SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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240.14a-12
Valhi, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[LOGO GOES HERE]
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
April 1, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of Valhi, Inc., which will be held on Monday, May 13, 2002, at 1:30 p.m., local
time, at Valhi's corporate offices at Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas. The matters to be acted upon at the meeting are
described in the attached Notice of Annual Meeting of Stockholders and Proxy
Statement.
Whether or not you plan to attend the meeting, please complete, date, sign
and return the enclosed proxy card or voting instruction form in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes. Your vote, whether given
by proxy or in person at the meeting, will be held in confidence by the
inspector of election as provided in Valhi's bylaws.
Sincerely,
/s/ Harold C. Simmons
Harold C. Simmons
Chairman of the Board and
Chief Executive Officer
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 2002
To the Stockholders of Valhi, Inc.:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the
"Meeting") of Valhi, Inc., a Delaware corporation ("Valhi"), will be held on
Monday, May 13, 2002, at 1:30 p.m., local time, at the corporate offices of
Valhi at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas for
the following purposes:
(1) To elect seven directors to serve until the 2003 Annual Meeting of
Stockholders and until their successors are duly elected and qualified
or their earlier removal, resignation or death; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The board of directors of Valhi set the close of business on March 18, 2002
as the record date (the "Record Date") for the Meeting. Only holders of Valhi's
common stock, par value $0.01 per share, at the close of business on the Record
Date are entitled to notice of, and to vote at, the Meeting. Valhi's stock
transfer books will not be closed following the Record Date. A complete list of
stockholders entitled to vote at the Meeting will be available for examination
during normal business hours by any stockholder of Valhi, for purposes related
to the Meeting, for a period of ten days prior to the Meeting at Valhi's
corporate offices located at the address set forth above.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting in person, please complete, date and sign the accompanying
proxy card or voting instruction form and return it promptly in the enclosed
envelope to ensure that your shares are represented and voted in accordance with
your wishes. You may revoke your proxy by following the procedures set forth in
the accompanying proxy statement. If you choose, you may still vote in person at
the Meeting even though you previously submitted your proxy.
In accordance with Valhi's bylaws, your vote, whether given by proxy or in
person at the Meeting, will be held in confidence by the inspector of election
for the Meeting.
By Order of the Board of Directors,
/s/ A. Andrew R. Louis
A. Andrew R. Louis, Secretary
Dallas, Texas
April 1, 2002
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement and the accompanying proxy card or voting instruction
form are being furnished in connection with the solicitation of proxies by and
on behalf of the board of directors (the "Board of Directors") of Valhi, Inc., a
Delaware corporation ("Valhi"), for use at the 2002 Annual Meeting of
Stockholders of Valhi to be held on Monday, May 13, 2002 and at any adjournment
or postponement thereof (the "Meeting"). The accompanying Notice of Annual
Meeting of Stockholders (the "Notice") sets forth the time and place and the
purposes of the Meeting. The Notice, this proxy statement, the accompanying
proxy card or voting instruction form and Valhi's Annual Report to Stockholders,
which includes Valhi's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 (the "Annual Report"), are first being mailed to the holders
of Valhi's common stock, par value $0.01 per share ("Valhi Common Stock"), on or
about April 5, 2002. Valhi's executive offices are located at Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
QUORUM, VOTING RIGHTS AND PROXY SOLICITATION
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of and to vote at the Meeting was the close of
business on March 18, 2002 (the "Record Date"). As of the Record Date, there
were 114,773,617 shares of Valhi Common Stock issued and outstanding. Each share
of Valhi Common Stock entitles its holder to one vote on all matters to be acted
on at the Meeting. The presence, in person or by proxy, of the holders of a
majority of the shares of Valhi Common Stock entitled to vote at the Meeting is
necessary to constitute a quorum for the conduct of business at the Meeting.
Shares of Valhi Common Stock that are voted to abstain from any business coming
before the Meeting and broker/nominee non-votes will be counted as being in
attendance at the Meeting for purposes of determining whether a quorum is
present.
If a quorum is present, a plurality of the affirmative votes of the
outstanding shares of Valhi Common Stock represented and entitled to be voted at
the Meeting is necessary to elect a director of Valhi. The accompanying proxy
card or voting instruction form provides space for a stockholder to withhold
authority to vote for any of the nominees of the Board of Directors. Neither
shares as to which the authority to vote on the election of directors has been
withheld nor broker/nominee non-votes will be counted as affirmative votes to
elect director nominees to the Board of Directors. However, since director
nominees need only receive the vote of a plurality of the shares represented at
the Meeting and entitled to vote, a vote withheld from a particular nominee will
not affect the election of such nominee.
Except as applicable laws may otherwise provide, the approval of any other
matter that may properly come before the Meeting will require the affirmative
vote of a majority of the shares represented and entitled to vote at the
Meeting. Shares of Valhi Common Stock that are voted to abstain from any other
business coming before the Meeting and broker/nominee non-votes will not be
counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Meeting "FOR" the election of the nominees for director and, to the extent
allowed by the federal securities laws, in the discretion of the agents on any
other matter that may properly come before the Meeting.
Contran Corporation ("Contran") and certain related persons and entities
held approximately 94% of the outstanding shares of Valhi Common Stock as of the
Record Date and have indicated their intention to have such shares represented
at the Meeting and voted "FOR" the election of each of the nominees for director
of the Board of Directors. If such shares are represented and voted as indicated
at the Meeting, a quorum will be present and all the nominees for director will
be elected as directors of Valhi.
Computershare Investor Services, L.L.C. or its successor ("Computershare"),
the transfer agent and registrar for Valhi Common Stock as of the Record Date,
has been appointed by the Board of Directors to ascertain the number of shares
represented, receive proxies and ballots, tabulate the vote and serve as
inspector of election at the Meeting. All proxies, ballots and voting
instructions delivered to Computershare that identify the vote of a particular
stockholder shall be kept confidential by Computershare in accordance with the
terms of Valhi's bylaws. Each holder of record of Valhi Common Stock giving the
proxy enclosed with this proxy statement may revoke it at any time prior to the
voting of such stock at the Meeting by delivering to Computershare a written
revocation of the proxy, delivering to Computershare a duly executed proxy
bearing a later date or by voting in person at the Meeting. Attendance by a
stockholder at the Meeting will not in itself constitute the revocation of such
stockholder's proxy.
This proxy solicitation is being made by and on behalf of the Board of
Directors. Valhi will pay all expenses related to the solicitation, including
charges for preparing, printing, assembling and distributing all materials
delivered to stockholders. In addition to solicitation by mail, directors,
officers and regular employees of Valhi may solicit proxies by telephone or in
person for which such persons will receive no additional compensation. Upon
request, Valhi will reimburse banking institutions, brokerage firms, custodians,
trustees, nominees and fiduciaries for their reasonable out-of-pocket expenses
incurred in distributing proxy materials and voting instructions to the
beneficial owners of Valhi Common Stock held of record by such entities.
ELECTION OF DIRECTORS
The bylaws of Valhi provide that the Board of Directors shall consist of
not less than five and not more than nine persons, as determined from time to
time by the Board of Directors in its discretion. The number of directors is
currently set at seven. The directors elected at the Meeting will hold office
until the 2003 Annual Meeting of Stockholders and until their successors are
duly elected and qualified or their earlier removal, resignation or death.
All of the nominees are currently directors of Valhi whose terms will
expire at the Meeting. All of the nominees have agreed to serve if elected. If
any nominee is not available for election at the Meeting, a proxy will be voted
"FOR" an alternate nominee to be selected by the Board of Directors, unless the
stockholder executing such proxy withholds authority to vote for such nominee.
The Board of Directors believes that all of its present nominees will be
available for election at the Meeting and will serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. The following information has been provided by the
respective nominees for election as directors of Valhi for terms expiring at the
2003 Annual Meeting of Stockholders.
Thomas E. Barry, age 58, has served as a director of Valhi since 2000. Dr.
Barry is vice president for executive affairs at Southern Methodist University
and has been professor of marketing in the Edwin L. Cox School of Business at
Southern Methodist University since prior to 1997. Dr. Barry is also a director
of Keystone Consolidated Industries, Inc., a steel fabricated wire products,
industrial wire and carbon steel rod company affiliated with Contran
("Keystone"). Additionally, he serves as a member of Valhi's audit committee and
management development and compensation committee (the "MD&C Committee").
Norman S. Edelcup, age 66, has served as a director of Valhi and/or certain
of Valhi's predecessors since 1975. Since 2001, Mr. Edelcup has served as senior
vice president of Florida Savings Bancorp. He also serves as a trustee for the
Baron Funds, a mutual fund group. Mr. Edelcup served as senior vice president of
Item Processing of America, Inc., a processing service bureau ("IPA"), from 1999
to 2000 and as chairman of the board of IPA from prior to 1997 to 1999.
Additionally, he serves as chairman of Valhi's audit committee and MD&C
Committee.
Edward J. Hardin, age 59, has served as a director of Valhi since 2000. Mr.
Hardin is also a director of CompX International Inc. ("CompX"), a majority
owned indirect subsidiary of Valhi that manufactures ergonomic computer support
systems, precision ball bearing slides and security products. Mr. Hardin has
been a partner of the law firm of Rogers & Hardin LLP since its formation in
1976. Mr. Hardin serves as a director of Westrup, Inc., a manufacturer of seed
processing machinery, and as chairman of the board of the Harvard Center for the
Study of World Religions. Additionally, he serves as a member of Valhi's audit
committee.
Glenn R. Simmons, age 74, has served as a director of Valhi and/or certain
of Valhi's predecessors since 1980. Mr. Simmons has been vice chairman of the
board of Valhi and Contran, a diversified holding company, since prior to 1997.
