<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _ )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
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(Name of Registrant as Specified In Its Charter)
TREMONT CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per-unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE> 2
TREMONT CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
March 29, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders of
Tremont Corporation ("Tremont" or the "Company"), which will be held on Tuesday,
May 4, 1999, at 9:30 a.m. (Central Time), at the offices of Valhi, Inc., Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas. In addition to
matters to be acted on at the meeting, which are described in detail in the
attached Notice of Annual Meeting of Stockholders and Proxy Statement, we will
update you on the Company. I hope that you will be able to attend.
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 so 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 for the meeting in accordance
with Tremont's Bylaws.
Sincerely,
J. Landis Martin
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
TREMONT CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 4, 1999
To the Stockholders of Tremont Corporation:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders (the
"Meeting") of Tremont Corporation, a Delaware corporation ("Tremont" or the
"Company"), will be held on Tuesday, May 4, 1999, at 9:30 a.m. (Central Time),
at the offices of Valhi, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite
1700, Dallas, Texas, for the following purposes:
(1) To elect seven directors to serve until the 2000 Annual
Meeting of Stockholders and until their successors are duly
elected and qualified; 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 17,
1999, as the record date (the "Record Date") for the Meeting. Only holders of
Tremont's common stock, $1.00 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
stock transfer books of the Company 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 Tremont
stockholder, for purposes related to the Meeting, for a period of ten days prior
to the Meeting, at Tremont's corporate offices located at 1999 Broadway, Suite
4300, Denver, Colorado.
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,
Robert E. Musgraves
Vice President, General Counsel and Secretary
Denver, Colorado
March 29, 1999
<PAGE> 4
TREMONT CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
--------------------
PROXY STATEMENT
--------------------
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 Tremont
Corporation, a Delaware corporation ("Tremont" or the "Company"), for use at the
1999 Annual Meeting of Stockholders of the Company to be held on Tuesday, May 4,
1999, at 9:30 a.m. (Central Time), at the offices of Valhi, Inc., Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas, and at any adjournment or
postponement thereof (the "Meeting"). This Proxy Statement and the accompanying
proxy card or voting instruction form will first be mailed to the holders of
Tremont's common stock, $1.00 par value per share ("Tremont Common Stock"), on
or about April 7, 1999.
PURPOSE OF THE MEETING
Stockholders of the Company represented at the Meeting will consider and vote
upon (i) the election of seven directors to serve until the 2000 Annual Meeting
of Stockholders of the Company and until their successors are duly elected and
qualified, and (ii) such other business as may properly come before the Meeting.
The Company is not aware of any business to be presented for consideration at
the Meeting other than the election of directors.
VOTING RIGHTS AND QUORUM
The presence, in person or by proxy, of the holders of a majority of the shares
of Tremont Common Stock entitled to vote at the Meeting is necessary to
constitute a quorum for the conduct of business at the Meeting. Shares of
Tremont 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 Tremont Common Stock present (in
person or by proxy) and entitled to vote. The accompanying proxy card or voting
instruction form provides space for a stockholder to withhold authority to vote
for any or all nominees for 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 nominees
for the Board of Directors. However, since director nominees need only receive
the vote of a plurality of the shares represented (in person or by proxy) at the
Meeting and entitled to vote, a vote withheld from a particular nominee will not
affect the election of such nominee.
Except as otherwise required by the Company's Amended and Restated Certificate
of Incorporation, any other matter that may be submitted to a stockholder vote
will require the affirmative vote of a majority of the shares represented at the
Meeting (in person or by proxy) and entitled to vote. Shares of
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<PAGE> 5
Tremont Common Stock that are voted to abstain from any business coming before
the Meeting and broker/nominee non-votes will not be counted as votes for or
against any such other matter.
First Chicago Trust Division of EquiServe ("First Chicago"), the transfer agent
and registrar for Tremont 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 and ballots delivered to First Chicago will be kept confidential by
First Chicago in accordance with the Company's Bylaws.
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Meeting is the close of
business on March 17, 1999 (the "Record Date"). Only holders of shares of
Tremont Common Stock at the close of business on the Record Date are entitled to
vote at the Meeting. As of the Record Date, there were 6,385,058 shares of
Tremont Common Stock issued and outstanding, each of which will be entitled to
one vote on each matter that comes before the Meeting.
AS OF THE RECORD DATE, VALHI, INC. ("VALHI"), TOGETHER WITH CERTAIN OTHER
PERSONS OR ENTITIES RELATED TO HAROLD C. SIMMONS, HELD APPROXIMATELY 53.5%
(3,413,041 SHARES) OF THE OUTSTANDING SHARES OF TREMONT COMMON STOCK. VALHI AND
SUCH PERSONS OR ENTITIES 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 SET FORTH IN THIS PROXY STATEMENT. IF ALL OF SUCH
SHARES ARE VOTED AS INDICATED, THE ELECTION OF SUCH DIRECTOR NOMINEES WILL BE
ASSURED.
PROXY SOLICITATION
This proxy solicitation is being made by and on behalf of the Board of Directors
of the Company. The Company will pay all expenses of this proxy solicitation,
including charges for preparing, printing, assembling and distributing all
materials delivered to stockholders. In addition to solicitation by mail,
directors, officers and regular employees of the Company may solicit proxies by
telephone or personal contact for which such persons will receive no additional
compensation. The Company has retained D.F. King & Co., Inc. to aid in the
distribution of this Proxy Statement, at a cost that the Company estimates will
be approximately $4,000. In addition, 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 Tremont
Common Stock held of record by such entities.
All shares of Tremont Common Stock represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted in accordance
with the instruction indicated in such proxies. If no instructions are
indicated, such shares will be voted (a) "FOR" the election of each of the seven
nominees set forth below as directors, and (b) in the discretion of the proxy
holders on any other matter that may properly come before the Meeting. Each
holder of record of Tremont 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 First Chicago a written revocation of the proxy,
(ii) delivering to First Chicago a duly executed proxy bearing a later date, or
(iii) voting in person at the Meeting. Attendance by a stockholder at the
Meeting will not in itself constitute the revocation of a proxy previously
given.
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<PAGE> 6
ELECTION OF DIRECTORS
The Bylaws of the Company currently provide that the Board of Directors shall
consist of a minimum of three and a maximum of seventeen persons, as determined
from time to time by the Board of Directors in its discretion. The number of
directors is currently set at seven. The seven directors elected at the Meeting
will hold office until the 2000 Annual Meeting of Stockholders of the Company
and until their successors are duly elected and qualified.
All of the nominees set forth below are currently directors of the Company whose
term will expire at the Meeting. All nominees have agreed to serve if elected.
If any nominee is not available for election at the Meeting, the 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.
The Board of Directors recommends a vote "FOR" each of the nominees identified
below.
NOMINEES FOR DIRECTOR
The following information has been provided by the respective nominees for
election to the Board of Directors.
Susan E. Alderton, 47, has been a director of Tremont since 1990. Ms. Alderton
was Vice President, Finance of Tremont from 1990 until 1992, Treasurer of
Tremont from 1988 to 1992 and Vice President of Tremont from 1988 to 1990. Since
1988, Ms. Alderton has been Vice President and Treasurer of NL Industries, Inc.
("NL"), which is engaged in the manufacture of titanium dioxide pigment. In
February 1998, Ms. Alderton was also named Chief Financial Officer of NL. Valhi
and Tremont hold approximately 58% and 20%, respectively, of the outstanding
common stock of NL ("NL Common Stock"). NL may be deemed to be an affiliate of
Tremont.
Richard J. Boushka, 64, has been a director of Tremont since 1990. Since before
1986, Mr. Boushka has served as the principal of Boushka Properties, a private
investment firm. Since 1986, Mr. Boushka has also served as Chairman of the
Board of Citation Oil and Gas Corporation, an oil and gas production company,
and has been President of Sunflower Racing, Inc., an operator of racetrack
facilities. From 1955 to 1980, Mr. Boushka was employed by Vickers Energy
Company, an oil and gas concern, where his last position was President. Mr.
Boushka is also a director of Perini Corporation. Mr. Boushka serves as Chairman
of Tremont's Audit Committee and is a member of the Management Development and
Compensation Committee (the "Compensation Committee").
J. Landis Martin, 53, has been the Chief Executive Officer and a director of
Tremont since 1988. Mr. Martin has been Chairman of the Board of Tremont since
1990, and has served as President of Tremont since 1987 (except for a period in
1990). Mr. Martin has also served since 1987 as Chairman and a director of
Titanium Metals Corporation ("TIMET"), a producer of titanium metal products, as
Chief Executive Officer of TIMET since 1995 and as President of TIMET from 1995
to 1996. The Company owns approximately 39% of the outstanding shares of common
stock of TIMET ("TIMET Common Stock"). TIMET may be deemed to be an affiliate of
Tremont. Since 1987, Mr. Martin has served as President and Chief Executive
Officer and, since 1986, as a director of NL. Mr. Martin is also a director of
Halliburton Company and Apartment Investment and Management Company.
Glenn R. Simmons, 71, has been a director of Tremont since 1988. Mr. Simmons is
Chairman of the Board of Keystone Consolidated Industries, Inc. ("Keystone"), a
steel fabricated wire products, industrial wire and carbon steel rod company.
Since prior to 1994, Mr. Simmons has been Vice Chairman of the Board of Valhi
and Contran Corporation ("Contran"), a diversified holding company that directly
and through related entities holds approximately 93% of the outstanding common
stock of
3
<PAGE> 7
Valhi ("Valhi Common Stock") and 47% of the outstanding common stock of
Keystone. Mr. Simmons has been an executive officer and/or director of various
companies related to Valhi and Contran since 1969. Mr. Simmons is also a
director of TIMET, NL and CompX International Inc. ("CompX"), a majority-owned,
indirect subsidiary of Valhi engaged in the manufacture of ergonomic computer
support systems, precision ball bearing slides and locking systems. Valhi and
CompX may be deemed to be affiliates of Tremont. Mr. Simmons is a brother of
Harold C. Simmons.
