NL Industries, Inc. Proxy
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
Filed
by
Registrant: ý
Filed
by
a Party other than the Registrant: ¨
Check
the
appropriate box:
¨ Preliminary
Proxy Statement
¨
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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ý Definitive
Proxy Statement
¨
Definitive
Additional Materials
¨
|
Soliciting
Material Pursuant to § 240.14a-12
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NL
Industries, Inc.
(Name
of
Registrant as Specified in Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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Title
of each class of securities to which transaction
applies:
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2)
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Aggregate
number of securities to which transaction
applies:
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3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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maximum aggregate value of
transaction:
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paid previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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Previously Paid:
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Schedule or Registration Statement
No.:
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April
19,
2007
To
Our
Shareholders:
You
are
cordially invited to attend the 2007 Annual Meeting of Shareholders of NL
Industries, Inc., which will be held on Friday, May 25, 2007, at 10:00 a.m.,
local time, at our 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 Shareholders 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 our by-laws.
Sincerely,
Harold
C.
Simmons
Chairman
of the Board and
Chief
Executive Officer
NL
Industries, Inc.
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held May 25, 2007
To
the
Shareholders of NL Industries, Inc.:
The
2007
Annual Meeting of Shareholders of NL Industries, Inc. will be held on Friday,
May 25, 2007, at 10:00 a.m., local time, at our corporate offices at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas, for the following
purposes:
(1)
To
elect
six directors to serve until the 2008 Annual Meeting of Shareholders;
and
|
(2)
|
To
transact such other business as may properly come before the meeting
or
any adjournment or postponement
thereof.
|
The
close
of business on April 2, 2007 has been set as the record date for the meeting.
Only holders of our common stock at the close of business on the record date
are
entitled to notice of, and to vote at, the meeting. A complete list of
shareholders entitled to vote at the meeting will be available for examination
during normal business hours by any of our shareholders, for purposes related
to
the meeting, for a period of ten days prior to the meeting at our corporate
offices.
You
are
cordially invited to attend the meeting. Whether or not you plan to attend
the
meeting, please complete, date and sign the accompanying proxy card or voting
instruction form and return it promptly in the enclosed envelope. If you choose,
you may still vote in person at the meeting even though you previously submitted
your proxy card.
By
Order
of the Board of Directors,
A. Andrew R. Louis, Secretary
Dallas,
Texas
April
19,
2007
TABLE
OF CONTENTS
Page
TABLE
OF
CONTENTS
GLOSSARY
OF TERMS
GENERAL
INFORMATION
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
CONTROLLING
SHAREHOLDER
SECURITY
OWNERSHIP
Ownership
of NL
Ownership
of Related Companies
ELECTION
OF DIRECTORS
Nominees
for Director
EXECUTIVE
OFFICERS
CORPORATE
GOVERNANCE
Controlled
Company Status, Director Independence and Committees
2006
Meetings and Standing Committees
of the Board of Directors
Audit
Committee
Management
Development and Compensation Committee
Non-Management
and Independent Director Meetings
Shareholder
Proposals and Director Nominations for the 2008 Annual Meeting
Shareholders
Communications
with Directors
Compensation
Committee Interlocks and Insider Participation
Code
of
Business Conduct and Ethics
Corporate
Governance Guidelines
Availability
of Corporate Governance Documents
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS AND OTHER INFORMATION
Compensation
Discussion and Analysis
Compensation
Committee Report
Summary
of Cash and Certain Other Compensation of Executive Officers
2006
Grants of Plan-Based Awards
Outstanding
Equity Awards at December 31, 2006
Option
Exercises and Stock Vested
Pension
Benefits
Nonqualified
Deferred Compensation
Director
Compensation
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
CERTAIN
RELATIONSHIPS AND TRANSACTIONS
Related
Party Transaction Policy
Relationships
with Related Parties
Intercorporate
Services Agreements
Insurance
Matters
Tax
Matters
Simmons
Family Matters
AUDIT
COMMITTEE REPORT
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM MATTERS
Independent
Registered Public Accounting Firm
Fees
Paid
to PricewaterhouseCoopers LLP
Preapproval
Policies and Procedures
OTHER
MATTERS
2006
ANNUAL REPORT ON FORM 10-K
ADDITIONAL
COPIES
GLOSSARY
OF TERMS
“CDCT
No. 2”
means
the Contran Deferred Compensation Trust No. 2, an irrevocable “rabbi trust”
established by Contran to assist it in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons.
“CMRT”
means
The Combined Master Retirement Trust, a trust Contran sponsors that permits
the
collective investment by master trusts that maintain assets of certain employee
defined benefit plans Contran and related entities adopt.
“Computershare”
means
Computershare Investor Services L.L.C., our stock transfer agent.
“CompX”
means
CompX International Inc., one of our publicly held subsidiaries that
manufactures precision slides, security products and ergonomic computer support
systems.
“CGI”
means
CompX Group, Inc., one of our subsidiaries in which TFMC holds a minority
interest and a parent corporation of CompX.
“Contran”
means
Contran Corporation, the parent corporation of our consolidated tax
group.
“Dixie
Holding”
means
Dixie Holding Company, one of our parent corporations.
“Dixie
Rice”
means
Dixie Rice Agricultural Corporation, Inc., one of our parent
corporations.
“FAS
123R”
means
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 (revised 2004) Share-Based
Payment.
“Foundation”
means
the Harold C. Simmons Foundation, Inc., a tax-exempt foundation organized for
charitable purposes.
“independent
directors”
means
the following directors: Cecil H. Moore, Jr., Thomas P. Stafford and Terry
N.
Worrell.
“ISA”
means
an intercorporate services agreement between or among Contran related companies
pursuant to which employees of one or more related companies provide certain
services, including executive officer services, to another related company
on a
fixed fee basis.
“Keystone”
means
Keystone Consolidated Industries, Inc., one of our publicly held sister
corporations that manufactures steel fabricated wire products, industrial wire
and carbon steel rod.
“Kronos
Worldwide”
means
Kronos Worldwide, Inc., one of our publicly held subsidiaries that is an
international manufacturer of titanium dioxide pigments and that we account
for
on our financial statements using the equity method.
“named
executive officer”
means
any person named in the Summary Compensation table in this proxy
statement.
“National”
means
National City Lines, Inc., one of our parent corporations.
“NL,”
“us,”
“we”
or
“our”
mean
NL
Industries, Inc.
“NOA”
means
NOA, Inc., one of our parent corporations.
“non-management
directors”
means
the following directors who are not one of our executive officers: Cecil H.
Moore, Jr., Glenn R. Simmons, Thomas P. Stafford, Terry N. Worrell and Steven
L.
Watson.
“NYSE”
means
the New York Stock Exchange.
“PwC”
means
PricewaterhouseCoopers LLP, our independent registered public accounting
firm.
“record
date”
means
the close of business on April 2, 2007, the date our board of directors set
for
the determination of shareholders entitled to notice of and to vote at the
2007
annual meeting of our shareholders.
“SEC”
means
the U.S. Securities and Exchange Commission.
“Securities
Exchange Act”
means
the Securities Exchange Act of 1934, as amended.
“Southwest”
means
Southwest Louisiana Land Company, Inc., one of our parent
corporations.
“Tall
Pines”
means
Tall Pines Insurance Company, an indirect wholly owned captive insurance
subsidiary of Valhi.
“TFMC”
means
TIMET Finance Management Company, a wholly owned subsidiary of
TIMET.
“TIMET”
means
Titanium Metals Corporation, one of our publicly held sister corporations that
is an integrated producer of titanium metals products.
“TIMET
series A preferred stock”
means
TIMET’s 6 ¾% series A convertible preferred stock, par value $0.01 per
share.
“Valhi”
means
Valhi, Inc., our publicly held parent corporation that is a diversified holding
company with principal investments in us and Kronos Worldwide.
“VGI”
means
Valhi Group, Inc., one of our parent corporations.
“VHC”
means
Valhi Holding Company, one of our parent corporations.
NL
Industries, Inc.
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
———————————————
PROXY
STATEMENT
———————————————
GENERAL
INFORMATION
This
proxy statement and the accompanying proxy card or voting instruction form
are
being furnished in connection with the solicitation of proxies by and on behalf
of our board of directors for use at our 2007 Annual Meeting of Shareholders
to
be held on Friday, May 25, 2007 and at any adjournment or postponement of the
meeting. The accompanying notice of annual meeting of shareholders sets forth
the time, place and purposes of the meeting. The notice, this proxy statement,
the accompanying proxy card or voting instruction form and our Annual Report
to
Shareholders, which includes our Annual Report on Form 10-K for the fiscal
year
ended December 31, 2006, are first being mailed on or about April 19, 2007
to
the holders of our common stock at the close of business on April 2, 2007.
Our
principal executive offices are located at Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697.
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING
Q: What
is the purpose of the annual meeting?
A:
|
At
the annual meeting, shareholders will vote on the election of six
directors and any other matter that may properly come before the
meeting.
|
Q: How
does the board recommend that I vote?
A:
The
board
of directors recommends that you vote FOR each of the nominees for
director.
Q: Who
is allowed to vote at the annual meeting?
A:
|
The
board of directors has set the close of business on April 2, 2007
as the
record date for the determination of shareholders entitled to notice
of
and to vote at the meeting. Only holders of record of our common
stock as
of the close of business on the record date are entitled to vote
at the
meeting. On the record date, 48,586,034
shares
of our common stock were issued and outstanding. Each share of our
common
stock entitles its holder to one
vote.
|
Q: How
do I vote?
A:
|
If
your shares are held by a bank, broker or other nominee (i.e.,
in “street name”), you must follow the instructions from your nominee on
how to vote your shares.
|
If
you
are a shareholder of record, you may:
|
·
|
vote
in person at the annual meeting; or
|
|
·
|
instruct
the agents named on the proxy card how to vote your shares by completing,
signing and mailing the enclosed proxy card in the envelope
provided.
|
If
you execute a proxy card but do not indicate how you would like your shares
voted for one or more of the nominees, the agents will vote FOR the election
of
each such nominee for director and, to the extent allowed by applicable law,
in
the discretion of the agents on any other matter that may properly come before
the meeting.
Q: Who
will count the votes?
A:
|
The
board of directors has appointed Computershare, our transfer agent
and
registrar, to receive proxies and ballots, ascertain the number of
shares
represented, tabulate the vote and serve as inspector of election
for the
meeting.
|
Q: Is
my vote confidential?
A:
|
Yes.
All proxy cards, ballots or voting instructions delivered to Computershare
will be kept confidential in accordance with our
by-laws.
|
Q: May
I change or revoke my proxy or voting instructions?
A:
|
If
you are a shareholder of record, you may change or revoke your proxy
instructions at any time before the meeting in any of the following
ways:
|
|
·
|
delivering
to Computershare a written
revocation;
|
|
·
|
submitting
another proxy card bearing a later date;
or
|
|
·
|
voting
in person at the meeting.
|
If
your
shares are held by a bank, broker or other nominee, you must follow the
instructions from your nominee on how to change or revoke your voting
instructions.
Q: What
constitutes a quorum?
A:
|
A
quorum is the presence, in person or by proxy, of the holders of
a
majority of the outstanding shares of our common stock entitled to
vote at
the meeting. Under the applicable rules of the NYSE and the SEC,
brokers
or other nominees holding shares of record on behalf of a client
who is
the actual beneficial owner of such shares are authorized to vote
on
certain routine matters without receiving instructions from the beneficial
owner of the shares. If such a broker/nominee who is entitled to
vote on a
routine matter delivers an executed proxy card and does not vote
on the
matter, such a vote is referred to in this proxy statement as a
“broker/nominee non-vote.” Shares of 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.
|
Q: What
vote is required to elect a director nominee or approve any other
matter?
A:
|
If
a quorum is present, a plurality of the affirmative votes of the
holders
of our outstanding shares of common stock represented and entitled
to be
voted at the meeting is necessary to elect each nominee for director.
The
accompanying proxy card or voting instruction form provides space
for you
to withhold authority to vote for any of the nominees. 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. However, since director nominees need
only
receive the plurality of the affirmative votes from the holders
represented and entitled to vote at the meeting to be elected, a
vote
withheld from a particular nominee will not affect the election of
such
nominee.
|
Except
as
our amended and restated certificate of incorporation and applicable laws may
otherwise provide, if a quorum is present, the approval of any other matter
that
may properly come before the meeting will require the affirmative votes of
the
holders of a majority of the outstanding shares represented and entitled to
vote
at the meeting. Shares of our 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.