Mr. Simmons is a director of Valhi's majority owned subsidiary, NL Industries,
Inc. ("NL"), a titanium dioxide pigments company; chairman of the board of CompX
and Keystone; a director of Titanium Metals Corporation ("TIMET"), a company
engaged in the titanium metals industry of which Tremont Corporation ("Tremont")
owns approximately 39%; and a director of Tremont, Valhi's majority owned
indirect subsidiary that in addition to its holdings in TIMET owns approximately
21% of NL and interests in land development entities. Mr. Simmons has been an
executive officer and/or director of various companies related to Valhi and
Contran since 1969. Mr. Simmons serves as a member of Valhi's executive
committee and is a brother of Harold C. Simmons.
Harold C. Simmons, age 70, has served as a director of Valhi and/or certain
of Valhi's predecessors since 1980. Mr. Simmons has been chairman of the board
and chief executive officer of Valhi and Contran since prior to 1997 and was
president of Valhi and Contran from prior to 1997 to 1998. Mr. Simmons is
chairman of the board of NL and a director of Tremont. Mr. Simmons has been an
executive officer and/or director of various companies related to Valhi and
Contran since 1961. Mr. Simmons serves as chairman of Valhi's executive
committee and is a brother of Glenn R. Simmons.
J. Walter Tucker, Jr., age 76, has served as a director of Valhi and/or
certain of Valhi's predecessors since 1982. Mr. Tucker has been the president,
treasurer and a director of Tucker & Branham, Inc., a mortgage banking,
insurance and real estate company, and vice chairman of the board and a director
of Keystone since prior to 1997. Mr. Tucker has been an executive officer and/or
director of various companies related to Valhi and Contran since 1982.
Steven L. Watson, age 51, has served as a director of Valhi since 1998. Mr.
Watson has been president of Valhi and Contran, and a director of Contran, since
1998. Mr. Watson is also a director of CompX, Keystone, NL, TIMET and Tremont.
From prior to 1997 to 1998, Mr. Watson served as vice president and secretary of
Valhi and Contran. Mr. Watson has served as an executive officer and/or director
of various companies related to Valhi and Contran since 1980. Mr. Watson serves
as a member of Valhi's executive committee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings and took action by written
consent in lieu of meetings on six occasions in 2001. Each of the directors
participated in all of such meetings and of the meetings of the committees on
which they served at the time they served.
The Board of Directors has established and delegated authority to the
following standing committees.
Audit Committee. The audit committee assists the Board of Directors in
fulfilling its oversight responsibilities relating to the financial accounting
and reporting practices of Valhi. The audit committee's primary responsibilities
are to serve as an independent and objective party to review Valhi's auditing,
accounting and financial reporting processes. For further information on the
role of the audit committee, see "Independent Auditor Matters--Audit Committee
Report." The current members of the audit committee are Norman S. Edelcup
(chairman), Edward J. Hardin and Dr. Thomas E. Barry. The audit committee held
two meetings in 2001.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve grants of stock
options and other awards under the Valhi, Inc. 1997 Long-Term Incentive Plan
(the "1997 Plan"), to review and administer the Valhi, Inc. 1987 Stock
Option--Stock Appreciation Rights Plan, as amended (the "1987 Plan"), and the
1997 Plan and to review and administer such other compensation matters as the
Board of Directors may direct from time to time. For further information on the
role of the MD&C Committee, see "Report on Executive Compensation." The current
members of the MD&C Committee are Norman S. Edelcup (chairman) and Dr. Thomas E.
Barry. The MD&C Committee held one meeting in 2001.
Executive Committee. The principal responsibilities of the executive
committee are to take such actions as are required to manage Valhi, within the
limits provided by Delaware statutes and the Board of Directors. The current
members of the executive committee are Harold C. Simmons (chairman), Glenn R.
Simmons and Steven L. Watson. The executive committee did not hold any meetings
in 2001.
The Board of Directors does not have a nominating committee or any
committee performing a similar function. All matters that would be considered by
such a committee are acted upon by the full Board of Directors. The Board of
Directors will consider recommendations by stockholders of Valhi with respect to
the election of directors if such recommendations are submitted in writing to
the secretary of Valhi and received not later than December 31 of the year prior
to the next annual meeting of stockholders. Such recommendations should be
accompanied by a full statement of qualifications and confirmation of the
nominee's willingness to serve.
It is anticipated that the members of the standing committees will be
elected at the annual meeting of the Board of Directors immediately following
the Meeting. The Board of Directors has previously established, and from time to
time may establish, other committees to assist it in the discharge of its
responsibilities.
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of Valhi. Each executive officer serves at the pleasure of the Board of
Directors. Biographical information with respect to Harold C. Simmons, Glenn R.
Simmons and Steven L. Watson is set forth under "Election of Directors--Nominees
for Director."
Name Age Position(s)
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Harold C. Simmons................... 70 Chairman of the Board and Chief Executive Officer
Glenn R. Simmons.................... 74 Vice Chairman of the Board
Steven L. Watson.................... 51 President
William J. Lindquist................ 44 Senior Vice President
Bobby D. O'Brien.................... 44 Vice President and Treasurer
J. Mark Hollingsworth............... 50 Vice President and General Counsel
Gregory M. Swalwell................. 45 Vice President and Controller
Eugene K. Anderson.................. 66 Vice President and Assistant Treasurer
A. Andrew R. Louis.................. 41 Secretary
Kelly D. Luttmer.................... 38 Tax Director
William J. Lindquist has served as senior vice president of Valhi and
Contran, and a director of Contran, since 1998. From prior to 1997 to 1998, Mr.
Lindquist served as vice president and tax director of Valhi and Contran. Mr.
Lindquist has served as an executive officer and/or director of various
companies related to Valhi and Contran since 1980.
Bobby D. O'Brien has served as vice president of Valhi and Contran since
prior to 1997 and treasurer of Valhi and Contran since 1997. Mr. O'Brien has
served in financial and accounting positions with various companies related to
Valhi and Contran since 1988.
J. Mark Hollingsworth has served as vice president of Valhi and Contran
since 1998 and as general counsel of Valhi and Contran since prior to 1997. Mr.
Hollingsworth has served as legal counsel to various companies related to Valhi
and Contran since 1983.
Gregory M. Swalwell has served as vice president of Valhi and Contran since
1998 and controller of Valhi and Contran since prior to 1997. Mr. Swalwell has
served in accounting positions with various companies related to Valhi and
Contran since 1988.
Eugene K. Anderson has served as vice president and assistant treasurer of
Valhi and Contran since prior to 1997. Mr. Anderson has served as an executive
officer of various companies related to Valhi and Contran since 1980.
A. Andrew R. Louis has served as secretary of Valhi and Contran since 1998.
From prior to 1997 to 1998, Mr. Louis served as corporate counsel of Valhi and
Contran. Mr. Louis has served as legal counsel of various companies related to
Valhi and Contran since 1995.
Kelly D. Luttmer has served as tax director of Valhi and Contran since
1998. Since prior to 1997 to 1998, Ms. Luttmer served as assistant tax manager
of Valhi and Contran. Ms. Luttmer has served in tax accounting positions with
various companies related to Valhi and Contran since 1989.
SECURITY OWNERSHIP
Ownership of Valhi and Its Parents. The following table and footnotes set
forth as of the Record Date the beneficial ownership, as defined by regulations
of the Securities and Exchange Commission (the "SEC"), of Valhi Common Stock
held by each person or group of persons known to Valhi to own beneficially more
than 5% of the outstanding shares of Valhi Common Stock, each director of Valhi,
each executive officer of Valhi named in the Summary Compensation Table below (a
"named executive officer") and all directors and executive officers of Valhi as
a group. See footnote (4) below for information concerning individuals and
entities that may be deemed to own indirectly and beneficially those shares of
Valhi Common Stock directly held by Contran, National City Lines, Inc.
("National") and Valhi Group, Inc. ("VGI"). Except as set forth below, no
securities of Valhi's parent companies are beneficially owned by any director or
executive officer of Valhi. All information is taken from or based upon
ownership filings made by such persons with the SEC or upon information provided
by such persons.
Valhi Common Stock
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Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
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Contran Corporation and subsidiaries:
Contran Corporation (3)...................................... 2,805,700 (4)(5) 2.4%
National City Lines, Inc. (3)................................ 10,891,009 (4) 9.5%
Valhi Group, Inc. (3)........................................ 93,739,554 (4) 81.7%
Thomas E. Barry.................................................. 4,000 (6) *
Norman S. Edelcup................................................ 29,000 (6) *
Edward J. Hardin................................................. 7,000 (6) *
Glenn R. Simmons................................................. 203,183 (4)(6)(7) *
Harold C. Simmons................................................ 80,383 (4)(5)(8) *
J. Walter Tucker, Jr............................................. 243,750 (4)(6)(9) *
Steven L. Watson................................................. 188,635 (4)(6) *
William J. Lindquist............................................. 168,000 (4)(6) *
Bobby D. O'Brien................................................. 83,000 (4)(6) *
Gregory M. Swalwell.............................................. 94,166 (4)(6) *
All directors and executive officers as a group (14 persons)..... 1,335,563 (4)(5)(6)(7)(8)(9) 1.2%
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* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares of Valhi Common
Stock set forth opposite their names. The number of shares and percentage
of ownership of Valhi Common Stock for each person or group assumes the
exercise by such person or group (exclusive of others) of stock options
that such person or group may exercise within 60 days subsequent to the
Record Date.
(2) The percentages are based on 114,773,617 shares of Valhi Common Stock
outstanding as of the Record Date. For purposes of calculating the
outstanding shares of Valhi Common Stock as of the Record Date, 1,186,200
shares of Valhi Common Stock held by a subsidiary of NL, a majority owned
subsidiary of Valhi, and 1,000,000 shares of Valhi Common Stock held by
Valmont Insurance Company, a wholly owned subsidiary of Valhi ("Valmont"),
are excluded from the amount of Valhi Common Stock outstanding. Pursuant to
Delaware corporate law, Valhi treats these excluded shares as treasury
stock for voting purposes.
