nlproxy0408.htm
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:
ý 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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¨ Definitive
Proxy Statement
¨
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Definitive
Additional Materials
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¨
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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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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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1)
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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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4)
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Proposed
maximum aggregate value of
transaction:
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¨
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Fee
paid previously with preliminary
materials.
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¨
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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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1)
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Amount
Previously Paid:
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2)
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Form,
Schedule or Registration Statement
No.:
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April 21,
2008
To our
Shareholders:
You are
cordially invited to attend the 2008 Annual Meeting of Shareholders of NL
Industries, Inc., which will be held on Wednesday, May 21, 2008, 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,
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 21, 2008
To the
Shareholders of NL Industries, Inc.:
The 2008
Annual Meeting of Shareholders of NL Industries, Inc. will be held on Wednesday,
May 21, 2008, 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:
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(1)
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to
elect six directors to serve until the 2009 Annual Meeting of
Shareholders;
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(2)
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to
adopt an amendment to NL’s certificate of incorporation to remove Article
XI (Requirements for Certain Business Transactions; Exceptions) as
approved by our board of directors;
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(3)
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to
adopt an amendment and restatement of NL’s certificate of incorporation as
approved by our board of directors;
and
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(4)
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to
transact such other business as may properly come before the meeting or
any adjournment or postponement
thereof.
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The close
of business on March 31, 2008 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 21,
2008
TABLE
OF CONTENTS
Page
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QUESTIONS
AND ANSWERS ABOUT THE ANNUAL
MEETING
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Ownership
of Related Companies
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PROPOSAL
1 — ELECTION OF DIRECTORS
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Controlled
Company Status, Director Independence and
Committees
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2007
Meetings and Standing Committees
of the Board of Directors
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Management
Development and Compensation
Committee
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Non-Management
and Independent Director Meetings
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Shareholder
Proposals and Director Nominations for the 2009 Annual Meeting of
Shareholders
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Communications
with Directors
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Compensation
Committee Interlocks and Insider
Participation
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Code
of Business Conduct and Ethics
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Corporate
Governance Guidelines
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Availability
of Corporate Governance Documents
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COMPENSATION
OF EXECUTIVE OFFICERS AND DIRECTORS AND OTHER
INFORMATION
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Compensation
Discussion and Analysis
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Compensation
Committee Report
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Summary
of Cash and Certain Other Compensation of Executive
Officers
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2007
Grants of Plan-Based Awards
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Outstanding
Equity Awards at December 31, 2007
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Option
Exercises and Stock Vested
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Nonqualified
Deferred Compensation
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
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CERTAIN
RELATIONSHIPS AND TRANSACTIONS
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Related
Party Transaction Policy
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Relationships
with Related Parties
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Intercorporate
Services Agreements
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Reduction
in the Outstanding CompX Class A Common
Stock
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Sale
of Shares of TIMET Common Stock to
Valhi
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PROPOSAL
2 — REMOVAL OF ARTICLE XI OF CERTIFICATE OF
INCORPORATION
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PROPOSAL
3 — AMENDMENT AND RESTATEMENT OF CERTIFICATE OF
INCORPORATION
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Summary
of the Changes between the Current Certificate of Incorporation and the
Proposed Amended and Restated Certificate of
Incorporation
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Amendment
and Restatement of our By-Laws
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INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
MATTERS
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Independent
Registered Public Accounting Firm
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Fees
Paid to PricewaterhouseCoopers LLP
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Preapproval
Policies and Procedures
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2007
ANNUAL REPORT ON FORM 10-K
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EXHIBIT
A — NL Industries, Inc. Amended and Restated Certificate of
Incorporation
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EXHIBIT
B — Article XI of the Current Certificate of Incorporation of NL
Industries, Inc.
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GLOSSARY
OF TERMS
“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 Trust Company, N.A., 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.
“Contran” means Contran
Corporation, the parent corporation of our consolidated tax group.
“Dixie Rice” means Dixie Rice
Agricultural Corporation, Inc., one of our parent corporations.
“EWI” means EWI RE, Inc., a
reinsurance brokerage and risk management company wholly owned by
us.
“FAS 123R” means Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 123
(revised 2004) Share-Based
Payment.
“Foundation” means the Harold
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.
“NL,” “us,” “we” or “our” means NL Industries,
Inc.
“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 March 31, 2008, the date our board of directors set for the
determination of shareholders entitled to notice of and to vote at the 2008
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.
“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.
“Valhi” means Valhi, Inc., our
publicly held parent corporation that is a diversified holding company with
principal investments in us and Kronos Worldwide.
“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 2008 Annual Meeting of Shareholders to
be held on Wednesday, May 21, 2008 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 2007 Annual Report to Shareholders, which includes our Annual Report on Form
10-K for the fiscal year ended December 31, 2007, are first being mailed on or
about April 21, 2008 to the holders of our common stock at the close of business
on March 31, 2008. 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:
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At
the annual meeting, shareholders will vote
on:
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·
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Proposal
1: the election of six
directors;
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·
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Proposal
2: the adoption of an amendment to our certificate of
incorporation to remove Article XI (Requirements for Certain Business
Transactions; Exceptions) as approved by our board of
directors;
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·
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Proposal
3: the adoption of an amendment and restatement of our
certificate of incorporation as approved by our board of directors;
and
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·
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any
other matter that may properly come before the
meeting.
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Q: How
does the board recommend that I vote?
A:
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The
board of directors recommends that you vote FOR each of the nominees for
director and FOR Proposal 2 and Proposal
3.
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Q: Who
is allowed to vote at the annual meeting?
A:
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The
board of directors has set the close of business on March 31, 2008 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, 48,592,034 shares
of our common stock were issued and outstanding. Each share of
our common stock entitles its holder to one
vote.
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Q: How
do I vote?
A:
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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.
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If you
are a shareholder of record, you may:
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·
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vote
in person at the annual meeting; or
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·
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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.
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If
you execute a proxy card but do not indicate how you would like your shares
voted for one or more of the nominees and for both of the other proposals, the
agents will vote FOR the election of each such nominee for director and FOR each
of Proposal 2 and Proposal 3 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:
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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.
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Q: Is
my vote confidential?
A:
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Yes. All
proxy cards, ballots or voting instructions delivered to Computershare
will be kept confidential in accordance with our
by-laws.
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Q: May
I change or revoke my proxy or voting instructions?
A:
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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:
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·
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delivering
to Computershare a written
revocation;
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·
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submitting
another proxy card bearing a later date;
or
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·
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voting
in person at the meeting.
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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:
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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
votes on some matters and not others, a matter not voted on 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.
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Q:
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Assuming
a quorum is present, what vote is required to elect a director
nominee?
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A:
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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 or a broker/nominee non-vote regarding a particular nominee
will not affect the election of such
nominee.
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Q:
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Assuming
a quorum is present, what vote is required to adopt Proposal 2 or Proposal
3?
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The
affirmative vote of the holders of at least two-thirds of our outstanding
shares, and also of at least a majority of our outstanding shares that are not
beneficially owned by Harold C. Simmons or his affiliates, is required to adopt
Proposal 2.
The
affirmative vote of the holders of at least two-thirds of our outstanding shares
is required to adopt Proposal 3. However, if Proposal 2 is not
adopted by the requisite vote, the proposed amended and restated certificate of
incorporation described in Proposal 3 will continue to include Article XI
(Requirements for Certain Business Transactions; Exceptions) of our current
certificate of incorporation.
The
accompanying proxy card or voting instruction form provides space for you to
vote against or abstain from voting on Proposal 2 or Proposal
3. Shares of our common stock that are voted to abstain from either
Proposal 2 or Proposal 3 or broker/nominee non-votes would have the same effect
as a vote against Proposal 2 or Proposal 3, as
applicable.
Q:
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Assuming
a quorum is present, what vote is required to approve any other matter
coming before the meeting?
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A:
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Except
as our certificate of incorporation and applicable laws may otherwise
provide, 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.
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Q: Who
will pay for the cost of soliciting the proxies?
A:
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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. at an
estimated cost of $6,000 plus the
reimbursement of certain out-of-pocket expenses to aid in the distribution
of this proxy statement and related materials and to solicit votes
regarding the Proposals 2 and 3. 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.
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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 and FOR the adoption
of Proposals 2 and 3.
If
Valhi attends the meeting in person or by proxy and votes as indicated, the
meeting will have a quorum present, the shareholders will elect all the nominees
to the board of directors and adopt Proposal 3 with Article XI
(Requirements for Certain Business Transactions; Exceptions) of our current
certificate of incorporation remaining in our proposed amended and restated
certificate of incorporation. The affirmative vote of Valhi’s shares
of our common stock when combined with the affirmative vote of at least a
majority of our outstanding shares that are not beneficially owned by Harold C.
