SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant: [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only as permitted by Rule 14a-6(e)(2))0
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to SS. 240.14a-11(c) or SS. 240.14a-12
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NL INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
March 28, 2002
Dear Shareholder:
You are cordially invited to attend the 2002 Annual Meeting of
Shareholders of NL Industries, Inc., which will be held on Wednesday, May 8,
2002, at 10:00 a.m. (C.D.T.) at the offices of Valhi, Inc. located at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas. In addition to the
matters to be acted upon at the meeting, which are described in detail in the
attached Notice of Annual Meeting of Shareholders and Proxy Statement, we will
update you on the Company. I hope that you will be able to attend.
Whether or not you plan to be at the meeting, please complete, date,
sign and return the proxy card or voting instruction form enclosed with this
Proxy Statement promptly or vote via the Internet or telephone following the
instructions on the proxy card so that your shares are represented at the
Meeting and voted in accordance with your wishes. Your vote, whether given by
proxy or in person at the Meeting, will be held in confidence by the Inspector
of Election for the meeting in accordance with NL's By-Laws.
Sincerely,
J. Landis Martin
President and Chief Executive Officer
NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 8, 2002
To the Shareholders of NL Industries, Inc.:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Shareholders (the
"Annual Meeting") of NL Industries, Inc., a New Jersey corporation (the
"Company" or "NL"), will be held on Wednesday, May 8, 2002, at 10:00 a.m.
(C.D.T.) at the offices of Valhi, Inc. located at Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas, for the following purposes:
1. To elect seven directors to serve until the 2003 Annual Meeting of
Shareholders and until their successors are duly elected and
qualified; and
2. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors of the Company set the close of business on March
18, 2002, as the record date (the "Record Date") for the determination of
shareholders entitled to notice of, and to vote at, the Annual Meeting. Only
holders of record of NL's common stock, $.125 par value per share, at the close
of business on the Record Date are entitled to notice of, and to vote at, the
Annual Meeting. The Company's stock transfer books will not be closed following
the Record Date.
You are cordially invited to attend the Annual Meeting. Whether or not
you expect to attend the Annual Meeting in person, please complete, sign, date
and mail the enclosed proxy card or voting instruction form promptly or vote via
the Internet or telephone following the instructions on the proxy card so that
your shares may be represented and voted at the Annual Meeting. You may revoke
your proxy by following the procedures set forth in the accompanying Proxy
Statement. If you choose, you may vote in person at the Annual Meeting even
though you previously submitted your proxy.
By order of the Board of Directors,
David B. Garten
Vice President, General Counsel and
Secretary
Houston, Texas
March 28, 2002
NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement and the accompanying proxy card or voting
instruction form are being furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors (the "Board") of NL
Industries, Inc., a New Jersey corporation (the "Company" or "NL"), for use at
the Company's 2002 Annual Meeting of Shareholders to be held at 10:00 a.m.
(C.D.T.) on Wednesday, May 8, 2002, at the offices of Valhi, Inc. located at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697,
and at any adjournment or postponement thereof (the "Annual Meeting"). This
Proxy Statement and the accompanying proxy card or voting instruction form were
first mailed to the holders of the Company's common stock, $.125 par value per
share ("Common Stock"), on or about April 8, 2002.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, shareholders of the Company will consider and
vote upon (i) the election of seven directors to serve until the Company's 2003
Annual Meeting of Shareholders and until their successors are duly elected and
qualified, and (ii) such other business as may properly come before the Annual
Meeting. The Company is not aware of any other business expected to come before
the Annual Meeting.
QUORUM AND VOTING RIGHTS; PROXY SOLICITATION
The presence in person or by proxy of the holders of a majority of the
votes represented by the outstanding shares of Common Stock entitled to vote at
the Annual Meeting is necessary to constitute a quorum for the conduct of
business at the Annual Meeting. Director nominees will be elected by a plurality
of the votes cast. Except as may be provided in the Company's Amended and
Restated Certificate of Incorporation (the "Certificate"), any other matter that
may be submitted to a shareholder vote will require the affirmative vote of a
majority of the votes cast at the Annual Meeting. Shares of Common Stock that
are voted to abstain from business coming before the Annual Meeting and
broker/nominee non-votes will be counted as being in attendance at the Annual
Meeting for purposes of determining whether a quorum is present, but will not be
counted as votes for or against any matter coming before the Annual Meeting. The
accompanying proxy card provides space for a shareholder to withhold voting for
any or all nominees for the Board. Because director nominees must receive a
plurality of the votes cast at the Annual Meeting, a vote withheld from a
particular nominee will not affect the election of that nominee.