(3) The business address of Contran, National and VGI is Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
(4) National, NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding") are
the direct holders of approximately 73.3%, 11.4% and 15.3%, respectively,
of the outstanding common stock of VGI. Contran and NOA are the direct
holders of approximately 85.7% and 14.3%, respectively, of the outstanding
common stock of National. Contran and Southwest Louisiana Land Company,
Inc. ("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the direct holder of 100%
of the outstanding common stock of Dixie Holding. Contran is the holder of
100% of the outstanding common stock of Dixie Rice and approximately 88.9%
of the outstanding common stock of Southwest. Substantially all of
Contran's outstanding voting stock is held by trusts established for the
benefit of certain children and grandchildren of Harold C. Simmons (the
"Trusts"), of which Mr. Simmons is the sole trustee. As sole trustee of the
Trusts, Mr. Simmons has the power to vote and direct the disposition of the
shares of Contran stock held by the Trusts. Mr. Simmons, however, disclaims
beneficial ownership of any Contran shares that the Trusts hold.
Harold C. Simmons is the chairman of the board and chief executive officer
of VGI, National, NOA, Dixie Holding, Dixie Rice, Southwest and Contran. By
virtue of the holding of the offices, the stock ownership and his service
as trustee, all as described above, Mr. Simmons may be deemed to control
such entities, and Mr. Simmons and certain of such entities may be deemed
to possess indirect beneficial ownership of the shares of Valhi Common
Stock directly held by certain of such other entities. Mr. Simmons,
however, disclaims beneficial ownership of the shares of Valhi Common Stock
beneficially owned, directly or indirectly, by any of such entities, NL or
Valmont.
Glenn R. Simmons, Steven L. Watson and William J. Lindquist are directors
of Contran and all of Valhi's executive officers are executive officers of
Contran. Each of such persons disclaims beneficial ownership of the shares
of Valhi Common Stock that Contran directly or indirectly beneficially
holds.
The Harold Simmons Foundation, Inc. (the "Foundation") directly holds
approximately 0.5% of the outstanding shares of Valhi Common Stock. The
Foundation is a tax-exempt foundation organized for charitable purposes.
Harold C. Simmons is the chairman of the board and chief executive officer
of the Foundation and may be deemed to control the Foundation. Mr. Simmons,
however, disclaims beneficial ownership of any shares of Valhi Common Stock
held by the Foundation.
The Combined Master Retirement Trust (the "Master Trust") directly holds
approximately 0.1% of the outstanding shares of Valhi Common Stock. Valhi
established the Master Trust to permit the collective investment by master
trusts that maintain assets of certain employee benefit plans Valhi and
related companies adopt. Harold C. Simmons is the sole trustee of the
Master Trust and a member of the trust investment committee for the Master
Trust. J. Walter Tucker, Jr. is also a member of the trust investment
committee for the Master Trust. The Board of Directors selects the trustee
and members of the trust investment committee for the Master Trust. Harold
C. Simmons, Glenn R. Simmons, Steven L. Watson, William J. Lindquist, Bobby
D. O'Brien, Gregory M. Swalwell and the other Valhi executive officers are
participants in one or more of the employee benefit plans that invest
through the Master Trust. Each of such persons disclaims beneficial
ownership of the shares of Valhi Common Stock held by the Master Trust,
except to the extent of his or her individual vested beneficial interest in
the assets held by the Master Trust.
The business address of NOA, Dixie Holding, the Master Trust and the
Foundation is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas 75240-2697. The business address of Dixie Rice is 600 Pasquiere
Street, Gueydan, Louisiana 70542. The business address of Southwest is 402
Canal Street, Houma, Louisiana 70360.
(5) The shares of Valhi Common Stock shown as owned by Contran include
approximately 0.4% of the outstanding Valhi Common Stock that is directly
held by the Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2").
U.S. Bank National Association serves as trustee of the CDCT No. 2. Contran
established the CDCT No. 2 as an irrevocable "rabbi trust" to assist
Contran in meeting certain deferred compensation obligations that it owes
to Harold C. Simmons. If the CDCT No. 2 assets are insufficient to satisfy
such obligations, Contran must satisfy the balance of such obligations.
Pursuant to the terms of the CDCT No. 2, Contran retains the power to vote
the shares held by the CDCT No. 2, retains dispositive power over such
shares and may be deemed the indirect beneficial owner of such shares. Mr.
Simmons, however, disclaims such beneficial ownership of the shares
beneficially owned, directly or indirectly, by the CDCT No. 2, except to
the extent of his interest as a beneficiary of the CDCT No. 2.
(6) The shares of Valhi Common Stock shown as beneficially owned by such person
or group include the following number of shares such person or group has
the right to acquire upon the exercise of stock options granted pursuant to
the 1987 Plan or 1997 Plan that such person or group may exercise within 60
days subsequent to the Record Date:
Shares of Valhi Common Stock
Issuable Upon the Exercise
of Stock Options
Name of Beneficial Owner On or Before May 17, 2002
--------------------------------------------------------------------------- ----------------------------
Thomas E. Barry........................................................... 2,000
Norman S. Edelcup......................................................... 5,000
Edward J. Hardin.......................................................... 4,000
Glenn R. Simmons.......................................................... 200,000
J. Walter Tucker, Jr...................................................... 5,000
Steven L. Watson.......................................................... 170,000
William J. Lindquist...................................................... 168,000
Bobby D. O'Brien.......................................................... 83,000
Gregory M. Swalwell....................................................... 93,000
All other executive officers of Valhi as a group (4 persons).............. 233,000
(7) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 800 shares his wife holds in her retirement account, with
respect to which he disclaims beneficial ownership.
(8) The shares of Valhi Common Stock shown as beneficially owned by Harold C.
Simmons include 77,000 shares his wife holds, with respect to which he
disclaims beneficial ownership.
(9) The shares of Valhi Common Stock shown as beneficially owned by J. Walter
Tucker, Jr. include 200,000 shares his wife holds, with respect to which he
disclaims beneficial ownership, and 17,250 shares held by a corporation of
which he is the sole stockholder.
Valhi understands that Contran and related entities may consider acquiring
or disposing of shares of Valhi Common Stock through open-market or privately
negotiated transactions, depending upon future developments, including, but not
limited to, the availability and alternative uses of funds, the performance of
Valhi Common Stock in the market, an assessment of the business of and prospects
for Valhi, financial and stock market conditions and other factors deemed
relevant by such entities. Valhi may similarly consider acquisitions of shares
of Valhi Common Stock and acquisitions or dispositions of securities issued by
related entities.
Valhi does not presently intend, and understands that Contran does not
presently intend, to engage in any transaction or series of transactions that
would result in Valhi Common Stock becoming eligible for termination of
registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or ceasing to be traded on a national securities exchange.
Ownership of NL and CompX. The following table and footnotes set forth the
beneficial ownership, as of the Record Date, of the common stock, par value
$0.125 per share, of NL ("NL Common Stock") and the class A common stock, par
value $0.01 per share, of CompX ("CompX Class A Common Stock") held by each
director of Valhi, each named executive officer and all directors and executive
officers of Valhi as a group. All information is taken from or based upon
ownership filings made by such persons with the SEC or upon information provided
by such persons.
NL Common Stock CompX Class A Common Stock
--------------------------------------- ------------------------------------
Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3)
------------------------ ----------------------- -------------- ---------------------- ----------
Thomas E. Barry................. -0- (4) -0- -0- (5) -0-
Norman S. Edelcup............... -0- (4) -0- 2,000 (5) *
Edward J. Hardin................ -0- (4) -0- 8,200 (5)(6) *
Glenn R. Simmons................ 10,000 (4)(6) * 50,900 (5)(6) *
Harold C. Simmons............... 81,475 (4)(6)(7) * 20,000 (5)(7) *
J. Walter Tucker, Jr............ -0- (4) -0- -0- (5) -0-
Steven L. Watson................ 7,000 (4)(6) * 11,200 (5)(6) *
William J. Lindquist............ -0- (4) -0- 8,000 (5)(6) *
Bobby D. O'Brien................ -0- (4) -0- 8,300 (5)(6) *
Gregory M. Swalwell............. -0- (4) -0- 4,000 (5)(6) *
All directors and executive
officers of Valhi as a
group (14 persons) ......... 98,975 (4)(6)(7) * 127,000 (5)(6)(8) 2.5%
--------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares set forth opposite
their names. The number of shares and percentage of ownership for each
person or group assumes the exercise by such person or group (exclusive of
others) of stock options that such person or group may exercise within 60
days subsequent to the Record Date.
(2) The percentages are based on 48,820,984 shares of NL Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 5,103,280 shares of CompX Class A Common Stock
outstanding as of the Record Date.
(4) Valhi and Tremont are the direct holders of approximately 61.7% and 20.9%,
respectively, of the outstanding NL Common Stock. Tremont Group, Inc.
("TGI"), Valhi and Tremont Holdings, LLC ("TRE Holdings") are the direct
holders of approximately 80.0%, 0.1% and 0.1%, respectively, of the
outstanding common stock of Tremont. Valhi and TRE Holdings are the direct
holders of 80.0% and 20.0%, respectively, of the outstanding common stock
of TGI. NL is the sole member of TRE Holdings. See footnotes (2), (4) and
(5) to the "Ownership of Valhi and Its Parents" table above for certain
information concerning Valhi and the individuals and entities that may be
deemed to own indirectly and beneficially shares of NL Common Stock that
Valhi and Tremont directly hold. Harold C. Simmons and all other directors
and executive officers of Valhi disclaim beneficial ownership of all of the
shares of NL Common Stock that Valhi and Tremont directly hold.