Q: Who
will pay for the cost of soliciting the proxies?
A:
|
We
will pay all expenses related to the solicitation, including charges
for
preparing, printing, assembling and distributing all materials delivered
to shareholders. In addition to the solicitation by mail, our directors,
officers and regular employees may solicit proxies by telephone or
in
person for which such persons will receive no additional compensation.
We
have retained The Altman Group, Inc. to aid in the distribution of
this
proxy statement and related materials at an estimated cost of $1,300.
Upon
request, we 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 our common stock that such
entities hold of record.
|
CONTROLLING
SHAREHOLDER
Valhi
directly held approximately 83.1% of the outstanding shares of our common stock
as of the record date. Valhi has indicated its intention to have its shares
of
our common stock represented at the meeting and voted FOR the election of each
of the director nominees to our board of directors. If Valhi attends the meeting
in person or by proxy and votes as indicated, the meeting will have a quorum
present and the shareholders will elect all the nominees to the board of
directors.
SECURITY
OWNERSHIP
Ownership
of NL.
The
following table and footnotes set forth as of the record date the beneficial
ownership, as defined by regulations of the SEC, of our common stock held by
each individual, entity or group known to us to own beneficially more than
5% of
the outstanding shares of our common stock, each director, each named executive
officer and all of our current directors and executive officers as a group.
See
footnote 4 below for information concerning the relationships of certain
individuals and entities that may be deemed to own indirectly and beneficially
more than 5% of the outstanding shares of our common stock. All information
is
taken from or based upon ownership filings made by such individuals or entities
with the SEC or upon information provided by such individuals or
entities.
|
NL
Common Stock
|
Name
of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership (1)
|
Percent
of
Class
(1)(2)
|
|
|
|
Harold
C. Simmons (3)
|
554,300
|
(4)
|
1.1%
|
Valhi,
Inc. (3)
|
40,387,531
|
(4)
|
83.1%
|
TIMET
Finance Management Company (3)
|
222,100
|
(4)
|
*
|
Annette
C. Simmons (3)
|
256,575
|
(4)
|
*
|
|
41,420,506
|
(4)
|
85.3%
|
Cecil
H. Moore, Jr.
|
2,000
|
|
*
|
Glenn
R. Simmons
|
10,000
|
(4)
|
*
|
Thomas
P. Stafford
|
7,000
|
|
*
|
Steven
L. Watson
|
10,000
|
(4)
|
*
|
Terry
N. Worrell
|
3,000
|
|
*
|
Robert
D. Graham
|
-0-
|
(4)
|
-0-
|
Gregory
M. Swalwell
|
-0-
|
(4)
|
-0-
|
Kelly
D. Luttmer
|
-0-
|
(4)
|
-0-
|
John
A. St. Wrba
|
-0-
|
(4)
|
-0-
|
James
W. Brown
|
-0-
|
(4)
|
-0-
|
All
our current directors and executive officers as a group
(11
persons)
|
41,452,506
|
(4)
|
85.3%
|
——————————
* Less
than
1%.
(1)
|
Except
as otherwise noted, the listed entities, individuals or 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
individual or group assumes the exercise by such individual or group
(exclusive of others) of stock options that such individual or group
may
exercise within 60 days subsequent to the record
date.
|
(2)
|
The
percentages are based on 48,586,034 shares of our common stock outstanding
as of the record date.
|
(3)
|
The
business address of Valhi and Harold C. and Annette C. Simmons is
Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
The business address of TFMC is
1007 Orange Street, Suite 1400, Wilmington, Delaware 19801.
|
(4)
|
TIMET
is the direct holder of 100% of the outstanding shares of TFMC common
stock. VHC, Annette C. Simmons, the CMRT, Harold C. Simmons, we,
the
Foundation, the CDCT No. 2 and Valhi are the holders of approximately
31.0%, 11.5%, 9.5%, 3.2%, 1.4%, 0.3%, 0.1% and less than 0.1%,
respectively, of the outstanding shares of TIMET common stock. Our
percentage ownership of TIMET common stock includes 0.4% directly
owned by
a wholly owned subsidiary of ours. The ownership of TIMET common
stock by
Ms. Simmons includes 20,957,533 shares of TIMET common stock that
she has
the right to acquire upon conversion of 1,571,815 shares of TIMET
series A
preferred stock that she directly holds. The percentage ownership
of TIMET
common stock held by Ms. Simmons assumes the full conversion of only
the
shares of TIMET series A preferred stock she
owns.
|
VHC,
the
Foundation, the CDCT No. 2 and the CMRT are the direct holders of approximately
92.1%, 0.9%, 0.4% and 0.1%, respectively, of the outstanding common stock of
Valhi. VGI, National and Contran are the direct holders of 87.4%, 10.3% and
2.3%, respectively, of the outstanding common stock of VHC. National, NOA and
Dixie Holding are the direct holders of approximately 73.3%, 11.4% and 15.3%,
respectively, of the outstanding VGI common stock. Contran and NOA are the
direct holders of approximately 85.7% and 14.3%, respectively, of the
outstanding National common stock. Contran and Southwest are the direct holders
of approximately 49.9% and 50.1%, respectively, of the outstanding NOA common
stock. 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 90.1% 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, of which
Mr.
Simmons is the sole trustee,
or held
by Mr. Simmons or persons or other entities related to Mr. Simmons.
As sole
trustee of these trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by these trusts. Mr. Simmons,
however, disclaims beneficial ownership of any Contran shares these trusts
hold.
The
Foundation directly holds approximately 0.3% of the outstanding shares of TIMET
common stock and 0.9% 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 of the Foundation.
The
CDCT
No. 2 directly holds approximately 0.1% of the outstanding shares of TIMET
common stock and 0.4% of the outstanding shares of Valhi common stock. U.S.
Bank
National Association serves as the 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.
The
CMRT
directly holds approximately 9.5% of the outstanding shares of TIMET common
stock and 0.1% of the outstanding shares of Valhi common stock. Contran sponsors
this trust to permit the collective investment by master trusts that maintain
assets of certain employee defined benefit plans Contran and related entities
adopt. Harold C. Simmons is the sole trustee of this trust and a member of
the
investment committee for this trust. Contran’s board of directors selects the
trustee and members of this trust’s investment committee. All of our executive
officers, Glenn R. Simmons and Steven L. Watson are participants in one or
more
of the employee defined benefit plans that invest through this trust. Each
of
such persons disclaims beneficial ownership of any of the shares this trust
holds, except to the extent of his or her individual vested beneficial interest,
if any, in the plan assets this trust holds.
Harold
C.
Simmons is the chairman of the board and chief executive officer of us and
Kronos Worldwide and the chairman of the board of each of TIMET, Valhi, VHC,
VGI, National, NOA, Dixie Holding, Dixie Rice, Southwest and
Contran.
By
virtue
of the holding of the offices, the stock ownership and his services as trustee,
all as described above, (a) Harold C. Simmons may be deemed to control certain
of such entities and (b) Mr. Simmons and certain of such entities may be deemed
to possess indirect beneficial ownership of shares directly held by certain
of
such other entities. However, Mr. Simmons disclaims beneficial ownership of
the
shares beneficially owned, directly or indirectly, by any of such entities,
except to the extent of his vested beneficial interest, if any, in shares held
by the CMRT and his interest as a beneficiary of the CDCT No. 2. Mr. Harold
Simmons disclaims beneficial ownership of all shares of our common stock
beneficially owned, directly or indirectly, by Valhi or TFMC.
All
of
our directors or executive officers who are also directors or executive officers
of Valhi, TFMC or their parent companies disclaim beneficial ownership of the
shares of our common stock that such companies directly or indirectly
hold.
Annette
C. Simmons is the wife of Harold C. Simmons. She is the direct owner of 256,575
shares of our common stock, 152,627 shares of TIMET common stock, 1,571,815
shares of TIMET series A preferred stock and 43,400 shares of Valhi common
stock. Mr. Simmons may be deemed to share indirect beneficial ownership of
such
shares. Mr. Simmons disclaims all such beneficial ownership.
The
Annette Simmons Grandchildren’s Trust, a trust of which Harold C. Simmons and
Annette C. Simmons are co-trustees and the beneficiaries of which are the
grandchildren of Annette C. Simmons, is the direct holder of 17,432 shares
of
TIMET common stock and 36,500 shares of Valhi common stock. Mr. Simmons, as
co-trustee of this trust, has the power to vote and direct the disposition
of
the shares of Valhi common stock this trust directly holds. Mr. Simmons
disclaims beneficial ownership of any shares that this trust holds.
Harold
C.
Simmons is the direct owner of 554,300 shares of our common stock, 5,114,515
shares
of TIMET common stock and 3,383 shares of Valhi common stock.
We
and a
wholly owned subsidiary of ours directly hold 3,522,967 and 1,186,200 shares
of
Valhi common stock, respectively. Since we are a majority owned subsidiary
of
Valhi, and pursuant to Delaware law, Valhi treats the shares of Valhi common
stock that we and our subsidiary hold as treasury stock for voting purposes.
For
the purposes of calculating the percentage ownership of the outstanding shares
of Valhi common stock as of the record date in this proxy statement, such shares
are not deemed outstanding.
Contran
is the sole owner of Valhi’s 6% series A preferred stock and VHC’s 2%
convertible preferred stock. Messrs. Harold and Glenn Simmons and Watson each
own one director qualifying share of Dixie Rice and Southwest.
VHC
has
pledged 3,304,992 shares of TIMET common stock as security and 13,920,000 shares
of Valhi common stock as security.
The
business address of Contran, the CDCT No. 2, the CMRT, Dixie Holding, the
Foundation, National, NOA, TIMET, VGI and VHC 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.
We
understand that Contran and related entities may consider acquiring or disposing
of shares of our 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 our common
stock in the market, an assessment of our business and prospects, financial
and
stock market conditions and other factors deemed relevant by such entities.
We
may similarly consider acquisitions of shares of our common stock and
acquisitions or dispositions of securities issued by related
entities.
Ownership
of Related Companies. Some
of our directors and executive officers own equity securities of several
companies related to us.
Ownership
of Kronos Worldwide and Valhi.
The
following table and footnotes set forth the beneficial ownership, as of the
record date, of the shares of Kronos Worldwide and Valhi common stock held
by
each of our directors, each named executive officer and all of our current
directors and executive officers as a group. All information is taken from
or
based upon ownership filings made by such individuals or entities with the
SEC
or upon information provided by such individuals or entities.
|
Kronos
Worldwide Common Stock
|
Valhi
Common Stock
|
Name
of Beneficial Owner
|
Amount
and Nature
of
Beneficial
Ownership
(1)
|
Percent
of
Class
(1)(2)
|
Amount
and Nature
of
Beneficial
Ownership
(1)
|
Percent
of
Class
(1)(3)
|
|
|
|
|
|
Harold
C. Simmons
|
5,255
|
(4)
|
*
|
3,383
|
(4)
|
*
|
Valhi,
Inc.
|
28,995,021
|
(4)
|
59.2%
|
n/a
|
|
n/a
|
NL
Industries, Inc.
|
17,516,132
|
(4)
|
35.8%
|
n/a
|
(3)
|
n/a
|
TIMET
Finance Management Company.
|
5,203
|
(4)
|
*
|
-0-
|
|
-0-
|
Valhi
Holding Company
|
-0-
|
(4)
|
-0-
|
105,098,763
|
(4)
|
92.1%
|
Contran
Corporation
|
-0-
|
(4)
|
-0-
|
439,400
|
(4)(5)
|
*
|
Harold
Simmons Foundation, Inc
|
-0-
|
(4)
|
-0-
|
1,006,500
|
(4)
|
*
|
The
Combined Master Retirement Trust
|
-0-
|
(4)
|
-0-
|
115,000
|
(4)
|
*
|
Annette
C. Simmons
|
36,356
|
(4)
|
*
|
43,400
|
(4)
|
*
|
Annette
Simmons Grandchildren’s Trust
|
-0-
|
(4)
|
-0-
|
36,500
|
(4)
|
*
|
|
46,557,967
|
|
95.1%
|
106,742,946
|
|
93.5%
|
|
|
|
|
|
|
|
Cecil
H. Moore, Jr.
|
1,512
|
(4)
|
*
|
-0-
|
|
-0-
|
Glenn
R. Simmons
|
1,208
|
(4)
|
*
|
22,247
|
(4)(6)
|
*
|
Thomas
P. Stafford
|
2,000
|
(4)
|
*
|
-0-
|
|
-0-
|
Steven
L. Watson
|
5,233
|
(4)
|
*
|
67,246
|
(4)(7)
|
*
|
Terry
N. Worrell
|
-0-
|
(4)
|
-0-
|
-0-
|
|
-0-
|
Robert
D. Graham
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
Gregory
M. Swalwell
|
-0-
|
(4)
|
-0-
|
81,166
|
(4)(7)
|
*
|
Kelly
D. Luttmer
|
-0-
|
(4)
|
-0-
|
65,000
|
(4)(7)
|
*
|
John
A. St. Wrba
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
James
W. Brown
|
-0-
|
(4)
|
-0-
|
-0-
|
|
-0-
|
All
our current directors and executive officers as a group (11
persons)
|
46,567,920
|
(4)
|
95.1%
|
106,978,605
|
(4)(5)(6)(7)
|
93.6%
|
——————————
* Less
than
1%.