Harold C. Simmons, 67, has been a director of Tremont since 1988 and served as
Chairman of the Board of Tremont from 1988 to 1990. Mr. Simmons has been
Chairman of the Board, Chief Executive Officer and a director of Valhi and
Contran since prior to 1994 and was President of Valhi and Contran from 1994 to
1998. Mr. Simmons has been an executive officer and/or director of various other
companies related to Valhi and Contran since 1961. Mr. Simmons is also Chairman
of the Board and a director of NL. Mr. Simmons is a brother of Glenn R. Simmons.
General Thomas P. Stafford (retired), 68, has been a director of Tremont since
1989. Gen. Stafford has served as co-founder of Stafford, Burke and Hecker,
Inc., a Washington-based consulting firm, since 1982. Gen. Stafford graduated
from the United States Naval Academy in 1952. He was commissioned as an officer
in the United States Air Force ("USAF") and attended the USAF Experimental
Flight Test School in 1958. He was selected as an astronaut in 1962, piloted
Gemini VI in 1965 and commanded Gemini IX in 1966. In 1969, Gen. Stafford was
named Chief of the Astronaut Office and was the Apollo X commander for the first
lunar module flight to the moon. He commanded the Apollo-Soyuz joint mission
with the Soviet cosmonauts in 1975. After his retirement from the USAF in 1979
as Lieutenant General, in which his last assignment was Deputy Chief of Staff
for Research, Development and Acquisitions, he became Chairman of Gibraltar
Exploration Limited, an oil and gas exploration and production company, and
served in that position until 1984, when he joined General Technical Services,
Inc., a consulting firm. In addition to serving as a director of TIMET, Gen.
Stafford is a director of Allied-Signal Inc., CMI Corporation and Seagate
Technologies, Inc. Gen. Stafford serves as Chairman of the Compensation
Committee and is a member of Tremont's Audit Committee and Nominations
Committee.
Avy H. Stein, 44, has been a director of Tremont since 1991. Mr. Stein has been
a managing partner in the private equity investment firm of Willis Stein &
Partners since 1995. Mr. Stein was a Managing Director of Continental Equity
Capital Corporation and Continental Illinois Venture Corporation, investment
funds affiliated with Continental Bank of Illinois, from 1989 to 1995. Mr. Stein
serves as Chairman of Tremont's Nominations Committee and is a member of the
Compensation Committee.
For information concerning certain transactions to which certain director
nominees are parties and other matters, see "Certain Relationships and
Transactions" below.
BOARD MEETINGS
The Board of Directors held five meetings in 1998. Each of the directors
participated in at least 75% of the total number of such meetings and of the
committee meetings held during the period for committees on which they served.
BOARD COMMITTEES
The Board of Directors has established the following standing committees:
Audit Committee. The principal responsibilities and authority of the Audit
Committee are to review and recommend to the Board of Directors the selection of
the Company's independent auditors, to review with the independent auditors the
scope and results of the annual auditing engagement and the system of internal
accounting controls, and to direct and supervise special audit inquiries. The
current members of the Audit Committee are Richard J. Boushka (Chairman) and
Gen. Thomas P. Stafford. The Audit Committee held one meeting in 1998.
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<PAGE> 8
Management Development and Compensation Committee. The principal
responsibilities and authority of the Compensation Committee are to review and
approve certain matters involving executive compensation, principally the review
of certain intercorporate services agreements through which reimbursement is
made for compensation paid by related parties to the Company's executive
officers, together with such other matters as the Board of Directors may from
time to time direct. The current members of the Compensation Committee are Gen.
Thomas P. Stafford (Chairman), Richard J. Boushka and Avy H. Stein. The
Compensation Committee held two meetings in 1998.
Nominations Committee. The principal responsibilities and authority of the
Nominations Committee are to review and make recommendations to the Board of
Directors regarding such matters as the size and composition of the Board of
Directors, criteria for director nominations, director candidates, the term of
office for directors and such other related matters as the Board of Directors
may request from time to time. The current members of the Nominations Committee
are Avy H. Stein (Chairman) and Gen. Thomas P. Stafford. The Nominations
Committee held one meeting in 1998. In February 1999, the Nominations Committee
reviewed and made its recommendations to the Board of Directors with respect to
the election of directors at the Meeting. The Nominations Committee will
consider recommendations by stockholders of the Company with respect to the
election of directors if such recommendations are submitted in writing to the
Secretary of the Company and received not later than December 31 of the year
prior to the next annual meeting of stockholders.
Members of the standing committees will be appointed at the 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.
COMPENSATION OF DIRECTORS
During 1998, directors of the Company who were not employees of the Company or
NL received an annual retainer of $15,000, payable in quarterly installments,
plus a fee of $750 per day for attendance at meetings and as a daily rate for
other services rendered on behalf of the Board of Directors or a committee of
the Board of Directors. In the event of the death while in active service of any
director who is eligible to receive fees, such director's designated beneficiary
or estate will be entitled to receive a one-time life insurance benefit equal to
one year's annual retainer. Directors are also reimbursed for reasonable
expenses incurred in attending Board of Directors and committee meetings.
Directors receiving fees for serving on the Board of Directors in 1998 were
Richard J. Boushka, Glenn R. Simmons, Harold C. Simmons, Gen. Thomas P. Stafford
and Avy H. Stein (together, the "Non-Employee Directors").
During 1998, each of the Non-Employee Directors other than Glenn R. Simmons and
Harold C. Simmons was granted an option, pursuant to the Tremont Corporation
1992 Non-Employee Director Stock Option Plan (the "Director Plan"), to purchase
1,000 shares of Tremont Common Stock at an exercise price of $56.50 per share,
representing the market value of Tremont Common Stock on the date of grant,
calculated as the last reported sale price of Tremont Common Stock on the New
York Stock Exchange Composite Tape on such date. Stock options granted pursuant
to the Director Plan become exercisable one year after the date of grant and
expire on the fifth anniversary following the date of grant.
In addition, pursuant to an intercorporate services agreement between Contran
and the Company, certain services were provided by Contran to Tremont during
1998, including services rendered by Glenn R. Simmons and Harold C. Simmons,
each of whom is a director of the Company. See "Certain Relationships and
Transactions--Contractual Relationships" below.
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<PAGE> 9
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of the Company. Biographical information with respect to J. Landis
Martin is set forth under "Election of Directors" above. See also "Certain
Relationships and Transactions" below.
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
J. Landis Martin 53 Chairman of the Board, President and Chief Executive
Officer of Tremont; Chairman of the Board and Chief
Executive Officer of TIMET; President and Chief Executive
Officer of NL
J. Thomas Montgomery, Jr. 52 Vice President-Controller and Treasurer of Tremont; Vice
President-Finance and Treasurer of TIMET
Robert E. Musgraves 44 Vice President, General Counsel and Secretary of Tremont;
Vice President, General Counsel and Secretary of TIMET
</TABLE>
J. THOMAS MONTGOMERY, JR. has served as Vice President-Controller and Treasurer
of Tremont since 1997. He has also been Vice President-Finance and Treasurer of
TIMET since 1996. From 1987 to 1996, Mr. Montgomery was Vice President and
Controller of Valhi and Contran.
ROBERT E. MUSGRAVES has served as General Counsel and Secretary of Tremont since
1993 and has been a Vice President of Tremont since 1994. Mr. Musgraves has been
Vice President and General Counsel of TIMET since 1990 and Secretary since 1991.
Prior to joining TIMET in 1990, Mr. Musgraves was a partner in the law firm of
Kirkland & Ellis.
SECURITY OWNERSHIP
OWNERSHIP OF TREMONT COMMON STOCK
The following table and notes set forth, as of the Record Date, the beneficial
ownership, as defined by the regulations of the Securities and Exchange
Commission (the "Commission"), of Tremont Common Stock held by (a) each person
or group of persons known to Tremont to beneficially own more than 5% of the
outstanding shares of Tremont Common Stock, (b) each director or nominee for
director of Tremont, (c) each executive officer of Tremont listed in the Summary
Compensation Table below who is not a director or nominee for director of
Tremont and (d) all executive officers and directors of Tremont as a group. See
footnote (3) for information concerning individuals and entities that may be
deemed to indirectly beneficially own those shares of Tremont Common Stock
directly beneficially owned by Valhi and related entities. All information has
been taken from or is based upon ownership filings made by such persons with the
Commission or upon information provided by such persons to Tremont.
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<PAGE> 10
OWNERSHIP OF TREMONT COMMON STOCK
<TABLE>
<CAPTION>
Tremont Common Stock
-----------------------------------
Amount and Nature
of
Beneficial Percent of
Name of Beneficial Owner Ownership (#) (1) Class (2)
------------------- ------------
<S> <C> <C>
GREATER THAN 5% STOCKHOLDERS
Valhi, Inc. and related entities (3) 3,155,788 49.4%
Tweedy, Browne Company L.P. and related entities (4) 960,474 15.0%
JMG Capital Partners, L.P. and related entities (5) 355,800 5.6%
DIRECTORS
Susan E. Alderton (6) 7,876 --
Richard J. Boushka (7) 7,100 --
J. Landis Martin (8) 210,421 3.3%
Glenn R. Simmons (3)(9) 534 --
Harold C. Simmons (3)(10) 3,747 --
Thomas P. Stafford (7) 3,000 --
Avy H. Stein (7) 11,300 --
OTHER EXECUTIVE OFFICERS
J. Thomas Montgomery, Jr. 2,000 --
Robert E. Musgraves (11) 23,010 --
ALL DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AS A
GROUP (9 persons) (3)(6)(7)(8)(9)(10)(11) 268,988 4.1%
</TABLE>
- ---------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%. For purposes
of calculating individual and group percentages, the number of shares
treated as outstanding for each individual includes stock options
exercisable by such individual (or all individuals included in the
group) within 60 days of the Record Date.
(3) As reported in Amendment No. 10, dated September 2, 1998, to a
Statement on Schedule 13D, as filed with the Commission, as of the
Record Date, Valhi was the holder of approximately 48.4% (3,089,131
shares) of the outstanding shares of Tremont Common Stock. As of the
Record Date, NL and Valmont Insurance Company ("Valmont") were the
holders of approximately 0.6% (36,167 shares) and 0.5% (30,490 shares),
respectively, of the outstanding shares of Tremont Common Stock.
Valhi is the holder of 100% of the outstanding common stock of Valmont.
Valhi and Tremont are the holders of approximately 58.1% and 19.7%,
respectively, of the outstanding shares of NL Common Stock. Tremont is
the holder of approximately 39.1% of the outstanding shares of TIMET
Common Stock.