(5) Valcor, Inc., a wholly owned subsidiary of Valhi ("Valcor"), owns 100% of
the CompX class B common stock, par value $0.01 per share ("CompX Class B
Common Stock" and together with the CompX Class A Common Stock, the "CompX
Common Stock"). Each share of CompX Class B Common Stock entitles the
holder to one vote on all matters except the election of directors on which
each share is entitled to ten votes. Valhi holds approximately 7.3% of the
outstanding CompX Class A Common Stock. As a result, Valhi holds, directly
and indirectly through Valcor, approximately 68.7% of the combined voting
power of the CompX Common Stock (approximately 95.5% for the election of
directors). In certain instances, shares of CompX Class B Common Stock are
automatically convertible into shares of CompX Class A Common Stock. See
footnotes (2), (4) and (5) to the "Ownership of Valhi and Its Parents"
table above for certain information concerning individuals and entities
that may be deemed to own indirectly and beneficially shares of CompX
Common Stock that Valcor and Valhi hold directly. Harold C. Simmons and all
other directors and executive officers of Valhi disclaim beneficial
ownership of all of the shares of CompX Common Stock that Valhi and Valcor
directly hold.
(6) The shares of NL Common Stock or CompX Class A Common Stock shown as
beneficially owned by such person or group include the following number of
shares such person or group has the right to acquire upon the exercise of
stock options granted pursuant to NL or CompX stock option plans that such
person or group may exercise within 60 days subsequent to the Record Date:
Shares of NL Common Stock Shares of CompX Class A Common
Issuable Upon the Exercise Stock Issuable Upon the
of Stock Options Exercise of Stock Options
Name of Beneficial Owner On or Before May 17, 2002 On or Before May 17, 2002
------------------------------------------ ----------------------------- -----------------------------
Edward J. Hardin......................... -0- 3,200
Glenn R. Simmons......................... 8,000 42,400
Harold C. Simmons........................ 8,000 -0-
Steven L. Watson......................... 2,000 9,200
William J. Lindquist..................... -0- 8,000
Bobby D. O'Brien......................... -0- 8,000
Gregory M. Swalwell...................... -0- 4,000
All other executive officers of Valhi
as a group (4 persons)................. -0- 14,400
(7) The shares of NL Common Stock and CompX Class A Common Stock shown as
beneficially owned by Harold C. Simmons include 69,475 and 20,000 shares,
respectively, held by his wife, with respect to which shares he disclaims
beneficial ownership.
Ownership of Tremont and TIMET. The following table and footnotes set forth
the beneficial ownership, as of the Record Date, of the common stock, par value
$1.00 per share, of Tremont ("Tremont Common Stock") and the common stock, par
value $0.01 per share, of TIMET ("TIMET Common Stock") held by each director of
Valhi, each named executive officer and all directors and executive officers of
Valhi as a group. All information has been taken from or based upon ownership
filings made by such persons with the SEC or upon information provided by such
persons.
Tremont Common Stock TIMET Common Stock
------------------------------------ ------------------------------------
Amount and Nature Percent of Amount and Nature Percent of
of Beneficial Class of Beneficial Class
Name of Beneficial Owner Ownership (1) (1)(2) Ownership (1) (1)(3)
------------------------ ---------------------- ------------ ----------------------- ----------
Thomas E. Barry................ -0- (4) -0- -0- (5) -0-
Norman S. Edelcup.............. -0- (4) -0- -0- (5) -0-
Edward J. Hardin............... -0- (4) -0- -0- (5) -0-
Glenn R. Simmons............... 19 (4) * 7,000 (5) *
Harold C. Simmons.............. -0- (4) -0- -0- (5) -0-
J. Walter Tucker, Jr........... 875 (4)(6) * -0- (5) -0-
Steven L. Watson............... 4,474 (4) * 14,500 (5)(7) *
William J. Lindquist........... -0- (4) -0- -0- (5) -0-
Bobby D. O'Brien............... -0- (4) -0- -0- (5) -0-
Gregory M. Swalwell............ -0- (4) -0- -0- (5) -0-
All directors and executive
officers of Valhi as a group
(14 persons)................ 5,368 (4)(6) * 21,600 (5)(7) *
--------------------
* Less than 1%.
(1) Except as otherwise noted, the listed individuals and group have sole
investment power and sole voting power as to all shares set forth opposite
their names. The number of shares and percentage of ownership for each
person or group assumes the exercise by such person or group (exclusive of
others) of stock options that such person or group may exercise within 60
days subsequent to the Record Date are outstanding.
(2) The percentages are based on 6,424,858 shares of Tremont Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 31,861,338 shares of TIMET Common Stock
outstanding as of the Record Date.
(4) TGI, Valhi and TRE Holdings are the holders of approximately 80.0%, 0.1%
and 0.1%, respectively, of the outstanding common stock of Tremont. Valhi
and TRE Holdings are the direct holders of 80.0% and 20.0%, respectively,
of the outstanding common stock of TGI. NL is the sole member of TRE
Holdings. Valhi and Tremont are the direct holders of approximately 61.7%
and 20.9%, respectively, of the outstanding NL Common Stock. See footnotes
(2), (4) and (5) to the "Ownership of Valhi and Its Parents" table above
for certain information concerning Valhi and the individuals and entities
that may be deemed to own indirectly and beneficially shares of Tremont
Common Stock that TGI directly holds. Harold C. Simmons and all other
directors and executive officers of Valhi disclaim beneficial ownership of
all of the shares of Tremont Common Stock any of these entities directly
hold.
(5) Tremont and the Master Trust directly hold approximately 38.5% and 3.1%,
respectively, of the outstanding TIMET Common Stock. See footnote (4) above
and footnotes (2), (4) and (5) to the "Ownership of Valhi and Its Parents"
table above for certain information concerning individuals and entities
that may be deemed to own indirectly and beneficially shares of TIMET
Common Stock that Tremont and the Master Trust hold directly. Harold C.
Simmons and all other directors and executive officers of Valhi disclaim
beneficial ownership of all of the shares of TIMET Common Stock that
Tremont and the Master Trust directly hold.
(6) The shares of Tremont Common Stock shown as beneficially owned by J. Walter
Tucker include 525 shares held by a corporation of which he is the sole
stockholder.
(7) The shares of TIMET Common Stock shown as beneficially owned by Steven L.
Watson include 5,000 shares he has the right to acquire upon the exercise
of stock options granted pursuant to a TIMET stock option plan that he may
exercise within 60 days subsequent to the Record Date.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. During 2001, Dr. Thomas E. Barry, Norman S.
Edelcup, Edward J. Hardin and J. Walter Tucker, Jr., directors of Valhi who were
not also employees of Valhi or an affiliate of Valhi (collectively, the
"Nonemployee Directors"), received an annual retainer of $16,000 paid in
quarterly installments, plus a fee of $1,000 per day for attendance at board
meetings and as a daily rate for other services rendered on behalf of the Board
of Directors and/or the standing committees thereof. Nonemployee directors who
were members of the audit committee or MD&C Committee also received an annual
retainer of $1,000, paid in quarterly installments, for each of these committees
on which they served. Nonemployee Directors are also reimbursed for reasonable
expenses incurred in attending meetings and in the performance of other services
rendered on behalf of the Board of Directors and/or its committees.
In February 2001, each of the Nonemployee Directors also received his
annual 2001 noncash compensation granted under the 1997 Plan consisting of 1,000
shares of Valhi Common Stock and stock options exercisable for 2,000 shares of
Valhi Common Stock. The annually granted stock options have an exercise price
equal to the closing sales price of Valhi Common Stock on the date of grant,
have a term of 10 years and fully vest on the first anniversary of the date of
grant. Valhi grants the annual Nonemployee Director stock and stock options on
the third business day after Valhi issues a press release reporting its
full-year earnings for the prior year.
Contran and certain of its subsidiaries, including Valhi, have entered
into certain intercorporate services agreements (collectively, the "ISAs")
pursuant to which Contran, among other things, provides the services of all or
certain of the named executive officers, to certain of Contran's subsidiaries,
including Valhi and its subsidiaries. For a discussion of these ISAs, see
"Compensation Committee Interlocks and Insider Participation--Relationships with
Related Parties--Intercorporate Services Agreements."
Summary of Cash and Certain Other Compensation of Executive Officers. The
Summary Compensation Table set forth below provides information concerning
annual and long-term compensation paid or accrued by Valhi and its subsidiaries
for services rendered to Valhi and its subsidiaries during 2001, 2000 and 1999
by Valhi's chief executive officer and each of the four other most highly
compensated individuals (based on salary and bonus paid by Valhi or ISA charges
to Valhi) who were executive officers of Valhi at December 31, 2001.
Harold C. Simmons was an employee of Contran for all of 2001, 2000 and
1999. For 2001 and the second half of 2000, Steven L. Watson, William J.
Lindquist and Bobby D. O'Brien were employees of Contran. For the first half of
2000 and all of 1999, Messrs. Watson, Lindquist and O'Brien were employees of
Valhi. For all of 2001, Mr. Gregory M. Swalwell was an employee of Contran. For
all of 2000 and 1999, Mr. Swalwell was an employee of Valhi. In 2001, pursuant
to the ISAs, Contran, among other things, provided to Valhi and certain of
Valhi's subsidiaries the services of all of the named executive officers.
Pursuant to the ISAs, the employer of an executive officer charged the other
party to the ISA a fee for such officer's services rendered under the ISA. For a
discussion of these ISAs, see "Compensation Committee Interlocks and Insider
Participation--Relationships with Related Parties--Intercorporate Services
Agreements."
