party, and their amendment by mutual agreement.
Subsidiary Relationships. NL is a party to certain additional agreements with
related entities as set forth in Appendix A to this Proxy Statement.
CERTAIN LITIGATION AND OTHER MATTERS
In November 1991, a purported derivative complaint was filed in the Court of
Chancery of the State of Delaware, New Castle County (Alan Russell Kahn v.
Tremont Corporation, et al., No. 12339), in connection with Tremont's purchase
of 7.8 million shares of NL Common Stock from Valhi (the "NL Stock Purchase").
In addition to Valhi, the complaint named as defendants Tremont and the members
of Tremont's board of directors, including Harold C. Simmons and Glenn R.
Simmons. The complaint alleged, among other things, that the NL Stock Purchase
constituted a waste of Tremont's assets and that Tremont's board of directors
had breached its fiduciary duties to Tremont's public stockholders. A trial on
this matter was held in June 1995 and in March 1996 the court issued its opinion
ruling in favor of the defendants and concluded that the NL Stock Purchase did
not constitute an overreaching by Valhi, that Tremont's purchase price in the NL
Stock Purchase was fair and that in all other respects the NL Stock Purchase was
fair to Tremont. The plaintiff's time for appeal has not yet expired.
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 will vote
on such matters in accordance with their best judgment.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Coopers & Lybrand, L.L.P. served as the Company's primary
independent public accountants for the year ended December 31, 1995 and is
expected to be considered for appointment as such for the year ended December
31, 1996. Representatives of Coopers & Lybrand, L.L.P. are expected to attend
the Meeting. They will have an opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1997 MEETING
Stockholders may submit proposals on matters appropriate for stockholder action
at the Company's annual stockholder meetings, consistent with rules adopted by
the Commission. Such proposals must be received by the Company not later than
December 6, 1996 to be considered for inclusion in the proxy statement and form
of proxy relating to the 1997 Annual Meeting of Stockholders. Any such
proposals should be addressed to: Corporate Secretary, Valhi, Inc., Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
1995 ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as filed with the Commission, is included as part of the
Annual Report mailed to the Company'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.
APPENDIX
Annexed to this Proxy Statement as Appendix A is a description of additional
matters related to the 1995 compensation NL paid to Joseph S. Compofelice, an
executive officer of Valhi, and information with respect to certain related
party transactions involving NL.
VALHI, INC.
Dallas, Texas
March 29, 1996
APPENDIX A
Compensation Paid by NL Industries, Inc.
to Joseph S. Compofelice and Related Issues
The information provided in this Appendix A is based on information provided in
the NL Proxy Statement.
Grants of NL Stock Options and Stock Appreciation Rights. The following table
provides information with respect to Mr. Compofelice concerning the grant of
stock options exercisable for NL Common Stock under the 1989 Long Term
Performance Incentive Plan of NL Industries, Inc. (the "NL Incentive Plan")
during 1995. No stock appreciation rights were granted under the NL Incentive
Plan in 1995.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF
SHARES OF PERCENT
NL COMMON OF TOTAL
STOCK OPTIONS EXERCISE
UNDERLYING GRANTED OR BASE
OPTIONS TO NL PRICE
GRANTED EMPLOYEES PER EXPIRATION
NAME (#) IN 1995 SHARE DATE
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Compofelice 10,000 (2) 32.8% $11.8125 (3) 03/09/05
10,000 (2) 13.3125
10,000 (2) 14.8125
</TABLE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
STOCK PRICE
APPRECIATION OF NL
COMMON STOCK
FOR OPTION TERM (1)
NAME 5% 10%
<S> <C> <C>
Joseph S. Compofelice $74,248 $188,260
59,287 173,260
44,287 158,260
</TABLE>
[FN]
- ----------
(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 NL Common Stock.