(1)
|
Except
as otherwise noted, the listed entities, individuals or 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
individual or group assumes the exercise by such individual or group
(exclusive of others) of stock options that such individual or group
may
exercise within 60 days subsequent to the record
date.
|
(2)
|
The
percentages are based on 48,953,049 shares of Kronos Worldwide common
stock outstanding as of the record
date.
|
(3)
|
The
percentages are based on 114,156,078 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, 3,522,967
and 1,186,200 shares of Valhi common stock held by us and a wholly
owned
subsidiary of ours, respectively, are treated as treasury stock for
voting
purposes and excluded from the amount of Valhi common stock
outstanding.
|
(4)
|
See
footnote 4 to the Ownership of NL table above for a description of
certain
relationships among the individuals, entities or groups appearing
in this
table. All of our directors or executive officers disclaim beneficial
ownership of any shares of Kronos Worldwide common stock that we
directly
or indirectly own. All of our directors or executive officers who
are also
directors or executive officers of any of our parent companies or
the
Foundation disclaim beneficial ownership of the shares of Kronos
Worldwide
or Valhi common stock that such entities directly or indirectly
own.
|
Other
than the securities he holds directly, Harold C. Simmons disclaims beneficial
ownership of any and all securities that his wife, Annette C. Simmons, directly
or indirectly owns.
Valhi
has
pledged 14,987,305 shares of Kronos Worldwide common stock as
security.
(5)
|
Represents
the 439,400 shares of Valhi common stock the CDCT No. 2 directly
holds.
|
(6)
|
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 shares he disclaims beneficial
ownership.
|
(7)
|
The
shares of Valhi common stock shown as beneficially owned by such
person
include the following number of shares such person has the right
to
acquire upon the exercise of stock options granted pursuant to Valhi’s
stock option plans that such person may exercise within 60 days subsequent
to the record date:
|
Name
of Beneficial Owner
|
Shares
of Valhi Common Stock Issuable Upon the Exercise of Stock
Options
On
or Before June 1, 2007
|
|
|
Steven
L. Watson
|
50,000
|
Gregory
M. Swalwell
|
80,000
|
Kelly
D. Luttmer
|
65,000
|
Ownership
of CompX. The
following table and footnotes set forth the beneficial ownership, as of the
record date, of the CompX class A and B common stock held by each of our
directors, each named executive officer and all of our current directors and
executive officers as a group. All information is taken from or based upon
ownership filings made by such individuals or entities with the SEC or upon
information provided by such individuals or entities.
|
CompX
Class A
Common
Stock
|
CompX
Class B
Common
Stock (1)
|
CompX
Class A and Class B Common Stock
Combined
Percent
of Class
(2)(3)
|
Beneficial
Owner
|
Amount
and Nature of Beneficial
Ownership
(2)
|
Percent
of Class
(2)(3)
|
Amount
and Nature of Beneficial
Ownership
(2)
|
Percent
of
Class
(2)(3)
|
|
|
|
|
|
|
|
|
Harold
C. Simmons
|
56,900
|
(4)
|
1.1%
|
-0-
|
(4)
|
-0-
|
*
|
CompX
Group, Inc.
|
2,586,820
|
(4)
|
49.1%
|
10,000,000
|
(4)
|
100.0%
|
82.4%
|
TIMET
Finance Management Company
|
483,600
|
(4)
|
9.2%
|
-0-
|
(4)
|
-0-
|
3.2%
|
NL
Industries, Inc.
|
381,004
|
(4)
|
7.2%
|
-0-
|
(4)
|
-0-
|
2.5%
|
Annette
C. Simmons
|
20,000
|
(4)
|
*
|
-0-
|
(4)
|
-0-
|
*
|
|
3,528,324
|
(4)
|
66.9%
|
10,000,000
|
(4)
|
100.0%
|
88.6%
|
|
|
|
|
|
|
|
|
Cecil
H. Moore, Jr.
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Glenn
R. Simmons
|
72,500
|
(4)(5)(6)
|
1.6%
|
-0-
|
(4)
|
-0-
|
*
|
Thomas
P. Stafford
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Steven
L. Watson
|
23,000
|
(4)(5)
|
*
|
-0-
|
(4)
|
-0-
|
*
|
Terry
N. Worrell
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Robert
D. Graham
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Gregory
M. Swalwell
|
5,000
|
(4)(5)
|
*
|
-0-
|
(4)
|
-0-
|
*
|
Kelly
D. Luttmer
|
4,200
|
(4)(5)
|
*
|
-0-
|
(4)
|
-0-
|
*
|
John
A. St. Wrba
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
James
W. Brown
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
All
our current directors and executive officers as a group (11
persons)
|
3,633,024
|
(4)(5)(6)
|
67.9%
|
10,000,000
|
(4)
|
100.0%
|
89.3%
|
——————————
* Less
than
1%.
(1)
|
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. In certain instances, shares of CompX class B common
stock
are automatically convertible into shares of CompX class A common
stock.
|
(2)
|
Except
as otherwise noted, the listed entities, individuals or 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
individual or group assumes the exercise by such individual or group
(exclusive of others) of stock options that such individual or group
may
exercise within 60 days subsequent to the record
date.
|
(3)
|
The
percentages are based on 5,271,780
shares of CompX class A common stock outstanding as of the record
date and
10,000,000 shares of CompX class B common stock outstanding as of
the
record date.
|
(4)
|
We
and TFMC directly hold 82.4% and 17.6%, respectively, of the outstanding
shares of CGI common stock. Valhi holds indirectly through CGI, TFMC
and
us approximately 88.1% of the combined voting power of the outstanding
shares of CompX class A and B common stock (approximately 98.3% for
the
election of directors).
|
All
of
our directors or executive officers disclaim beneficial ownership of any shares
of CompX common stock that we directly own. All of our directors or executive
officers who are also directors or executive officers of CGI, TFMC or their
parent companies disclaim beneficial ownership of the shares of CompX common
stock that such entities directly hold.
Other
than the securities he holds directly, Harold C. Simmons disclaims beneficial
ownership of any and all securities that his wife, Annette C. Simmons, directly
or indirectly owns.
(5)
|
The
shares of CompX class A common stock shown as beneficially owned
by such
person include the following number of shares such person has the
right to
acquire upon the exercise of stock options that such person or group
may
exercise within 60 days subsequent to the record
date:
|
Name
of Beneficial Owner
|
Shares
of CompX Class A Common Stock Issuable Upon the Exercise of Stock
Options
On
or Before June 1, 2007
|
|
|
Glenn
R. Simmons
|
56,000
|
Steven
L. Watson
|
16,000
|
Gregory
M. Swalwell
|
5,000
|
Kelly
D. Luttmer
|
4,000
|
(6)
|
The
shares of CompX class A common stock shown as beneficially owned
by Glenn
R. Simmons include 500 shares his wife holds in her retirement account,
with respect to which shares he disclaims beneficial
ownership.
|
ELECTION
OF DIRECTORS
Our
amended and restated certificate of incorporation provides that the board of
directors shall consist of not less than seven nor more than 17 members as
determined by our board of directors or shareholders. Our board of directors
has
currently set the number of directors at seven and recommended six director
nominees for the 2007 annual meeting. The board of directors has determined
that
it can adequately represent our shareholders with six directors and one vacancy
on the board of directors. Even though there is currently a vacancy of one
directorship on the board of directors, you cannot vote for a greater number
of
persons than the six director nominees set forth in this proxy statement. The
directors elected at the meeting will hold office until our 2008 Annual Meeting
of Shareholders and until their successors are duly elected and qualified or
their earlier removal or resignation.
All
of
the nominees are currently members of our board of directors 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, all shares represented
by a proxy card will be voted FOR an alternate nominee to be selected by the
board of directors, unless the shareholder executing such proxy card withholds
authority to vote for such nominee. The board of directors believes that all
of
its 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
respective nominees have provided the following information.
Cecil
H. Moore, Jr.,
age 67,
has served on our board of directors since 2003. Mr. Moore is currently a
private investor and retired from KPMG LLP in 2000 after 37 years in which
he
served in various capacities with the public accounting firm. Among other
positions, he served as managing partner of the firm’s Dallas, Texas business
unit from 1990 to 1999. Prior to 1990, Mr. Moore was partner-in-charge of the
audit and accounting practice of the firm’s Dallas, Texas business unit for 12
years. Mr. Moore is also a director and chairman of the audit committee of
Perot
Systems Corporation, a worldwide provider of information technology services
and
business solutions. He is a member of our audit committee and on the board
of
directors and chairman of the audit committee of Kronos Worldwide.
Glenn
R. Simmons,
age 79,
has served on our board of directors since 1986. Mr. Simmons has been vice
chairman of the board of Valhi and Contran since prior to 2002. Mr. Simmons
has
been chairman of the board of CompX and Keystone since prior to 2002 and also
serves on the board of directors of Kronos Worldwide and TIMET. In 2004,
Keystone filed a voluntary petition for reorganization under federal bankruptcy
laws and emerged from the bankruptcy proceedings in 2005. Mr. Simmons has been
an executive officer or director of various companies related to Valhi and
Contran since 1969. He is a brother of Harold C. Simmons.
Harold
C. Simmons,
age 75,
has served as our chief executive officer since 2003, our chairman of the board
since 1987 and on our board of directors since 1986. Mr. Simmons has served
as
chairman of the board and chief executive officer of Kronos Worldwide since
2003. He also has served as chairman of the board of TIMET since 2005, chief
executive officer of TIMET from 2005 to 2006 and vice chairman of the board
of
TIMET from 2004 to 2005. Mr. Simmons has been chairman of the board of Valhi
and
Contran since prior to 2002 and was chief executive officer of Valhi in 2002
and
prior years. Mr. Simmons has been an executive officer or director of various
companies related to Valhi and Contran since 1961. Mr. Simmons is a brother
of
Glenn R. Simmons.
General
Thomas P. Stafford
(retired),
age 76,
served on our board of directors from 1984 to 1986 and was re-appointed in
2000.
Gen. Stafford was selected as an astronaut in 1962, piloted Gemini VI in 1965
and commanded Gemini IX in 1966. In 1969, Gen. Stafford was named Chief of
the
Astronaut Office and was the Apollo X commander for the first lunar module
flight to the moon. He commanded the Apollo-Soyuz joint mission with the Soviet
cosmonauts in 1975. After his retirement from the United States Air Force in
1979 as Lieutenant General, he became chairman of Gibraltar Exploration Limited,
an oil and gas exploration and production company, and served in that position
until 1984, when he joined General Technical Services, Inc., a consulting firm.