Simmons or his affiliates will be sufficient to adopt Proposals 2 and 3 with the
removal of Article XI (Requirements for Certain Business Transactions;
Exceptions) from the proposed amended and restated certificate of
incorporation.
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.
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Amount
and Nature of
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Percent
of
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Harold
C. Simmons
(3)
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879,600
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(4)
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1.8%
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Valhi,
Inc.
(3)
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40,387,531
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(4)
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83.1%
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TIMET
Finance Management Company
(3)
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222,100
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(4)
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*
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Annette
C. Simmons
(3)
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(4)
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*
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41,749,006
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(4)
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85.9%
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Cecil
H. Moore,
Jr.
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3,000
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*
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Glenn
R.
Simmons
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11,000
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(4)
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*
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Thomas
P.
Stafford
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6,000
|
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*
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Steven
L.
Watson
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11,000
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(4)
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*
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Terry
N.
Worrell
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4,000
|
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*
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Robert
D.
Graham
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-0-
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(4)
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-0-
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Gregory
M.
Swalwell
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-0-
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(4)
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-0-
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Kelly
D.
Luttmer
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-0-
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(4)
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-0-
|
John
A. St.
Wrba
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-0-
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(4)
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-0-
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All
our current directors and executive officers as a group
(11
persons)
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41,794,006
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(4)
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86.0%
|
——————————
* 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.
|
(2)
|
The
percentages are based on 48,592,634 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, Valhi and the Foundation
are the holders of approximately 27.3%, 11.8%, 8.6%, 4.0%, 0.8%, 0.5% and 0.2%,
respectively, of the outstanding shares of common stock of TIMET. Our
percentage ownership of TIMET common stock includes 0.3% directly held by a
wholly owned subsidiary of ours.
VHC, the
Foundation, TFMC and the CMRT are the direct holders of approximately 92.8%,
0.9%, 0.5% and 0.1%, respectively, of the outstanding common stock of
Valhi. Dixie Rice is the direct holder of 100% of the outstanding
common stock of VHC. Contran is the beneficial holder of 100% of the
outstanding common stock of Dixie Rice.
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 0.2% 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 CMRT
directly holds approximately 8.6% 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,
Dixie Rice 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. 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 269,775 shares of our common stock, 21,167,875 shares of TIMET common 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 839,600 shares of our common stock, 7,074,239
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 a trust related to
Harold C. Simmons is the sole owner of VHC’s 2% convertible preferred
stock. Messrs. Harold and Glenn Simmons and Watson each hold of
record one director qualifying share of Dixie Rice.
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 CMRT, the Foundation, TIMET 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.
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
|
|
|
|
Amount
and Nature
of
Beneficial
|
Percent
of
Class
|
Amount
and Nature
of
Beneficial
|
Percent
of
Class
|
|
|
|
|
|
Harold
C.
Simmons
|
152,367
|
(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)
|
*
|
558,411
|
|
*
|
Valhi
Holding Company
|
-0-
|
(4)
|
-0-
|
105,538,163
|
(4)
|
92.8%
|
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
|
|
(4)
|
-0-
|
|
(4)
|
*
|
|
46,705,097
|
|
95.4%
|
107,301,357
|
|
94.4%
|
|
|
|
|
|
|
|
Cecil
H. Moore,
Jr.
|
2,012
|
(4)
|
*
|
-0-
|
|
-0-
|
Glenn
R.
Simmons
|
10,438
|
(4)
|
*
|
9,060
|
(4)(5)
|
*
|
Thomas
P.
Stafford
|
2,000
|
(4)
|
*
|
-0-
|
|
-0-
|
Steven
L.
Watson
|
5,733
|
(4)
|
*
|
17,246
|
(4)
|
*
|
Terry
N.
Worrell
|
-0-
|
(4)
|
-0-
|
-0-
|
|
-0-
|
Robert
D.
Graham
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
Gregory
M. Swalwell
|
-0-
|
(4)
|
-0-
|
56,166
|
(4)(6)
|
*
|
Kelly
D.
Luttmer
|
-0-
|
(4)
|
-0-
|
45,000
|
(4)(6)
|
*
|
John
A. St.
Wrba
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
All
our current directors and executive officers as a group (11
persons)
|
46,725,262
|
(4)
|
95.4%
|
107,428,829
|
(4)(5)(6)
|
94.4%
|
——————————
* 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 48,956,549 shares of Kronos Worldwide common
stock outstanding as of the record
date.
|
(3)
|
The
percentages are based on 113,679,278 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 for purposes of this statement are 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 19,987,305 shares of Kronos Worldwide common stock as
security.
(5)
|
The
shares of Valhi common stock shown as beneficially owned by Glenn R.
Simmons include 1,900 shares his wife holds in her retirement account,
with respect to which shares he disclaims beneficial
ownership.
|
(6)
|
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:
|
|
Shares
of Valhi Common Stock Issuable Upon the Exercise of Stock
Options
On
or Before May 30, 2008
|
|
|
Gregory M. Swalwell
|
55,000
|
Kelly D. Luttmer
|
45,000
|
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
|
CompX
Class B
|
CompX
Class A and Class B Common Stock
Combined
Percent
of Class
|
|
Amount
and Nature of Beneficial
|
Percent
of Class
|
Amount
and Nature of Beneficial
|
Percent
of
Class
|
|
|
|
|
|
|
|
|
Harold
C. Simmons
|
66,900
|
(4)
|
2.8%
|
-0-
|
(4)
|
-0-
|
*
|
NL
Industries, Inc.
|
755,004
|
(4)
|
31.1%
|
10,000,000
|
(4)
|
100.0%
|
86.6%
|
Annette
C. Simmons
|
|
(4)
|
*
|
|
(4)
|
-0-
|
*
|
|
841,904
|
(4)
|
34.7%
|
10,000,000
|
(4)
|
100.0%
|
87.3%
|
|
|
|
|
|
|
|
|
Cecil
H. Moore,
Jr.
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Glenn
R.
Simmons
|
23,500
|
(4)(5)(6)
|
1.0%
|
-0-
|
(4)
|
-0-
|
*
|
Thomas
P.
Stafford
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Steven
L.
Watson
|
14,000
|
(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
|
-0-
|
(4)(5)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
Kelly
D.
Luttmer
|
200
|
(4)(5)
|
*
|
-0-
|
(4)
|
-0-
|
*
|
John
A. St.
Wrba
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
-0-
|
All
our current directors and executive officers as a group (11
persons)
|
879,604
|
(4)(5)(6)
|
67.9%
|
10,000,000
|
(4)
|
100.0%
|
87.6%
|
——————————
* 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 2,426,060 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)
|
NL
directly holds approximately 86.6% of the combined voting power of the
outstanding shares of CompX class A and B common stock (approximately
98.4% 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 our parent
companies disclaim beneficial ownership of the shares of CompX common stock that
NL directly holds.
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:
|
|
Shares
of CompX Class A Common Stock Issuable Upon the Exercise of Stock
Options
On
or Before May 30, 2008
|
|
|
Glenn R.
Simmons
|
6,000
|
Steven
L.
Watson
|
6,000
|
(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.
|
PROPOSAL
1
ELECTION
OF DIRECTORS
Our
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
2008 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. Our proposed amendment and restatement of our
certificate of incorporation as discussed in Proposal 3 to this proxy statement
and is set forth in Exhibit
A to this proxy statement and would, among other things, provide for our
by-laws to set the minimum and maximum number of persons who serve on our board
of directors and allow our board of directors more flexibility, without a vote
of our shareholders, in setting the number of persons who serve on our board of
directors. In the event of the adoption of Proposal 3, our board of
directors has set the number of directors at six.
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 2009 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.
OUR 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 68,
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 office 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 office 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 80, 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
2003. Mr. Simmons has been chairman of the board of CompX and
Keystone since prior to 2003 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 76, 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 2003. 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 77, 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 57, 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 63, 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. He is also a director of TIMET and
serves on TIMET’s audit committee. 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.
|
|
|
Harold
C.
Simmons
|
76
|
Chairman
of the Board and Chief Executive Officer
|
Robert
D.
Graham
|
52
|
Vice
President and General Counsel
|
Tim
C.
Hafer
|
46
|
Vice
President and Controller
|
Kelly
D.
Luttmer
|
44
|
Vice
President and Tax Director
|
John
A. St.
Wrba
|
51
|
Vice
President and Treasurer
|
Gregory
M.
Swalwell
|
51
|
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 Lord Bissell & Liddell
LLP.
Tim C. Hafer has served as
vice president and controller of us and Kronos Worldwide since
2006. He served as director – finance and control of us and Kronos
Worldwide from 2003 to 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.
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
2005, 2006 and 2007 $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.
2007 Meetings and
Standing Committees of the Board of Directors. The board of
directors held five meetings and took action by written consent on one occasion
in 2007. Each director participated in at least 80% of all of such
meetings and of the 2007 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 our directors attended our 2007 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, Jr. 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 2007.
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 in 2007.