The potential realizable value to Mr. Compofelice was computed as the difference
between the appreciated value at the end of the ten-year term of the stock
option of the NL Common Stock into which such stock option is exercisable and
the aggregate exercise price of such stock option on such date. The appreciated
value per share at the end of the ten-year term would be $19.24 and $30.64 at
the 5% and 10% rates, respectively.
The amount of gain to Mr. Compofelice is dependent on the amount of increase in
the price of NL Common Stock, which would benefit all NL shareholders
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 NL Common Stock, overall market conditions and the
timing of the exercise thereof by Mr. Compofelice. There can be no assurance
that the amounts reflected in the table will be achieved.
(2) This stock option is exercisable for shares of NL Common Stock. This stock
option was granted as of March 9, 1995 under the NL Incentive Plan. This stock
option vests over five years from the date of grant at a rate of 40% on the
second anniversary of the date of grant and 20% on each of the next three
succeeding anniversary dates. The options expire on the tenth anniversary of
the date of grant.
(3) This exercise price of $11.8125 is equal to the mean of the high and the
low sales prices on the date of grant of NL Common Stock as reported by the New
York Stock Exchange Composite Tape
NL Stock Option Exercises and NL Holdings. The following table provides
information, with respect to Joseph S. Compofelice concerning the value of
unexercised NL stock options held by him as of December 31, 1995. Mr.
Compofelice did not exercise any NL stock options in 1995. In addition, no
stock appreciation rights have been granted under the NL Incentive Plan.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 OPTION VALUES
Number of Shares Value of Unexercised
Underlying In-the-Money Options
Unexercised Options at at December 31, 1995 (1)
December 31, 1995 (#)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Joseph S. Compofelice -0- 155,000 $ -0- $458,125
</TABLE>
[FN]
- ----------
(1) The aggregate amount represents the difference between the exercise price
of Mr. Compofelice's stock options and the $12.125 per share market value of NL
Common Stock on December 31, 1995, calculated as the last reported sales price
per share as reported on the New York Stock Exchange Composite Tape on such
date.
NL Pension Plan. The Retirement Plan of NL Industries, Inc. for its U.S.
employees (the "NL Pension Plan") provides lifetime retirement benefits to
eligible employees. In February 1996, NL approved the suspension of all future
accruals under the NL Pension Plan effective as of March 31, 1996 (the
"Suspension Date"). Salaried employees, who were at least 21 years of age
became eligible to participate in the NL Pension Plan if they completed at least
five months of service (as defined in the NL Pension Plan) in a specified
twelve-month period prior to the Suspension Date. Annually, prior to the
Suspension Date, NL's Board of Directors established, in its discretion, the
amount of an employee's annual pension benefit for the year based primarily on
the employee's total eligible earnings for that year and NL's financial
performance in relationship to its annual operating plan for the previous year.
To the extent that the minimum, target, or maximum level of operating income
performance were achieved, the employee earned an annual benefit equal to 1%, 2%
or 3%, respectively, of such employee's total base salary and bonus. See "-NL
Compensation Committee Report on Executive Compensation-Variable Compensation
Plan." Such pension benefits are payable upon retirement and attainment of ages
specified in the NL Pension Plan. The NL Pension Plan covers Mr. Compofelice.
No amounts were paid or distributed to Mr. Compofelice in 1995. The estimated
accrued annual benefits payable upon retirement at normal retirement age for Mr.
Compofelice is $4,793.
NL Employment Agreement with Mr. Compofelice. In connection with Mr.
Compofelice's employment with NL in February 1994, NL's Management Development
and Compensation Committee approved the terms of an executive severance
agreement with Mr. Compofelice that provides that Mr. Compofelice's employment
with NL may be terminated at any time by action of NL's board of directors. The
executive severance agreement also provides that the following payments shall be
made to Mr. Compofelice in the event Mr. Compofelice's employment with NL is
terminated by NL without cause (as defined in the agreement) or Mr. Compofelice
terminates his employment with NL for good reason (as defined in the agreement):
(i) the greater of two times Mr. Compofelice's annual base salary plus target
bonus (which shall not be less that the amount of his annual salary) or Mr.