The record date for determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting is the close of business on March 18, 2002
(the "Record Date"). As of the Record Date, there were issued and outstanding
48,820,984 shares of Common Stock, each of which entitles the holder to one vote
on all matters that come before the Annual Meeting. Valhi, Inc. ("Valhi") and
Tremont Corporation ("Tremont") held approximately 62% and 21%, respectively, of
the outstanding shares of the Common Stock as of the Record Date and have
indicated their intention to have their shares represented at the Annual
Meeting. Valhi is a diversified company engaged in the titanium dioxide pigments
(through its ownership of NL stock), component products (ergonomic computer
support systems, precision ball bearing slides and security products), titanium
metals products, and waste management industries. Tremont is a holding company
engaged in the titanium metals and titanium dioxide pigments industries (through
its ownership of NL stock). Both Valhi and Tremont are affiliates of Contran
Corporation ("Contran"). See "Security Ownership" and "Election of Directors."
If the shares of Common Stock held by Valhi and Tremont together or the shares
of Common Stock held by Valhi alone are represented at the Annual Meeting, a
quorum will be present.
All shares of Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted (i) "FOR" the election of each of the seven
nominees for director, and (ii) to the extent allowed by federal securities
laws, in the discretion of the proxy holders on any other matter that may
properly come before the Annual Meeting. Any holder of Common Stock has the
unconditional right to revoke his or her proxy at any time prior to the voting
thereof at the Annual Meeting by (i) filing with the Company's Secretary written
revocation of his or her proxy, (ii) giving a duly executed proxy bearing a
later date, or (iii) voting in person at the Annual Meeting. Attendance by a
shareholder at the Annual Meeting will not in and of itself revoke his or her
proxy.
This proxy solicitation is made by and on behalf of the Board.
Solicitation of proxies for use at the Annual Meeting may be made by mail,
telephone or in person, by directors, officers and employees of the Company.
Such persons will receive no additional compensation for any solicitation
activities. The Company will request banking institutions, brokerage firms,
custodians, trustees, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of Common Stock held of record by such entities, and
the Company will, upon the request of such record holders, reimburse reasonable
forwarding expenses. The costs of preparing, printing, assembling and mailing
the Proxy Statement, proxy card or voting instruction form and all materials
used in the solicitation of proxies from shareholders of the Company, and all
clerical and other expenses of such solicitation, will be borne by the Company.
EquiServe Trust Company, N.A. ("EquiServe"), the transfer agent and
registrar for the Common Stock, has been appointed by the Board to serve as
inspector of election (the "Inspector of Election") to determine the number of
shares of Common Stock represented and voted at the Annual Meeting. All proxies
and ballots delivered to EquiServe shall be kept confidential by EquiServe in
accordance with the terms of the Company's By-Laws.
THE AGENTS DESIGNATED IN THE ENCLOSED PROXY CARD WILL VOTE "FOR" THE
ELECTION OF ALL SEVEN NOMINEES FOR DIRECTOR IDENTIFIED BELOW UNLESS AUTHORITY IS
WITHHELD BY THE SHAREHOLDER GRANTING THE PROXY. IF ANY NOMINEE BECOMES
UNAVAILABLE TO SERVE FOR ANY REASON, THE PROXY WILL BE VOTED FOR A SUBSTITUTE
NOMINEE OR NOMINEES TO BE SELECTED BY THE BOARD, UNLESS THE SHAREHOLDER
WITHHOLDS AUTHORITY TO VOTE FOR THE ELECTION OF DIRECTORS. VALHI AND TREMONT,
WHICH HOLD APPROXIMATELY 62% AND 21%, RESPECTIVELY, OF THE OUTSTANDING COMMON
STOCK, HAVE INFORMED THE COMPANY THAT THEY WILL VOTE THEIR SHARES IN FAVOR OF
THE NOMINEES SET FORTH IN THIS PROXY STATEMENT. VALHI'S AND TREMONT'S VOTES
TOGETHER, OR VALHI'S VOTES ALONE, ARE SUFFICIENT TO ELECT ALL SEVEN NOMINEES.