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 2009 Annual Meeting of
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 22, 2008 to be
considered for inclusion in the proxy statement and form of proxy card relating
to our annual meeting of shareholders in 2009.
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 2007 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 2007 or any prior
year;
|
|
·
|
had
any related party relationships with us that requires disclosure under
applicable SEC rules; or
|
|
·
|
had
any interlock relationships under applicable SEC
rules.
|
For 2007,
no executive officer of ours had any interlock relationships within the scope of
the intent of applicable SEC rules. However, our chairman of the
board is on the board of directors of Contran and Contran employs Glenn R.
Simmons and Steven L. Watson, who each serve as one of our
directors.
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 of our audit
committee charter, code of business conduct and ethics and corporate governance
guidelines is available on our website at www.nl-ind.com 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. For 2006 and 2007, all of our named
executive officers were employees of Contran. For each of these
years, we paid Contran a fee to receive, among other things, the services of our
named executive officers pursuant to our ISA with Contran, which fee was
approved by our independent directors after receiving the recommendation of our
management development and compensation committee. Pursuant to
certain other ISAs, each of CompX and Kronos Worldwide also paid a fee to
Contran for, among other things, the services our named executive officers
provided to those companies, which fees were approved by the independent
directors of those companies. Additionally, we and Kronos Worldwide
each paid director fees in the form of cash and stock compensation to our chief
executive officer for his service on the boards of directors of us and Kronos
Worldwide, respectively. Other than these director fees, we did 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 for each year 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 2007 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 for each year 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 the
last quarter of the prior year and the early part of each current year,
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 such
current year 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 and 2007 was the sum of the following:
|
·
|
the
annualized base salary of such officer at the beginning of the
year;
|
|
·
|
the
bonus Contran paid such officer (other than bonuses for specific matters)
in the prior year, which served as a reasonable approximation of the bonus
that may be paid in the current year;
and
|
|
·
|
an
overhead factor (19% for 2007 as compared to 21% for 2006) 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.
|
The
overhead factor declined in 2007 as compared to 2006 as a result of Contran
achieving some economies of scale and being able to spread the fixed costs
included in determining the overhead factor over a greater number of employees
providing services under various ISAs. 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 each year, the proposed charges for that year 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 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 the prior year and proposed for
the current year;
|
|
·
|
the
comparison of the prior year and proposed current year 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; and
|
|
·
|
the
comparison of the prior year and proposed current year average hourly
rate.
|
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 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 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 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 annual ISA
charge effective January 1st of each
year 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.
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 2008, 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 or loss we recognized
for financial statement reporting purposes in each of the reported years for
stock options to purchase our common stock held by the named executive
officers. The dollar amount of stock awards appearing in
the Summary Compensation table represents the value recognized for financial
statement reporting purposes of shares of common stock we or Kronos Worldwide
granted to Mr. Harold Simmons in 2006 and 2007 for his director
services.
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 section 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 2007
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, 2007 and one of
our former executive officers. All of our named executive officers
were employees of Contran for 2007 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.
2007 SUMMARY COMPENSATION TABLE
(1)
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
|
|
|
Harold
C.
Simmons
|
2007
|
$3,046,000
|
(2)
|
$25,740
|
(3)
|
$(10,310)
|
(4)
|
$3,061,430
|
Chairman
of the Board and Chief
|
2006
|
3,047,000
|
(2)
|
26,985
|
(3)
|
(11,904)
|
(4)
|
3,062,081
|
Executive
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
D.
Graham
|
2007
|
785,900
|
(2)
|
-0-
|
|
-0-
|
|
785,900
|
Vice
President and General Counsel
|
2006
|
584,200
|
(2)
|
-0-
|
|
-0-
|
|
584,200
|
|
|
|
|
|
|
|
|
|
Kelly
D.
Luttmer
|
2007
|
559,000
|
(2)
|
-0-
|
|
-0-
|
|
559,000
|
Vice
President and Tax Director
|
2006
|
505,700
|
(2)
|
-0-
|
|
-0-
|
|
505,700
|
|
|
|
|
|
|
|
|
|
Gregory
M.
Swalwell
|
2007
|
548,600
|
(2)
|
-0-
|
|
-0-
|
|
548,600
|
Vice
President, Finance and Chief
|
2006
|
508,000
|
(2)
|
-0-
|
|
-0-
|
|
508,000
|
Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
A. St.
Wrba
|
2007
|
376,500
|
(2)
|
-0-
|
|
-0-
|
|
376,500
|
Vice
President and Treasurer
|
2006
|
348,700
|
(2)
|
-0-
|
|
-0-
|
|
348,700
|
——————————
(1)
|
Certain
non-applicable columns have been omitted from this
table.
|
(2)
|
The
amounts shown in the 2007 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
2007 Summary Compensation table for each of our named executive officers
are as follows.
|
|
|
|
|
|
|
Harold
C. Simmons
|
|
|
|
ISA
Fees:
|
|
|
|
|
CompX
|
$
1,000,000
|
|
$
1,000,000
|
|
Kronos
Worldwide
|
1,000,000
|
|
1,000,000
|
|
NL
|
1,000,000
|
|
1,000,000
|
|
Director
Fees Earned or Paid in Cash:
|
|
|
|
|
Kronos
Worldwide
|
23,000
|
(a)
|
22,000
|
(a)
|
NL
|
24,000
|
|
24,000
|
|
|
$ 3,047,000
|
|
$ 3,046,000
|
|
|
|
|
|
|
Robert
D. Graham
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
CompX
|
$ 25,400
|
|
$
80,200
|
|
Kronos
Worldwide
|
254,000
|
(a)
|
255,000
|
(a)
|
NL
|
304,800
|
|
450,700
|
|
|
$ 584,200
|
|
$ 785,900
|
|
|
|
|
|
|
Kelly
D. Luttmer
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
CompX
|
$ 78,400
|
|
$ 63,900
|
|
Kronos
Worldwide
|
274,400
|
(a)
|
307,900
|
(a)
|
NL
|
152,900
|
(b)
|
187,200
|
(b)
|
|
$ 505,700
|
|
$ 559,000
|
|
|
|
|
|
|
Gregory
M. Swalwell
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
CompX
|
$
50,800
|
|
$
36,000
|
|
Kronos
Worldwide
|
228,600
|
(a)
|
218,800
|
(a)
|
NL
|
228,600
|
|
293,800
|
|
|
$ 508,000
|
|
$ 548,600
|
|
|
|
|
|
|
John
A. St. Wrba
|
|
|
|
|
ISA
Fees:
|
|
|
|
|
CompX
|
$
26,800
|
|
$
14,800
|
|
Kronos
Worldwide
|
268,200
|
(a)
|
302,400
|
(a)
|
NL
|
53,700
|
|
59,300
|
|
|
$ 348,700
|
|
$ 376,500
|
|
|
(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, our wholly owned subsidiary, under the ISA
between Contran and us.
|
(3)
|
Stock
awards to Mr. Simmons in 2006 and 2007 consisted of shares of common stock
we or Kronos Worldwide granted to him for his services as a
director. See the 2007 Grants of Plan-Based Awards table below
for more details regarding the 2007 grants. The 2006 grants
consisted of the following:
|
|
|
Closing
Price on Date of Grant
|
Grant
Date Value of Shares of Common Stock
|
|
|
|
|
500
shares of Kronos Worldwide common stock
|
May
24, 2006
|
$29.99
|
$
14,995
|
|
1,000
shares of NL common
stock
|
May
24, 2006
|
$11.99
|
11,990
|
|
|
|
|
$
26,985
|
|
(4)
|
Represents
the compensation income or expense we recognized in the respective year
for financial statement reporting purposes for 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, 2005
closing market price of our common stock was higher as compared to
December 31, 2006. The aggregate fair value of Mr. Simmons’
outstanding stock options decreased during 2007 due to their expiration.
As a result, we recognized compensation income in 2006 and 2007
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 and 2007, we report in this table
the corresponding reduction in compensation expense with respect to the
change in stock option values.
|
2007 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 2007 for his services as director of each corporation. No other
named executive officer received any plan-based awards from us or our
subsidiaries in 2007.
2007 GRANTS OF PLAN-BASED AWARDS
(1)
|
|
|
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
17, 2007
|
January
1, 2004
|
500
|
$15,120
|
NL
common stock
(4)
|
May
25, 2007
|
January
1, 2004
|
1,000
|
10,620
|
|
|
|
|
$25,740
|
(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
|
|
|
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:
|
|
Closing
Price on Date of Grant
|
|
|
|
Kronos
Worldwide
|
May
17, 2007
|
$30.24
|
NL
|
May
25, 2007
|
$10.62
|
(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.
|
No Outstanding
Equity Awards at December 31, 2007. As of December 31, 2007,
no named executive officer held any stock options to purchase shares of our
common stock or of our subsidiaries or unvested shares of our common stock or of
our subsidiaries.