Gen. Stafford was also affiliated with Stafford, Burke and Hecker, Inc., a
Washington-based consulting firm, from 1982 until 2005. Gen. Stafford has more
recently served as an advisor to a number of governmental agencies including
the
National Aeronautics and Space Administration (NASA) and the Air Force Material
Command. He is currently chairman of the NASA Advisory Council Task Force on
the
International Space Station Program, and also served as co-chairman of the
Stafford-Covey NASA Space Shuttle Return to Flight Task Group. Gen. Stafford
has
received many honors and decorations including the Congressional Space Medal
of
Honor. He is also a director of TIMET and chairman of each of TIMET’s audit
committee, management development and compensation committee and nominations
committee. Gen. Stafford is chairman of each of our audit committee and
management development and compensation committee.
Steven
L. Watson,
age 56,
has served on our board of directors since 2000. Mr. Watson has served as vice
chairman of the board of Kronos Worldwide since 2004. He has served as chief
executive officer of TIMET since 2006 and vice chairman of the board of TIMET
since 2005. Mr. Watson has been chief executive officer of Valhi since 2002
and
president and a director of Valhi and Contran since 1998. He is also a director
of CompX and Keystone. Mr. Watson has served as an executive officer or director
of various companies related to Valhi and Contran since 1980.
Terry
N. Worrell,
age 62,
has served on our board of directors since 2003. Mr. Worrell has been a private
investor with Worrell Investments, Inc., a real estate investment company,
since
1989. From 1974 to 1989, Mr. Worrell was president and chief executive officer
of Sound Warehouse of Dallas Inc., a chain of retail music stores. Mr. Worrell
is a director of Regency Centers Corporation and a trust manager of Crescent
Real Estate Equities Company, both real estate investment trusts. Mr. Worrell
serves on each of our audit committee and management development and
compensation committee.
EXECUTIVE
OFFICERS
Set
forth
below is certain information relating to our executive officers. Each executive
officer serves at the pleasure of the board of directors. Biographical
information with respect to Harold C. Simmons is set forth under the Nominees
for Director subsection above.
Name
|
Age
|
Position(s)
|
Harold
C. Simmons
|
75
|
Chairman
of the Board and Chief Executive Officer
|
Robert
D. Graham
|
51
|
Vice
President and General Counsel
|
Tim
C. Hafer
|
45
|
Vice
President and Controller
|
Kelly
D. Luttmer
|
43
|
Vice
President and Tax Director
|
John
A. St. Wrba
|
50
|
Vice
President and Treasurer
|
Gregory
M. Swalwell
|
50
|
Vice
President, Finance and Chief Financial Officer
|
Robert
D. Graham has
served as vice president and general counsel of us and Kronos Worldwide since
2003, executive vice president of TIMET since 2006, vice president of TIMET
from
2004 to 2006 and vice president of Valhi and Contran since 2002. From 1997
to
2002, Mr. Graham served as an executive officer and later as executive vice
president and general counsel of Software Spectrum, Inc., a global
business-to-business software services provider. From 1985 to 1997, Mr. Graham
was a partner in the law firm of Locke Purnell Rain Harrell (A Professional
Corporation), a predecessor to Locke Liddell & Sapp LLP.
Tim
C. Hafer
has
served as vice president and controller of us and Kronos Worldwide since May
2006. He served as director - finance and control of us and Kronos Worldwide
from 2003 to May 2006. For 2003 and prior years, Mr. Hafer served as an
assistant controller of Valhi and Contran. Mr. Hafer has served in financial
accounting positions with various companies related to Valhi and Contran since
1999.
Kelly
D. Luttmer
has
served as vice president of us, CompX, Contran, Kronos Worldwide and Valhi
since
2004, vice president and tax director of TIMET since 2006, tax director of
us
and Kronos Worldwide since 2003 and tax director of CompX, Valhi and Contran
since 1998. Ms. Luttmer has served in tax accounting positions with various
companies related to Valhi and Contran since 1989.
John
A. St. Wrba has
served as vice president and treasurer of us since 2003, Valhi since 2005 and
TIMET and Contran since 2004. He has also served as vice president of Kronos
Worldwide since 2004 and treasurer of Kronos Worldwide since 2003. He was our
assistant treasurer from 2002 to 2003. From 2000 until 2002, he was assistant
treasurer of Kaiser Aluminum & Chemical Corporation, a leading producer of
fabricated aluminum products.
Gregory
M. Swalwell
has
served as chief financial officer of us and Kronos Worldwide since 2004, vice
president, finance of us and Kronos Worldwide since 2003, vice president of
TIMET since 2004 and vice president and controller of Valhi and Contran since
1998. Mr. Swalwell has served in accounting and financial positions with various
companies related to Valhi and Contran since 1988.
CORPORATE
GOVERNANCE
Controlled
Company Status, Director Independence and Committees.
Because
of Valhi’s ownership of 83.1% of our common stock, we are considered a
controlled company under the listing standards of the NYSE. Pursuant to the
listing standards, a controlled company may choose not to have a majority of
independent directors, independent compensation, nominating or corporate
governance committees or charters for these committees. We have chosen not
to
have a majority of independent directors or an independent nominating or
corporate governance committee or charters for these committees. Our board
of
directors believes that the full board of directors best represents the
interests of all of our shareholders and that it is appropriate for all matters
that would be considered by a nominating or corporate governance committee
to be
considered and acted upon by the full board of directors. Applying the NYSE
director independence standards without any additional categorical standards,
the board of directors has determined that Cecil H. Moore, Jr., Thomas P.
Stafford and Terry N. Worrell are independent and have no material relationship
with us other than serving as our directors. While the members of our management
development and compensation committee currently satisfy the independence
requirements of the NYSE, we have chosen not to satisfy all of the NYSE listing
standards for a compensation committee.
In
determining that Mr. Worrell has no material relationship with us other than
serving as our director, the board of directors considered the following
relationship.
|
·
|
As
part of a five-year pledge of $5.0 million, the Foundation, of which
Harold C. Simmons is the chairman of the board, contributed in each
of
2004, 2005 and 2006 $1.0 million to Children’s Medical Foundation of
Texas, of which foundation Mr. Worrell serves as a
trustee.
|
The
board
determined that Mr. Worrell did not have a direct or indirect material interest
in this transaction based on his representation that he receives no compensation
for serving as a trustee of Children’s Medical Foundation of Texas.
2006
Meetings and Standing Committees of the Board of
Directors.
The
board of directors held five meetings and took action by written consent on
two
occasions in 2006. Each director participated in at least 80% of all of such
meetings and of the 2006 meetings of the committees on which he served at the
time. It is expected that each director will attend all of our annual meetings
of shareholders, which are held immediately before the annual meetings of the
board of directors. All but one of our directors attended our 2006 annual
shareholder meeting.
The
board
of directors has established and delegated authority to two standing committees,
which are described below. The board of directors is expected to elect the
members of the standing committees at the board of directors annual meeting
immediately following the annual shareholder 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.
Audit
Committee.
Our
audit committee assists with the board of directors’ oversight responsibilities
relating to our financial accounting and reporting processes and auditing
processes. The purpose, authority, resources and responsibilities of our audit
committee are more specifically set forth in our audit committee charter.
Applying the requirements of the NYSE listing standards (without additional
categorical standards) and SEC regulations, as applicable, the board of
directors has determined that:
|
·
|
each
member of our audit committee is independent, financially literate
and has
no material relationship with us other than serving as our director;
and
|
|
·
|
Mr.
Cecil H. Moore is an “audit committee financial
expert.”
|
No
member
of our audit committee serves on more than three public company audit
committees. For further information on the role of our audit committee, see
the
Audit Committee Report in this proxy statement. The current members of our
audit
committee are Thomas P. Stafford (chairman), Cecil H. Moore, Jr. and Terry
N.
Worrell. Our audit committee held seven meetings in 2006.
Management
Development and Compensation Committee.
The
principal responsibilities of our management development and compensation
committee are:
|
·
|
to
recommend to the board of directors whether or not to approve any
proposed
charge to us or any of our privately held subsidiaries pursuant to
an ISA
with a related party;
|
|
·
|
to
review, approve or administer certain matters regarding our employee
defined benefit plans or programs;
|
|
·
|
to
review, approve, administer and grant awards under our equity compensation
plans; and
|
|
·
|
to
review and administer such other compensation matters as the board
of
directors may direct from time to
time.
|
The
board
of directors has determined that each member of our management development
and
compensation committee is independent by applying the NYSE director independence
standards (without additional categorical standards). In certain instances
under
our 1998 Long-Term Incentive Plan, a plan allowing for grants of cash or equity
performance awards, the management development and compensation committee may
delegate its authority to administer this plan to certain individuals, which
delegation authority the committee has not utilized. With respect to the role
of
our executive officers in determining or recommending the amount or form of
executive compensation, see the Compensation Discussion and Analysis section
of
this proxy statement. With respect to director compensation, our executive
officers make recommendations on such compensation directly to our board of
directors for its consideration without involving the management development
and
compensation committee. The current members of our management development and
compensation committee are Thomas P. Stafford (chairman) and Terry N. Worrell.
Our management development and compensation committee held one meeting and
took
action by written consent on two occasions in 2006.
Non-Management
and Independent Director Meetings.
Pursuant to our corporate governance guidelines our non-management directors
are
entitled to meet on a regular basis throughout the year, and will meet
at
least once annually, without management participation.
Our
independent directors also meet at least once annually, without management
participation. The chairman of our audit committee presides at all of these
meetings.
Shareholder
Proposals and Director Nominations for the 2008 Annual Meeting
Shareholders.
Shareholders may submit proposals on matters appropriate for shareholder action
at our annual shareholder meetings, consistent with rules adopted by the SEC.
We
must receive such proposals not later than December 21, 2007 to be considered
for inclusion in the proxy statement and form of proxy card relating to our
annual meeting of shareholders in 2008.
The
board
of directors will consider the director nominee recommendations of our
shareholders. The board of directors has no specific minimum qualifications
for
director candidates. The board of directors will consider a potential director
nominee’s ability to satisfy the need, if any, for any required expertise on the
board of directors or one of its committees. Historically, our management has
recommended director nominees to the board of directors. Because under the
NYSE
listing standards we may be deemed to be a controlled company, the board of
directors believes that additional policies or procedures with regard to the
consideration of director candidates recommended by its shareholders are not
appropriate.
Proposals
and nominations should be addressed to our corporate secretary at NL Industries,
Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2697.
Communications
with Directors.
Shareholders and other interested parties who wish to communicate with the
board
of directors or its non-management directors may do so through the following
procedures. Such communications not involving complaints or concerns regarding
accounting, internal accounting controls and auditing matters related to us
may
be sent to the attention of our
corporate secretary at
NL
Industries, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas 75240-2697. Provided that any such communication relates to our business
or affairs and is within the function of our board of directors or its
committees, and does not relate to insignificant or inappropriate matters,
such
communications, or summaries of such communications, will be forwarded to the
chairman of our audit committee, who also serves as the presiding director
of
our non-management and independent director meetings.
Complaints
or concerns regarding accounting, internal accounting controls and auditing
matters, which may be made anonymously, should be sent to the attention of
our
general counsel with a copy to our chief financial officer at the same address
as our corporate secretary. These complaints or concerns will be forwarded
to
the chairman of our audit committee. We will keep these complaints or concerns
confidential and anonymous, to the extent feasible, subject to applicable law.
Information contained in such a complaint or concern may be summarized,
abstracted and aggregated for purposes of analysis and
investigation.
Compensation
Committee Interlocks and Insider Participation.
As
discussed above, for 2006 the management
development and compensation committee was composed of Thomas
P.
Stafford and Terry N. Worrell.
No
member of the committee:
|
·
|
was
an officer or employee of ours during 2006 or any prior
year;
|
|
·
|
had
any related party relationships with us that requires disclosure
under
applicable SEC rules; or
|
|
·
|
had
any interlock relationships within the scope of the intent of applicable
SEC rules.
|
Code
of Business Conduct and Ethics.
We have
adopted a code of business conduct and ethics. The code applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial officer, principal accounting officer and controller. Only
the board of directors may amend the code. Only our audit committee or other
committee of the board of directors with specific delegated authority may grant
a waiver of this code. We will disclose amendments to or waivers of the code
as
required by law and the applicable rules of the NYSE.
Corporate
Governance Guidelines.
We have
adopted corporate governance guidelines to assist the board of directors in
exercising its responsibilities. Among other things, the corporate governance
guidelines provide for director qualifications, for independence standards
and
responsibilities, for approval procedures for ISAs and that our audit committee
chairman presides at all meetings of the non-management or independent
directors.