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"), and
Contran are the holders of approximately 81.9%, 9.5%, and 0.9%,
respectively, of the outstanding shares of Valhi Common Stock.
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
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<PAGE> 11
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 88.8% and 66.3% of the outstanding common stock
of Southwest and Dixie Rice, respectively. Substantially all of
Contran's outstanding voting stock is held either by trusts established
for the benefit of certain of Harold C. Simmons' children and
grandchildren (the "Simmons Trusts"), of which Harold C. Simmons is the
sole trustee, or by Harold C. Simmons directly. As sole trustee of the
Simmons Trusts, Harold C. Simmons has the power to vote and direct the
disposition of the shares of Contran common stock held by the Simmons
Trusts. However, Mr. Simmons disclaims beneficial ownership of all such
shares, except for those he holds directly.
Valmont and NL directly hold 1,000,000 and 1,186,200 shares,
respectively, of the outstanding shares of Valhi Common Stock. Pursuant
to Delaware law, Valhi treats the shares of Valhi Common Stock owned by
Valmont and NL as treasury stock for voting purposes. For purposes of
this footnote, such shares are not deemed outstanding.
The Combined Master Retirement Trust (the "CMRT") is the holder of
approximately 0.1% (3,506 shares) of the outstanding shares of Tremont
Common Stock and approximately 0.1% of the outstanding shares of Valhi
Common Stock. The CMRT is a trust formed by Valhi 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 CMRT and a member of the trust
investment committee for the CMRT. The trustee and members of the trust
investment committee for the CMRT are selected by Valhi's Board of
Directors. Harold C. Simmons and Glenn R. Simmons are each members of
Valhi's Board of Directors and are participants in one or more of the
employee benefit plans that invest through the CMRT. However, each such
person disclaims beneficial ownership of the Valhi Common Stock and
Tremont Common Stock held by the CMRT, except to the extent of his
individual, vested beneficial interest in the CMRT.
The Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2")
directly holds approximately 0.2% of the outstanding shares of Valhi
Common Stock. Boston Safe Deposit and Trust Company serves as trustee
of the CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable
"rabbi trust" to assist Contran in meeting certain deferred
compensation obligations that it owes to Harold C. Simmons. If the
assets of the CDCT No. 2 are insufficient to satisfy such obligations,
Contran is obligated to satisfy the balance of such obligations as they
come due. Pursuant to the terms of the CDCT No. 2, Contran (i) retains
the sole power to vote the shares held by the CDCT No. 2, (ii) retains
dispositive power over such shares, and (iii) may be deemed the
indirect beneficial owner of such shares. Mr. Simmons disclaims
beneficial ownership of the shares held by the CDCT No. 2, except to
the extent of his interest as a beneficiary of the CDCT No. 2.
The Harold Simmons Foundation, Inc. (the "Foundation") directly holds
approximately 3.9% (250,000 shares) of the outstanding shares of
Tremont Common Stock and 0.5% of the outstanding shares of Valhi Common
Stock. The Foundation is a tax-exempt foundation organized for
charitable purposes. Harold C. Simmons is Chairman of the Board and
Chief Executive Officer of the Foundation and may be deemed to control
the Foundation. However, Mr. Simmons disclaims beneficial ownership of
all such shares held by the Foundation. The shares of Tremont Common
Stock held by the CMRT and the Foundation are not included in the
ownership number shown for Valhi and related entities in the stock
ownership table.
Harold C. Simmons is Chairman of the Board of NL, Chairman of the Board
and Chief Executive Officer of Valhi, Contran, Dixie Rice, Southwest,
Dixie Holding, NOA, National, and VGI, and a director of Tremont. By
virtue of holding such offices, the stock ownership and his service as
trustee, all as described above, (a) Mr. Simmons may be deemed to
control these entities, and (b) Mr. Simmons and certain of such
entities may be deemed to possess indirect beneficial ownership of the
Tremont Common Stock, Valhi Common Stock, NL Common Stock, and TIMET
Common Stock directly held by certain of such entities. However, Mr.
Simmons disclaims beneficial
8
<PAGE> 12
ownership of the shares of Tremont Common Stock, Valhi Common Stock, NL
Common Stock, and TIMET Common Stock beneficially owned, directly and
indirectly, by all of such entities, except to the extent otherwise
expressly indicated above.
The business address of each such holder is Three Lincoln Centre, 5430
LBJ Freeway, Suite 1700, Dallas, TX 75240.
(4) As reported in Amendment No. 7, dated September 9, 1993, to a Statement
on Schedule 13D, as filed with the Commission, Tweedy, Browne Company
L.P. ("TBC") beneficially owns 862,744 shares of Tremont Common Stock
and TBK Partners, L.P. and Vanderbilt Partners, L.P., entities which
are part of a group with TBC, beneficially own 86,730 shares and 11,000
shares, respectively, of Tremont Common Stock. The business address of
each such holder is 52 Vanderbilt Avenue, New York, NY 10017.
(5) As reported in a Statement on Schedule 13D, dated November 12, 1997, as
filed with the Commission on behalf of JMG Capital Partners, L.P., JMG
Convertible Investments, L.P., JMG Capital Management, Inc., Jonathan
M. Glaser, Triton Capital Investments, L.P., Triton Capital Holdings,
Ltd. and Pacific Capital Management. The business address of each such
holder is 1999 Avenue of the Stars, Suite 1950, Los Angeles, CA 90067,
except in the case of Triton Capital Investments, Ltd. and Triton
Capital Holdings Ltd., for which the business address is Kaya Flamoyan
9, Curacao, Netherland Antilles.
(6) The shares of Tremont Common Stock shown as beneficially owned by Susan
E. Alderton include (i) 7,365 shares that Ms. Alderton has the right to
acquire by exercise of stock options within 60 days of the Record Date
under the Tremont 1988 Long Term Performance Incentive Plan (the
"Tremont Stock Incentive Plan"), and (ii) 11 shares held for the
benefit of Ms. Alderton under the NL Industries, Inc. Retirement
Savings Plan (the "NL Savings Plan").
(7) The shares of Tremont Common Stock shown as beneficially owned by each
of Richard J. Boushka, Gen. Thomas P. Stafford and Avy H. Stein include
4,000, 3,000, and 5,000 shares, respectively, that each such person has
the right to acquire by exercise of stock options within 60 days of the
Record Date under the Director Plan, described above.
(8) The shares of Tremont Common Stock shown as beneficially owned by J.
Landis Martin include (i) 60,000 shares that Mr. Martin has the right
to acquire by exercise of stock options within 60 days of the Record
Date under the Tremont Stock Incentive Plan and (ii) 513 shares held
for the benefit of Mr. Martin under the NL Savings Plan. Such shares
also include (i) 1,800 shares held by Mr. Martin's wife, (ii) 2,400
shares held by the Martin's Children Trust No. II of which Mr. Martin
is trustee, and (iii) 100 shares held by one of Mr. Martin's daughters,
with respect to all of which shares beneficial ownership is disclaimed
by Mr. Martin.
(9) The shares of Tremont Common Stock shown as beneficially owned by Glenn
R. Simmons represent shares held by Mr. Simmons' individual retirement
account.
(10) The shares of Tremont Common Stock shown as beneficially owned by
Harold C. Simmons represent shares held by Mr. Simmons' wife,
beneficial ownership of which is disclaimed by Mr. Simmons.
(11) The shares of Tremont Common Stock shown as beneficially owned by
Robert E. Musgraves include (i) 23,000 shares that Mr. Musgraves has
the right to acquire by the exercise of stock options within 60 days of
the Record Date under the Tremont Stock Incentive Plan, and (ii) 10
shares held by a member of his household, beneficial ownership of which
is disclaimed by Mr. Musgraves.
Tremont understands that Valhi and related entities may consider acquiring or
disposing of shares of Tremont 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
9
<PAGE> 13
performance of Tremont Common Stock in the market, an assessment of the business
of and prospects for Tremont, financial and stock market conditions and other
factors. Tremont may similarly consider such acquisitions of shares of Tremont
Common Stock and acquisition or disposition of securities issued by related
parties. In 1997, Tremont announced that it may repurchase up to 2,000,000
shares of Tremont Common Stock. During 1997 and 1998, Tremont repurchased an
aggregate of 1,219,300 shares of Tremont Common Stock pursuant to such program.
Neither Valhi nor Tremont presently intends to engage in any transaction or
series of transactions that would result in the Tremont Common Stock's becoming
eligible for termination of registration under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), or ceasing to be traded on a national
securities exchange.
OWNERSHIP OF VALHI, TIMET, AND NL COMMON STOCK
By virtue of the share ownership described above, for purposes of the
Commission's regulations, Valhi may be deemed to be the parent of Tremont, and
TIMET and NL may be deemed to be subsidiaries of Tremont. The following table
and notes set forth the beneficial ownership, as of the Record Date, of (a)
Valhi Common Stock, $.01 par value per share, (b) TIMET Common Stock, $.01 par
value per share, and (c) NL Common Stock, $.125 par value per share, held by (i)
each director or nominee for director of Tremont, (ii) each executive officer of
Tremont listed in the Summary Compensation Table below who is not a director or
nominee for director of Tremont, and (iii) all executive officers and directors
of Tremont as a group. Except as set forth below and under the heading
"Ownership of TIMET Trust Securities" below, no securities of Tremont's parent,
subsidiaries or less than majority-owned affiliates are beneficially owned by
any director, nominee for director or executive officer of Tremont. All
information has been taken from or is based upon ownership filings made by such
persons with the Commission or upon information provided by such persons to
Tremont.