Option Exercises
and Stock Vested. During 2007, no named executive officer
exercised any stock options or had any stock awards vest. For stock
awards granted in 2007 that had no vesting restrictions, see the 2007 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 of the board of directors or its
committees and at a daily rate ($125 per hour) for other services rendered on
behalf of our board of directors or its committees. In addition to
the annual retainers for service on the board of directors, 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 receive 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 receive an annual retainer
of $10,000, paid in quarterly installments, for their service on the audit
committee. Members of our management development and compensation
committee also receive an annual retainer of $2,000, paid in quarterly
installments, for their service on that committee. 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 2007 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 2007 director services provided to
us.
2007 DIRECTOR COMPENSATION
(1)
|
Fees
Earned or Paid in Cash (2)
|
|
|
|
|
|
|
|
|
|
|
Cecil
H. Moore, Jr. (4).
|
$49,000
|
$10,620
|
$ -0-
|
|
$ -0-
|
|
$59,620
|
Glenn
R. Simmons (4)
|
25,000
|
10,620
|
-0-
|
|
-0-
|
|
35,620
|
Thomas
P. Stafford
|
51,000
|
10,620
|
-0-
|
|
15,000
|
(5)
|
76,620
|
Steven
L. Watson (4)
|
25,000
|
10,620
|
(10,310)
|
(6)
|
-0-
|
|
25,310
|
Terry
N.
Worrell
|
40,000
|
10,620
|
-0-
|
|
-0-
|
|
50,620
|
——————————
(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 2007 Summary Compensation table (footnotes 2 and 3) and
2007 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 2007.
|
(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 $10.62 and May 25, 2007,
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 2007, they each earned or received the following
for these director services:
|
|
Fees
Earned or Paid in Cash (a)
|
|
|
|
|
|
|
|
|
Cecil
H. Moore, Jr.
|
|
|
|
|
Kronos
Worldwide Director Services
|
$47,000
|
$15,120
|
$ -0-
|
$62,120
|
|
|
|
|
|
Glenn
R. Simmons
|
|
|
|
|
CompX
Director
Services
|
24,000
|
18,350
|
2,300
|
$44,650
|
Kronos
Worldwide Director Services
|
23,000
|
15,120
|
-0-
|
38,120
|
|
|
|
|
$82,770
|
|
|
|
|
|
Steven
L. Watson
|
|
|
|
|
CompX
Director
Services
|
24,000
|
18,350
|
2,300
|
$44,650
|
Kronos
Worldwide Director Services
|
23,000
|
15,120
|
-0-
|
38,120
|
|
|
|
|
$82,770
|
—————————
|
(a)
|
Represents
retainers and meeting fees received or earned for 2007 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:
|
|
|
|
Closing
Price on Date of Grant
|
Dollar
Value of Stock Award
|
|
|
|
|
|
CompX
Class A Common Stock
|
1,000
|
May
30, 2007
|
$18.35
|
$18,350
|
Kronos
Worldwide Common Stock
|
500
|
May
17, 2007
|
$30.24
|
$15,120
|
|
(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
(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, 2007, 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 2007 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 2007 our executive officers, directors
and 10% shareholders complied with all applicable filing requirements under
section 16(a), except that Gen. Thomas P. Stafford filed on February 29, 2008 a
Form 4 after the required filing date reporting a purchase of shares of our
common stock on September 30, 2004 and Harold C. Simmons filed on February 27,
2008 a Form 4 after the required filing date reporting a purchase of shares of
our common stock on November 26, 2007.
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, real estate management, environmental management, 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. Generally, each of the ISAs renews on
a quarterly basis 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, real estate 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 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 2007 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 2007 and the amount anticipated to be paid to Contran in 2008 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 2007
|
Fees
Expected to be Paid to Contran under the ISA in
2008
|
|
(In
millions)
|
|
|
|
NL
Industries,
Inc.
|
$ 4.877
|
(1)
|
$ 4.779
|
(1)
|
Kronos
Worldwide,
Inc.
|
6.516
|
(1)
|
6.824
|
(1)
|
CompX
International
Inc.
|
2.879
|
(2)
|
3.081
|
(2)
|
Total
|
$14.272
|
(1)(2)
|
$14.684
|
(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 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 and/or assess fees 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
2007, 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 Huntsman
Holding LLC each own 50%. These amounts principally included payments
for insurance and reinsurance 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 2008. 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 2007 pursuant to the tax sharing agreements and
policies, we made net cash payments to Valhi of approximately $14.2 million, and
Kronos Worldwide made net cash payments to Valhi of approximately $3.0
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 2007, L. Andrew
Fleck (a step-son of Harold Simmons) provided certain real property management
services to us pursuant to these ISAs. The portion of the fees we
paid to Contran in 2007 pursuant to these ISAs for the services of Mr. 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 2007 ISA fee Contran charged us. As disclosed
in the Director Compensation table in this proxy statement, Mr. Glenn Simmons (a
brother of Harold Simmons) also received compensation in cash and stock from us,
Kronos Worldwide and CompX for his director services for 2007 and is expected to
continue to receive similar compensation for 2008 for such
services.
Reduction in the
Outstanding CompX Class A Common Stock. In October 2007, CompX
on a net basis purchased and/or cancelled approximately 2.7 million shares of
its class A common stock formerly held directly or indirectly by TFMC for $19.50
per share paid in the form of a consolidated promissory note pursuant to a stock
purchase agreement between CompX and TFMC and a merger agreement among CompX
Group, Inc., a former parent of CompX in which we and TFMC were the sole
stockholders, and CompX KDL LLC, a former wholly owned subsidiary of
CompX. The price per share was determined based on CompX’s open
market purchases of its class A common stock around the time of the approval of
these transactions. The stock purchase agreement and the merger
agreement were approved by the independent directors of CompX and
TIMET.
Pursuant
to the agreements:
|
·
|
CompX
Group merged into CompX KDL with CompX KDL surviving the
merger;
|
|
·
|
the
CompX Group common stock outstanding immediately prior to the merger was
cancelled;
|
|
·
|
the
2,586,820 shares of CompX class A common stock and 10.0 million shares
CompX class B common stock owned by CompX Group immediately prior to
merger were cancelled;
|
|
·
|
simultaneously
with the cancellation of the shares formerly held by CompX Group, CompX
issued 374,000 shares of CompX class A common stock and 10.0 million
shares CompX class B common stock to
us;
|
|
·
|
CompX
purchased from TFMC 483,600 shares of CompX class A common stock and
initiated the cancellation of such
shares;
|
|
·
|
CompX
issued a consolidated unsecured term loan promissory note to TFMC in the
original principal amount of $52,580,190
that:
|
|
o
|
matures
in seven years;
|
|
o
|
bears
interest at an annual rate of LIBOR plus
1.00%;
|
|
o
|
requires
quarterly principal payments of $250,000 beginning on September 30,
2008;
|
|
o
|
does
not have prepayment penalties; and
|
|
o
|
is
subordinated to the CompX credit agreement with Wachovia Bank, National
Association and certain other banks;
and
|
|
·
|
TFMC,
CompX and certain of its subsidiaries and Wachovia Bank, as administrative
agent for the banks that are a party to the CompX credit agreement,
entered into a subordination agreement that subordinated certain of the
terms of the consolidated promissory note to the CompX credit
agreement.
|
As a
result of these transactions, we became the direct owner of the same number of
the shares of CompX class A and class B common stock that we formerly held
indirectly through CompX Group and TFMC ceased to own, directly or indirectly,
any shares of CompX class A common stock and became a creditor of
CompX.
During
the fourth quarter of 2007, CompX prepaid TFMC approximately $2.6 million of the
consolidated promissory note. At December 31, 2007, approximately
$50.0 million principal amount remained outstanding under the promissory
note.
Sale of Shares of
TIMET Common Stock to Valhi. On October 11, 2007, we entered
into a stock purchase agreement with Valhi. Pursuant to the
agreement, we sold to Valhi 800,000 shares of TIMET common stock for a cash
purchase price of $33.50 per share and an aggregate purchase price of $26.8
million. The sales price was equal to the closing sales price per
share for TIMET common stock at the close of business on October 10, 2007, which
was higher than the average of closing sales prices for TIMET common stock over
the thirty days ending on October 10, 2007. Our independent
directors approved the sale.
PROPOSAL
2
REMOVAL
OF ARTICLE XI OF CERTIFICATE OF INCORPORATION
Summary of the
Proposal. In an effort to simplify and update our current
certificate of incorporation adopted in 1990, our board of directors, at its
meeting on February 22, 2008, adopted, and is recommending that our shareholders
adopt, a proposal to amend our certificate of incorporation to remove Article XI
(Requirements for Certain Business Transactions; Exceptions). Article
XI, as contained in our current certificate of incorporation, is set forth in
its entirety in Exhibit
B to this proxy statement.