Compofelice's actual salary and bonus for the two years prior to termination;
(ii) accrued salary and bonus through the date of termination; (iii) an amount
in cash or NL Common Stock equal to the fair market value of outstanding NL
stock options granted to Mr. Compofelice in excess of the exercise price and
unvested NL restricted stock awarded to Mr. Compofelice; (iv) an amount equal to
unvested NL contributions together with an amount equal to NL's matching
contributions to Mr. Compofelice's account under the NL Savings Plan for a
period of two years; (v) an amount equal to the vested and unvested portions of
Mr. Compofelice's account under the Supplemental Executive Retirement Plan for
Executives and Officers of NL Industries, Inc.; and (vi) certain other benefits.
This agreement is automatically extended for a one-year term commencing each
January 1, unless NL and Mr. Compofelice agree otherwise in writing.
Certain NL Relationships and Transactions
- -----------------------------------------
Intercorporate Services Agreements. NL and Valhi are parties to an
intercorporate services agreement (the "Valhi/NL ISA") whereby Valhi renders
certain management, financial and administrative services to NL and NL makes the
services of Joseph S. Compofelice available to Valhi. Mr. Compofelice serves as
an executive officer of Valhi. NL paid net fees of approximately $80,000 to
Valhi for services pursuant to the Valhi/NL ISA during 1995 in excess of the
amount owed by Valhi to NL for the portion of Mr. Compofelice's salary earned in
1995 for services attributable to Valhi. NL expects to pay approximately the
same net amount for services in 1996. The Valhi/NL ISA is subject to
termination or renewal by mutual agreement and may be terminated by either party
pursuant to a written notice delivered 30 days prior to a quarter-end. In
addition, in 1995 NL provided to Valhi certain internal audit services totaling
approximately $28,000 for which NL expects to be reimbursed or credited in 1996.
NL and Tremont are parties to an intercorporate services agreement (the
"NL/Tremont ISA") whereby the NL makes available to Tremont certain services
with respect to Tremont's insurance, risk management, real property, and
internal audit needs. Tremont paid fees of approximately $60,000 to NL for
services pursuant to the NL/Tremont ISA during 1995 and NL expects to receive
approximately the same amount for services in 1996. The NL/Tremont ISA is
subject to termination or renewal by mutual agreement for succeeding one-year
terms commencing January 1, 1996 and may be terminated at anytime by either
party pursuant to 90 day prior written notice to the other party.
Tremont Registration Rights Agreement. In connection with the December 1991
purchase by Tremont of 7.8 million shares of NL Common Stock from Valhi, NL
entered into a Registration Rights Agreement pursuant to which Tremont received
certain registration rights with respect to the purchased shares. Unless all
registration rights are exercised earlier, such agreement expires in December
2001.
Valhi Stock Options. Certain employees of the NL hold options to purchase Valhi
Common Stock under the terms of the Incentive Plan. At December 31, 1995, three
of NL's executive officers (including Mr. Compofelice) and one other employee
held options to purchase, in the aggregate, 415,000 shares of Valhi Common Stock
at exercise prices ranging from $4.76 to $14.66 per share. With respect to all
such employees except Mr. Compofelice, NL has agreed to pay Valhi the aggregate
difference between the option price and the market value of Valhi's Common Stock
on the exercise date if such options are exercised.
Insurance Sharing Agreement. An indirect insurance subsidiary of Tremont has
assumed the obligation of the issuer of certain reinsurance contracts that
relate to primary insurance policies issued by a third-party insurance company
in favor of Tremont and NL. NL and the Tremont insurance subsidiary are parties
to an insurance sharing agreement with respect to such reinsurance contracts
(the "Insurance Sharing Agreement"). Under the terms of the Insurance Sharing
Agreement, NL is to reimburse the Tremont insurance subsidiary with respect to
certain loss payments and reserves established by such Tremont subsidiary that
(a) arise out of claims against NL and its subsidiaries (the "NL Liabilities")
and (b) are subject to payment by such Tremont subsidiary under its reinsurance
contracts with the third-party insurance company. Also pursuant to the
Insurance Sharing Agreement, the Tremont insurance subsidiary is to credit NL
with respect to certain underwriting profits or recoveries that such Tremont
subsidiary receives from independent reinsurers that relate to the NL
Liabilities. As of December 31, 1995, NL had current accounts payable to such
Tremont subsidiary of approximately $3.7 million with respect to such agreement.