SUMMARY COMPENSATION TABLE
Long Term
Compensation (1)
------------------
Awards
------------------
Annual Compensation (2) Shares
Name and ---------------------------------- Underlying All Other
Principal Position Year Salary Bonus Options (#) Compensation
-------------------------------- ---- -------------- ---------------- ------------------ ---------------
Harold C. Simmons................ 2001 $3,485,000 (3) $ -0- (3) 2,000 (4) $ -0-
Chairman of the Board and Chief 2000 2,992,469 (3) -0- (3) 2,000 (4) -0-
Executive Officer 1999 2,982,563 (3) -0- (3) 2,000 (4) -0-
Steven L. Watson................. 2001 1,040,335 (3) -0- (3) 2,000 (4) 52,481 (7)
President 2,000 (5)
5,000 (6)
2000 862,663 (3) -0- (3) 2,000 (5) 85,337 (7)
5,000 (6)
1999 312,322 (3) 694,048 (3) -0- 187,628 (7)
William J. Lindquist............. 2001 432,000 (3) -0- (3) -0- 37,635 (7)
Senior Vice President 2000 374,000 (3) -0- (3) -0- 62,906 (7)
1999 250,615 (3) 448,863 (3) 30,000 (8) 115,628 (7)
Bobby D. O'Brien................. 2001 455,000 (3) -0- (3) -0- 3,380 (7)
Vice President and Treasurer 2000 373,000 (3) -0- (3) -0- 12,363 (7)
1999 175,832 (3) 168,799 (3) 30,000 (8) 39,332 (7)
Gregory M. Swalwell.............. 2001 407,000 (3) -0- (3) -0- 793 (7)
Vice President and Controller 2000 129,575 (3) 126,758 (3) 25,000 (8) 11,336 (7)
1999 115,269 (3) 108,064 (3) 30,000 (8) 19,738 (7)
--------------------
(1) No shares of restricted stock were granted to the named executive officers
nor payouts made to the named executive officers pursuant to long-term
incentive plans during the last three years. Therefore, the columns for
such compensation have been omitted.
(2) Other annual compensation for each of the named executive officers included
perquisites, which perquisites were less than the level required for
reporting pursuant to SEC rules. Therefore, the column for other annual
compensation has been omitted.
(3) For 2001, the amounts shown in the table as salary compensation for the
named executive officers represent the portion of the fees Valhi and its
subsidiaries paid to Contran pursuant to the ISAs with respect to services
such officers rendered to Valhi and its subsidiaries, plus director fees
paid to Messrs. Simmons Watson by Valhi's subsidiaries.
For 2000 and 1999, the amounts shown in the table as salary compensation
for Mr. Simmons represent the portion of the fees Valhi and its
subsidiaries paid to Contran pursuant to the ISAs with respect to services
he rendered to Valhi and its subsidiaries, plus director fees paid to him
by Valhi's subsidiaries.
For 2000, the amounts shown in the table as salary compensation for Messrs.
Watson, Lindquist and O'Brien represent the full amount paid by Valhi and
its subsidiaries for services such individuals rendered to Valhi during the
first half of 2000, less the portion of such compensation that is
attributable to the services such executive officers rendered to Contran
and certain entities related to Contran, for which Contran credited Valhi
pursuant to the ISA between Contran and Valhi (the "Contran/Valhi ISA"),
plus the portion of such compensation that is attributable to the services
such executive officers rendered to Valhi and its subsidiaries during the
second half of 2001, for which Contran charged Valhi and its subsidiaries
pursuant to the ISAs. For 2000, the amount shown in the table as salary
compensation for Mr. Watson also includes director fees paid to him by
Valhi's subsidiaries.
For 2000 for Mr. Swalwell and 1999 for Messrs. Watson, Lindquist, O'Brien
and Swalwell, the amounts shown in the table as compensation represent the
full amount paid by Valhi and its subsidiaries for services such
individuals rendered to Valhi and its subsidiaries during each respective
period, less the portion of such compensation that is attributable to the
services such executive officers rendered to Contran and certain entities
related to Contran, for which Contran credited Valhi pursuant to the
Contran/Valhi ISA. The net salary and bonus amounts shown for each such
individual for each such period reflect the reduction for the amount
credited to Valhi by Contran for such individuals, which has been allocated
proportionately between each individual's base salary and bonus.
The components of the salary and bonus compensation shown in the table for
each of the named executive officers are as follows.
1999 2000 2001
--------------------- -------------------- -----------------
Harold C. Simmons
Contran/Valhi ISA Fee............ $ 1,000,000 $ 1,000,000 $ 1,000,000
Contran/NL ISA Fee............... 950,000 950,000 951,000
Contran/Tremont ISA Fee.......... 980,000 980,000 980,000
Contran/CompX ISA Fee............ -0- -0- 500,000
NL Cash Directors Fees........... 20,000 20,000 20,000
NL Director Stock................ 14,563 22,719 15,250
Tremont Cash Directors Fees...... 18,000 19,750 18,750
-------------- ------------- -------------
$ 2,982,563 $ 2,992,469 $ 3,485,000
============== ============= =============
Steven L. Watson
Valhi Salary..................... $ 337,500 $ 200,000 $ -0-
Valhi Bonus...................... 750,000 -0- -0-
Net Contran/Valhi ISA Fee........ (81,130) 573,000 746,000 (a)
Contran/NL ISA Fee............... -0- -0- 91,000
Contran/Tremont ISA Fee.......... -0- -0- 24,000
Contran/CompX ISA Fee............ -0- -0- 61,000
NL Cash Directors Fees........... -0- 9,500 20,000
NL Director Stock................ -0- 22,719 15,250
Tremont Cash Directors Fees...... -0- 4,500 18,750
TIMET Cash Directors Fees........ -0- 19,350 24,050
TIMET Director Stock............. -0- 1,969 14,210
CompX Cash Directors Fees........ -0- 22,000 20,000
CompX Director Stock............. -0- 9,625 6,075
-------------- ------------- -------------
$ 1,006,370 $ 862,663 $ 1,040,335
============== ============= =============
William J. Lindquist
Valhi Salary..................... $ 279,166 $ 150,000 $ -0-
Valhi Bonus...................... 500,000 -0- -0-
Net Contran/Valhi ISA Fee........ (79,688) 224,000 284,000 (a)
Contran/NL ISA Fee............... -0- -0- 8,000
Contran/Tremont ISA Fee.......... -0- -0- 40,000
Contran/CompX ISA Fee............ -0- -0- 100,000
-------------- ------------- -------------
$ 699,478 $ 374,000 $ 432,000
============== ============= =============
Bobby D. O'Brien
Valhi Salary..................... $ 208,333 $ 125,000 $ -0-
Valhi Bonus...................... 200,000 -0- -0-
Net Contran/Valhi ISA Fee........ (63,702) 248,000 382,000 (a)
Contran/NL ISA Fee............... -0- -0- 44,000
Contran/Tremont ISA Fee.......... -0- -0- 29,000
Contran/CompX ISA Fee............ -0- -0- -0-
-------------- ------------- -------------
$ 344,631 $ 373,000 $ 455,000
============== ============= =============
Gregory M. Swalwell
Valhi Salary..................... $ 133,333 $ 153,333 $ -0-
Valhi Bonus...................... 125,000 150,000 -0-
Net Contran/Valhi ISA Fee........ (35,000) (47,000) 201,000 (a)
Contran/NL ISA Fee............... -0- -0- 114,000
Contran/Tremont ISA Fee.......... -0- -0- 69,000
Contran/CompX ISA Fee............ -0- -0- 23,000
-------------- ------------- -------------
$ 223,333 $ 256,333 $ 407,000
============== ============= =============
(a) Includes for 2001 amounts Contran charged pursuant to ISAs to Medite
Corporation, an indirect wholly owned subsidiary of Valhi, and Waste
Control Specialists LLC, an indirect subsidiary of Valhi.
(4) Represents shares of NL Common Stock underlying stock options NL granted to
this named executive officer.
(5) Represents shares of CompX Class A Common Stock underlying stock options
CompX granted to this named executive officer.
(6) Represents shares of TIMET Common Stock underlying stock options TIMET
granted to this named executive officer.
(7) All other compensation for the last three years for each of the following
named executive officers consisted of matching contributions pursuant to
Valhi's deferred incentive plan (the "DIP"); accruals to unfunded reserve
accounts attributable to certain limits under the Internal Revenue Code of
1986, as amended (the "Code"), with respect to the DIP and Valhi's former
defined benefit pension plan; and interest accruals on the balance of such
accounts, all of which amounts are payable upon the named executed
officer's retirement, the termination of his employment with Valhi or to
his beneficiaries upon his death; as follows:
Unfunded Reserve Account Accruals
------------------------------------
Accruals Related
Employer's to DIP and Interest Accruals
DIP Pension Plan Above 120% of the
Named Executive Officer Year Contributions Limitations AFR Rate (a) Total
--------------------------- ----- ------------------ ------------- ----------------- ----------
Steven L. Watson........ 2001 $ -0- (b) $ -0- $ 52,481 $ 52,481
2000 10,200 -0- 75,137 85,337
1999 9,600 128,985 49,043 187,628
William J. Lindquist.... 2001 -0- (b) -0- 37,635 37,635
2000 9,024 -0- 53,882 62,906
1999 9,600 70,209 35,819 115,628
Bobby D. O'Brien........ 2001 $ -0- (b) $ -0- 3,380 $ 3,380
2000 7,524 -0- 4,839 12,363
1999 9,600 27,121 2,611 39,332
Gregory M. Swalwell..... 2001 -0- (b) -0- 793 793
2000 10,200 -0- 1,136 11,336
1999 9,600 9,620 518 19,738
(a) The agreements for these unfunded reserve accounts provide that the
balance of such accounts accrue interest compounded quarterly.
Pursuant to the rules of the SEC, the amounts shown represent the
portion of the interest accruals to the unfunded reserve accounts that
exceeds 120% of the applicable federal long-term rate as prescribed by
the Code (the "AFR Rate"). The AFR Rate used for such computations was
the 120% AFR Rate for quarterly compounding in effect for the month of
the respective quarter that the interest accrual was credited to the
account.