ELECTION OF DIRECTORS
The Certificate provides for a Board consisting of not less than seven
and not more than seventeen persons, as such number is determined from time to
time by a majority of the entire Board. The Board has determined that it shall
consist of seven members.
At the Annual Meeting, holders of Common Stock will be asked to elect
seven nominees to the Board, each to serve for a one-year term ending at the
2003 Annual Meeting of Shareholders and until his or her successor shall have
been elected and qualified or until his or her earlier resignation, removal or
death. All of the nominees have agreed to serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES IDENTIFIED
BELOW.
Nominees for Director
The information provided below has been provided by the respective
nominees for election as directors for a term expiring at the 2003 Annual
Meeting of Shareholders of the Company. Each of the following nominees for
election except Mr. Poston is currently a director of the Company whose term
expires at the Annual Meeting.
ANN MANIX, age 49, has been a director of NL since June 2001. Since
prior to 1997, Ms. Manix has been a managing partner of Ducker Research
Corporation, a privately held industrial research firm. Ms. Manix is a director
of CompX International, Inc., a manufacturer of ergonomic computer support
systems, precision ball bearing slides, and security products that is a
subsidiary of Valhi ("CompX"). She is a member of NL's Audit Committee.
J. LANDIS MARTIN, age 56, has been President and Chief Executive Officer
of NL since 1987, and a director of NL since 1986. He has served as Chairman of
the Board, President and Chief Executive Officer of Tremont since prior to 1997.
Mr. Martin also has served as Chairman of the Board and Chief Executive Officer
of Titanium Metals Corporation, an integrated producer of titanium metals
products that is 39% owned by Tremont ("TIMET"), since prior to 1997. Mr. Martin
is a director of Halliburton Company, Apartment Investment and Management
Corporation, Crown Castle International Corporation, and Special Metals
Corporation.
GEORGE E. POSTON, age 65, has been President of Poston Real Estate Co.,
a privately-held commercial real estate investment company, and President of
Poston Capital Co., a privately-held investment company, since 1970.
GLENN R. SIMMONS, age 74, has been a director of NL since 1986. Mr.
Simmons is Chairman of the Board of Keystone Consolidated Industries, Inc.
("Keystone"), a steel fabricated wire products, industrial wire and carbon steel
rod company that is affiliated with Contran, and CompX. Since prior to 1997, Mr.
Simmons has been Vice Chairman of the Board of Valhi and Contran, a diversified
holding company which directly and through related entities holds approximately
94% of the outstanding common stock of Valhi. Mr. Simmons is also a director of
Tremont and TIMET. Mr. Simmons has been an executive officer and/or director of
various companies related to Valhi and Contran since 1969. He serves as Chairman
of NL's Nominations Committee. He is a brother of Harold C. Simmons.
HAROLD C. SIMMONS, age 70, has been a director of NL since 1986 and
Chairman of the Board of NL since 1987. He has been Chairman of the Board and
Chief Executive Officer of Valhi and Contran since prior to 1997 and was
President of Valhi and Contran from prior to 1997 to 1998. Mr. Simmons is also a
director of Tremont. Mr. Simmons has been an executive officer and/or director
of various companies related to Valhi and Contran since 1961. He is a brother of
Glenn R. Simmons.
GENERAL THOMAS P. STAFFORD (retired), age 71, served as a director of NL
from 1984 to 1986 and was re-appointed in February 2000. General Stafford was a
co-founder of and has been affiliated with Stafford, Burke and Hecker, Inc., a
Washington-based consulting firm, since 1982. He was selected as an astronaut in
1962, piloted Gemini VI in 1965 and commanded Gemini IX in 1966. In 1969,
General 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. In addition to serving as a
director of NL, General Stafford is a director of TIMET, Tremont, and The
Wackenhut Corp. General Stafford is a member of NL's Audit Committee,
Nominations Committee, and Management Development and Compensation Committee.
STEVEN L. WATSON, age 51, has been a director of NL since November 2000.
Mr. Watson has been president and a director of Valhi and Contran since 1998.