OWNERSHIP OF VALHI COMMON STOCK, TIMET COMMON STOCK, AND NL COMMON STOCK
<TABLE>
<CAPTION>
Valhi Common Stock (3) TIMET Common Stock NL Common Stock
----------------------- ----------------------- -----------------------
Number of Percent of Number of Percent of Number of Percent of
Shares (1) Class (2) Shares (1) Class(2) Shares (1) Class (2)
----------- ----------- ----------- ----------- ----------- -----------
DIRECTORS
<S> <C> <C> <C> <C> <C> <C>
Susan E. Alderton (4) -0- -- -0- -- 115,477 --
Richard J. Boushka -0- -- -0- -- -0- --
J. Landis Martin (5)(6)(7) 25,000 -- 103,867 -- 642,732 1.2%
Glenn R. Simmons 425,833 -- 2,000 -- 4,800 --
(8)(9)(10)(11)(12)
Harold C. Simmons 530,383 -- -0- -- 72,475 --
(8)(9)(12)(13)(14)
Thomas P. Stafford (15) -0- -- 4,350 -- -0- --
Avy H. Stein -0- -- -0- -- -0- --
OTHER EXECUTIVE OFFICERS
J. Thomas Montgomery, Jr. 25,400 -- 22,200 -- 9,500 --
(16)(17)
Robert E. Musgraves (18) -0- -- 28,000 -- -0- --
ALL DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY AS A
GROUP (9 persons)
(3)(4)(5)(6)(7)(8)(9)(10)
(11)(12)(13)(14)(15)(16)(17) 1,006,616 -- 160,417 -- 844,984 1.6%
</TABLE>
- --------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%. In addition,
for purposes of calculating individual and group ownership percentages,
the number of shares treated as outstanding for each individual
includes stock options exercisable by such individual (or all
individuals included in the group) within 60 days of the Record Date.
(3) As previously noted, the 1,186,200 shares of Valhi Common Stock held by
NL and the 1,000,000 shares of Valhi Common Stock held by Valmont are
excluded from the number of shares of Valhi
10
<PAGE> 14
Common Stock outstanding. Tremont understands that Valhi treats these
excluded shares as treasury stock for voting purposes pursuant to
Delaware law.
(4) The shares of NL Common Stock shown as beneficially owned by Susan E.
Alderton include (i) 62,400 shares that Ms. Alderton has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under stock option plans adopted by NL, and (ii) 11,920 shares
held for the benefit of Ms. Alderton under the NL Savings Plan.
(4) The shares of TIMET Common Stock shown as beneficially owned by J.
Landis Martin include (i) 400 shares held by Mr. Martin's daughters,
beneficial ownership of which is disclaimed by Mr. Martin, and (ii)
45,600 shares that Mr. Martin has the right to acquire by the exercise
of stock options within 60 days of the Record Date under TIMET's 1996
Long Term Performance Incentive Plan (the "TIMET Stock Incentive
Plan").
(5) J. Landis Martin is the holder of 3,000 of the 6-5/8% Convertible
Preferred Securities, Beneficial Unsecured Convertible Securities (the
"TIMET Trust Securities") of the TIMET Capital Trust I. See "Ownership
of TIMET Trust Securities" below. Such TIMET Trust Securities are
convertible into 4,017 shares of TIMET Common Stock, which amount is
included in the TIMET Common Stock ownership number shown for Mr.
Martin. No other director, nominee for director or executive officer of
the Company is known to hold any TIMET Trust Securities.
(6) The shares of NL Common Stock shown as beneficially owned by J. Landis
Martin include (i) 418,000 shares that Mr. Martin has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under stock option plans adopted by NL, and (ii) 14,591 shares
held for the benefit of Mr. Martin under the NL Savings Plan.
(7) VGI, National, Contran, and the CMRT directly beneficially own
approximately 81.9%, 9.5%, 0.9%, and 0.1%, respectively, of the
outstanding shares of Valhi Common Stock. See footnote (3) above
regarding certain shares of Valhi Common Stock held by NL and Valmont.
See footnote (3) to the table appearing under the heading "Ownership of
Tremont Common Stock" above for information concerning individuals and
entities that may be deemed to indirectly beneficially own the shares
of Valhi Common Stock directly beneficially owned by such entities.
Glenn R. Simmons and Harold C. Simmons disclaim beneficial ownership of
all of the shares of Valhi Common Stock owned by such entities, except
as otherwise noted in such footnote (3).
(8) Tremont directly beneficially owns approximately 39.1% of the
outstanding shares of TIMET Common Stock. See footnote (3) to the table
appearing under the heading "Ownership of Tremont Common Stock" above
for information concerning individuals and entities that may be deemed
to indirectly beneficially own the shares of TIMET Common Stock
directly beneficially owned by Tremont. Glenn R. Simmons and Harold C.
Simmons disclaim beneficial ownership of all of the shares of TIMET
Common Stock owned by Tremont.
(9) Valhi and Tremont directly beneficially own approximately 57.8% and
19.7%, respectively, of the outstanding shares of NL Common Stock. See
footnote (3) to the table appearing under the heading "Ownership of
Tremont Common Stock" above for information concerning individuals and
entities that may be deemed to indirectly beneficially own the shares
of NL Common Stock directly beneficially owned 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 Valhi and Tremont.
(10) The shares of Valhi Common Stock shown as beneficially owned by Glenn
R. Simmons include (i) 410,000 shares that Mr. Simmons has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under stock option plans adopted by Valhi and (ii) 4,383 shares
held in Mr. Simmons' individual retirement account. In addition, such
shares include (i) 3,000 shares held by Mr. Simmons' wife and (ii) 800
shares held in a retirement account for Mr. Simmons' wife, with respect
to all of which shares beneficial ownership is disclaimed by Mr.
Simmons.
11
<PAGE> 15
(11) The shares of NL Common Stock shown as beneficially owned by Glenn R.
Simmons include 2,000 shares that Mr. Simmons has the right to acquire
by the exercise of stock options within 60 days of the Record Date
under stock option plans adopted by NL.
(12) The shares of Valhi Common Stock shown as beneficially owned by Harold
C. Simmons include (i) 77,000 shares held by Mr. Simmons' wife,
beneficial ownership of which is disclaimed by Mr. Simmons, and (ii)
450,000 shares that Mr. Simmons has the right to acquire by the
exercise of stock options within 60 days of the Record Date under stock
option plans adopted by Valhi.
(13) The shares of NL Common Stock shown as beneficially owned by Harold C.
Simmons include (i) 69,475 shares held by Mr. Simmons' wife, beneficial
ownership of which is disclaimed by Mr. Simmons, and (ii) 2,000 shares
that Mr. Simmons has the right to acquire by the exercise of stock
options within 60 days of the Record Date under stock option plans
adopted by NL.
(14) The shares of TIMET Common Stock shown as beneficially owned by Gen.
Thomas P. Stafford include 2,750 shares that Gen. Stafford has the
right to acquire by the exercise of stock options within 60 days of the
Record Date under a stock option plan adopted by TIMET for its
non-employee directors.
(15) The shares of TIMET Common Stock shown as beneficially owned by J.
Thomas Montgomery, Jr. include 10,800 shares that Mr. Montgomery has
the right to acquire by the exercise of stock options within 60 days of
the Record Date under the TIMET Stock Incentive Plan.
(16) The shares of Valhi Common Stock shown as beneficially owned by J.
Thomas Montgomery, Jr. include 15,000 shares that Mr. Montgomery has
the right to acquire by the exercise of stock options within 60 days of
the Record Date under stock option plans adopted by Valhi.
(17) The shares of TIMET Common Stock shown as beneficially owned by Robert
E. Musgraves include (i) 1,000 shares held by Mr. Musgraves and his
wife as joint tenants, (ii) 900 shares held by other members of Mr.
Musgraves' household, beneficial ownership of which is disclaimed by
Mr. Musgraves, and (iii) 13,200 shares that Mr. Musgraves has the right
to acquire by the exercise of stock options within 60 days of the
Record Date under the TIMET Stock Incentive Plan.
OWNERSHIP OF TIMET TRUST SECURITIES
The TIMET Capital Trust I (the "TIMET Trust") is a statutory business trust
formed under the laws of the State of Delaware, all of whose common securities
are owned by TIMET. The TIMET Trust Securities represent undivided beneficial
interests in the TIMET Trust. The TIMET Trust exists for the sole purpose of
issuing the TIMET Trust Securities and investing in an equivalent amount of
6-5/8% Convertible Junior Subordinated Debentures due 2026 (the "Debentures") of
TIMET. The TIMET Trust Securities are convertible, at the option of the holder
thereof, into an aggregate of approximately 5.4 million shares of TIMET Common
Stock at a conversion rate of 1.339 shares of TIMET Common Stock for each TIMET
Trust Security. TIMET has, in effect, fully and unconditionally guaranteed
repayment of all amounts due on the TIMET Trust Securities.
The TIMET Trust Securities were issued pursuant to an offering exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"). Pursuant to an agreement with the original purchasers of the TIMET Trust
Securities, TIMET has filed a registration statement (the "BUCS Registration
Statement") under the Securities Act to register, among other things, the TIMET
Trust Securities, the Debentures, the TIMET Common Stock issuable upon the
conversion of the TIMET Trust Securities, and certain other shares of TIMET
Common Stock that are held by, or may be acquired by, Tremont. Except as set
forth in footnote (4) to the table under the heading "Ownership of Valhi, TIMET,
and NL Common Stock," no director, nominee for director or executive officer of
Tremont is known to hold any TIMET Trust Securities.
12
<PAGE> 16
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding the compensation
paid by Tremont and TIMET for services rendered by (i) Tremont's Chief Executive
Officer and (ii) each of Tremont's two other executive officers, in each case
for services rendered during each of the fiscal years 1996, 1997 and 1998
(regardless of the year in which actually paid).
SUMMARY COMPENSATION TABLE (1)(2)
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Securities
Annual Compensation Underlying All Other
Names and Position Year Salary($) Bonus($)(3)(4) Options(#) Compensation ($)(5)
- ------------------ ---- ---------- ------------- ----------- --------------------
<S> <C> <C> <C> <C> <C>
J. Landis Martin
Chairman of the Board, 1998 500,000 265,000 75,000 14,560
President and Chief Executive 1997 500,000 565,000 60,000 19,827
Officer (6) 1996 225,000 2,650,331 54,000 15,150
J. Thomas Montgomery, Jr. 1998 150,000 60,000 9,000 124,902
Vice President, Controller and 1997 150,000 87,000 9,000 44,443
Treasurer
1996 -- -- -- --
Robert E. Musgraves 1998 175,000 84,000 15,000 13,108
Vice President, General 1997 160,000 107,600 15,000 13,185
Counsel and Secretary 1996 160,000 277,092 18,000 13,838
</TABLE>
- ---------------
(1) Columns required by the regulations of the Commission that would
contain no entries have been omitted.