Article
XI of our current certificate of incorporation provides that, in addition to any
affirmative vote required by law or the current certificate of incorporation,
certain business combination transactions generally require the affirmative vote
of the holders of at least a majority of our common stock, voting together as a
single class, excluding those shares which are beneficially owned by all
Interested Shareholders or any affiliate of any Interested
Shareholder. For purposes of Article XI, “Interested Shareholder”
includes (i) any person (other than NL or our subsidiaries) who beneficially
owns more than 10% of the voting power of our outstanding voting stock or (ii)
one of our affiliates who any time within the two-year period immediately prior
to a business combination transaction beneficially owned 10% or more of the
voting power of our then outstanding voting stock.
Article
XI provides that it is not applicable if such business combination transaction
is consummated after January 1, 1999. Article XI is therefore no longer
applicable and the removal of this provision will not impact the rights of our
shareholders.
Voting
Requirements. The adoption of Proposal 2 requires the
affirmative vote of the holders of at least two-thirds of our outstanding
shares, and also of at least a majority of our outstanding shares that are not
beneficially owned by Harold C. Simmons or his affiliates. If Valhi
votes its approximately 83.1% of the outstanding shares of our common stock for
Proposal 2 as Valhi intends to do, it is only necessary for the additional
affirmative vote of at least a majority of our outstanding shares that are not
beneficially owned by Harold C. Simmons or his affiliates to adopt Proposals
2.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 2.
PROPOSAL
3
AMENDMENT
AND RESTATEMENT OF CERTIFICATE OF INCORPORATION
Summary of the
Proposal. As described above, in an effort to simplify and
update our current certificate of incorporation adopted in 1990, our board of
directors, at its meeting on February 22, 2008, adopted, and is recommending
that our shareholders adopt, a proposal to amend and restate our certificate of
incorporation. The proposed amendment and restatement of our
certificate of incorporation is set forth as Exhibit A to this proxy
statement. The proposed amendment and restatement of our certificate
of incorporation, among other things, would:
|
·
|
remove
certain provisions of our current certificate of incorporation that
ordinarily would appear in by-laws or amend certain other provisions of
our current certificate of incorporation that also appear in our by-laws
(which by-laws are allowed to be amended by our board of directors without
shareholder approval), such as director terms, the power of the board of
directors to appoint committees and officers, determine the size of the
board and fill vacancies on the board and the power of the board or
officers to call special meetings of our
shareholders;
|
|
·
|
remove
a provision of our current certificate of incorporation that sets forth
the power of the board of directors to determine or vary the amount of our
working capital;
|
|
·
|
remove
certain provisions of our current certificate of incorporation that are
similar to provisions of the New Jersey Business Corporation Act (which
provisions will continue to provide similar rights even if Proposal 3 is
adopted) such as the power of the board of directors to hold meetings
outside of New Jersey, the power of the board to remove officers and the
power of the shareholders to remove directors or take action by written
consent; and
|
|
·
|
technical
amendments to update the name and address of our registered agent and
office, set forth our current director names and addresses and renumber
article and section numbers.
|
Summary of the
Changes between the Current Certificate of Incorporation and the Proposed
Amended and Restated Certificate of Incorporation. The table
on the following pages provides a summary of the differences between our current
certificate of incorporation and the proposed amendment and restatement of our
certificate of incorporation, other than the removal of Article
XI (Requirements for Certain Business Transactions; Exceptions) of
our current certificate of incorporation as described in Proposal
2. In addition to the changes summarized below, the article and
section references in the amended and restated certificate will be revised as
applicable. The article and section references in the table below are
to our current certificate of incorporation unless otherwise
indicated.
Current
Certificate of Incorporation
|
Proposed
Amended and Restated Certificate of Incorporation
|
|
Article
II. Location of Office and Registered Agent
|
|
Provides
the name and address of our registered agent that is no longer
correct.
|
Provides
the correct name and address of our current registered
agent.
|
|
Article
IV: Authorized Capital Stock
|
Provides
that our total authorized capital stock is 155,000,000 shares, of which
150,000,000 shares are common stock and 5,000,000 shares are preferred
stock. Also provides for the creation of a series of preferred
stock “$8.625 Preferred Stock, Series A” consisting of 500,000 shares, and
fixes the powers, preferences and relative and other special rights and
the qualifications, limitations and restrictions thereof.
|
Provides
for the same authorized capital stock, with the removal of the reference
to the series A preferred stock, which shares have been fully
retired.
|
|
Article
V: Current Board of Directors
|
|
Provides
the names and addresses of the members of the board of directors as of
1990.
|
Updates
Article V to provide the names and addresses of the current members of our
board of directors.
|
|
(Former
Article VII: Paragraph A.)
|
|
Provides
that:
(i)the
board of directors may hold their meetings outside the State of New Jersey
at such places as from time to time may be designated by the by-laws, or
by resolution of the board of directors;
(ii)the
board of directors may remove any officer elected or appointed by the
board of directors;
(iii)any
other officer or employee may be removed at any time by vote of the board
of directors or by any committee or superior officer upon whom such power
or removal may be conferred by the by-laws or by vote of the board of
directors;
(iv)the
board of directors may appoint an executive committee that may exercise
the powers of the board of directors as set forth in our
by-laws;
(v)the
Board of Directors may appoint any other standing committees with such
powers as are conferred or authorized by our by-laws;
(vi)the
Board of Directors may appoint certain officers with the powers set forth
in our by-laws;
(vii)the
Board of Directors may fix or determine, and to vary the amount of our
working capital, and to direct and determine the use and disposition of
any surplus or net profits over and above the capital stock paid in, and
may use and apply any such surplus or accumulated profits in purchasing or
acquiring its own obligations to such extent and in such manner, and upon
such terms as the board of directors deems expedient.
|
Deletes
clauses (i) and (ii) because similar provisions are contained in
subsections 14A:6-10(1) and 14A:6-16(1) of the New Jersey Business
Corporation Act, which will continue to apply and provide similar rights
as those contained in the current certificate of incorporation even if
Proposal 3 is approved.
Deletes
clauses (iii), (iv), (v) and (vi) because similar powers are conferred on
the board of directors in our by-laws and the provisions are not required
to be in our certificate of incorporation.
Deletes
clause (vii) in favor of relevant limitations on distributions to
shareholders or repurchases of stock in the New Jersey Business
Corporation Act.
|
|
Article
VII: Special Shareholder Meetings; Shareholder Approval of
Certain Actions
(Former
Article IX: Paragraph B and Article VII: Paragraph
B)
|
|
Provides
that special meetings of shareholders may be called by the board of
directors, the chairman of the board of directors, the executive committee
of the board of directors or the holders of 10% of the shares that would
be entitled to vote at such meeting.
Also
provides for shareholder approval of certain major
transactions.
|
Amends
the provisions relating to special meetings of shareholders to provide
that they may be called as set forth in our by-laws or by the holders of
at least 10% of the shares that would be entitled to vote at such
meeting. We intend to revise our by-laws to provide that
special meetings may be called by the board of directors or
management. We believe that this will provide the board of
directors with more flexibility in the future in making changes to these
powers without the necessity of a vote of our shareholders that would be
required if such provisions remained in our certificate of incorporation,
but retains in the amended and restated certificate of incorporation the
current rights of shareholders to call a special meeting.
The
provision relating to shareholder approval will not be
amended.
|
|
Article
VIII: Board of Directors, Paragraph A.
|
|
Provides
generally that the number of members of the board of directors will be
between seven and 17 persons, with the exact number within the minimum and
maximum limitations to be fixed from time to time (i) except as
provided in clause (ii) below, by the board of directors or (ii) by the
shareholders by a majority vote. Also provides that all members
of the board of directors elected after the 1990 annual meeting will serve
one year terms and stand for election at each annual meeting of
shareholders.
|
Provide
that the number of directors will consist of one or more persons within
the maximum and minimum limitations set forth in our by-laws, with the
exact number to be fixed in the same manner as set forth in the current
certificate of incorporation. Currently, our board of directors
consists of six members with one vacancy since the minimum number set by
our current certificate of incorporation is seven. The board of
directors has determined that it can adequately represent our shareholders
with six directors. By placing these provisions in the by-laws,
we are acting in accordance with a common practice of public corporations
that provides the board of directors with more flexibility in making
changes to these minimum and maximum numbers without the necessity of a
vote of our shareholders that would be required if such provisions
remained in our certificate of incorporation.
Deletes
the sentence related a director’s term since it is similar to section
14A:6-3 of the New Jersey Business Corporation Act, which will continue to
apply and provide similar rights as those contained in the current
certificate of incorporation even if Proposal 3 is
approved.
|
|
Article
VIII: Board of Directors, Paragraph B
|
|
Provides
that newly created directorships resulting from any increase in the number
of directors may generally be filled by the board of directors and any
vacancies on the board of directors may be filled by the remaining
directors even though less than a quorum, except that any vacancy
resulting from an increase in the board of directors which is the result
of a resolution adopted by our shareholders may be filled by the
shareholders in accordance with the New Jersey Business Corporation Act
and any other applicable provisions of the certificate of
incorporation.