(b) Since all of Valhi's employees became employees of Contran effective
January 1, 2001, Valhi did not make any contributions to the DIP in
2001.
(8) Represents shares of Valhi Common Stock underlying stock options Valhi
granted to this named executive officer.
Grants of Stock Options. The following table provides information, with
respect to the named executive officers, concerning the grant of stock options
during 2001 under the 1997 Plan and the stock option plans of NL, TIMET and
CompX. Neither Valhi nor any of its parent or subsidiary corporations has
granted any stock appreciation rights ("SARs"). In addition, neither Valhi nor
any of its parent or subsidiary corporations granted any stock options to
Messrs. Lindquist, O'Brien or Swalwell in 2001.
OPTION GRANTS IN 2001
Individual Grants
----------------------------------------------------------
Potential Realizable Value at
Number of Percent of Assumed Annual Rates of
Shares of Total Options Stock Price Appreciation
Underlying Granted to Exercise or for Option Term (1)
Options Employees Base Price Expiration ------------------------------
Name Granted (#) In 2001 (2) Per Share Date 5% 10%
----------------------- --------------- -------------- -------------- ------------ --------------- --------------
Harold C. Simmons
NL Stock Options..... 2,000 (3) 0.41% $20.51 (3) 02/01/06 $ 11,340 (4) $ 25,040 (4)
Steven L. Watson
NL Stock Options..... 2,000 (3) 0.41% 20.51 (3) 02/01/06 11,340 (4) 25,040 (4)
TIMET Stock Options.. 5,000 (5) 16.67% 14.21 (5) 05/22/11 44,700 (4) 113,250 (4)
CompX Stock Options.. 2,000 (6) 0.61% 12.15 (6) 05/10/11 15,280 (4) 38,720 (4)
--------------------
(1) Pursuant to the rules of the SEC, the amounts under these columns reflect
calculations at assumed 5% and 10% annual appreciation rates and,
therefore, are not intended to forecast future appreciation, if any, of the
respective underlying common stocks. The potential realizable value to the
optionees was computed as the difference between the appreciated value, at
the expiration dates of the stock options, of the applicable underlying
common stock obtainable upon exercise of such stock options over the
aggregate exercise price of such stock options.
The amount of gain to the optionees is dependent on the amount of increase
in the price of the applicable underlying common stock, which would benefit
all the respective stockholders proportionately. These potentially
realizable values are based solely on arbitrarily assumed rates of
appreciation required by applicable SEC regulations. Actual gains, if any,
on stock option exercises are dependent on the future performance of the
applicable common stock, overall market conditions and the timing of the
exercise thereof by each respective optionee. There can be no assurance
that the amounts reflected in the table will be achieved.
(2) With respect to NL, TIMET and CompX stock options, the percent of total
options granted to employees is based on the number of shares underlying
stock options the respective issuer granted to its employees and directors
in 2001 as shown in the following table.
Shares of the Issuer's Common
Stock Underlying Stock Options
Issuer Granted in 2001 by the Issuer
--------------------------------------------------------------------- --------------------------------
NL................................................................... 484,000
TIMET................................................................ 30,000
CompX................................................................ 330,000
(3) This stock option represents stock options NL annually grants to its
nonemployee directors. This stock option is exercisable for shares of NL
Common Stock and becomes exercisable on the first anniversary of its date
of grant. The exercise price for this stock option can be paid in already
owned shares of NL Common Stock, provided such tendered shares were held by
the optionee for at least six months.
(4) The appreciated value per share on the respective stock option's expiration
date, based on the exercise price as the fair market value per share of the
underlying common stock, would be as follows:
Fair Market Term of 5% Assumed 10% Assumed
Value on Option in Annual Rate of Annual Rate of
Issuer Date of Grant Years Appreciation Appreciation
---------------------------------- ------------------------------- ----------------- ---------------
NL................................ $20.51 5 $26.18 $33.03
TIMET............................. 14.21 10 23.15 36.86
CompX............................. 12.15 10 19.79 31.51
(5) This stock option represents stock options TIMET annually grants to its
nonemployee directors. This stock option is exercisable for shares of TIMET
Common Stock and becomes exercisable on the first anniversary of its date
of grant.
(6) This stock option represents stock options CompX annually grants to its
nonemployee directors. This stock option is exercisable for shares of CompX
Class A Common Stock and becomes exercisable at a rate of 20% on each of
the first five anniversary dates of the date of grant. The exercise price
for this stock option can be paid in already owned shares of CompX Class A
Common Stock, provided such tendered shares were held by the optionee for
at least six months.
Stock Option Exercises and Holdings. The following table provides
information, with respect to the named executive officers, concerning the value
of unexercised stock options exercisable for Valhi, NL and TIMET Common Stock
and CompX Class A Common Stock held as of December 31, 2001. In 2001, no named
executive officer exercised any stock options. Neither Valhi nor any of its
parent or subsidiary corporations has granted any SARs.
DECEMBER 31, 2001 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 2001 (#) at December 31, 2001 (1)
---------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
------------------------------------------------- ------------ -------------- ------------ --------------
Harold C. Simmons
Valhi Stock Options............................ 500,000 -0- $ 3,160,000 $ -0-
NL Stock Options............................... 6,000 2,000 7,080 -0-
------------ -------------- ------------ -------------
506,000 2,000 3,167,080 -0-
Steven L. Watson
Valhi Stock Options............................ 260,000 20,000 1,606,240 64,000
NL Stock Options............................... -0- 2,000 -0- -0-
TIMET Stock Options............................ 5,000 5,000 263 -0-
CompX Stock Options............................ 6,400 7,600 -0- 1,640
------------ -------------- ------------ -------------
271,400 34,600 1,606,503 65,640
William J. Lindquist
Valhi Stock Options............................ 227,000 38,000 1,316,080 76,600
CompX Stock Options............................ 6,000 4,000 -0- -0-
------------ -------------- ------------ -------------
233,000 42,000 1,316,080 76,600
Bobby D. O'Brien
Valhi Stock Options............................ 167,000 38,000 913,760 76,600
CompX Stock Options............................ 6,000 4,000 -0- -0-
------------ -------------- ------------ -------------
173,000 42,000 913,760 76,600
Gregory M. Swalwell
Valhi Stock Options............................ 97,000 48,000 495,060 78,600
CompX Stock Options............................ 3,000 2,000 -0- -0-
------------ -------------- ------------ -------------
100,000 50,000 495,060 78,600
--------------------
(1) The aggregate amount is based on the difference between the exercise price
of the individual stock options and the closing sales price of such
underlying common stock as reported on the New York Stock Exchange
Composite Tape on December 31, 2001. Such closing sales prices were: $12.70
per share for Valhi Common Stock, $15.27 per share for NL Common Stock,
$3.99 per share for TIMET Common Stock and $12.97 per share for CompX Class
A Common Stock.
Pension Plan. Effective January 1, 2001, all of Valhi's Pension Plan (the
"Pension Plan") assets were transferred to Contran and Contran assumed all of
Valhi's obligations under the Pension Plan. Accordingly, Valhi no longer incurs
costs for a pension plan after December 31, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Valhi's executive officers,
directors and persons who own more than 10% of a registered class of Valhi's
equity securities to file reports of ownership with the SEC, the New York Stock
Exchange, Inc. and Valhi. Based solely on the review of the copies of such forms
and written representations by certain reporting persons received, Valhi
believes that for 2001 its executive officers, directors and 10% stockholders
complied with all applicable filing requirements under section 16(a).
REPORT ON EXECUTIVE COMPENSATION
During 2001 the Nonemployee Directors and the MD&C Committee administered
matters regarding compensation of Valhi's executive officers. This report is
submitted by such individuals in their respective capacities, as set forth
below.
The Board of Directors, with directors other than Nonemployee Directors
abstaining, considered and approved the terms of the Contran/Valhi ISA, pursuant
to which Contran provided to Valhi the services of all of Valhi's executive
officers. Effective January 1, 2001, all of Valhi's employees became employees
of Contran. The amount of the fee Valhi pays under the Contran/Valhi ISA with
respect to each of its executive officers and others who provides services to
Valhi while employed by Contran represents, in the view of the Board of
Directors, the reasonable equivalent of "compensation" for such services.
The Nonemployee Directors, in considering the fee Valhi pays under the
Contran/Valhi ISA with respect to Valhi's chief executive officer, took into
account the chief executive officer's unique experience and knowledge. The
Nonemployee Directors also considered the significant role the chief executive
officer has in establishing Valhi's policies and directing strategic
transactions involving Valhi and its subsidiaries. The Nonemployee Directors, in
considering the fee Valhi pays under the Contran/Valhi ISA with respect to each
of Valhi's other executive officers, considered the overall fee charged under
the Contran/Valhi ISA for the services such officers provide Valhi. No specific
formulas, guidelines or comparable positions were considered in determining the
amount of such fee, nor was there any specific relationship between Valhi's
current or future performance and the level of such fee.
The MD&C Committee, which is comprised solely of the Nonemployee Directors,
review and approve actions related to grants of stock options to Valhi's
executive officers pursuant to the 1997 Plan. It is Valhi's policy that its
executive officers' performance on behalf of Valhi be related to the performance
of Valhi's equity securities and have a commonality of interest with the
stockholders of Valhi, which objectives are generally met through the periodic
grant of stock options, since the amount realized from options depends entirely
on the appreciation of the stock underlying such options. Therefore, unless the
price of Valhi's equity securities increases over the term of the stock options,
the executive officer will receive no compensation from the options.