(2) J. Landis Martin, Tremont's Chairman, President and Chief Executive
Officer, J. Thomas Montgomery, Jr., Tremont's Vice President-Controller
and Treasurer, and Robert E. Musgraves, Tremont's Vice President,
General Counsel and Secretary, also currently serve as executive
officers of TIMET.
The amounts shown as salary and bonus for Messrs. Martin, Montgomery
and Musgraves represent the full amount paid by TIMET for services
rendered by such persons on behalf of both TIMET and Tremont during
1996, 1997 and 1998. Pursuant to an intercorporate services agreement,
in 1996, 1997, and 1998, Tremont reimbursed TIMET for approximately
20%, 10% and 10%, respectively, of the TIMET salary and regular bonus
of each of Messrs. Martin, Montgomery and Musgraves (prorated, in the
case of Mr. Montgomery for the portion of 1997 during which he served
as an executive officer of Tremont), plus a proportionate share of
applicable estimated fringe benefits and overhead expense for each as
follows:
<TABLE>
<CAPTION>
Year Martin Montgomery Musgraves
---- ------- ---------- ---------
<S> <C> <C> <C>
1998 $ 91,800 $ 25,200 $ 31,080
1997 $ 128,000 $ 19,000 $ 31,872
1996 $ 120,000 -0- $ 72,674
</TABLE>
Mr. Montgomery's employment with TIMET commenced in December 1996 and
his services as an executive officer of Tremont commenced in May 1997.
Consequently, no information is shown for Mr. Montgomery for 1996.
Tremont expects that each of Messrs. Martin, Montgomery and Musgraves
will devote approximately 10% of his total TIMET/Tremont time during
1999 to Tremont matters.
13
<PAGE> 17
Accordingly, it is anticipated that Tremont will reimburse TIMET for
such proportionate percentage of the 1999 salary and bonus paid by
TIMET to such individuals (plus a share of applicable estimated fringe
benefits and overhead expense for each) pursuant to an intercorporate
services agreement. See "Certain Relationships and Related
Transactions--Contractual Relationships" below.
Tremont beneficially owns approximately 19.7% of the outstanding shares
of NL Common Stock. For financial reporting purposes, Tremont reports
its interest in NL by the equity method. For each of the years
1996-1998, J. Landis Martin also served as an executive officer of NL
and was separately compensated by NL for such services. Appended to
this Proxy Statement as Appendix A is information with respect to
compensation paid by NL to Mr. Martin for services rendered to NL for
each such year.
(3) Under TIMET's variable incentive compensation plan applicable to Mr.
Montgomery and Mr. Musgraves (the "TIMET Employee Cash Incentive
Plan"), a portion of the compensation payable to such individuals under
this plan is based upon TIMET's financial performance, while the
balance is based on the assessed performance of the individual officer.
Mr. Martin participates in TIMET's Senior Executive Cash Incentive Plan
(the "TIMET Senior Executive Cash Incentive Plan"). Such plan provides
for payments based solely upon TIMET's financial performance.
Participation in this plan is in lieu of participation in the TIMET
Employee Cash Incentive Plan. Except as noted in footnotes (4) and (6)
below, the amounts shown in the "Bonus" column represent amounts paid
under the TIMET Employee Cash Incentive Plan or the TIMET Senior
Executive Cash Incentive Plan, as applicable to such individual.
(4) In 1996, in connection with TIMET's acquisition of IMI Titanium, TIMET
made special cash and stock bonus (the "Management Shares") awards to
certain of its executive officers. Applying the fair value of TIMET
Common Stock at the effective date of grant of the Management Shares,
aggregate cash and stock awards totaling $667,831 and $136,292 were
made to Mr. Martin and Mr. Musgraves, respectively. Such amounts are
included in the "Bonus" column for each of such individuals for 1996.
Tremont's reimbursement to TIMET for 1996 services did not include any
portion of such amounts.
(5) "All Other Compensation" amounts represent (i) matching contributions
made or accrued by TIMET pursuant to the savings feature of TIMET's
Retirement Savings Plan, (ii) retirement contributions made or accrued
by TIMET pursuant to the TIMET Retirement Savings Plan, and (iii) life
insurance premiums paid by TIMET, as follows:
<TABLE>
<CAPTION>
Year Martin Montgomery Musgraves
---- ------- ---------- ---------
<S> <C> <C> <C> <C>
Savings Match 1998 $ 6,400 $ 4,501 $ 6,400
1997 $11,667 $ 6,127 $ 6,477
1996 $ 7,500 -0- $ 7,500
Retirement Contribution 1998 $ 8,160 $ 7,840 $ 5,920
1997 $ 8,160 $ 7,840 $ 5,920
1996 $ 7,650 -0- $ 5,550
Life Insurance 1998 -0- $ 1,860 $ 788
1997 -0- $ 444 $ 788
1996 -0- -0- $ 788
</TABLE>
In addition, the amounts shown as "All Other Compensation" for Mr.
Montgomery include $30,032 of TIMET travel-related compensation for
1997 and $110,701 of TIMET relocation-related compensation for 1998.
14
<PAGE> 18
(6) The amount shown as "Bonus" for Mr. Martin for 1996 also includes a
special bonus of $2 million awarded by Tremont in 1996. Of this amount,
$955,000 was paid by Tremont to Mr. Martin in 1996, $900,000 was paid
in 1997, and the balance was paid in 1998 (with interest on the unpaid
balances in 1997 and 1998 at 8.75% per annum).
STOCK OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or stock appreciation rights ("SARs") have been granted under
the Tremont Stock Incentive Plan since 1994. Consequently, the table showing
stock option grants with respect to Tremont Common Stock for the last fiscal
year has been omitted. Since 1996, executive officers of Tremont have instead
been granted stock options pursuant to the TIMET Stock Incentive Plan, a stock
option/stock appreciation/restricted stock plan adopted by TIMET in 1996. Set
forth below is information regarding grants made to executive officers of
Tremont under the TIMET Stock Incentive Plan in 1998.
TIMET OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Percent of Assumed Annual Rate
Total of Stock Price
Options Appreciation
Securities Granted to for
Underlying Employees Exercise or Option Term ($) (3)
Date of Options in Fiscal Base Price Expiration --------------------
Name Grant Granted(#)(1) Year ($/share)(2) Date 5% 10%
- ---- ------- ------------- ------ ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Landis Martin 2/19/98 25,000 29.3125 2/19/2008 460,938 1,167,938
25,000 32.3125 2/19/2008 385,938 1,092,938
25,000 16.4% 35.3125 2/19/2008 310,938 1,017,938
J. Thomas Montgomery, Jr. 2/19/98 3,000 29.3125 2/19/2008 55,313 140,153
3,000 32.3125 2/19/2008 46,313 131,153
3,000 2.0% 35.3125 2/19/2008 37,313 122,153
Robert E. Musgraves 2/19/98 5,000 29.3125 2/19/2008 92,188 233,588
5,000 32.3125 2/19/2008 77,188 218,588
5,000 3.3% 35.3125 2/19/2008 62,188 203,588
</TABLE>
- -------------------
(1) Options become exercisable 40% on the second anniversary of the date of
grant and 20% on each of the third, fourth, and fifth anniversaries of
such date.
(2) The exercise price of $29.3125 per share represents the "fair market
value" of TIMET Common Stock on the grant date, calculated as the mean
of the highest and lowest sales prices on such date (the "Grant Date
FMV"). The exercise prices of $32.3125 and $35.3125 per share represent
the Grant Date FMV plus $3.00 and $6.00 per share, respectively.
(3) Pursuant to the rules of the Commission, these amounts reflect the
calculations at assumed 5% and 10% appreciation rates from the Grant
Date FMV. Such calculations are not intended to forecast future
appreciation, if any, and do not necessarily reflect the actual value,
if any, that may be realized. The actual value of such stock options,
if any, would be realized only upon the exercise of such options and
will depend upon the actual future performance of TIMET Common Stock.
No assurance can be made that the amounts reflected in these columns
will be achieved. The potential realizable value was computed as the
difference between the appreciated value (at the end of the ten-year
term of the options) of TIMET Common Stock into which the identified
stock options are exercisable and the aggregate exercise price of such
options. The appreciated value per share at the end of the ten-year
term would be $47.75 and $76.03 at the assumed 5% and 10% appreciation
rates, respectively.
15
<PAGE> 19
STOCK OPTION EXERCISES AND HOLDINGS
The following table provides information, with respect to the executive officers
of Tremont listed in the Summary Compensation Table above, concerning the
exercise of Tremont and TIMET stock options during the last fiscal year and the
value of unexercised Tremont and TIMET stock options held as of December 31,
1998. Mr. Montgomery holds no Tremont stock options. No SARs have been granted
under the Tremont Stock Incentive Plan or the TIMET Stock Incentive Plan. TIMET
has previously agreed to reimburse Tremont for the difference between the market
price of Tremont Common Stock on the date of exercise of a Tremont stock option
held by a TIMET employee (up to $16.625 per share) and the exercise price of
such option. See also "Certain Relationships and Transactions--Contractual
Relationships--Option Reimbursement Agreement."
AGGREGATED OPTION EXERCISES IN 1998 AND 12/31/98 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised,
Unexercised Options In-the-Money
Shares at 12/31/98 Options at 12/31/98
Acquired on (Exercisable/ (Exercisable/
Name Exercise (#) Value Realized Unexercisable) (#) Unexercisable)
- ---- ------------ -------------- ------------------ -------------------
<S> <C> <C> <C> <C>
TREMONT
J. Landis Martin 27,500 $1,212,031 48,000/12,000 $1,134,000/$283,500
Robert E. Musgraves -0- -0- 21,000/2,000 $ 462,688/$50,250
TIMET
J. Landis Martin -0- -0- 21,600/167,400 -0-/-0-
J. Thomas Montgomery, Jr. -0- -0- 7,200/28,800 -0-/-0-
Robert E. Musgraves -0- -0- 7,200/40,800 -0-/-0-
</TABLE>
16
<PAGE> 20
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of Tremont's Board of Directors presents the
following report on executive compensation. The Compensation Committee is
composed of directors who are neither officers nor employees of Tremont, its
subsidiaries or affiliates and who are not eligible to participate in any of the
employee benefit plans administered by it.