Paragraph
B also provides that any director chosen in accordance with the preceding
sentence will hold office until the next succeeding annual meeting of
shareholders and until his successor has been elected and qualified and
that no decrease in the number of directors will shorten the term of any
incumbent director.
|
Provide
that newly created directorships and vacancies may be filled as set forth
in our by-laws. By placing these provisions in our by-laws, the
board of directors would have more flexibility in the future in making
changes to these minimum and maximum numbers without the necessity of a
vote of our shareholders that would be required if such provisions
remained in our certificate of incorporation.
Deletes
the provision described in the last paragraph since it is similar to
section 14A:6-3 of the New Jersey Business Corporation Act t, which will
continue to apply and provide similar rights as those contained in the
current certificate of incorporation even if Proposal 3 is
approved.
|
|
(Former
Article VIII: Board of Directors, Paragraph C.)
|
|
Provides
that in general any director, or the entire board of directors, may be
removed from office at any time, with or without cause, by the affirmative
vote of the holders of a majority of the votes cast by the shareholders
entitled to vote for the election of directors.
|
Deletes
this provision since it is similar to subsection 14A:6-6(1) of the New
Jersey Business Corporation Act. Shareholders therefore will
have similar rights as those contained in the current certificate of
incorporation even if Proposal 3 is approved.
|
|
(Former
Article IX: Action of Shareholders by Written Consent; Special
Meetings)
|
|
Provides
that any action required or permitted to be taken by shareholders, other
than the annual election of directors and the approval of certain other
transactions which pursuant to the New Jersey Business Corporation Act
require the unanimous consent of all shareholders entitled to vote
thereon, may be taken without a meeting upon the written consent of the
shareholders who would have been entitled to cast the minimum number of
votes which would be necessary to authorize such action at a meeting at
which all of the shareholders entitled to vote thereon were present and
voting.
Also
contains provisions related to the calling of special shareholder meetings
that are redundant with those contained in Article VII.
|
Deletes
this provision since it is similar to subsection 14A:5-6(2) of the New
Jersey Business Corporation Act. Shareholders therefore will
have similar rights as those contained in the current certificate of
incorporation even if Proposal 3 is approved.
Please
see “Article VII: Special Shareholder Meetings; Shareholder
Approval of Certain Actions” above for a summary of the amendments to the
provisions relating to the calling of special shareholder
meetings.
|
|
Voting
Requirements. The adoption of Proposal 3 requires the
affirmative vote of the holders of at least two-thirds of our outstanding
shares. If Proposal 2 is not adopted by the requisite vote, the text
of the proposed amended and restated certificate of incorporation as adopted in
this Proposal 3 shall include not only the text of Exhibit A to this proxy
statement but also the text of Article XI (Requirements for Certain Business
Transactions; Exceptions) of our current certificate of incorporation (which
text of Article XI is contained in Exhibit B to this proxy
statement).
If
Proposal 3 is not adopted, but Proposal 2 is adopted, our current certificate of
incorporation will be amended to delete the current Article XI (Requirements for
Certain Business Transactions; Exceptions) as described in Proposal 2, but will
not be further amended.
Valhi, of
which Harold C. Simmons is the chairman of the board, 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 Proposal
3. If Valhi attends the meeting in person or by proxy and votes as
indicated, our shareholders will adopt Proposal 3 with Article XI (Requirements
for Certain Business Transactions; Exceptions) of our current certificate of
incorporation remaining in our proposed amended and restated certificate of
incorporation. The affirmative vote of Valhi’s shares of our common
stock when combined with the affirmative vote of at least a majority of our
outstanding shares that are not beneficially owned by Harold C. Simmons or his
affiliates will be sufficient to adopt Proposals 2 and 3 with the removal of
Article XI (Requirements for Certain Business Transactions; Exceptions) from the
proposed amended and restated certificate of incorporation.
Amendment and
Restatement of our By-Laws. Upon the approval of Proposal 3,
our board of directors will approve amended and restated by-laws with certain
changes, among others, that complement our new amended and restated certificate
of incorporation.
OUR BOARD
OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF PROPOSAL
3.
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 the
effectiveness of our 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 2007. 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, as adopted by the Public Company Accounting Oversight
Board. PwC has provided to our audit committee written disclosures
and the letter required by Independence Standards Board No. 1, Independence Discussions with Audit
Committees, as adopted by the Public Company Accounting Oversight
Board, 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 2007
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,
2007. 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 2008. 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, 2008. 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 2006 and 2007 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
2007 may subsequently be authorized and paid to PwC, in which case the amounts
disclosed below for fees paid to PwC for 2007 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 2006
have been adjusted from amounts disclosed in our proxy statement for last year’s
annual shareholder meeting.
|
Audit
|
Audit
Related
|
Tax
|
All
Other
|
|
|
|
|
|
|
|
NL
and Subsidiaries
|
|
|
|
|
|
2006
|
$317,000
|
$ -0-
|
$ -0-
|
$ -0-
|
$317,000
|
2007
|
$325,000
|
$ -0-
|
$ -0-
|
$ -0-
|
$325,000
|
|
|
|
|
|
|
CompX
and Subsidiaries
|
|
|
|
|
|
2006
|
741,100
|
6,300
|
14,400
|
-0-
|
761,800
|
2007
|
674,500
|
7,500
|
10,400
|
-0-
|
692,400
|
|
|
|
|
|
|
Kronos
Worldwide and Subsidiaries (5)
|
|
|
|
|
|
2006
|
1,869,000
|
5,000
|
18,000
|
-0-
|
1,892,000
|
2007
|
1,746,000
|
19,000
|
15,000
|
-0-
|
1,780,000
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
2006
|
$2,927,100
|
$11,300
|
$32,400
|
$ -0-
|
$2,970,800
|
2007
|
$2,745,500
|
$26,500
|
$25,400
|
$ -0-
|
$2,797,400
|
——————————
(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/or 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 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,
2008. 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.
|
The
policy also lists certain services for which the independent auditor is always
prohibited from providing to us under applicable requirements of the SEC or the
Public Company Accounting Oversight Board.
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 2007,
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 annual 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.
2007
ANNUAL REPORT ON FORM 10-K
A copy of
our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 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
2007 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 2007 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 21,
2008
Exhibit
A
NL
Industries, Inc.
Amended
and Restated Certificate of Incorporation
To:
Treasurer, State of New Jersey
The
undersigned, NL Industries, Inc., a corporation organized and existing by virtue
of the New Jersey Business Corporation Act, pursuant to the provisions of
Section 14A:9-5 of said Act does hereby certify as follows:
ARTICLE
I
NAME
The name
of the corporation is “NL Industries, Inc.” (the “Corporation”).
ARTICLE
II
LOCATION
OF OFFICE AND REGISTERED AGENT
The
address of the Corporation’s current registered office in the State of New
Jersey, as of the date of this Amended and Restated Certificate of
Incorporation, is 830 Bear Tavern Road, West Trenton, New
Jersey 08628. The name of its current registered
agent at such address, as of the date of this Amended and Restated Certificate
of Incorporation, is The Prentice-Hall Corporation System, New Jersey,
Inc.
ARTICLE
III
CORPORATE
PURPOSE
The
purpose for which the Corporation is organized is to engage in any activity
within the purposes for which corporations may be organized under the New Jersey
Business Corporation Act (the “Act”).
ARTICLE
IV
AUTHORIZED
CAPITAL STOCK
The total
authorized capital stock of the Corporation is one hundred fifty-five million
(155,000,000) shares, of which one hundred fifty million (150,000,000) shares
shall be common stock (hereinafter called “Common Stock”), with the par
value of $.125 each, and five million (5,000,000) shares shall be preferred
stock (hereinafter called “Preferred Stock”), without
par value.
A. Common
Stock. Subject to the provisions of any series of Preferred
Stock which may at the time be outstanding, the holders of shares of Common
Stock shall be entitled to receive, when and as declared by the Board of
Directors out of any funds legally available for the purpose, such dividends as
may be declared from time to time by the Board of Directors. In the
event of the liquidation of the Corporation, or upon the distribution of its
assets, after the payment in full or the setting apart for payment of such
preferential amounts, if any, as the holders of Preferred Stock at the time
outstanding shall be entitled, the remaining assets of the Corporation available
for payment and distribution to shareholders shall, subject to any participating
or similar rights of Preferred Stock at the time outstanding, be distributed
ratably among the holders of Common Stock at the time
outstanding. Each share of Common Stock shall be entitled to one (1)
vote, on a non-cumulative basis, at all meetings of shareholders, and shall have
no preference, conversion, exchange, preemptive or redemption
rights.