Availability
of Corporate Governance Documents.
A copy
of each our audit committee charter, code of business conduct and ethics and
corporate governance guidelines is available on our website at www.nl-ind.net
under
the
corporate governance section. In addition, any person may obtain a copy of
these
three documents without charge, by sending a written request to the attention
of
our corporate secretary at NL Industries, Inc., Three Lincoln Centre, 5430
LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697.
COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS
AND
OTHER INFORMATION
Compensation
Discussion and Analysis.
All of
our named executive officers are employees of Contran. We pay Contran a fee
to
receive, among other things, the services of our named executive officers
pursuant to our ISA with Contran, which fee is approved by our independent
directors, generally after receiving the recommendation of our management
development and compensation committee. Pursuant to certain other ISAs, each
of
CompX and Kronos Worldwide also pay a fee to Contran for, among other things,
the services our named executive officers provide to those companies, which
fees
are approved by the independent directors of those companies. Additionally,
we,
CompX and Kronos Worldwide pay director fees in the form of cash and stock
compensation to certain of our named executive officers who serve on the boards
of directors of us, CompX or Kronos. Other than these director fees, we do
not
pay any compensation directly to our named executive officers.
Intercorporate
Services Agreements. The
charges under these ISAs reimburse Contran for its cost of employing the
personnel who provide the services by allocating such cost to us based on the
estimated time such personnel were expected to devote to us over the year.
The
amount of the fee we paid in 2006 under these ISAs for a person who provided
services to us represents, in management’s view, the reasonable equivalent of
“compensation” for such services. See the Intercorporate Services Agreements
part of the Certain Relationships and Transactions section of this proxy
statement for the aggregate amount we paid to Contran in 2006 under these ISAs.
Under the various ISAs among Contran and its subsidiaries, we share the cost
of
the employment of our named executive officers with Contran and certain of
its
other publicly held subsidiaries. For each named executive officer, the portion
of the annual charge we paid in 2006 to Contran under these ISAs attributable
to
the services of such executive officer is set forth in footnote 2 to the Summary
Compensation table in this proxy statement. The amounts charged under these
ISAs
and the cash director fees are not dependent upon our financial
performance.
We
believe the cost of the services received under our ISA with Contran, after
considering the quality of the services received, is fair to us and is no less
favorable to us than we could otherwise obtain from an unrelated third party
for
comparable services, based solely on our collective business judgment and
experience without performing any independent market research.
In
late
2005, Contran’s senior management, including our named executive officers,
estimated the number of hours (out of a standard 2,080-hour year) that each
Contran employee, including our named executive officers, was expected to devote
in 2006 to Contran and its subsidiaries, including us. Contran’s senior
management then allocated Contran’s cost of employing each of its employees
among Contran and its various subsidiaries based on the ratio of the estimated
hours of service devoted to each company and the total number of standard hours
in the year. The cost of each officer’s services that is allocated for 2006 was
the sum of the following:
|
·
|
the
annualized base salary of such officer at the beginning of
2006;
|
|
·
|
the
bonus Contran paid such officer (other than bonuses for specific
matters)
in 2005, which served as a reasonable approximation of the bonus
that may
be paid in 2006; and
|
|
·
|
a
21% overhead factor applied
to the base salary
for the cost of medical and life insurance benefits, social security
and
medicare taxes, unemployment taxes, disability insurance, defined
benefit
and defined contribution plan benefits, professional education and
licensing and costs of providing an office, equipment and supplies
related
to the provision of such services.
|
Contran’s
senior management then made such adjustments to the details of the proposed
ISA
charges as they deemed necessary for accuracy, overall reasonableness and
fairness to us and our subsidiaries.
In
the
first quarter of 2006, the proposed 2006 charges under these ISAs were presented
to the respective management development and compensation committees of CompX,
Kronos Worldwide and us to determine whether the committee would recommend
that
its board of directors approve the applicable 2006 ISA charges. During such
presentations, each committee was informed of:
·
the
quality of the services Contran provides;
|
·
|
the
$1.0 million charge to each publicly held company for the services
of
Harold C. Simmons for his service as chief executive officer, where
applicable, or his consultation and advice to the chief executive
officer
regarding major strategic corporate
matters;
|
|
·
|
the
comparison of the ISA charge and number of full-time equivalent employees
reflected in the charge by department for 2005 and proposed for 2006;
and
|
|
·
|
the
comparison of the 2005 and proposed 2006 charges by department and
in
total and such amounts as a percentage of Contran’s similarly calculated
costs for its departments and in total for those
years.
|
After
such presentations and following further discussion and review, the management
development and compensation committee of each of CompX, Kronos Worldwide and
us
recommended that their respective boards of directors approve the proposed
2006
ISA fee after concluding that:
|
·
|
the
cost to employ the additional personnel necessary to provide the
quality
of the services provided by Contran would exceed the proposed 2006
aggregate fee to be charged by Contran under the applicable ISA;
and
|
|
·
|
the
cost for such services would be no less favorable than could otherwise
be
obtained from an unrelated third party for comparable
services.
|
In
reaching its recommendation, our management development and compensation
committee did not review any 2006 ISA charges from Contran to any other publicly
held sister or subsidiary company, which charges were separately reviewed by
the
management development and compensation committee of the applicable
company.
Based
on
the recommendations of the committees, the independent directors of each of
CompX, Kronos Worldwide and us approved the applicable proposed 2006 ISA charge
effective January 1, 2006 with the other directors abstaining.
For
financial reporting and income tax purposes, the ISA fees are expensed as
incurred on a quarterly basis. Contran has implemented a limit of $1.0 million
on any individual’s charge to a publicly held company in order to enhance the
deductibility by the company of the charge for tax purposes under Section 162(m)
of the Internal Revenue Code of 1986, if such section were somehow to be deemed
applicable. Section 162(m) generally disallows a tax deduction to publicly
held
companies for non-performance based compensation over $1.0 million paid to
the
company’s chief executive officer and four other most highly compensated
executive officers.
Deductibility
of Compensation.
It is
our general policy to structure the performance-based portion of the
compensation of our executive officers in a manner that enhances our ability
to
deduct fully such compensation under Section 162(m) of the Internal Revenue
Code.
Equity-Based
Compensation.
Prior
to 2004, we decided to forego the grant of any equity compensation to our
employees, although we continue to grant annual awards of stock to our
directors. We also do not have any security ownership requirements or guidelines
for our management or directors. We do not currently anticipate any equity-based
compensation will be granted to anyone in 2007, other than annual grants of
stock to our directors, including our chief executive officer. See the Director
Compensation section in this proxy statement for a discussion of these annual
grants. The dollar amount for option awards appearing in the Summary
Compensation table below represents the income we recognized for financial
statement reporting purposes in 2006 for stock options to purchase our common
stock held by the named executive officers.
Compensation
Committee Report.
The
management development and compensation committee has reviewed with management
the Compensation Discussion and Analysis section in this proxy statement. Based
on the committee’s review and the discussion with management, the committee
recommended to the board of directors that the compensation discussion and
analysis be included in this proxy statement.
The
following individuals, in the capacities indicated, hereby submit the foregoing
report.
Thomas
P. Stafford
Chairman
of our Management Development and Compensation
Committee
|
|
Terry
N. Worrell
Member
of our Management Development and Compensation
Committee
|
Summary
of Cash and Certain Other Compensation of Executive
Officers.
The
Summary Compensation table below provides information concerning compensation
we, CompX and Kronos Worldwide paid or accrued for services rendered during
2006
by our chief executive officer, chief financial officer and each of the three
other most highly compensated individuals (based on ISA charges to us and our
subsidiaries) who were our executive officers at December 31, 2006 and one
of
our former executive officers. All of our named executive officers were
employees of Contran for 2006 and provided their services to us and our
subsidiaries pursuant to the ISAs. For a discussion of these ISAs, see the
Intercorporate Services Agreements part of the Certain Relationships and
Transactions section of this proxy statement.
2006
SUMMARY COMPENSATION TABLE (1)
Name
and Principal Position
|
Year
|
Salary
|
Stock
Awards
|
Option
Awards
|
Total
|
|
|
|
|
|
|
|
Harold
C. Simmons
|
2006
|
$3,047,000
|
(2)
|
$26,985
|
(3)
|
$(11,904)
|
(4)
|
$3,062,081
|
Chairman
of the Board and Chief
|
|
|
|
|
|
|
|
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
D. Graham
|
2006
|
584,200
|
(2)
|
-0-
|
|
-0-
|
|
584,200
|
Vice
President and General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
M. Swalwell
|
2006
|
508,000
|
(2)
|
-0-
|
|
-0-
|
|
508,000
|
Vice
President, Finance and Chief
|
|
|
|
|
|
|
|
|
Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly
D. Luttmer
|
2006
|
505,700
|
(2)
|
-0-
|
|
-0-
|
|
505,700
|
Vice
President and Tax Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
A. St. Wrba
|
2006
|
348,700
|
(2)
|
-0-
|
|
-0-
|
|
348,700
|
Vice
President and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Brown (5)
|
2006
|
536,600
|
(2)
|
-0-
|
|
-0-
|
|
536,600
|
Former
Vice President and Controller
|
|
|
|
|
|
|
|
|
——————————
(1)
|
Certain
non-applicable columns have been omitted from this
table.
|
(2)
|
The
amounts shown in the 2006 Summary Compensation table as salary for
each
named executive officer represent the portion of the fees we, CompX
and
Kronos Worldwide paid to Contran pursuant to certain ISAs with respect
to
the services such officer rendered to us and our subsidiaries. The
amount
shown in the table as salary for Mr. Harold Simmons also includes
director
cash compensation paid to him by us and Kronos Worldwide. The components
of salary shown in the 2006 Summary Compensation table for each of
our
named executive officers are as
follows.
|
|
|
2006
|
|
|
|
|
Harold
C. Simmons
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
1,000,000
|
|
|
|
|
Kronos
Worldwide
|
|
|
1,000,000
|
|
|
|
|
NL
|
|
|
1,000,000
|
|
|
|
|
Director
Fees Earned or Paid in Cash:
|
|
|
|
|
|
|
|
Kronos
Worldwide
|
|
|
23,000
|
|
|
|
|
NL
|
|
|
24,000
|
|
|
|
|
|
|
$
|
3,047,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
D. Graham
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
25,400
|
|
|
|
|
Kronos
Worldwide
|
|
|
254,000
|
(a) |
|
|
|
NL
|
|
|
304,800
|
|
|
|
|
|
|
$
|
584,200
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
M. Swalwell
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
50,800
|
|
|
|
|
Kronos
Worldwide
|
|
|
228,600
|
(a) |
|
|
|
NL
|
|
|
228,600
|
|
|
|
|
|
|
$
|
508,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Kelly
D. Luttmer
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
78,400
|
|
|
|
|
Kronos
Worldwide
|
|
|
274,400
|
(a) |
|
|
|
NL
|
|
|
152,900
|
(b) |
|
|
|
|
|
$
|
505,700
|
|
|
|
|
|
|
|
|
|
|
|
|
John
A. St. Wrba
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
26,800
|
|
|
|
|
Kronos
Worldwide
|
|
|
268,200
|
(a) |
|
|
|
NL
|
|
|
53,700
|
|
|
|
|
|
|
$
|
348,700
|
|
|
|
|
|
|
|
|
|
|
|
|
James
W. Brown
|
|
|
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
|
|
|
CompX
|
|
$
|
-0-
|
|
|
|
|
Kronos
Worldwide
|
|
|
429,300
|
(a) |
|
|
|
NL
|
|
|
107,300
|
|
|
|
|
|
|
$
|
536,600
|
|
|
|
|
|
(a)
|
Includes
amounts allocated to Kronos International, Inc., a wholly owned subsidiary
of Kronos Worldwide, under the ISA between Contran and Kronos
Worldwide.
|
|
(b)
|
Includes
amounts allocated to EWI RE, Inc., our wholly owned subsidiary, under
the
ISA between Contran and us.
|
(3)
|
Stock
awards to Mr. Simmons in 2006 consisted of shares of common stock
we or
Kronos Worldwide granted to him for his services as a director. See
the
2006 Grants of Plan-Based Awards table below for more details regarding
these grants.
|
(4)
|
Represents
the compensation income we recognized in 2006 for financial statement
reporting purposes of the options to purchase our common stock held
by Mr.