As previously indicated, none of Tremont's executive officers is directly
compensated by Tremont. Mr. Martin, Tremont's Chairman, President and Chief
Executive Officer, is compensated directly by TIMET and NL. Mr. Montgomery and
Mr. Musgraves are each compensated directly by TIMET. Tremont, through an
intercorporate services agreement, reimburses TIMET for a portion of the
compensation paid to each of Tremont's executives by TIMET (see "Certain
Relationships and Transactions--Contractual Relationships" below). TIMET (as
well as NL) currently maintains a compensation committee of that company's Board
of Directors that addresses the compensation directly paid to these affected
individuals and separately reports on these matters to its stockholders in its
proxy statement.
Consequently, beginning in 1997, the role of Tremont's Compensation Committee
relating to compensation for its executive officers has been limited to
evaluating and recommending to the full Tremont Board the portion of such
individuals' compensation that would be subject to reimbursement under Tremont's
intercorporate services agreement with TIMET. This evaluation takes into account
the Compensation Committee's view of the reasonableness of the allocation and
amount in relation to the amount of time being devoted by such individuals to
the affairs of Tremont and the cost that might be expected to be incurred by
Tremont were it to hire separate individuals to perform these functions on a
full-time basis.
For 1998, the Compensation Committee recommended that the full Board of
Directors approve an intercorporate services agreement with TIMET providing for
payment to TIMET of approximately $275,000, including approximately $155,000
related to reimbursement for compensation paid by TIMET to Tremont's executives.
This was based upon an allocation of approximately 10% of each such executive's
TIMET compensation (including base salary, incentive compensation, and an
allocated portion of benefit costs), which the Compensation Committee felt to be
reasonable and less than Tremont would incur were it to fill such positions with
separate, full-time employees.
In 1993, Congress amended the Internal Revenue Code to impose a $1 million
deduction limit on compensation paid to the chief executive officer 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 companies'
stockholders. The Compensation Committee does not believe that any existing
compensation program of Tremont could give rise to a deductibility limitation at
current executive compensation levels.
The role of the Compensation Committee will be reassessed periodically based
upon any changes in facts or circumstances that might occur.
MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE
Gen. Thomas P. Stafford (Chairman)
Richard J. Boushka
Avy H. Stein
17
<PAGE> 21
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return for the period commencing December 31, 1993 and ending December 31, 1998
on Tremont Common Stock against the cumulative total return of (a) the S & P
Composite 500 Stock Index, (b) TIMET's self-selected peer group, comprised
solely of RTI International Metals, Inc. (NYSE: RTI) (formerly RMI Titanium
Company), the principal U.S. competitor of TIMET in the titanium metals industry
for which meaningful, same-period stockholder return information is available,
and (c) the S&P Chemicals Index, which is utilized as a comparison of
performance by NL. The graph shows the value at December 31 of each year,
assuming an original investment of $100 in each and reinvestment of cash
dividends and other distributions to stockholders.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG TREMONT CORPORATION,
S&P COMPOSITE 500 STOCK INDEX, THE SELF-SELECTED TIMET PEER GROUP,
AND THE S&P CHEMICALS INDEX
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) TREMONT S&P 500 RTI S&P Chemical
- --------------------- ------- ------- --- ------------
<S> <C> <C> <C> <C>
12/31/93 100 100 100 100
12/30/94 171 101 37 116
12/29/95 242 139 53 151
12/31/96 525 171 188 200
12/31/97 760 229 134 246
12/31/98 486 294 93 237
</TABLE>
18
<PAGE> 22
CERTAIN RELATIONSHIPS AND TRANSACTIONS
RELATIONSHIPS WITH RELATED PARTIES
As set forth under the caption "Security Ownership," Harold C. Simmons, through
Contran and other related entities or persons, may be deemed to control Tremont.
In addition, Valhi, a 93%-owned subsidiary of Contran (together with related
entities), and Tremont beneficially own approximately 57.8% and 19.7%,
respectively, of the outstanding NL Common Stock, and together may be deemed to
control NL. Tremont and other entities that may be deemed to be controlled by or
related to Mr. Simmons sometimes engage in (a) intercorporate transactions with
related companies 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. Tremont continuously considers, reviews and evaluates,
and understands that Contran, Valhi and related entities also consider, review
and evaluate, such transactions. Depending upon the business, tax and other
objectives then relevant, it is possible that Tremont might be a party to one or
more of such transactions in the future. In connection with these activities,
Tremont may consider issuing additional equity securities or incurring
additional indebtedness. Tremont's acquisition activities have in the past and
may in the future include participation in the acquisition or restructuring
activities conducted by Contran, NL and other companies that may be deemed to be
controlled by Harold C. Simmons. It is the policy of Tremont to engage in
transactions with related parties on terms that are, in the opinion of Tremont,
no less favorable to Tremont than could be obtained from unrelated parties.
Susan E. Alderton, a director of Tremont, is currently Vice President, Chief
Financial Officer and Treasurer of NL. J. Landis Martin, Chairman of the Board,
President and Chief Executive Officer of Tremont, is also currently a director,
President and Chief Executive Officer of NL and Chairman and Chief Executive
Officer of TIMET. Glenn R. Simmons, a director of Tremont, is also currently
Vice Chairman of the Board of Contran and Valhi and a director of TIMET and NL.
Harold C. Simmons, a director of Tremont, is also currently Chairman of the
Board and Chief Executive Officer of Contran and Valhi, and Chairman of the
Board of NL. Gen. Thomas P. Stafford, a director of Tremont, is also currently a
director of TIMET. J. Thomas Montgomery, Jr., Vice President-Controller and
Treasurer of Tremont, is also currently Vice President-Finance and Treasurer of
TIMET. Robert E. Musgraves, Vice President, General Counsel and Secretary of
Tremont, currently holds similar positions at TIMET. Joan H. Prusse, Assistant
General Counsel and Assistant Secretary of Tremont, currently holds similar
positions at TIMET. David B. Garten, Assistant Secretary of Tremont, is
currently Vice President, General Counsel and Secretary of NL. Steven L. Watson,
Assistant Secretary of Tremont, is also currently an executive officer of
Contran and Valhi. William A. Kirschner, Assistant Treasurer of Tremont,
currently holds a similar position at TIMET. Robert D. Hardy, Assistant
Treasurer of Tremont, currently holds a similar position at TIMET and is also
currently Vice President-Controller of NL. Tremont understands that all such
persons are expected to continue to serve in such capacities in 1999. Such
individuals divide their time among the companies for which they serve as
executive officers. Such management interrelationships and intercorporate
relationships may lead to possible conflicts of interest. These possible
conflicts of interest 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 conflicts of interest.
Although no specific procedures are in place that govern the treatment of
transactions among Tremont, Contran, Valhi, TIMET and NL, the board of directors
of each of these companies (with the exception of Contran) includes one or more
members who are not officers or directors of any entity that may be
19
<PAGE> 23
deemed to be related to Tremont. Additionally, 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 stockholders
of all the companies for which they serve.
CONTRACTUAL RELATIONSHIPS
NL Registration Rights Agreement
In connection with the 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.
Baroid Letters of Credit
Approximately $9 million in letters of credit were issued under a bank credit
agreement in favor of Baroid Corporation ("Baroid"), a former affiliate of
Tremont, to collateralize certain obligations arising out of the insurance and
bentonite mining operations of Tremont and its subsidiaries. Pursuant to an
indemnification agreement, Tremont agreed to indemnify Baroid for all fees and
expenses arising out of Baroid's issuance of any letters of credit on Tremont's
behalf. Following the January 1994 sale of Baroid to an unrelated third party,
these letters of credit continued to be issued under the unrelated third party's
credit facility until 1998, when Tremont arranged for substitute letters of
credit collateralized by Tremont cash.
Insurance Sharing Agreements
NL Insurance Ltd. of Vermont, a wholly owned subsidiary of Tremont ("TRE
Insurance"), has assumed the obligations of the issuer of certain reinsurance
contracts that relate to primary insurance policies issued by a third-party
insurance company in favor of NL and Tremont. NL and TRE Insurance are parties
to an insurance sharing agreement with respect to such reinsurance contracts
(the "NL Insurance Sharing Agreement"). Under the terms of the NL Insurance
Sharing Agreement, NL will reimburse TRE Insurance with respect to certain loss
payments and reserves established by TRE Insurance that (a) arise out of claims
against NL and its subsidiaries (the "NL Liabilities"), and (b) are subject to
payment by TRE Insurance under its reinsurance contracts with the third-party
insurance company. Also pursuant to the NL Insurance Sharing Agreement, TRE
Insurance is to credit NL with respect to certain underwriting profits or
recoveries that TRE Insurance receives from independent reinsurers that relate
to the NL Liabilities. Baroid and TRE Insurance are also parties to an insurance
sharing agreement having substantially the same terms and conditions as the NL
Insurance Sharing Agreement with respect to certain loss payments and reserves
established by TRE Insurance that arise out of claims against Baroid and its
subsidiaries. As of December 31, 1997, TRE Insurance had current accounts
receivable of approximately $3.0 million and $0.4 million from NL and Baroid,
respectively, pursuant to their respective insurance sharing agreements. In the
first quarter of 1999, NL collateralized letters of credit relating to the NL
Liabilities issued and outstanding on behalf of TRE Insurance with $9.7 million
of NL's cash.
Contran Intercorporate Services Agreement
During 1998, Contran and Tremont were parties to an intercorporate services
agreement (the "Contran ISA") that provides that Contran will render certain
management functions to Tremont and its subsidiaries, including services
rendered by Harold C. Simmons and Glenn R. Simmons. Tremont paid Contran
approximately $1 million for services rendered under the Contran ISA during
1998. The Contran ISA is subject to automatic renewal and may be terminated by
either party pursuant to written notice delivered at least 30 day prior to a
quarter-end. Tremont expects to enter into a similar agreement for 1999
providing for payments by Tremont to Contran of approximately the same amount.