Mr. Watson is also a director of CompX, Keystone, TIMET and Tremont. From prior
to 1997 to 1998, Mr. Watson served as Vice President and Secretary of Valhi and
Contran. Mr. Watson has served as an executive officer and/or director of
various companies related to Valhi and Contran since 1980.
See also "Certain Relationships and Transactions."
MEETINGS AND COMMITTEES
The Board held five meetings and took action by unanimous written
consent in lieu of a meeting on five occasions in 2001. Each of the directors
participated in more than 75% of the total number of meetings of the Board and
committees on which he or she served that were held during his or her period of
service in 2001.
The Board has established three standing committees: an Audit Committee,
a Management Development and Compensation Committee and a Nominations Committee,
all of which are composed entirely of individuals who are not employees of the
Company.
Audit Committee. The principal responsibilities of the Audit Committee
are to serve as an independent and objective party to review the Company's
auditing, accounting, and financial reporting processes. The Company's Board of
Directors has adopted a written charter for the Audit Committee. Each of the
members of the Audit Committee is independent within the meaning of the New York
Stock Exchange listing standards. The Audit Committee held five meetings in
2001. The current members of the Audit Committee are Mr. Kenneth R. Peak
(Chairman), Ms. Manix and General Stafford. See "Independent Auditor Matters -
Audit Committee Report."
Management Development and Compensation Committee. The principal
responsibilities of the Management Development and Compensation Committee are to
review and make recommendations regarding executive compensation policies,
periodically to review and approve or make recommendations with respect to
matters involving executive compensation, to take action or to review and make
recommendations to the Board regarding employee benefit plans or programs, and
to serve as a counseling committee to the Chief Executive Officer regarding
matters of key personnel selection, organization strategies, and such other
matters as the Board may from time to time direct. The Management Development
and Compensation Committee also is responsible for reviewing and approving stock
option and other stock-based compensation awards under the Company's incentive
plan and for reviewing and approving the Company's target and performance levels
under the Variable Compensation Plan. The Management Development and
Compensation Committee held one meeting and took action by written consent in
lieu of a meeting on three occasions in 2001. Its current members are Mr. Peak
(Chairman) and General Stafford.
Nominations Committee. The principal responsibilities of the Nominations
Committee are to review and make recommendations to the Board regarding such
matters as the size and composition of the Board and criteria for director
nominations, director candidates, the term of office of directors, and such
other related matters as the Board may request from time to time. The
Nominations Committee held one meeting in 2001. The current members of the
Nominations Committee are Mr. Glenn Simmons (Chairman), General Stafford, and
Mr. Peak. The Nominations Committee made its recommendations to the Board of
Directors with respect to the election of directors at the Annual Meeting. The
Nominations Committee will consider recommendations by shareholders of the
Company with respect to nominees for election as director if such
recommendations are submitted in writing to the Secretary of the Company and
received not later than December 31 of the year prior to the next annual meeting
of shareholders, and are accompanied by a full statement of qualifications and
confirmation of the recommended nominees' willingness to serve.
The Board has previously established, and from time to time may
establish, other committees to assist it in discharging its responsibilities.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information regarding the Company's executive
officers. Biographical information with respect to Messrs. Simmons and Martin is
set forth above under "Election of Directors."
Name Age Position(s)
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Harold C. Simmons 70 Chairman of the Board
J. Landis Martin 56 President and Chief Executive Officer
Dr. Lawrence A. Wigdor 60 Executive Vice President; President and Chief
Executive Officer of Kronos, Inc.
David B. Garten 50 Vice President, General Counsel and Secretary
Robert D. Hardy 41 Vice President, Chief Financial Officer,
Controller, Treasurer and Assistant Secretary
David B. Garten has been Vice President, General Counsel and Secretary
of the Company since prior to 1997.
Robert D. Hardy has been Chief Financial Officer and Treasurer of the
Company since January 2002, Vice President and Controller of the Company since
1999, Assistant Treasurer since prior to 1997, and Assistant Secretary since
1998. From prior to 1997 to 1998, Mr. Hardy served as the Company's Director of
Taxes, and from 1998 to 1999 served as Vice President-Tax.