Simmons. We account for these options to purchase our common stock
using
the liability method of FAS 123R, under which we re-measure the fair
value
of all outstanding stock options at each balance sheet date until
the
options are exercised or otherwise settled. We use the closing
market price of our common stock at each balance sheet date to determine
the fair value, which fair value cannot be less than zero. For financial
statement reporting purposes, we recognize compensation expense or
income,
as applicable, to reflect increases or decreases in the aggregate
fair
value of all outstanding stock options. The aggregate fair value of
the outstanding stock options decreased during 2006, principally
because
the December 31, 2006 closing market price of our common stock was
lower
as compared to December 31, 2005. As a result, we recognized
compensation income in 2006 related to Mr. Simmons’ stock options.
To the extent we recognize compensation income for financial reporting
purposes related to these stock options, such as we did in 2006,
we report
the corresponding reduction in compensation expense with respect
to the
change in stock option values reported in this
table.
|
(5)
|
In
May 2006, Mr. Brown ceased to hold the titles of vice president and
controller of us and Kronos Worldwide. Concurrently, TIMET appointed
Mr.
Brown as its vice president, corporate finance. While he performed
services for us and Kronos Worldwide, Mr. Brown spent a substantial
amount
of his time on the documentation and testing of internal control
over
financial reporting of us and Kronos Worldwide. Following Mr. Brown’s
appointment as an officer of TIMET, we elected Mr. Hafer, also a
Contran
employee, to become our vice president and controller and Kronos
Worldwide
elected him its vice president and
controller.
|
2006
Grants of Plan-Based Awards.
The
following table sets forth details of the stock awards we and Kronos Worldwide
granted to our chief executive officer in 2006 for his services as director
of
each corporation. No other named executive officer received any plan-based
awards from us or our subsidiaries in 2006.
2006
GRANTS OF PLAN-BASED AWARDS (1)
Name
|
|
Grant
Date
|
|
Date
of Approval (2)
|
|
All
Other Stock Awards: Number of Shares of Stock or Units (#)
(2)
|
|
Grant
Date Fair Value of Stock and Option Awards (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold
C. Simmons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kronos
Worldwide common stock (3)
|
|
|
May
24, 2006
|
|
|
January
1, 2004
|
|
|
500
|
|
$
|
14,995
|
|
NL
common stock (4)
|
|
|
May
24, 2006
|
|
|
January
1, 2004
|
|
|
1,000
|
|
|
11,990
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
26,985
|
|
(1)
|
Certain
non-applicable columns have been omitted from this
table.
|
(2)
|
As
preapproved by the respective management development and compensation
committees of each of us and Kronos Worldwide on the day of each
issuer’s
annual shareholder meeting, each director elected on that day receives
a
grant of shares of such issuer’s common stock as determined by the
following formula based on the closing price of a share of the common
stock on the date of such meeting.
|
Range
of Closing Price Per
Share
on the Date of Grant
|
Shares
of Common
Stock
to Be Granted
|
|
|
Under
$5.00
|
2,000
|
$5.00
to $9.99
|
1,500
|
$10.00
to $20.00
|
1,000
|
Over
$20.00
|
500
|
These
shares are fully vested and tradable immediately on their date of grant, other
than restrictions under applicable securities laws. For the purposes of this
table and financial statement reporting, these stock awards were valued at
the
closing price per share of such shares on their dates of grant, which closing
prices were:
Common
Stock
|
Date
of Grant
|
Closing
Price on Date of Grant
|
|
|
|
Kronos
Worldwide
|
May
24, 2006
|
$29.99
|
NL
|
May
24, 2006
|
$11.99
|
(3)
|
Granted
by Kronos Worldwide pursuant to its 2003 Long-Term Incentive
Plan.
|
(4)
|
Granted
by us pursuant to our 1998 Long-Term Incentive
Plan.
|
Outstanding
Equity Awards at December 31, 2006.
The
following table provides information with respect to the outstanding stock
options to purchase shares of our common stock or common stock of our
subsidiaries and held by our named executive officers as of December 31,
2006. Messrs. Harold Simmons and Swalwell and Ms. Luttmer were the only named
executive officers that held such stock options at December 31,
2006.
OUTSTANDING
EQUITY AWARDS AT DECEMBER 31, 2006 (1)
|
Option
Awards
|
Name
|
Number
of Shares
Underlying
Unexercised
Options at
December
31, 2006 (#)
|
Option
Exercise Price
|
Option
Expiration Date
|
Exercisable
|
Unexercisable
|
|
|
|
|
|
Harold
C. Simmons
|
|
|
|
|
|
NL
Stock Options (2)
|
2,000
|
-0-
|
|
$5.1850
|
02/01/07
|
|
|
|
|
|
|
Gregory
M. Swalwell
|
|
|
|
|
|
CompX
Stock Options
(3)
|
5,000
|
-0-
|
|
20.0000
|
03/05/08
|
|
|
|
|
|
|
Kelly
D. Luttmer
|
|
|
|
|
|
CompX
Stock Options
(3)
|
4,000
|
-0-
|
|
20.0000
|
03/05/08
|
——————————
(1)
|
Certain
non-applicable columns have been omitted from this
table.
|
(2)
|
These
stock options vested in full on February 1,
2003.
|
(3)
|
These
stock options vested at a rate of 20% on each of the first five
anniversary dates of the date of grant of the stock option, which
date of
grant was the tenth anniversary prior to the expiration date of the
stock
option.
|
Option
Exercises and Stock Vested.
During
2006, no named executive officer exercised any stock options or had any stock
awards vest. For stock awards granted in 2006 that had no vesting restrictions,
see the 2006 Grants of Plan-Based Awards table above.
Pension
Benefits.
We do
not have any pension plans in which our named executive officers
participate.
Nonqualified
Deferred Compensation.
We do
not owe any nonqualified deferred compensation to our named executive
officers.
Director
Compensation.
Our
directors are entitled to receive compensation for their services as directors.
Our directors receive an annual retainer of $20,000, paid in quarterly
installments, plus a fee of $1,000 per day for attendance at meetings and at
a
daily rate ($125 per hour) for other services rendered on behalf of our board
of
directors or its committees. For the first six months of 2006, the chairman
of
our audit committee and any member of our audit committee whom the board
identified as an “audit committee financial expert” for purposes of the annual
proxy statement received an annual retainer of $10,000, paid in quarterly
installments (provided that if one person served in both capacities only one
such retainer was paid), and other members of our audit committee received
an
annual retainer of $5,000, paid in quarterly installments. Effective July 1,
2006, our board of directors increased the annual retainer paid to our audit
committee members. For the last six months of 2006, the chairman of our audit
committee and any member of our audit committee whom the board identified as
an
“audit committee financial expert” for purposes of the annual proxy statement
received an annual retainer of $20,000, paid in quarterly installments (provided
that if one person served in both capacities only one such retainer was paid),
and other members of our audit committee received an annual retainer of $10,000,
paid in quarterly installments. If a director dies while serving on our board
of
directors, his designated beneficiary or estate will be entitled to receive
a
death benefit equal to the annual retainer then in effect. We reimburse our
directors for reasonable expenses incurred in attending meetings and in the
performance of other services rendered on behalf of our board of directors
or
its committees. In addition, Gen. Stafford receives an annual payment of $15,000
as a result of his service on our board of directors prior to 1987.
As
discussed in footnote 2 to the 2006 Grants of Plan-Based Awards table, on the
day of each annual shareholder meeting, each of our directors elected on that
date receives a grant of shares of our common stock as determined by the closing
price of a share of our common stock on the date of such meeting. The following
table provides information with respect to compensation certain of our directors
earned or received for their 2006 director services provided to us.
2006
DIRECTOR COMPENSATION (1)
Name
|
Fees
Earned or Paid in Cash (2)
|
Stock
Awards
(3)
|
Option
Awards
|
All
Other Compensation
|
Total
|
|
|
|
|
|
|
Cecil
H. Moore, Jr. (4).
|
$45,000
|
$11,990
|
$-0-
|
|
$-0-
|
|
$56,990
|
Glenn
R. Simmons (4)
|
25,000
|
11,990
|
|
|
-0-
|
|
36,990
|
Thomas
P. Stafford
|
47,000
|
11,990
|
|
|
15,000
|
(5)
|
73,990
|
Steven
L. Watson (4)
|
25,000
|
11,990
|
(11,904)
|
(6)
|
-0-
|
|
25,086
|
Terry
N. Worrell
|
38,500
|
11,990
|
|
|
-0-
|
|
50,490
|
——————————
(1)
|
Certain
non-applicable columns have been omitted from this table. For compensation
Harold C. Simmons earned or received for serving as our director,
see the
2006 Summary Compensation table (footnotes 2 and 3) and 2006 Grants
of
Plan-Based Awards table set forth
above.
|
(2)
|
Represents
retainers and meeting fees the director received or earned for director
services he provided to us in 2006.
|
(3)
|
Represents
the value of 1,000 shares of our common stock we granted to each
of these
directors. For the purposes of this table and financial statement
reporting, these stock awards were valued at the closing price per
share
of such shares on their date of grant, which closing price and date
of
grant were $11.99 and May 24, 2006,
respectively.
|
(4)
|
Messrs.
Moore, Glenn Simmons and Watson also receive compensation from CompX
and
Kronos Worldwide for services as a director of CompX or Kronos Worldwide.
For 2006, they each earned or received the following for these director
services:
|
Name
|
Fees
Earned or Paid in Cash (a)
|
Stock
Awards
(b)
|
Option
Awards (c)
|
Total
|
|
|
|
|
|
Cecil
H. Moore, Jr.
|
|
|
|
|
Kronos
Worldwide Director Services
|
$43,000
|
$14,995
|
$-0-
|
$57,995
|
|
|
|
|
|
Glenn
R. Simmons
|
|
|
|
|
CompX
Director Services
|
23,000
|
15,500
|
4,068
|
$42,568
|
Kronos
Worldwide Director Services
|
23,000
|
14,995
|
-0-
|
37,995
|
|
|
|
|
$80,563
|
|
|
|
|
|
Steven
L. Watson
|
|
|
|
|
CompX
Director Services
|
23,000
|
15,500
|
4,068
|
$42,568
|
Kronos
Worldwide Director Services
|
23,000
|
14,995
|
-0-
|
37,995
|
|
|
|
|
$80,563
|
—————————
|
(a)
|
Represents
retainers and meeting fees received or earned for 2006 director
services.
|
|
(b)
|
For
the purposes of this table and financial statement reporting, these
stock
awards comprised the following number of shares and were valued at
the
following closing prices per share of such shares on their respective
dates of grant:
|
Common
Stock
|
Shares
Granted
|
Date
of Grant
|
Closing
Price on Date of Grant
|
Dollar
Value of Stock Award
|
|
|
|
|
|
CompX
Class A Common Stock
|
1,000
|
May
16, 2006
|
$15.50
|
$15,500
|
Kronos
Worldwide Common Stock
|
500
|
May
24, 2006
|
$29.99
|
$14,995
|
|
(c)
|
This
value relates to stock options to purchase CompX class A common stock
that
CompX granted to its nonemployee directors for their director services.
We
determined this value by applying FAS 123R to determine the amount
recognized for financial statement reporting purposes for 2006
(disregarding any estimate of forfeitures related to service based
vesting
conditions) and calculated using the Black-Scholes stock option valuation
model with the following weighted average
assumptions:
|
|
·
|
a
stock price volatility of 37% to
45%;
|
|
·
|
risk-free
rates of return of 5.1% to 6.9%;
|
|
·
|
dividend
yields of nil to 5.0%; and
|
|
·
|
an
expected term of ten years.
|
(5)
|
Gen.
Stafford (ret.) receives an annual lifetime benefit payment of $15,000
as
a result of his service on our board of directors prior to
1987.
|
(6)
|
Prior
to 2004, we granted stock options exercisable for shares of our common
stock on an annual basis to each director for his director services.
As of
December 31, 2006, Steven L. Watson held stock options exercisable
for
4,000 shares of our common stock, which shares were fully vested
at that
date. This amount represents the compensation income we recognized
in 2006
for financial statement reporting purposes related to these stock
options.