The size of each executive officer's grant of stock options is based upon
the recommendation of management as modified and/or approved by the chief
executive officer in his best business judgment. When it is deemed appropriate
to grant stock options, annual performance reviews are an important factor in
determining management's recommendation, which is primarily based on each
executive's individual performance and to a lesser extent on Valhi's overall
performance. Individual performance is typically measured by the ability an
executive demonstrates in performing, in a timely and cost efficient manner, the
functions of his or her position on behalf of Valhi, including routine corporate
activities and the development and implementation of strategic transactions and
policies. Additionally, an executive's sustained performance, experience and
potential for growth are assessed. No specific financial or budget tests were
applied in the measurement of individual performance. Valhi's overall
performance is typically measured by Valhi's historical financial results and
the level of success with respect to the development and implementation of
strategic transactions. No specific overall performance measures were utilized
and there is no specific relationship between overall performance measures and
an executive's incentive compensation. Additionally, there was no specific
weighing of the factors considered in the determination of incentive
compensation paid to executive officers.
In granting stock options to Valhi's executive officers, the MD&C Committee
considers the policies and factors set forth in this report, the recommendation
of the chief executive officer and the number of unexpired stock options
previously granted to each individual. In 2001, the MD&C Committee did not grant
any stock options other than the annual stock option grants to the Nonemployee
Directors.
Section 162(m) of the Code generally disallows a tax deduction to public
companies for compensation over $1.0 million paid to the company's chief
executive officer and four other most highly compensated executive officers. It
is Valhi's general policy to structure the performance-based portion of the
compensation of its executive officers in a manner that enhances Valhi's ability
to deduct fully such compensation.
The foregoing report is submitted by the following individuals in the
capacities indicated:
Norman S. Edelcup Dr. Thomas E. Barry
Nonemployee Director and chairman of Nonemployee Director and member
the MD&C Committee of the MD&C Committee
Edward J. Hardin J. Walter Tucker, Jr.
Nonemployee Director Nonemployee Director
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties. As set forth under the caption
"Security Ownership," Harold C. Simmons, through Contran, may be deemed to
control Valhi. Valhi and other entities that may be deemed to be controlled by
or affiliated with Mr. Simmons sometimes engage in (a) intercorporate
transactions such as guarantees, management and expense sharing arrangements,
shared fee arrangements, tax sharing agreements, joint ventures, partnerships,
loans, options, advances of funds on open account and sales, leases and
exchanges of assets, including securities issued by both related and unrelated
parties and (b) common investment and acquisition strategies, business
combinations, reorganizations, recapitalizations, securities repurchases and
purchases and sales (and other acquisitions and dispositions) of subsidiaries,
divisions or other business units, which transactions have involved both related
and unrelated parties and have included transactions that resulted in the
acquisition by one related party of an equity interest in another related party.
Valhi continuously considers, reviews and evaluates and understands that Contran
and related entities consider, review and evaluate transactions of the type
described above. Depending upon the business, tax and other objectives then
relevant, it is possible that Valhi might be a party to one or more of such
transactions in the future. In connection with these activities Valhi may
consider issuing additional equity securities or incurring additional
indebtedness. Valhi's acquisition activities have in the past and may in the
future include participation in the acquisition or restructuring activities
conducted by other companies that may be deemed to be controlled by Mr. Simmons.
It is the policy of Valhi to engage in transactions with related parties on
terms, in the opinion of Valhi, no less favorable to Valhi than could be
obtained from unrelated parties.
Each of the executive officers of Valhi is also currently serving as an
executive officer of certain other companies related to Valhi and it is expected
that each will continue to do so in 2002. Such management interrelationships and
intercorporate relationships may lead to possible conflicts of interest. These
possible conflicts may arise from the duties of loyalty owed by persons acting
as corporate fiduciaries to two or more companies under circumstances in which
such companies may have adverse interests. No specific procedures are in place
that govern the treatment of transactions among Valhi and its related entities,
although such entities may implement specific procedures as appropriate for
particular transactions. In addition, under applicable principles of law, in the
absence of stockholder ratification or approval by directors who may be deemed
disinterested, transactions involving contracts among companies under common
control must be fair to all companies involved. Furthermore, directors of
companies owe fiduciary duties of good faith and fair dealing to all
stockholders of the companies for which they serve.
Intercorporate Services Agreements. Valhi and certain related corporations
have entered into certain ISAs. Pursuant to each ISA, the parties to the ISA, in
exchange for agreed upon fees and reimbursements of costs, agreed to render
certain services to the other, which services may include executive officer
services rendered to one party by employees of the other. The fees paid pursuant
to the ISAs are generally based upon the estimated percentage of time individual
employees, including executive officers, devote to certain matters on behalf of
the recipient of the services and the employer's cost in providing such
services. Each of the ISAs automatically extend on a quarter-to-quarter basis,
subject to termination by either party pursuant to written notice delivered 30
days prior to a quarter-end, and may be amended by mutual agreement.
Under the Contran/Valhi ISA, Contran renders certain management, financial,
tax, administrative and aircraft maintenance services to Valhi, including the
services of all of Valhi's executive officers. Valhi paid Contran fees of
$3,990,000 for services rendered under the ISA in 2001.
The ISA between Contran and Tremont provides that Contran will make
available certain management, financial, tax and administrative services to
Tremont, including the services of certain of Valhi's executive officers.
Tremont paid Contran fees of $1,326,000 for such services rendered in 2001.
Tremont also paid director's fees and expenses directly to Messrs. Glenn and
Harold Simmons and Mr. Watson.
The ISA between Contran and NL provides that Contran will make available
certain management, financial, tax and administrative services to NL, including
the services of certain of Valhi's executive officers, and NL provides certain
administrative support services to Contran. NL paid Contran net fees of
$1,195,000 for services rendered under the ISA in 2001, which represented
$1,490,000 for services Contran rendered to NL less $295,000 for certain
administrative support services NL rendered to Contran. NL also paid director's
fees and expenses directly to Messrs. Glenn and Harold Simmons and Mr. Watson.
The ISA between Contran and CompX provides that Contran will make available
certain management, financial, tax and administrative services to CompX,
including the services of certain of Valhi's executive officers. CompX paid
Contran fees of $1,208,000 for such services rendered in 2001. CompX also paid
director's fees and expenses directly to Messrs. Glenn Simmons and Watson.
The ISA between Contran and Waste Control Specialists LLC, an indirect
subsidiary of Valhi ("WCS"), provides that Contran will make available certain
management, financial, tax and administrative services to WCS, including the
services of certain of Valhi's executive officers. WCS paid Contran fees of
$500,000 for such services rendered in 2001.
The ISA between Contran and Medite Corporation, an indirect wholly owned
subsidiary of Valhi ("Medite"), provides that Contran will make available
certain management, financial, tax and administrative services to Medite,
including the services of certain of Valhi's executive officers. Medite paid
Contran fees of $243,000 for such services rendered in 2001.
Trust Loan Agreement. In May 2001, a wholly owned subsidiary of NL
Environmental Management Services, Inc. ("EMS"), a majority-owned subsidiary of
NL, loaned $20 million to one of the Trusts, the Harold C. Simmons Family Trust
No. 2 ("Family Trust No. 2"), under a $25 million revolving credit agreement.
The loan was approved by special committees of NL's and EMS' boards of
directors. The loan bears interest at the prime rate (6% at December 31, 2001),
is due on demand with sixty days notice and is collateralized by 13,749 shares,
or approximately 35%, of Contran's outstanding Class A voting common stock and
5,000 shares, or 100%, of Contran's Series E Cumulative preferred stock, both of
which are owned by the Family Trust No. 2. The value of this collateral is
dependent in part on the value of Valhi as Contran's interest in Valhi is one of
Contran's more substantial assets. At December 31, 2001, $5 million was
available for additional borrowing by the Family Trust No. 2. At December 31,
2001, the outstanding loan balance was $20 million.
Insurance Matters. Tall Pines Insurance Company ("Tall Pines"), Valmont and
EWI RE, Inc. ("EWI Inc.") provide for or broker certain of Valhi's insurance
policies. Tall Pines is a wholly owned captive insurance company of Tremont.
Valmont is a wholly owned captive insurance company of Valhi. During 2001, one
of the daughters of Harold C. Simmons and a wholly owned subsidiary of Contran
owned, directly or indirectly, 57.8% and 42.2%, respectively, of the outstanding
common stock of EWI Inc. and of the membership interests of EWI Inc.'s
management company, EWI RE, Ltd. (collectively with EWI Inc., "EWI"). Through
December 31, 2000, a son-in-law of Harold C. Simmons managed the operations of
EWI. Subsequent to December 31, 2000, pursuant to an agreement that terminates
on December 31, 2002, such son-in-law provides advisory services to EWI as
requested by EWI, for which the son-in-law is paid $11,875 per month and
receives certain other benefits under EWI's benefit plans. Consistent with
insurance industry practices, Tall Pines, Valmont and EWI Inc. receive
commissions from the insurance and reinsurance underwriters for the policies
that they provide or broker. During 2001, Valhi and its subsidiaries paid
approximately $14.4 million for policies provided or brokered by Tall Pines,
Valmont and/or EWI Inc. These amounts principally included payments for
reinsurance and insurance premiums paid to unrelated third parties, but also
included commissions paid to Tall Pines, Valmont and EWI Inc. In Valhi's
opinion, the amounts that Valhi and its subsidiaries paid for these insurance
policies are reasonable and similar to those they could have obtained through
unrelated insurance companies and/or brokers. Valhi expects that these
relationships with Tall Pines, Valmont and EWI will continue in 2002.
Sale of EWI. In January 2002, NL purchased EWI from its previous owners for
an aggregate cash purchase price of approximately $9.0 million. The purchase was
approved by a special committee of NL's board of directors consisting of two of
its independent directors, and the purchase price was negotiated by the special
committee based upon its consideration of relevant factors, including but not
limited to, due diligence performed by independent consultants and an appraisal
of EWI conducted by an independent third party selected by the special
committee.