20
<PAGE> 24
Tremont will continue to pay directors' fees and expenses separately to Harold
C. Simmons and Glenn R. Simmons. See "Compensation of Directors" above.
NL Intercorporate Services Agreements
NL and Tremont are parties to an intercorporate services agreement (the "NL
ISA") whereby NL makes available to Tremont certain services with respect to
Tremont's insurance, risk management, real property, internal audit, tax and
executive secretarial needs. Tremont paid fees of approximately $87,200 to NL
for services pursuant to the NL ISA during 1998. The NL ISA is subject to
automatic renewal and may be terminated by either party pursuant to written
notice delivered at least 30 days prior to a quarter-end. Tremont expects to
enter into a similar agreement for 1999 providing for comparable services and
payments.
NL and TIMET are parties to an intercorporate services agreement (the "NL/TIMET
ISA") whereby NL makes available to TIMET certain services with respect to
TIMET's insurance, risk management, real property, internal audit, tax and
executive secretarial needs. TIMET paid NL approximately $508,000 for such
services during 1998. The NL/TIMET ISA is subject to automatic renewal and may
be terminated by either party pursuant to written notice delivered at least 30
days prior to a quarter-end. Tremont understands that TIMET and NL expect to
enter into a similar agreement for 1999 providing for comparable services and
payments.
TIMET Intercorporate Services Agreement
Tremont and TIMET are parties to an intercorporate services agreement (the
"TIMET ISA") that provides that TIMET will render certain management, financial,
tax and administrative services to Tremont, including provision for the
reimbursement by Tremont to TIMET of a portion of the salary, bonus and overhead
expense for the executive officers of Tremont. The TIMET ISA is subject to
automatic renewal and may be terminated by either party pursuant to a written
notice delivered at least 30 days prior to a quarter-end. Tremont paid TIMET
approximately $267,000 under the TIMET ISA during 1998. Tremont expects to enter
into a similar agreement for 1999 providing for comparable services and
payments.
Utility Services
In connection with the operations of TIMET's Henderson, Nevada facility, TIMET
purchases utility services from Basic Investments, Inc. and its subsidiaries
(collectively, "BII") pursuant to various agreements. During 1998, the aggregate
amount paid by TIMET to BII was approximately $2 million. A 75%-owned subsidiary
of Tremont owns approximately 32% of the outstanding equity securities of BII
(representing 26% of the voting securities of BII).
Contran Advances
During 1998, Tremont borrowed a total of $5.875 million from Contran to finance
the purchase of shares of NL Common Stock and for other general corporate
purposes. These advances, which are payable upon demand, bear interest at the
prime rate from time to time, less 0.5% (an effective rate of 7.25% at December
31, 1998).
Option Reimbursement Agreement
In 1996, IMI and UTSC entered into separate agreements with Tremont and TIMET
whereby IMI and UTSC each agreed to reimburse Tremont for a portion of the cost
to Tremont associated with the exercise of certain Tremont stock options issued
to employees of TIMET pursuant to the Tremont Stock Incentive Plan. The payments
are calculated by multiplying (x) the number of shares of Tremont Common Stock
covered by such exercised option by (y) the difference between (i) the closing
sale price of Tremont Common Stock on the NYSE Composite Tape on the date of
exercise, not to exceed $34, minus (ii) $16.625, and (z) multiplying the
resulting product by (i) 0.16 in the case of UTSC and (ii) 0.34 in the case of
IMI. The maximum aggregate payments to be made by IMI and UTSC to Tremont under
such agreements are limited to $1.1 million and $520,000, respectively. Pursuant
to this
21
<PAGE> 25
agreement, IMI and UTSC made payments to Tremont of $81,718 and $13,066,
respectively, during 1998.
Interest in Aircraft
In February 1999, NL purchased for $2.85 million a 25% undivided interest in an
aircraft that was previously owned by TIMET. The seller of the aircraft interest
to NL reacquired the interest from TIMET in February 1999 for $2.85 million.
Tremont understands that the purchase of the aircraft interest was unanimously
approved by the outside directors of each of TIMET's and NL's Boards of
Directors.
Insurance Brokerage Commissions
TRE Insurance, Valmont, and EWI RE, Inc. ("EWI") arrange for or broker certain
of Tremont's and TIMET's insurance policies. TRE Insurance is a wholly owned
subsidiary of Tremont. Valmont is a wholly owned subsidiary of Valhi. Parties
related to Contran hold 90% of the outstanding common stock of EWI, and a
son-in-law of Harold C. Simmons manages the operations of EWI. Consistent with
insurance industry practices, TRE Insurance, Valmont and EWI receive commissions
from the insurance and reinsurance underwriters for the policies that they
arrange or broker. During 1998, Tremont and TIMET paid approximately $0.1
million and $1.8 million, respectively, for policies arranged or brokered by EWI
and, in certain cases, also by either TRE Insurance or Valmont. These amounts
principally included payments for reinsurance and insurance premiums paid to
unrelated third parties, but also included commissions paid to TRE Insurance,
Valmont and EWI. In Tremont's opinion, the amounts that Tremont paid for these
insurance policies are reasonable and similar to those it could have obtained
through an unrelated insurance broker and/or insurance company. Tremont
understands that TIMET takes the same view with respect to the amounts paid by
TIMET. Tremont expects, and understands that TIMET expects, that these
relationships with TRE Insurance, Valmont, and EWI will continue in 1999.
TIMET Executive Stock Ownership Loan Program
In 1998, the TIMET Board of Directors approved a loan program designed to assist
TIMET's executive officers in meeting certain goals established with respect to
their ownership of TIMET Common Stock. Each executive may borrow up to 50% of
his or her base salary per calendar year and 200% of such base salary in the
aggregate. Interest accrues at a rate equal to .0625% per annum above TIMET's
effective borrowing rate at the time of the loan, subject to annual adjustment,
and is payable quarterly. The effective interest rate in 1998 was 6.25% (5.625%
for 1999). Principal is repayable in equal annual installments commencing on the
sixth anniversary of the loan. Repayment of the loans is secured by the stock
purchased with the loan proceeds. The loans are "full recourse" to the executive
personally, except that in the case of a sale of all of the collateral by TIMET
upon an event of default or upon the termination of the executive's employment,
whether for cause or otherwise, the borrower's personal liability for repayment
of the loan is limited to 70% of the principal amount remaining after sale and
application of the proceeds from the sale of the stock. The following table
identifies the executive officers of Tremont who were indebted to TIMET under
this program during 1998:
<TABLE>
<CAPTION>
Maximum Principal
Principal Amount Outstanding as
Outstanding of March 17,
Name during 1998 ($) 1999 ($)
---- -------------- --------
<S> <C> <C>
J. Landis Martin 238,685 -0-
J. Thomas Montgomery, Jr. 75,000 75,000
Robert E. Musgraves 87,461 87,461
</TABLE>
22
<PAGE> 26
SUBSIDIARY AND AFFILIATE RELATIONSHIPS
NL is a party to certain additional agreements with related entities as set
forth in Appendix A to this Proxy Statement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Tremont's executive officers,
directors, and persons who own beneficially more than 10% of a registered class
of Tremont's equity securities to file reports of ownership and changes in
ownership with the Commission and Tremont. Based solely on a review of copies of
the Section 16(a) reports furnished to Tremont and written representations by
certain reporting persons, Tremont believes that all of Tremont's executive
officers, directors and greater than 10% beneficial owners filed on a timely
basis all reports required during and with respect to the fiscal year ended
December 31, 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.)
served as Tremont's independent public accountants for the year ended December
31, 1998 and is currently expected to be considered for appointment by the Board
of Directors as such for the year ended December 31, 1999. Representatives of
PricewaterhouseCoopers LLP are not expected to attend the Meeting.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder action
at Tremont's annual stockholder meetings, consistent with rules adopted by the
Commission. Such proposals must be received by Tremont no later than November
30, 1999, to be considered for inclusion in the proxy statement and form of
proxy relating to the 2000 Annual Meeting of Stockholders. Any such proposals
should be addressed to: Corporate Secretary, Tremont Corporation, 1999 Broadway,
Suite 4300, Denver, Colorado 80202.
OTHER MATTERS
The Board of Directors knows of no other business to be presented for
consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their best
judgment.
1998 ANNUAL REPORT ON FORM 10-K
Tremont's 1998 Annual Report on Form 10-K, as filed with the Commission, is
included as a part of Tremont's 1998 Annual Report which accompanies this Proxy
Statement. Additional copies are available to stockholders without charge on
request by writing: Investor Relations Department, Tremont Corporation, 1999
Broadway, Suite 4300, Denver, Colorado 80202.
23
<PAGE> 27
APPENDIX A
Appended to this Proxy Statement as Appendix A is information with respect to
compensation paid by NL to certain individuals who are executive officers of
Tremont and information with respect to certain related party transactions
involving NL.
TREMONT CORPORATION
Denver, Colorado
March 29, 1999
24
<PAGE> 28
APPENDIX A
NL INDUSTRIES, INC. COMPENSATION AND
RELATED PARTY TRANSACTIONS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF EXECUTIVE OFFICERS PAID BY NL
The Summary Compensation Table and related notes set forth below provide certain
summary information concerning annual and long-term compensation paid or accrued
by NL to, or on behalf of, J. Landis Martin, the only executive officer of
Tremont listed under "Executive Compensation" in the Proxy Statement who was,
during 1998, also an executive officer of NL, for services rendered during the
fiscal years ended December 31, 1996, 1997 and 1998.
SUMMARY COMPENSATION TABLE (1)
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Other Securities All
Annual Underlying Other
Salary Bonus Compensation Options Compensation
Names and Position Year ($) ($) (2) ($) (3) (#) ($) (5)
- ------------------ ---- --- ------- ------- --- -------
<S> <C> <C> <C> <C> <C> <C>
J. Landis Martin 1998 500,000 2,750,000 20,127 120,000 318,600
President and Chief 1997 500,000 750,000 -0- 90,000 9,600
Executive Officer (4) 1996 400,000 -0- -0- 45,000 85,000
</TABLE>
- ---------------
(1) No grants of SARs, awards of restricted stock or payouts under
long-term incentive plans (as defined by applicable federal securities
regulations) were made during 1998, 1997 or 1996. Therefore, columns
for such compensation otherwise required by applicable federal
securities regulations have been omitted.
(2) Amounts paid pursuant to the NL Variable Compensation Plan (the "NL
Variable Compensation Plan"). In addition, for 1998, Mr. Martin was
granted a special discretionary bonus by NL of $2,000,000 in view of
his contributions to the sale of NL's rheological additives business.