B. Preferred
Stock. The Board of Directors is hereby expressly authorized,
to the full extent now or hereafter permitted by the laws of the State of New
Jersey, at any time, and from time to time, to provide for the issuance of some
or all of the Preferred Stock in one or more series, with such voting powers,
full or limited, or without voting powers, and with such designations,
preferences and relative participating options or other special rights, and
qualifications, limitations or restrictions thereof as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, including (without limiting the generality
thereof) the following as to each such series:
(i) the
designation of such series;
(ii) the
dividends, if any, payable with respect to such series, the rates or basis for
determining such dividends, any conditions and dates upon which such dividends
shall be payable, the preferences, if any, of such dividends over, or the
relation of such dividends to, the dividends payable on any other class or
series of stock of the Corporation, including the imposition of restrictions or
limitations on dividends payable with respect to any other class or series of
stock of the Corporation, whether such dividends shall be non-cumulative or
cumulative, and, if cumulative, the date or dates from which such dividends
shall be cumulative;
(iii) whether
shares of Preferred Stock of such series shall be redeemable at the option of
the Corporation or the holder or both or upon the happening of a specified event
or events and, if redeemable, whether for cash, property or rights, including
securities of the Corporation, the time, prices or rates and any adjustment and
other items and conditions of such redemption;
(iv) the
terms and amount of any sinking, retirement or purchase fund provided for the
purchase or redemption of Preferred Stock of such series;
(v) whether
or not Preferred Stock of such series shall be convertible into or exchangeable
for shares of another class or series, at the option of the Corporation or of
the holder or both or upon the happening of a specified event or events and, if
provision be made for such conversion or exchange, the terms, prices, rates,
adjustments and any other terms and conditions thereof;
(vi) the
extent, if any, to which the holders of the Preferred Stock of such series shall
be entitled to vote with respect to the election of Directors or otherwise,
including, without limitation, the extent, if any, to which such holders shall
be entitled, voting as a series or as a part of a class, to elect one or more
Directors upon the happening of a specified event or events or
otherwise;
(vii) the
restrictions, if any, on the issue or reissue of Preferred Stock of such series
or any other series; and
(viii) the
rights of the holders of the Preferred Stock of such series upon the termination
of the Corporation or any distribution of its assets.
Before
the Corporation shall issue any Preferred Stock of any series, the Board of
Directors shall adopt a resolution or resolutions fixing the voting powers,
designations, preferences and rights of such series, the qualifications,
limitations or restrictions thereof, and the number of shares of Preferred Stock
of such series, and appropriate documents shall be executed and filed as
required by law.
Unless
otherwise provided in any such resolution or resolutions, the holders of the
series so authorized shall have non-cumulative voting rights (to the extent such
series has any voting rights) and shall have no conversion, exchange, preemptive
or redemption rights. Unless otherwise provided in any such
resolution or resolutions, the number of shares of Preferred Stock of the series
authorized by such resolution or resolutions may be increased or decreased from
time to time (but not below the number of shares of Preferred Stock of such
series then outstanding), and the number of shares of Preferred Stock specified
in any such decrease shall be restored to the status of authorized but unissued
shares of Preferred Stock without designation as to series.
ARTICLE
V
CURRENT
BOARD OF DIRECTORS
The
number of directors constituting the current Board of Directors of the
Corporation, as of the date of this Amended and Restated Certificate of
Incorporation, is six (6), and the names and addresses of such persons
are:
|
|
|
|
Cecil
H. Moore,
Jr.
|
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
|
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Glenn
R.
Simmons
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Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
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Harold
C.
Simmons
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Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
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Thomas
P.
Stafford
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Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
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Steven
L.
Watson
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Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
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|
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Terry
N.
Worrell
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Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
Texas 75240-2697
|
ARTICLE
VI
DURATION
The
duration of the Corporation shall be perpetual.
ARTICLE
VII
SPECIAL
SHAREHOLDER MEETINGS;
SHAREHOLDER
APPROVAL OF CERTAIN ACTIONS
A. Special Meetings of
Shareholders. Except as otherwise required by law and subject
to the rights of the holders of Preferred Stock or any other class of capital
stock of the Corporation (other than Common Stock) or any series of any of the
foregoing which is then outstanding, special meetings of shareholders of the
Corporation may be called (i) as set forth in the by-laws of the Corporation or
(ii) by the holders of at least 10% of the shares of the Corporation that would
be entitled to vote at such meeting.
B. Shareholder Approval of Certain
Actions. Except as otherwise required by this
Certificate:
(i) A
plan of merger or a plan of consolidation approved by the Board of Directors and
submitted to a vote of the shareholders of the Corporation at a meeting at which
action is to be taken on any such plan, shall be approved upon receiving the
affirmative vote of a majority of the votes cast by the holders of shares of the
Corporation entitled to vote thereon, and, in addition, if any class or series
of shares is entitled to vote thereon as a class, the affirmative vote of a
majority of the votes cast in each class vote.
(ii) A
sale, lease, exchange, or other disposition of all, or substantially all, the
assets of the Corporation, if not in the usual and regular course of business as
conducted by the Corporation, recommended by the Board of Directors and
submitted to a vote of the shareholders of the Corporation at a meeting at which
action is to be taken thereon, shall be approved upon receiving the affirmative
vote of a majority of the votes cast by the holders of shares of the Corporation
entitled to vote thereon, and, in addition, if any class or series of shares is
entitled to vote thereon as a class, the affirmative vote of a majority of the
votes cast in each clan vote
ARTICLE
VIII
BOARD
OF DIRECTORS
A. Number. Except as
otherwise fixed by or pursuant to the provisions of Article IV hereof relating
to the rights of the holders of Preferred Stock or any other class of capital
stock of the Corporation (other than Common Stock) or any series of any of the
foregoing which is then outstanding, the number of the directors of the
Corporation shall consist of one or more persons within the minimum and maximum
limitations set forth in the by-laws of the Corporation. The exact
number of directors within the minimum and maximum limitations specified in the
first sentence of this Article VIII shall be fixed from time to time (i) except
as provided in clause (ii) below, by the Board of Directors pursuant to a
resolution adopted as set forth in the by-laws of the Corporation or (ii) by the
shareholders pursuant to a resolution adopted by a majority of the shareholders
of the Corporation entitled to vote for the election of directors.
B. Newly Created Directorships and
Vacancies. Except as otherwise fixed by or pursuant to the
provisions of Article IV hereof relating to the rights of the holders of
Preferred Stock or any other class of capital stock of the Corporation (other
than Common Stock) or any series of any of the foregoing which is then
outstanding, newly created directorships resulting from any increase in the
number of directors, and any vacancies on the Board of Directors, however
caused, shall be filled as set forth in the by-laws of the Corporation; provided, however, that any
vacancy resulting from an increase in the Board of Directors which is the result
of a resolution adopted by the shareholders of the Corporation may be filled by
the shareholders of the Corporation in accordance with the Act and any other
applicable provisions of this Amended and Restated Certificate of Incorporation
and the by-laws of the Corporation.
ARTICLE
IX
BY-LAWS
Subject
always to the by-laws made by the shareholders, the Board of Directors may make
by-laws from time to time, and may alter, amend or repeal any by-laws, but any
by-laws made by the Board of Directors may be altered or repealed by the
shareholders at any annual meeting or at any special meeting, provided notice of
such alteration or repeal be included in the notice of the meeting.
ARTICLE
X
LIMITATION
OF LIABILITY
A
director or officer of the Corporation shall not be personally liable to the
Corporation or its shareholders for damages for breach of any duty owed to the
Corporation or its shareholders, except that such provisions shall not relieve a
director or officer from liability for any breach of duty based upon an act or
omission (i) in breach of such persons duty of loyalty to the Corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal
benefit. If the Act is amended after approval by the shareholders of
this provision to authorize corporate action further eliminating or limiting the
personal liability of directors or officers, then the liability of a director
and/or officer of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Act as so amended. Any repeal or modification
of the foregoing paragraph by the shareholders of the Corporation shall not
adversely affect any right or protection of a director or officer of the
Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, this
Amended and Restated Certificate of Incorporation of the Corporation is executed
and attested on behalf of NL Industries, Inc. by its officers hereunto duly
authorized on this 21st day of
May, 2008.
NL
Industries, Inc.
By:
Gregory
M. Swalwell
Vice
President, Finance and
Chief
Financial Officer
ATTEST:
A.
Andrew R. Louis, Secretary
Exhibit
B
Article
XI of the Current Certificate of Incorporation of NL Industries,
Inc.
ARTICLE XI.