Dr. Lawrence A. Wigdor has been Executive Vice President of the Company
since prior to 1997 and has been President and Chief Executive Officer of
Kronos, Inc. ("Kronos"), a wholly owned subsidiary of NL involved in the
titanium dioxide pigments business, since prior to 1997 and was President and
Chief Executive Officer of Rheox, Inc. ("Rheox"), a wholly owned subsidiary of
NL involved in the specialty chemicals business, since prior to 1997 until it
was sold in 1998. From 1992 until 2002, Dr. Wigdor served as a director of NL.
SECURITY OWNERSHIP
Ownership of NL Common Stock. The following table and accompanying notes
set forth as of the Record Date the beneficial ownership, as defined by the
regulations of the Securities and Exchange Commission (the "Commission"), of
Common Stock held by (a) each person or group of persons known by NL to
beneficially own more than 5% of the outstanding shares of Common Stock, (b)
each director or nominee for director of NL, (c) each person listed in the
Summary Compensation Table below, and (d) all current executive officers and
directors of NL as a group. See note (3) below for information concerning
individuals and entities that may be deemed to indirectly beneficially own those
shares of Common Stock held by Valhi and Tremont, as reported in the table
below. No securities of NL's subsidiaries are beneficially owned by any
director, nominee for director, or officer of NL. Information concerning
ownership of equity securities of NL's parent companies is contained in note (3)
below and the table under the caption "Ownership of Valhi and Tremont Common
Stock" below. All information is taken from or based upon ownership filings made
by such persons with the Commission or information provided by such persons to
NL.
NL Common Stock
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Name of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Class (2)
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Valhi, Inc. 30,135,390 (3) 61.7%
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, TX 75240
Tremont Corporation 10,215,541 (3) 20.9%
1999 Broadway, Suite 4300
Denver, CO 80202
Ann Manix 1,000 --
J. Landis Martin 340,900 (4) --
Kenneth R. Peak 11,825 (5) --
George E. Poston -0- --
Glenn R. Simmons 10,000 (3)(6) --
Harold C. Simmons 81,475 (3)(7) --
General Thomas P. Stafford (retired) 6,000 (8) --
Steven L. Watson 7,000 (3)(9) --
Dr. Lawrence A. Wigdor 263,900 (10) --
Susan E. Alderton 54,294 (11) --
David B. Garten 160,335 (12) --
Robert D. Hardy 89,344 (13) --
All current directors and executive officers
of the Company as a group (10 persons) 971,779 (3)(4)(5)(6) 2.0%
(7)(8)(9)(10)
(11)(12)(13)
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(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%.
(3) Valhi, Inc. ("Valhi") and Tremont Corporation ("Tremont") are the direct
holders of approximately 61.7% and 20.9%, respectively, of the
outstanding common stock of NL. Tremont Group, Inc. ("TGI"), Valhi and
Tremont Holdings, LLC ("TRE Holdings") are the direct holders of
approximately 80.0%, 0.1% and 0.1%, respectively, of the outstanding
common stock of Tremont. Valhi and TRE Holdings are the direct holders
of 80.0% and 20.0%, respectively, of the outstanding common stock of
TGI. NL is the sole member of TRE Holdings. Valhi Group, Inc. ("VGI"),
National City Lines, Inc. ("National") and Contran Corporation
("Contran") are the direct holders of approximately 81.7%, 9.5% and
2.1%, respectively, of the outstanding common stock of Valhi. National,
NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding") are the
direct holders of approximately 73.3%, 11.4% and 15.3%, respectively, of
the outstanding common stock of VGI. Contran and NOA are the direct
holders of approximately 85.7% and 14.3%, respectively, of the
outstanding common stock of National. Contran and Southwest Louisiana
Land Company, Inc. ("Southwest") are the direct holders of approximately
49.9% and 50.1%, respectively, of the outstanding common stock of NOA.
Dixie Rice Agricultural Corporation, Inc. ("Dixie Rice") is the direct
holder of 100% of the outstanding common stock of Dixie Holding. Contran
is the holder of 100% of the outstanding common stock of Dixie Rice and
approximately 88.9% of the outstanding common stock of Southwest.
Substantially all of Contran's outstanding voting stock is held by
trusts established for the benefit of certain children and grandchildren
of Harold C. Simmons (the "Trusts"), of which Mr. Simmons is the sole
trustee. As sole trustee of the Trusts, Mr. Simmons has the power to
vote and direct the disposition of the shares of Contran stock held by
the Trusts.