Other Certain NL Relationships and Transactions. For a discussion of certain
other NL relationships and transactions, see "Certain Relationships and
Transactions" in the Proxy Statement.
NL Compensation Committee Report on Executive Compensation
- ----------------------------------------------------------
The following report is the same as the one that appears in the NL Proxy
Statement. Accordingly, capitalized terms that appear in the following report
have the same meanings given to such terms as in the NL Proxy Statement. Cross
references appearing in the following report refer to sections of the NL Proxy
Statement. A copy of the NL Proxy Statement can be obtained without charge by
writing: Investor Relations Department, NL Industries, Inc., 16825 Northchase
Drive, Suite 1200, Houston, Texas 77060.
The Company's Management Development and Compensation Committee (the
"Committee") consists of individuals who are neither officers nor employees of
the Company or its subsidiaries and who are not eligible to participate in any
of the employee benefit plans the Committee administers.
The Committee reviews and recommends executive officer compensation policies and
practices. The Committee was responsible for reviewing and approving all
compensation actions during 1995, including stock-based compensation, involving
the Company's executive officers. However, in connection with the Chief
Executive Officer (the "CEO"), compensation other than stock-based compensation
was approved by the Board of Directors after recommendation by the Committee.
See "Meetings and Committees."
The Company's compensation system with respect to its executive officers,
including the CEO, consists of three primary components: base salary, annual
variable compensation pursuant to the Variable Compensation Plan and the grant
of stock options, restricted stock, and stock appreciation rights pursuant to
the Incentive Plan. Through the use of the foregoing components, the Committee
seeks to achieve a balanced compensation package that will attract and retain
high quality key executives, appropriately reflect each such executive officer's
individual performance and contributions, and provide further incentives to
such officers to maximize annual operating performance and long-term shareholder
value.
Base Salaries
- -------------
The Committee reviews recommendations of the CEO regarding base salaries for
executive officers. Such reviews occur no more frequently than annually. The
annual base salaries of all but two of the executive officers, including the
CEO, were not increased in 1995 and remained at 1992 levels. When
recommendations regarding changes in base salary levels are made by the CEO, the
Committee reviews them and may take such actions, including any modifications,
as it deems appropriate. These recommendations are based primarily on past and
potential future individual performance and contributions and also on data
regarding companies employing executives in positions similar to those whose
salaries are being reviewed, both inside and outside of the chemicals industry
(which may include companies contained in the peer group index plotted on the
Performance Graph following this report), and other companies with similar
financial and business characteristics as the Company, or where the executive in
question has similar responsibilities. In 1995, the Committee approved a base
annual salary increase for Dr. Wigdor from $450,000 to $550,000 and for Mr.
Garten from $175,000 to $225,000 based on the considerations described in this
paragraph.
Variable Compensation Plan
- --------------------------
Awards under the Variable Compensation Plan constitute a significant portion of
an executive's potential annual cash compensation (between 0% and 150% of base
salary for the CEO and the executive officers). Awards are based primarily on
the applicable business segment achieving annual predetermined operating income
goals and secondarily, with respect to certain of the executive officers, on
individual performance. The Company's management makes recommendations to the
Board regarding the operating income plan for the year after reviewing market
conditions and the Company's operations, competitive position, marketing
opportunities, and strategies for maximizing financial performance. The Board
approves this recommendation with any modifications it deems appropriate. Based
on the operating income plan for the year, the Committee sets the Company's and
its business segments' operating income goals at three levels which are designed
to help focus the executives' attention on achieving superior annual operating
results in light of existing conditions: a threshold level, which is the minimum
operating income level for any award to be made under the Variable Compensation
Plan (the "Minimum Level"), a target level (the "Target Level"), and a maximum
level (the "Maximum Level").