REQUIREMENTS
FOR CERTAIN BUSINESS TRANSACTIONS; EXCEPTIONS
A. Requirements for Certain Business
Transactions. In addition to any affirmative vote required by
law or this Amended and Restated Certificate of Incorporation (including,
without limitation, the provisions of paragraph B of Article VII hereof), and
except as otherwise expressly provided in paragraph C of this Article
XI:
(i) any
merger or consolidation of the Corporation or any Subsidiary with (a) any
Interested Shareholder or (b) any other corporation or other person (whether or
not itself an interested Shareholder) which is, or after such merger or
consolidation would be, an Affiliate of an Interested Shareholder;
or
(ii) any
plan of exchange for all outstanding shares of the Corporation or any Subsidiary
or for any class of shares of either with (a) any Interested Shareholder or (b)
any other corporation or other person (whether or not itself an Interested
Shareholder) who is, or after such plan of exchange would be, an Affiliate of an
Interested Shareholder; or
(iii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with any interested Shareholder
or any Affiliate of any Interested Shareholder of all or substantially all of
the assets of the Corporation or any Subsidiary; or
(iv) the
adoption of an plan or proposal for the liquidation or dissolution of the
Corporation proposed by or on behalf of an Interested Shareholder or any
Affiliate of any Interested Shareholder; or
(v) any
reclassification of securities (including any reverse stock split), or
recapitalization of the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other transaction (whether or
not with or into or otherwise involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or indirectly owned by an
Interested Shareholder or any Affiliate of any Interested Shareholder; shall
require (i) the affirmative vote of the holders of at least a majority of the
Common Stock, voting together as a single class, excluding from the number of
shares deemed to be outstanding at the time of such vote and from such vote
those shares which are beneficially owned, directly or indirectly, by all
Interested Shareholders or any Affiliate of any Interested Shareholder and (ii)
the opinion of a nationally recognized investment banking firm as to the
fairness of the terms of the Business Transaction (as hereinafter defined) from
a financial point of view to the holders of the outstanding shares of capital
stock of the Corporation other than any Interested Shareholder and any Affiliate
of any Interested Shareholder. The affirmative vote described in the previous
sentence shall be required notwithstanding the fact that no vote may be required
or that a lesser percentage may be specified, by law or in any agreement with
any national securities exchange or otherwise.
B. Definition of “Business
Transaction”. The term “Business Transaction” as used in this
Article XI shall mean any transaction which is referred to in any one or more of
clauses (i) through (v) of paragraph A of this Article XI.
C. Exceptions.
The provisions of paragraph A of this Article XI shall not be applicable to any
particular Business Transaction, and such Business Transaction shall require
only such affirmative vote as is required by law and any other provision of this
Amended and Restated Certificate of Incorporation, (i) if the Interested
Shareholder is the beneficial owner of 90% or more of the voting power of the
then outstanding Voting Stock, except that the requirement for an opinion of a
nationally recognized investment banking firm as to the fairness of such
transaction as described above shall continue to be applicable, or (ii) if such
Business Transaction is consummated after January 1, 1999, or (iii) if each of
the following conditions are met: (a) the interest of the Interested Shareholder
or any Affiliate of any Interested Shareholder in the transaction is solely that
of a holder of the Corporation’s securities and (b) the Interested Shareholder
or any such Affiliate receives no benefit or consideration in the transaction as
such which is not received proportionately by all holders of the same class of
such securities, and (c) if, in the Business Transaction, the Interested
Shareholder or an Affiliate of the Interested Shareholder receives any interest
in a Subsidiary or a successor to the Corporation or any Subsidiary, the charter
or similar governing instrument of such Subsidiary or successor contains
provisions substantially identical to this Article XI hereof or if the charter
of such Subsidiary or such successor does not so provide, the charter is amended
on or prior to consummation of the Business Transaction to so
provide.
D. Certain
Definitions. For purposes of this Article XI:
(i) A
“person” shall mean any individual, firm, corporation or other
entity.
(ii) “Interested
Shareholder” shall mean any person (other than the Corporation or any
Subsidiary) who or which:
(a) is
the beneficial owner, directly or indirectly, of more than 10% of the voting
power of the outstanding Voting Stock; or
(b) is
an Affiliate of the Corporation and at any time within the two-year period
immediately prior to the date, in question was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then outstanding Voting
Stock; or
(c) is
an assignee of or has otherwise succeeded to any shares of Voting Stock which
were at any time within the two-year period immediately prior to the date in
question beneficially owned by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933.
(iii) A
person shall be a “beneficial owner” of any Voting Stock:
(a) which
such person or any of its Affiliates or Associates (as hereinafter defined)
beneficially owns, directly or indirectly; or
(b) which
such person or any of its Affiliates or Associates has (1) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (2) the right, to vote pursuant to any agreement, arrangement or
understanding; or
(c) which
are beneficially owned, directly or indirectly, by any other person with which
such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Voting Stock.
(iv) For
the purpose of determining whether a person is an Interested Shareholder
pursuant to subparagraph (ii) of this paragraph D, the number of shares of
Voting Stock deemed to be outstanding shall include shares deemed owned through
application of subparagraph (iii) of this paragraph D but shall not include any
other shares of Voting Stock which may be issuable pursuant to any agreement,
arrangement or understanding, or upon exercise of conversion rights, warrants or
options, or otherwise.
(v) “Affiliate”
or “Associate” shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as in effect on September 16, 1988.
(vi) “Subsidiary”
means any corporation, partnership or other unincorporated business organization
of which a majority of any class of equity security is owned, directly or
indirectly, by the Corporation; provided. however, that for the purposes of the
definition of Interested Shareholder set forth in subparagraph (ii) of this
paragraph D, the term “Subsidiary” shall mean only a corporation, partnership or
other unincorporated business organization of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
(vii) “Continuing
Director” means any member of the Board of Directors of the Corporation (the
“Board”) who is unaffiliated with the Interested Shareholder and was a member of
the Board prior to the time that the Interested Shareholder became an Interested
Shareholder, and any successor of a Continuing Director who is unaffiliated with
the Interested Shareholder and is recommended to succeed a Continuing Director
by a majority of Continuing Directors then on the Board.
(viii) “Voting
Stock” means the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors.
E. Powers
of the Board of Directors. The Continuing Directors of the Corporation shall
have the power and duty to determine for the purposes of this Article XI, on the
basis of information known to it after reasonable inquiry, (i) whether a person
is an Interested Shareholder, (ii) the number of shares of Voting Stock
beneficially owned by any person and (iii) whether a person is an Affiliate or
Associate of another. Any such determination made in good faith shall be binding
and conclusive on all parties.
F. Effect
on Fiduciary Obligations of Interested Shareholders. Nothing contained in this
Article XI shall be construed to relieve any Interested Shareholder from any
fiduciary obligation imposed by law.
G. Amendment
or Repeal. Notwithstanding any other provision of law, this Amended and Restated
Certificate of Incorporation or the by-laws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Amended and Restated Certificate of Incorporation or the by-laws of the
Corporation), and in addition to any affirmative vote of the holders of
Preferred Stock or any other class of capital stock of the Corporation or any
series of any of the foregoing then outstanding which is required by law or by
or pursuant to this Amended and Restated Certificate of Incorporation, the
affirmative vote of the holders of at least a majority of the Voting Stock,
voting together as a single class (it being understood that for purposes of this
Article XI, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article IV of this Amended and Restated Certificate of
Incorporation), excluding from the number of shares deemed to be outstanding at
the time of such vote and from such vote those shares which are beneficially
owned, directly or indirectly, by any Interested Shareholder and any Affiliate
of any Interested Shareholder, shall be required to amend or repeal this Article
XI of this Amended and Restated Certificate of Incorporation.
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
ENVELOPE.
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 21, 2008
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 2008
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 Wednesday, May
21, 2008, 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, “FOR”
the proposed amended and restated certificate of incorporation 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 21, 2008.
Vote
by Internet
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Log
on to the Internet and go to
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www.investorvote.com
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Follow
the steps outlined on the secured
website.
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Vote
by telephone
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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.
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·
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Follow
the instructions provided by the recorded
message.
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Using
a black ink pen, mark your
votes with an X as
shown in
this
example. Please do not write outside the designated areas.
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x
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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 ENCLOSED
ENVELOPE.
A. Election
of Directors – The Board of Directors recommends a vote FOR all the nominees
listed and For
Proposals 2 and 3.
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For
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Withhold
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For
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Withhold
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For
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Withhold
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01
– Cecil H. Moore, Jr.
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¨
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02
– Glenn R. Simmons
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03
– Harold C. Simmons
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04
– Thomas P. Stafford
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05
– Steven L. Watson
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06
– Terry N. Worrell
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For
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Against
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Abstain
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For
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Against
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Abstain
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2.Amendment
to the Certificate of Incorporation to delete Article XI (Requirements for
Certain Business Transactions; Exceptions)
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¨
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3.Amendment
and Restatement of Certificate of Incorporation
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4.In
their discretion, the proxies are authorized to vote upon such other
business as may
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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. Exact 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.
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Signature
1 – Please keep signature within the box.
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Signature
2 – Please keep signature within the box.
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/ /
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