See footnote 4 to the Summary Compensation table for information
as to how
we calculated this compensation
income.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act requires our executive officers, directors
and persons who own more than 10% of a registered class of our equity securities
to file reports of ownership with the SEC, the NYSE and us. Based solely on
the
review of the copies of such forms and representations by certain reporting
persons, we believe that for 2006 our executive officers, directors and 10%
shareholders complied with all applicable filing requirements under section
16(a).
CERTAIN
RELATIONSHIPS AND TRANSACTIONS
Related
Party Transaction Policy .
As set
forth in our code of business conduct and ethics, from time to time, we engage
in transactions with affiliated companies. In addition, certain of our executive
officers and directors serve as executive officers and directors of affiliated
companies. With
respect to transactions between or involving us and one or more of our
affiliates,
it is
not a violation of the code if the transaction, in our opinion, is no less
favorable to us than could be obtained from unrelated parties, or the
transaction, in the absence of shareholder ratification or approval by
independent directors, is fair to all companies involved. Furthermore, the
code
provides that:
|
·
|
directors
and officers owe a duty to us to advance our legitimate interests
when the
opportunity to do so arises; and
|
|
·
|
they
are prohibited from (a) taking for themselves personally opportunities
that properly belong to us or are discovered through the use of our
property, information or position; (b) using corporate property,
information or position for improper personal gain; and (c) competing
with
our interests.
|
Our
executive officers are responsible for applying this policy to related parties.
No specific procedures are in place, however, that govern the treatment of
transactions among us and our related entities, although we and such entities
may implement specific procedures as appropriate for particular transactions.
Provided, in our judgment, the standard set forth in the code of business
conduct and ethics is satisfied, we believe, given the number of companies
affiliated with Contran, that related party transactions with our affiliates,
in
many instances (such as achieving economies of scale), are in our best interest.
In certain instances, our executive officers may seek the approval or
ratification of such transactions by our independent directors, but there is
no
quantified threshold for seeking this approval.
Relationships
with Related Parties. As
set
forth under the Security Ownership section of this proxy statement, Harold
C.
Simmons, through Contran, may be deemed to control us. We and other entities
that may be deemed to be controlled by or related to Mr. Simmons sometimes
engage in the following:
|
·
|
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
|
|
·
|
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.
|
We
periodically consider, review and evaluate and understand that Contran and
related entities periodically consider, review and evaluate such transactions.
Depending upon the business, tax and other objectives then relevant and
restrictions under indentures and other agreements, it is possible that we
might
be a party to one or more of such transactions in the future. In connection
with
these activities, we may consider issuing additional equity securities or
incurring additional indebtedness. Our acquisition activities have in the past
and may in the future include participation in acquisition or restructuring
activities conducted by other companies that may be deemed to be related to
Harold C. Simmons.
Certain
directors or executive officers of Contran, CompX, Keystone, Kronos Worldwide,
TIMET or Valhi also serve as our directors or executive officers. Such
relationships may lead to possible conflicts of interest. These possible
conflicts of interest may arise under circumstances in which such companies
may
have adverse interests. In such an event, we implement such procedures as
appropriate for the particular transaction.
Intercorporate
Services Agreements. As
discussed elsewhere in this proxy statement, we and certain related companies
have entered into ISAs. Under the ISAs, employees of one company provide certain
services, including executive officer services, to the other company on a fixed
fee basis. The services rendered under the ISAs may include executive,
management, financial, internal audit, accounting, tax, legal, insurance, risk
management, treasury, aviation, human resources, technical, consulting,
administrative, office, occupancy and other services as required from time
to
time in the ordinary course of the recipient’s business. The fees paid pursuant
to the ISAs are generally based upon an estimate of the time devoted by
employees of the provider of the services to the business of the recipient
and
the employer’s cost related to such employees, which includes the employees’
cash compensation and an overhead component that takes into account other
employment related costs. Each of the ISAs renews on a quarterly basis,
generally subject to the termination by either party pursuant to a written
notice delivered 30 days prior to the start of the next quarter. Because of
the
number of companies related to Contran and us, we believe we benefit from cost
savings and economies of scale gained by not having certain management,
financial, legal, tax and administrative staffs duplicated at each company,
thus
allowing certain individuals to provide services to multiple companies. With
respect to a publicly held company that is a party to an ISA, the ISA and the
related aggregate annual charge are approved by the independent directors of
the
company, generally after receiving a recommendation from the company’s
management development and compensation committee. See the Intercorporate
Services Agreements part of the Compensation Discussion and Analysis section
in
this proxy statement for a more detailed discussion on the procedures and
considerations taken in approving the aggregate 2006 ISA fees charged by Contran
to us or our subsidiaries.
The
following table sets forth the fees paid by us and our subsidiaries to Contran
in 2006 and the amount anticipated to be paid to Contran in 2007 for services
Contran provided us or our subsidiaries under the various ISAs.
Recipient
of Services from Contran under an ISA
|
Fees
Paid to Contran under the ISA in 2006
|
Fees
Expected to be Paid to Contran under the ISA in
2007
|
|
(In
millions)
|
|
|
|
NL
Industries, Inc.
|
$4.800
|
(1)
|
$4.877
|
(1)
|
Kronos
Worldwide, Inc.
|
6.332
|
(1)
|
6.516
|
(1)
|
CompX
International Inc.
|
2.733
|
(2)
|
2.879
|
(2)
|
Total
|
$13.865
|
(1)(2)
|
$14.272
|
(1)(2)
|
——————————
(1)
|
In
addition to the reported ISA charges, we and Kronos Worldwide also
pay
Messrs. Glenn and Harold Simmons and Watson for their services as
directors.
|
(2)
|
In
addition to the reported ISA charges, CompX also pays Messrs. Glenn
Simmons and Watson for their services as directors of
CompX.
|
Insurance
Matters.
We and
Contran participate in a combined risk management program. Pursuant to the
program, Contran and certain of its subsidiaries and related entities, including
us and certain of our subsidiaries and related entities, purchase certain
insurance policies as a group, with the costs of the jointly owned policies
being apportioned among the participating companies. Tall Pines and EWI RE,
Inc.
provide for or broker these insurance policies. Tall Pines is a captive
insurance company wholly owned by Valhi, and EWI is a reinsurance brokerage
and
risk management company wholly owned by us. Consistent with insurance industry
practices, Tall Pines and EWI receive commissions from insurance and reinsurance
underwriters for the policies that they provide or broker.
With
respect to certain of such jointly owned insurance policies, it is possible
that
unusually large losses incurred by one or more insureds during a given policy
period could leave the other participating companies without adequate coverage
under that policy for the balance of the policy period. As a result, Contran
and
certain of its subsidiaries or related companies, including us, have entered
into a loss sharing agreement under which any uninsured loss is shared by those
companies who have submitted claims under the relevant policy. We believe the
benefits in the form of reduced premiums and broader coverage associated with
the group coverage for such policies justify the risks associated with the
potential for any uninsured loss.
During
2006, we, CompX and Kronos Worldwide paid premiums of approximately $11.5
million for insurance policies Tall Pines provided or EWI brokered, including
approximately $1.5 million paid by Louisiana Pigment Company, L.P., a
partnership of which a wholly owned subsidiary of Kronos Worldwide and a
subsidiary of Huntsman Corporation each own 50%. These amounts principally
included payments for reinsurance and insurance premiums paid to unrelated
third
parties, but also included commissions paid to Tall Pines and EWI. Tall Pines
purchases reinsurance for substantially all of the risks it underwrites. In
our
opinion, the amounts that we, our subsidiaries and Louisiana Pigment paid for
these insurance policies and the allocation among us and our related entities
of
these insurance premiums are reasonable and are less than the costs we would
incur if such policies were obtained or brokered through third parties. We
expect that these relationships with Tall Pines and EWI will continue in 2007.
Because we believe there is no conflict of interest regarding our participation
in the combined risk management program, our audit committee received a report
regarding this program but our independent directors were not asked to approve
it.
Tax
Matters.
We
and
our qualifying subsidiaries are members of the consolidated U.S. federal tax
return of which Contran is the parent company, which we refer to as the “Contran
Tax Group.” As a member of the Contran Tax Group and pursuant to certain tax
sharing agreements or policies, each of the members and its qualifying
subsidiaries compute provisions for U.S. income taxes on a separate company
basis using tax elections made by Contran. Pursuant to the tax sharing
agreements or policies and using tax elections made by Contran, each of the
parties makes payments or receives payments in amounts it would have paid to
or
received from the U.S. Internal Revenue Service had it not been a member of
the
Contran Tax Group but instead had been a separate taxpayer. Refunds are
generally limited to amounts previously paid under the respective tax sharing
agreement or policy. We and our qualifying subsidiaries are also a part of
consolidated tax returns filed by Contran in certain U.S. state jurisdictions.
The terms of the applicable tax sharing agreements or policies also apply to
state payments to these jurisdictions.
Under
applicable law, we, as well as every other member of the Contran Tax Group,
are
each jointly and severally liable for the aggregate federal income tax liability
of Contran and the other companies included in the group for all periods in
which we are included in the group. Contran’s policy, however, is to indemnify
us for any liability for income taxes of the Contran Tax Group in excess of
our
tax liability previously computed and paid by us in accordance with the tax
allocation policy.
Under
certain circumstances, tax regulations could require Contran to treat items
differently than we would have treated them on a stand alone basis. In such
instances, accounting principles generally accepted in the United States of
America require us to conform to Contran’s tax elections. In 2006 pursuant to
the tax sharing agreements and policies, we received a net cash refund for
income taxes from Valhi of approximately $5.8 million, and Kronos Worldwide
made
net cash payments to Valhi of approximately $5.0 million. Because the
calculation of amounts payable to Valhi by us and our subsidiaries is determined
pursuant to the applicable tax law in accordance with the tax sharing agreements
and policies, our independent directors were not asked to approve these payments
to Valhi.
Simmons
Family Matters.
In
addition to the services he provides under the ISAs with us and our subsidiaries
as discussed under the Intercorporate Services Agreements section above, certain
family members of Harold C. Simmons also provide services to us pursuant to
these ISAs. In 2006, James C. Epstein (a son-in-law of Harold C. Simmons) and
L.
Andrew Fleck (a step-son of Harold C. Simmons) provided certain risk management
and property management services, respectively, to us pursuant to these ISAs.
The portion of the fees we paid to Contran in 2006 pursuant to these ISAs for
the services of each of Messrs. Epstein and Fleck was not enough to require
quantification under SEC rules. See the Intercorporate Services Agreements
section above for a more detailed discussion on the procedures and
considerations taken by our independent directors in approving the aggregate
2006 ISA fee Contran charged us. As disclosed in the Director Compensation
table
in this proxy statement, Mr. Glenn Simmons (a brother of Harold C. Simmons)
also
received compensation in cash and stock from us and Kronos Worldwide and CompX
for his director services for 2006 and is expected to continue to receive
similar compensation for 2007 for such services.
AUDIT
COMMITTEE REPORT
Our
audit
committee of the board of directors is comprised of three directors and operates
under a written charter adopted by the board of directors. All members of our
audit committee meet the independence standards established by the board of
directors and the NYSE and promulgated by the SEC under the Sarbanes-Oxley
Act
of 2002. The audit committee charter is available on our website at
www.nl-ind.com
under
the corporate governance section.
Our
management is responsible for, among other things, preparing its consolidated
financial statements in accordance with accounting principles generally accepted
in the United States of America, or “GAAP,” establishing and maintaining
internal control over financial reporting (as defined in Securities Exchange
Act
Rule 13a-15(f)) and evaluating the effectiveness of such internal control over
financial reporting. Our independent registered public accounting firm is
responsible for auditing our consolidated financial statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States) and for expressing an opinion on the conformity of the financial
statements with GAAP. Our independent registered public accounting firm is
also
responsible for auditing our internal control over financial reporting in
accordance with such standards and for expressing an opinion on (i) management’s
assessment of the effectiveness of its internal control over financial reporting
and (ii) the effectiveness of its internal control over financial reporting.
Our
audit committee assists the board of directors in fulfilling its responsibility
to oversee management’s implementation of our financial reporting process. In
its oversight role, our audit committee reviewed and discussed the audited
financial statements with management and with PwC, our independent registered
public accounting firm for 2006. Our audit committee also reviewed and discussed
internal control over financial reporting with management and with
PwC.