The Variable Compensation Plan, in combination with base salary, is designed to
result in executive officers and other eligible participants receiving annual
cash compensation below competitive compensation levels if the Minimum Level is
not achieved. Since the Variable Compensation Plan was begun in 1989, the
Company has achieved on average the Target Level for determination of payments
under such plan.
Pursuant to the Variable Compensation Plan, if operating income is below the
Minimum Level, no variable compensation is paid. If the Minimum Level is met,
executive officers are eligible to receive variable compensation payments that
in 1995 ranged between 14% and 60% of base salary, depending on the executive.
If the Target Level is reached, the range of variable compensation payments is
higher, and in 1995 ranged between 22% and 100% of base salary, depending on the
executive. If the Maximum Level is reached or exceeded, executives are eligible
to receive the highest variable compensation payments, and in 1995 the range of
payments for which executive were eligible was between 35% and 150% of base
salary, depending on the executive. With respect to 1995, in view of the
achievement of operating income above the Maximum Level, the Committee approved
Maximum Level payments under the Variable Compensation Plan to the executive
officers, including the CEO. The awards made for 1995 together with the awards
for 1994 and 1993 to the CEO and the four other highest paid executive officers
under the Variable Compensation Plan are reported in the bonus column in the
Summary Compensation Table set forth above. Apart from the Variable
Compensation Plan, the Committee may award other bonuses as the Committee deems
appropriate from time to time under its general authority or under a separate
discretionary plan.
In addition, target levels for operating income performance were utilized by the
Committee and the Board, as applicable, for determining the contributions by the
Company to the accounts of eligible participants, including the CEO and the
executive officers, under the Savings Plan, the Pension Plan, and the SERP. See
"Pension Plan" above. As noted below, the Board has approved, subject to
shareholder approval, the Variable Compensation Plan in a form that reflects
certain federal tax law requirements and limitations with respect to payments
under such plan to the Company's executive officers necessary for the
deductibility by the Company of such payments.
Stock-Based Compensation
- ------------------------
The Incentive Plan further supports the goal of the Committee to maximize long-
term shareholder value by providing for stock-based compensation, the value of
which is directly related to increases in shareholder value. Stock option
grants, in particular, are considered a significant element of the Company's
total compensation package for the CEO and the other executive officers of the
Company. The Committee believes that compensation linked to stock price
performance helps focus the executives' attention on management of the Company
from the shareholders' perspective.
Option grants are intended to provide incentives to increase shareholder value
in the future and to reward past performance by the executive. Annually, the
Committee reviews recommendations by the CEO regarding option grants to
executive officers other than the CEO. Options are granted to executive
officers, including the CEO, in the Committee's discretion based on a subjective
evaluation regarding each executive's performance and responsibilities. In
1995, the Committee included in its determination regarding the number of
options to be granted to each executive officer, including the CEO, the amount
and terms of options already held by such officers. In 1995, options were
granted to a single executive officer and are reported in the Option Grants in
Last Fiscal Year Table set forth above.
To help assure a focus on long-term creation of shareholder value, the Committee
grants ten year options, which vest 40%, 60%, 80% and 100% on the second, third,
fourth and fifth anniversary dates of the date of grant, respectively. In 1995
the Committee granted options in three exercise price tranches. One-third of
such options granted in 1995 are exercisable at the fair market value of the
Common Stock on the date of grant. The remaining two-thirds of the options are
exercisable at levels that are above the market price on the date of grant. See
the Summary Compensation Table above. Although permitted under the Incentive
Plan, the Committee in 1995 did not make or recommend any grants of restricted
stock, stock appreciation rights or other equity-based awards.