Law Firm Relationship. Contran and its affiliates, including CompX, engaged
and paid to Rogers & Hardin, LLP, a law firm of which Valhi's director Edward J.
Hardin is a partner, in the aggregate approximately $240,000 in fees for
services Rogers & Hardin LLP rendered to such entities in 2001. The aggregate
amount paid includes approximately $10,300 in fees that CompX paid to Rogers &
Hardin, LLP for services rendered to CompX in 2001. Valhi and its subsidiaries
presently expect, and understands that Contran and its other affiliates
presently expect, to continue their relationship with Rogers & Hardin LLP in
2002.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on Valhi Common Stock against the cumulative
total return of the S&P 500 Stock Index and the S&P Manufacturing (Diversified)
Index for the period of five fiscal years commencing December 31, 1996 and
ending December 31, 2001. The graph shows the value at December 31 of each year
assuming an original investment of $100 and the reinvestment of dividends to
stockholders.
[PERFORMANCE GRAPH GOES HERE]
December 31,
-----------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
------------- ------------- ------------ ------------- ------------ ---------
Valhi, Inc................. $100 $ 151 $ 186 $ 175 $ 195 $ 220
S&P 500 Index.............. 100 133 171 208 189 166
S&P Manufacturing
(Diversified) Index...... 100 119 138 170 202 199
INDEPENDENT AUDITOR MATTERS
Independent Auditors. The firm of PricewaterhouseCoopers LLP served as
Valhi's independent auditors for the year ended December 31, 2001. Valhi's audit
committee has appointed PricewaterhouseCoopers LLP to review Valhi's quarterly
unaudited consolidated financial statements to be included in its Quarterly
Reports on Form 10-Q for the first three quarters of 2002. Valhi expects
PricewaterhouseCoopers LLP will be considered for appointment to audit Valhi's
annual consolidated financial statements for the year ending December 31, 2002.
Representatives of PricewaterhouseCoopers LLP are not expected to attend the
Meeting.
Audit Committee Report. The audit committee of the Board of Directors is
composed of three directors, all of whom are independent within the meaning of
New York Stock Exchange listing standards. The audit committee operates under a
written charter the Board of Directors adopted, a copy of which was attached as
Exhibit A to Valhi's proxy statement for its 2001 annual meeting of
stockholders. Valhi's management is responsible for preparing Valhi's
consolidated financial statements in accordance with accounting principles
generally accepted in the United States of America. Valhi's independent auditors
are responsible for auditing Valhi's consolidated financial statements in
accordance with auditing standards generally accepted in the United States of
America. The audit committee serves as an independent and objective party to
review Valhi's auditing, accounting and financial reporting processes.
The audit committee has reviewed and discussed Valhi's audited consolidated
financial statements for the year ended December 31, 2001 with Valhi's
management and independent auditors. The audit committee discussed with the
independent auditors the matters required by Statement on Auditing Standards No.
61 (Communication with Audit Committees), received written disclosures from the
independent auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with the
independent auditors their independence. The audit committee also considered
whether the independent auditors' provision of non-audit services to Valhi and
its subsidiaries is compatible with such auditors' independence. Additionally,
the audit committee discussed with Valhi's management and the independent
auditors such other matters as the committee deemed appropriate. Based on the
audit committee's review of Valhi's audited consolidated financial statements
and the audit committee's discussions with Valhi's management and independent
auditors, the audit committee recommended to the Board of Directors that Valhi's
audited consolidated financial statements for the year ended December 31, 2001
be included in Valhi's Annual Report on Form 10-K for the year ended December
31, 2001, which has been filed with the SEC.
Norman S. Edelcup Dr. Thomas E. Barry Edward J. Hardin
Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee
Audit and Other Fees. The following table shows the aggregate fees
PricewaterhouseCoopers LLP has billed or is expected to bill Valhi and its
subsidiaries for services rendered for 2001.
Financial Information
Systems Design and
Entity Audit Fees (1) Implementation Fees All Other Fees
--------------------------------- ------------------------- ------------------------- --------------------
Valhi, Inc....................... $ 144,500 $ -0- $ 14,300 (2)
NL Industries, Inc............... 512,911 -0- 124,476 (3)
Tremont Corporation.............. 60,200 -0- -0-
CompX International Inc.......... 200,770 -0- 146,695 (4)
Waste Control Specialists LLC.... 41,000 -0- -0-
----------- ------- -----------
Subtotal..................... 959,381 -0- 285,471
----------- ------- -----------
Titanium Metals Corporation (5).. 502,500 -0- 112,750 (6)
----------- ------- -----------
Total........................ $ 1,461,881 $ -0- $ 398,221
=========== ======= ==========
--------------------
(1) Includes, without duplication, (a) fees for the audit of the entity's
consolidated financials statements for the year ended December 31, 2001,
(b) if applicable, fees for reviews of the unaudited quarterly financial
statements appearing in the corporation's Forms 10-Q for each of the first
three quarters of 2001 and (c) the estimated out-of-pocket costs
PricewaterhouseCoopers LLP incurred in such audits and reviews. The entity
reimburses PricewaterhouseCoopers LLP for such out-of-pocket costs.
(2) Consists exclusively of audit fees incurred in auditing Valhi's deferred
incentive plan.
(3) Primarily related to NL's pension plan audits and tax consulting services.
(4) Includes $85,071 for audits of benefit plans that CompX or its subsidiaries
sponsor.
(5) Valhi accounts for its interest in TIMET by the equity method.
(6) Includes $66,750 of tax consulting services, $25,000 for compensation
studies and $21,000 for advice on accounting for potential investments.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their best
judgment.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2003
Stockholders may submit proposals on matters appropriate for stockholder
action at Valhi's annual stockholder meetings, consistent with rules adopted by
the SEC. Such proposals must be received by Valhi not later than December 6,
2002 to be considered for inclusion in the proxy statement and form of proxy
relating to the Annual Meeting of Stockholders in 2003. Proposals should be
addressed to: Corporate Secretary, Valhi, Inc., Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697.
2001 ANNUAL REPORT ON FORM 10-K
A copy of Valhi's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001, as filed with the SEC, is included as part of the annual
report mailed to Valhi's stockholders with this proxy statement.
ADDITIONAL COPIES
The SEC recently approved a new rule concerning the delivery of annual
reports and proxy statements. It permits a single set of these reports to be
sent to any household at which two or more stockholders reside if they appear to
be members of the same family. Each stockholder continues to receive a separate
proxy card. This procedure, referred to as householding, reduces the volume of
duplicate information stockholders receive and reduces mailing and printing
expenses. A number of brokerage firms have instituted householding. Certain
beneficial stockholders who share a single address may have received a notice
sent earlier this year that only one annual report and proxy statement will be
sent to that address unless a stockholder at that address gave contrary
instructions. Valhi will promptly deliver a separate copy of Valhi's 2001 annual
report or this proxy statement to any stockholder at a shared address to which a
single copy of such documents were delivered, upon written or oral request of
such stockholder.
To obtain copies of the Valhi's 2001 annual report or this proxy statement
without charge, please mail your request to A. Andrew R. Louis, Corporate
Secretary, at Valhi, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700,
Dallas, Texas 75240-2697, or call him at 972.233.1700.
VALHI, INC.
Dallas, Texas
April 1, 2002
VALHI, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
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Proxy -Valhi, Inc.
------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VALHI, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 13, 2002
The undersigned hereby appoints Harold C. Simmons, Glenn R. Simmons and Steven
L. Watson, and each of them, proxy and attorney-in-fact for the undersigned,
with full power of substitution, to vote on behalf of the undersigned at the
2002 Annual Meeting of Stockholders (the "Meeting") of Valhi, Inc., a Delaware
corporation ("Valhi"), to be held at the offices of Valhi at Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Monday, May 13, 2002, at
1:30 p.m. (local time), and at any adjournment or postponement of said Meeting,
all of the shares of common stock, par value $0.01 per share, of Valhi standing
in the name of the undersigned or that the undersigned may be entitled to vote
on the proposals set forth, and in the manner directed, on this proxy.
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE VALHI PROXY
STATEMENT THAT ACCOMPANIED THIS PROXY.
This proxy, if properly executed, will be voted in the manner directed on this
proxy. If no direction is made, this proxy will be voted "FOR" all nominees for
election as directors named in proposal 1 and, to the extent allowed by federal
securities laws, in the discretion of the proxies as to all other matters that
may properly come before the Meeting and any adjournment or postponement
thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
SEE REVERSE SIDE.
Valhi, Inc.
Use a BLACK pen. Print in CAPITAL letters inside the grey areas as shown in
this example
[A] [B] [C] [1] [2] [3] [X]
[ ] Mark this box with an X if you have made changes to your name or address
details above.
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Annual Meeting Proxy Card
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A. Election of Directors
1. The board of directors recommends a vote FOR the listed nominee.
For Withhold
01-Thomas E. Barry [ ] [ ]
02-Norman S. Edelcup [ ] [ ]
03-Edward J. Hardin [ ] [ ]
04-Glenn R. Simmons [ ] [ ]
05-Harold C. Simmons [ ] [ ]
06-J. Walter Tucker, Jr. [ ] [ ]
07-Steven L. Watson [ ] [ ]
B. Issues
The board of directors recommends a vote FOR the following proposal.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment or
postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
C. Authorized Signatures - Sign Here - This section must be completed for
your instructions to be executed.
NOTE: Please sign exactly as the name that appears on this card. Joint
owners should each sign. When signing other than in an individual
capacity, please fully describe such capacity. Each signatory hereby
revokes all proxies heretofore given to vote at said Meeting and any
adjournment or postponement thereof.
Signature 1 Signature 2 Date (dd/mm/yyyy)
[ ][ ]/[ ][ ]/[ ][ ][ ][ ]
---------------------- ----------------------