Our
audit
committee met with PwC and discussed any issues deemed significant by our
independent registered public accounting firm, including the required matters
to
be discussed by Statement of Auditing Standards No. 61, Communication
with Audit Committee, as
amended. PwC has provided to our audit committee written disclosures and the
letter required by Independence Standards Board No. 1, Independence
Discussions with Audit Committees, and
our
audit committee discussed with PwC that firm’s independence. Our audit committee
also concluded that PwC’s provision of non-audit services to us and our related
entities is compatible with PwC’s independence.
Based
upon the foregoing considerations, our audit committee recommended to the board
of directors that our audited financial statements be included in our 2006
Annual Report on Form 10-K for filing with the SEC.
Members
of our audit committee of the board of directors respectfully submit the
foregoing report.
Thomas
P. Stafford
Chairman
of our Audit Committee
|
Cecil
H. Moore, Jr.
Member
of our Audit Committee
|
Terry
N. Worrell
Member
of our Audit Committee
|
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM MATTERS
Independent
Registered Public Accounting Firm. PwC
served as our independent registered public accounting firm for the year ended
December 31, 2006. Our audit committee has appointed PwC to review our quarterly
unaudited consolidated financial statements to be included in our Quarterly
Reports on Form 10-Q for the first three quarters of 2007. We expect PwC will
be
considered for appointment to audit our annual consolidated financial statements
and internal control over financial reporting for the year ending
December 31, 2007. Representatives of PwC are not expected to attend the
annual meeting.
Fees
Paid to PricewaterhouseCoopers LLP. The
following table shows the aggregate fees that PwC has billed or is expected
to
bill to us, CompX or Kronos Worldwide for services rendered for 2005 and 2006
that our audit committee authorized for us and our privately held subsidiaries
and the CompX or Kronos Worldwide audit committees each separately authorized
for its corporation and such corporation’s privately held subsidiaries.
Additional fees for 2006 may subsequently be authorized and paid to PwC, in
which case the amounts disclosed below for fees paid to PwC for 2006 would
be
adjusted to reflect such additional payments in our proxy statement relating
to
next year’s annual shareholder meeting. In this regard, the fees shown below for
2005 have been adjusted from amounts disclosed in our proxy statement for last
year’s annual shareholder meeting.
Entity
(1)
|
|
Audit
Fees
(2)
|
|
Audit
Related
Fees
(3)
|
|
Tax
Fees
(4)
|
|
All
Other
Fees
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NL
and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
$
|
598,100
|
|
$
|
49,200
|
|
$
|
-0-
|
|
$
|
-0-
|
|
$
|
647,300
|
|
2006
|
|
$
|
317,000
|
|
$
|
-0-
|
|
$
|
-0-
|
|
$
|
-0-
|
|
$
|
317,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX
and Subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
738,900
|
|
|
9,600
|
|
|
14,600
|
|
|
-0-
|
|
|
763,100
|
|
2006
|
|
|
707,000
|
|
|
6,000
|
|
|
14,600
|
|
|
-0-
|
|
|
727,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kronos
Worldwide and Subsidiaries (5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
2,010,100
|
|
|
19,000
|
|
|
24,100
|
|
|
-0-
|
|
|
2,053,200
|
|
2006
|
|
|
1,869,000
|
|
|
5,000
|
|
|
18,000
|
|
|
-0-
|
|
|
1,892,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
$
|
3,347,100
|
|
$
|
77,800
|
|
$
|
38,700
|
|
$
|
-0-
|
|
$
|
3,463,600
|
|
2006
|
|
$
|
2,893,000
|
|
$
|
11,000
|
|
$
|
32,600
|
|
$
|
-0-
|
|
$
|
2,936,600
|
|
——————————
(1)
|
Fees
are reported without duplication.
|
(2)
|
Fees
for the following services:
|
|
(a)
|
audits
of consolidated year-end financial statements for each year and audit
of
internal control over financial
reporting;
|
|
(b)
|
reviews
of the unaudited quarterly financial statements appearing in Forms
10-Q
for each of the first three quarters of each
year;
|
|
(c)
|
consents
and assistance with registration statements filed with the
SEC;
|
|
(d)
|
normally
provided statutory or regulatory filings or engagements for each
year;
and
|
|
(e)
|
the
estimated out-of-pocket costs PwC incurred in providing all of such
services, for which PwC is
reimbursed.
|
(3)
|
Fees
for assurance and related services reasonably related to the audit
or
review of financial statements for each year. These services included
employee benefit plan audits, accounting consultations and attest
services
concerning financial accounting and reporting standards and advice
concerning internal controls.
|
(4)
|
Permitted
fees for tax compliance, tax advice and tax planning
services.
|
(5)
|
We
account for our interest in Kronos Worldwide by the equity method
as of
July 1, 2004.
|
Preapproval
Policies and Procedures. For
the purpose of maintaining the independence of our independent registered public
accounting firm, our audit committee has adopted policies and procedures for
the
preapproval of audit and permitted non-audit services the firm provides to
us or
any of our subsidiaries other than our publicly held subsidiaries and their
respective subsidiaries. We may not engage the firm to render any audit or
permitted non-audit service unless the service is approved in advance by our
audit committee pursuant to the committee’s amended and restated preapproval
policies and procedures that the committee approved on February 22, 2005.
Pursuant to the policy:
|
·
|
the
committee must specifically preapprove, among other things, the engagement
of our independent registered public accounting firm for audits and
quarterly reviews of our financial statements, services associated
with
certain regulatory filings, including the filing of registration
statements with the SEC, and services associated with potential business
acquisitions and dispositions involving us;
and
|
|
·
|
for
certain categories of permitted non-audit services of our
independent registered public accounting firm,
the committee may preapprove
limits on the aggregate fees in any calendar year without specific
approval of the service.
|
These
permitted
non-audit services include:
|
·
|
audit
services, such as certain consultations regarding accounting treatments
or
interpretations and assistance in responding to certain SEC comment
letters;
|
|
·
|
audit-related
services, such as certain other consultations regarding accounting
treatments or interpretations, employee benefit plan audits, due
diligence
and control reviews;
|
|
·
|
tax
services, such as tax compliance and consulting, transfer pricing,
customs
and duties and expatriate tax services;
and
|
|
·
|
other
permitted non-audit services, such as assistance with corporate governance
matters and filing documents in foreign jurisdictions not involving
the
practice of law.
|
Pursuant
to the policy, our audit committee has delegated preapproval authority to the
chairman of the committee or his designee to approve any fees in excess of
the
annual preapproved limits for these categories of permitted non-audit services
provided by our independent registered public accounting firm. The chairman
must
report any action taken pursuant to this delegated authority at the next meeting
of the committee.
For
2006,
our audit committee preapproved all PwC’s services provided to us or any of our
subsidiaries, other than our publicly held subsidiaries and their subsidiaries,
in compliance with the amended and restated preapproval policies and procedures
without the use of the SEC’s de
minimis exception
to such preapproval requirement.
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 reasonable
judgment.
2006
ANNUAL REPORT ON FORM 10-K
A
copy of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2006
is
included as part of the annual report mailed to our shareholders with this
proxy
statement and may also be accessed on our website at www.nl-ind.com.
ADDITIONAL
COPIES
Pursuant
to an SEC rule concerning the delivery of annual reports and proxy statements,
a
single set of these documents may be sent to any household at which two or
more
shareholders reside if they appear to be members of the same family. Each
shareholder continues to receive a separate proxy card. This procedure, referred
to as householding, reduces the volume of duplicate information shareholders
receive and reduces mailing and printing expenses. A number of brokerage firms
have instituted householding. Certain beneficial shareholders who share a single
address may have received a notice that only one annual report and proxy
statement would be sent to that address unless a shareholder at that address
gave contrary instructions. If, at any time, a shareholder who holds shares
through a broker no longer wishes to participate in householding and would
prefer to receive a separate proxy statement and related materials, or if such
shareholder currently receives multiple copies of the proxy statement and
related materials at his or her address and would like to request householding
of our communications, the shareholder should notify his or her broker.
Additionally, we will promptly deliver a separate copy of our 2006 annual report
or this proxy statement to any shareholder at a shared address to which a single
copy of such documents was delivered, upon the written or oral request of the
shareholder.
To
obtain
copies of our 2006 annual report or this proxy statement without charge, please
mail your request to the attention of A.
Andrew
R. Louis, corporate
secretary, at NL Industries, Inc., Three Lincoln Centre, 5430 LBJ Freeway,
Suite
1700, Dallas, Texas 75240-2697, or call him at
972.233.1700.
NL
Industries, Inc.
Dallas,
Texas
April
19,
2007
NL
Industries, Inc.
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
Dear
Shareholder:
NL
Industries, Inc. encourages you to take advantage of new and convenient ways
by
which you can vote your shares. You can vote your shares electronically through
the internet or by telephone. This eliminates the need to return this proxy
card.
Your
electronic or telephonic vote authorizes the agents named on this proxy card
to
vote in the same manner as if you marked, signed, dated and returned this proxy
card.
If you
vote your shares electronically or telephonically, do not mail back this proxy
card.
Your
vote is important. Thank
you for voting.
SEE
REVERSE SIDE.
IF
YOU HAVE NOT VOTED VIA THE INTERNET OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN
THE ENCLOSED ENLVEOPE.
Proxy
-
NL Industries, Inc.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF NL INDUSTRIES, INC.
FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 25, 2007
The
undersigned hereby appoints Steven L. Watson, Robert D. Graham and A. Andrew
R.
Louis, 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 2007
Annual Meeting of Shareholders
(the “Meeting”) of NL Industries, Inc., a New Jersey corporation (“NL”), to
be held at NL’s corporate offices at Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas on Friday, May 25, 2007, at 10:00 a.m. (local time),
and at any adjournment or postponement of the Meeting, all of the shares of
common stock, par value $0.125 per share, of NL 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 card.
THIS
PROXY MAY BE REVOKED AS SET FORTH IN THE PROXY STATEMENT THAT ACCOMPANIED THIS
PROXY CARD.
The
proxies, if this card is properly executed, will vote in the manner directed
on
this card. If no direction is made, the proxies will vote “FOR” all nominees
named on the reverse side of this card for election as directors and, to the
extent allowed by applicable law, 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 CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
SEE
REVERSE SIDE.
NL
Industries, Inc.
Electronic
Voting Instructions
You
can vote by Internet or telephone!
Available
24 hours a day, 7 days a week!
Instead
of mailing your proxy, you may choose one of the two voting methods outlined
below to vote your proxy.
VALIDATION
DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies
submitted by the Internet or telephone must be received by 12:01 a.m., Central
Time, on May 25, 2007.
Vote
by Internet
· |
Log
on to the Internet and go to
|
www.investorvote.com
· |
Follow
the steps outlined on the secured
website.
|
Vote
by telephone
· |
Call
toll free 1-800-652-VOTE (8683) within the United States, Canada
&
Puerto Rico any time on a touch tone telephone. There is NO
CHARGE to
you for the call.
|
· |
Follow
the instructions provided by the recorded
message.
|
Using
a black
ink pen,
mark your votes with an X
as
shown in
this
example. Please do not write outside the designated areas.
|
x
|
Annual
Meeting Proxy Card
IF
YOU HAVE NOT VOTED VIA THE INTERNET OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION
IN
THE ENCLSOED ENLVEOPE.
A
Election
of Directors - The Board of Directors recommends a vote FOR
all the nominees listed.
For
Withhold
For
Withhold
For Withhold
01
- Cecil H. Moore, Jr.
|
¨
|
¨
|
|
02
- Glenn R. Simmons
|
¨
|
¨
|
|
03
- Harold C. Simmons
|
¨
|
¨
|
04
- Thomas P. Stafford
|
¨
|
¨
|
|
05
- Steven L. Watson
|
¨
|
¨
|
|
06
- Terry N. Worrell
|
¨
|
¨
|
|
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.
|
B
Non-Voting
Items
Change
of Address -
Please
print new address below.
C
Authorized
Signatures - This section must be completed for your vote to be counted. -
Date
and Sign Below
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.
Date
(mm/dd/yyyy) - Please print date below. Signature
1 - Please keep signature within the box. Signature
2 - Please keep signature within the box.