To encourage growth in shareholder value, the Committee believes that executives
who are in a position to make a substantial contribution to the long-term
success of the Company should have a significant stake in its ongoing success.
In 1993, the Committee established the following voluntary goals for minimum
Common Stock ownership for executive officers to encourage executives to build
their Common Stock ownership. Executives are encouraged to achieve these
ownership goals over the next two to four years. The table also shows the year-
end market value of the actual share ownership (excluding unexercised options
and shares of restricted Common Stock as to which restrictions have not lapsed)
as a multiple of 1995 base salary.
<TABLE>
<CAPTION>
YEAR-END MARKET VALUE
OF SHARE OWNERSHIP AS A
MULTIPLE OF BASE SALARY
ACTUAL GOAL
------ ----
<S> <C> <C>
President and Chief Executive Officer 2.4X 4X
Executive Vice President 1.2X 3X
Vice Presidents: Chief Financial 2.3X 3X
Officer
Controller 2.9X 2X
General Counsel 1.8X 2X
Treasurer 2.5X 2X
</TABLE>
Tax Code Limitation on Executive Compensation Deductions
- --------------------------------------------------------
In 1993, Congress amended the Internal Revenue Code to impose a $1 million
deduction limit on compensation paid to the CEO and the four other most highly
compensated executive officers of public companies, subject to certain
transition rules and exceptions for compensation received pursuant to non-
discretionary performance-based plans approved by such company's shareholders.
The Committee has reviewed the Company's compensation practices and plans in
light of this law and concluded that modifications to the Company's Variable
Compensation Plan and Incentive Plan are appropriate in order for compensation
paid or awards or grants made to executives pursuant to such plans to continue
to qualify for deductibility by the Company. Modifications to the Variable
Compensation Plan will include, among other things, the elimination of the
Committee's ability to increase variable compensation payments to reflect
individual performance for any executive officer, including the CEO, whose total
compensation would otherwise exceed the $1 million deduction limitation. The
amendments to the Incentive Plan include a limitation on the number of shares
which may be the subject of a grant or award to any particular individual in any
fiscal year. The Company expects that if the Variable Compensation Plan and the
Incentive Plan Amendments, each as described herein and in the form attached
hereto as Exhibit A and Exhibit B, respectively, are approved by the Company's
--------- ---------
shareholders, all amounts paid under the Variable Compensation Plan and option
awards made under the Incentive Plan in 1996 will continue to be tax-deductible
by the Company. Accordingly, the Committee recommends shareholder approval of
the Variable Compensation Plan and the Incentive Plan Amendments as described
herein.
The foregoing report on executive compensation has been furnished by the
Company's Management Development and Compensation Committee of the Board of
Directors.
Mr. Kenneth R. Peak (Chairman)
General Thomas P. Stafford
Admiral Elmo R. Zumwalt, Jr.
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 10, 1996
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
1996 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 Friday, May 10, 1996, at
10:00 a.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 following proposal, in the manner directed on the reverse side:
1. Election of Five Directors
Nominees: Norman S. Edelcup, Kenneth R. Ferris, Glenn R. Simmons, Harold C.
Simmons and J. Walter Tucker, Jr.
This Proxy, if properly executed, will be voted in the manner directed on the
reverse side. If no direction is made, this Proxy will be voted "FOR" all
nominees for election as directors named in Proposal 1 and 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.
[X] Please mark your votes as in this example.
Election of Five Directors (see reverse)
[ ] FOR all nominees (except as marked below)
[ ] WITHHOLD authority to vote for all nominees
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
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.
(Change of address)
Please sign exactly as the name that appears on this card. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, give full title as such. If a partnership or corporation, sign full
name of entity and an authorized person's name and title.
The undersigned hereby revokes all proxies heretofore given to vote at said
Meeting and any adjournment or postponement thereof.
SIGNATURE DATE
---------------------------------- ---------------
SIGNATURE DATE
---------------------------------- ---------------
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE VALHI PROXY STATEMENT THAT