(3) Amount that exceeds 120% of the applicable Federal long-term interest
rate on deferred compensation.
(4) During 1998, 1997 and 1996, Mr. Martin also served as an executive
officer of Tremont and TIMET. Mr. Martin is expected to continue to
serve as an executive officer of NL, Tremont and TIMET in 1999 and to
be compensated directly by NL for services to NL and by TIMET for
services to TIMET and Tremont. Mr. Martin is expected to continue to
devote approximately one-half of his working time to his duties as
President and Chief Executive Officer of NL. See "Certain Relationships
and Transactions" below.
(5) Represents (i) contributions to the account of Mr. Martin under the NL
Savings Plan and (ii) amounts accrued by NL in unfunded accounts for
the benefit of Mr. Martin under the Supplemental Executive Retirement
Plan for Executives and Officers of NL Industries, Inc. (the "NL
SERP"), as follows:
A-1
<PAGE> 29
<TABLE>
<CAPTION>
Year Martin
---- ----------
<S> <C> <C>
NL Savings Plan 1998 $ 9,600
1997 $ 9,600
1996 -0-
NL SERP 1998 $ 309,000
1997 -0-
1996 $ 85,000
</TABLE>
STOCK OPTION GRANTS BY NL
The following table and related notes provide information, with respect to the
grant to Mr. Martin of options ("NL Options") under the Long Term Performance
Incentive Plan of NL (the "NL Incentive Plan") during fiscal year 1998. No stock
appreciation rights ("NL SARs") were granted under the NL Incentive Plan in
1998.
NL OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rate of Stock
Securities Total Options Price Appreciation for
Underlying Granted to Exercise or Option Term ($) (3)
Date of Options Employees in Base Price Expiration --------------------
Name Grant Granted Fiscal Year ($/share)(2) Date 5% 10%
- ---- ------- ------------- ------------ ------------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Landis Martin 2/11/98 40,000 17.9688 2/11/08 452,048 1,145,648
40,000 19.9688 2/11/08 372,048 1,065,648
40,000 25.3% 21.9688 2/11/08 292,048 985,648
</TABLE>
- ----------------
(1) Grants of NL Options to purchase shares of NL Common Stock under the NL
Incentive Plan vest over five years from February 11, 1998, 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 NL
Options expire on the tenth anniversary date of the date of grant.
(2) Exercise price of $17.9688 is equal to the mean of the high and low
prices of NL Common Stock on the New York Stock Exchange Composite Tape
on the date of grant; exercise prices of $19.9688 and $21.9688 are
equal to the foregoing mean price on the date of grant plus $2.00 and
$4.00, respectively.
(3) Pursuant to the rules of the Commission, these amounts reflect the
calculations at assumed 5% and 10% appreciation rates. Such
calculations are not intended to forecast future appreciation, if any,
and do not necessarily reflect the actual value, if any, that may be
realized. The actual value of such options, if any, would be realized
only upon the exercise of such options and depends upon the future
performance of the NL Common Stock. No assurance can be made that the
amounts reflected in these columns will be achieved. The potential
realizable value was computed as the difference between the appreciated
value (at the end of the ten-year term of the options) of the NL Common
Stock into which the listed options are exercisable and the aggregate
exercise price of such options. The appreciated value per share at the
end of the ten-year term would be $29.27 and $46.61 at the assumed 5%
and 10% rates, respectively.
A-2
<PAGE> 30
STOCK OPTION EXERCISES AND HOLDINGS FOR NL
The following table and related notes provide information with respect to Mr.
Martin regarding the exercise of NL Options during the last fiscal year and the
value of unexercised NL Options held as of December 31, 1998. No NL SARs have
been granted to Mr. Martin under the NL Incentive Plan.
AGGREGATED NL OPTION EXERCISES IN 1998 AND 12/31/98 OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised,
Unexercised In-the-Money
Shares Options at 12/31/98 Options at 12/31/98
Acquired on (Exercisable/ (Exercisable/
Name Exercise (#)(1) Value Realized($) Unexercisable)(#) Unexercisable)
---- --------------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C>
J. Landis Martin 324,000 3,351,751 334,000/276,000 $1,333,639/$259,971
</TABLE>
- ----------------
(1) On September 23, 1998, Valhi and NL entered into an agreement with Ms.
Alderton, Mr. Garten, and Mr. Martin under which Valhi purchased from
such individuals 33,889 shares, 30,241 shares, and 72,650 shares,
respectively, of NL Common Stock for an aggregate of $694,725,
$619,941, and $1,489,325, respectively. Under the agreement, the
sellers delivered certain shares of NL Common Stock to NL in payment of
the exercise price and applicable withholding taxes (as permitted by
the relevant NL incentive plan), and NL issued directly to Valhi
certificates representing the appropriate number of shares of NL Common
Stock purchased by them.
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
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, the Board 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, up to the limits set forth in the Internal Revenue Code. Such
pension benefits are payable upon retirement and attainment of ages specified in
the NL Pension Plan. The NL Pension Plan covers Mr. Martin. No amounts were paid
or distributed to Mr. Martin in 1998. The estimated accrued annual benefits
payable upon retirement at normal retirement age for Mr. Martin is $50,277.
NL EMPLOYMENT AGREEMENT
Mr. Martin has entered into an executive severance agreement with NL which
provides that he may be terminated at any time by action of the NL Board of
Directors. The executive severance agreement also provides that the following
payments shall be made to Mr. Martin in the event Mr. Martin's employment is
terminated by NL without cause (as defined in the agreement) or Mr. Martin
terminates his employment with NL for good reason (as defined in the agreement):
(i) two times Mr. Martin's annual NL base salary plus NL target bonus (which
shall not be less than the amount of his annual NL salary); (ii) accrued NL
salary and NL bonus through the date of termination; and (iii) certain other
benefits. The amended agreement provides that it shall be in effect through
December 31, 2000.
A-3
<PAGE> 31
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Intercorporate Services Agreements
NL and Contran are parties to an intercorporate services agreement (the
"NL/Contran ISA") whereby Contran makes available to NL the services of Harold
C. Simmons to consult with NL and assist in the development and implementation
of NL's strategic plans and objectives. The services do not include major
corporation acquisitions, divestitures and other special projects outside the
scope of NL's business as it has been conducted in the past. NL paid Contran
approximately $980,000 in 1998 for services pursuant to the NL/Contran ISA and
expects to pay approximately the same amount in 1999 for such services. The
NL/Contran ISA is subject to automatic renewal and may be terminated by either
party pursuant to a written notice delivered at least 30 days prior to a
quarter-end. NL will continue to pay directors' fees and expenses separately to
Harold C. Simmons.
NL and Valhi are parties to an intercorporate services agreement (the "NL/Valhi
ISA") whereby Valhi renders certain management, financial and administrative
services to NL and NL made available to Valhi the services of Joseph S.
Compofelice (through February 1998) and NL's internal audit personnel. In
addition, in 1998, NL provided to Valhi certain insurance and risk management
services. Mr. Compofelice served as an executive officer of Valhi in 1998. NL
paid total net fees of approximately $13,000 to Valhi for services provided in
1998. NL expects to pay approximately the same amount for services in 1999. The
NL/Valhi ISA is subject to automatic renewal and may be terminated by either
party pursuant to a written notice delivered at least 30 days prior to a
quarter-end.
NL and CompX are parties to an intercorporate services agreement (the "NL/CompX
ISA") whereby NL makes available to CompX certain services with respect to
CompX's occupancy, accounting, computer support and internal audit needs. CompX
paid fees of approximately $87,500 for services pursuant to the NL/CompX ISA
during 1998. The NL/CompX ISA is subject to automatic renewal and may be
terminated by either party pursuant to a written notice delivered at least 30
days prior to a quarter-end. NL expects to receive approximately the same amount
for services to be provided to CompX in 1999.
Insurance Brokerage Commissions
EWI RE, Inc. ("EWI") arranges for and brokers certain of NL's insurance policies
and those of NL's 50%-owned joint venture. Parties related to Contran own 90% of
the outstanding common stock of EWI, and a son-in-law of Harold C. Simmons
manages the operations of EWI. Consistent with insurance industry practices, EWI
receives a commission from the insurance underwriters for the policies that it
arranges or brokers. NL and its joint venture paid an aggregate of approximately
$3.0 million for such policies in 1998, which amount principally included
payments for reinsurance premiums paid to third parties, but also included
commissions paid to EWI. In NL's opinion, the premiums that NL paid for these
insurance policies are reasonable and similar to those it could have obtained
through an unrelated insurance broker. NL expects that these relationships with
EWI will continue in 1999.
A-4
<PAGE> 32
TREMONT CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
<PAGE> 33
PROXY
TREMONT CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 4, 1999
The undersigned hereby appoints J. Thomas Montgomery, Jr., Robert E. Musgraves
and Joan H. Prusse, 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 1999 Annual Meeting of Stockholders (the "Meeting") of
Tremont Corporation, a Delaware corporation ("Tremont"), to be held at the
offices of Valhi, Inc., 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Tuesday,
May 4, 1999, at 9:30 a.m. (Central Time), and at any adjournment or postponement
of said Meeting, all of the shares of Common Stock ($1.00 par value) of Tremont
standing in the name of the undersigned or which the undersigned may be entitled
to vote on the matters described on the reverse side of this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TREMONT
CORPORATION. PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
SEE REVERSE SIDE
<PAGE> 34
[ ] Please mark your votes as in this example.
This proxy, if properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted "FOR" all nominees named in
Item 1 below.
The Board of Directors recommends a vote "FOR" each of the director nominees
named in Item 1 below.
1. Election of Seven Directors FOR ALL WITHHELD AS TO ALL
(except as marked below)
[ ] [ ]
Vote withheld as to the following nominee(s): Nominees:
Susan E. Alderton
Richard J. Boushka
J. Landis Martin
Glenn R. Simmons
Harold C. Simmons
Gen. Thomas P. Stafford
Avy H. Stein
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment of
postponement thereof.
Please sign exactly as your name appears on this card. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please show full corporate
name and sign authorized officer's name and title. If a partnership, please show
full partnership name and sign authorized person's name and title.
The undersigned hereby revokes all proxies heretofore given by the undersigned
to vote at such meeting and any adjournment or postponements thereof.
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SIGNATURE(S) DATE