Harold C. Simmons is the chairman of the board and chief executive
officer of TGI, Valhi, VGI, National, NOA, Dixie Holding, Dixie Rice,
Southwest and Contran, chairman of the board of NL and a director of
Tremont.
The Harold Simmons Foundation, Inc. (the "Foundation") directly holds
approximately 0.5% of the outstanding shares of Valhi Common Stock. The
Foundation is a tax-exempt foundation organized for charitable purposes.
Harold C. Simmons is the chairman of the board and chief executive
officer of the Foundation and may be deemed to control the Foundation.
The Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2")
directly holds approximately 0.4% of the Valhi common stock. U.S. Bank
National Association serves as the trustee of the CDCT No. 2. Contran
established the CDCT No. 2 as an irrevocable "rabbi trust" to assist
Contran in meeting certain deferred compensation obligations that it
owed to Harold C. Simmons. If the CDCT No. 2 assets are insufficient to
satisfy such obligations, Contran is obligated to satisfy the balance of
such obligations as they come due. Pursuant to the terms of the CDCT No.
2, Contran (i) retains the power to vote the shares of Valhi common
stock held directly by the CDCT No. 2, (ii) retains dispositive power
over such shares and (iii) may be deemed the indirect beneficial owner
of such shares.
The Combined Master Retirement Trust (the "CMRT") directly holds
approximately 0.1% of the outstanding shares of Valhi common stock.
Valhi established the CMRT to permit the collective investment by master
trusts that maintain the assets of certain employee benefit plans Valhi
and related companies adopt. Harold C. Simmons is the sole trustee of
the CMRT and a member of the trust investment committee for the CMRT.
Valhi's board of directors selects the trustee and members of the trust
investment committee for the CMRT. Harold C. Simmons, Glenn R. Simmons
and Steven L. Watson are participants in one or more of the employee
benefit plans that invest through the CMRT. Each of such persons
disclaims beneficial ownership of the shares of Valhi common stock held
by the CMRT, except to the extent of his individual vested beneficial
interest in the assets held by the CMRT.
By virtue of the holding of the offices, the stock ownership and his
service as trustee, all as described above, (a) Mr. Harold C. Simmons
may be deemed to control 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 such beneficial ownership of the shares beneficially
owned, directly or indirectly, by any of such entities, except to the
extent of his vested beneficial interest in shares held by the CMRT and
his interest as a beneficiary of the CDCT No. 2.
Harold C. Simmons' spouse is the direct beneficial owner of 77,000
shares of Valhi common stock and 69,475 shares of NL common stock. Mr.
Simmons may be deemed to share indirect beneficial ownership of such
shares. Mr. Simmons disclaims all such beneficial ownership.
Valmont Insurance Company ("Valmont") and a subsidiary of NL directly
hold 1,000,000 shares and 1,186,200 shares of Valhi common stock,
respectively. Valhi is the holder of 100% of the outstanding common
stock of Valmont and may be deemed to control Valmont. The Company
understands that, pursuant to Delaware law, Valhi treats the shares of
Valhi common stock that the subsidiary of NL and Valmont hold directly
as treasury stock for voting purposes. For purposes of the percentage
calculations herein, such shares are not deemed outstanding.
The business address of VGI, National, TGI, NOA, Dixie Holding, the
CMRT, the Foundation and Contran is Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697. The business address of
Dixie Rice is 600 Pasquiere Street, Gueydan, Louisiana 70542. The
business address of Southwest is 402 Canal Street, Houma, Louisiana
70360. The business address of TRE Holdings is 16825 Northchase Dr.,
Suite 1200, Houston, TX 77060.
(4) The shares of Common Stock shown as beneficially owned include 330,400
shares of Common Stock which J. Landis Martin has the right to acquire
by exercise of options within 60 days of the Record Date under the
Company's 1989 and 1998 Long-Term Incentive Plans (the "1989 Incentive
Plan" and "1998 Incentive Plan," respectively, and collectively the
"Incentive Plans").
(5) The shares of Common Stock shown as beneficially owned include (i) 8,000
shares of Common Stock which Kenneth R. Peak has the right to acquire by
exercise of options within 60 days of the Record Date pursuant to the NL
Industries, Inc. 1992 Non-Employee Director Stock Option Plan (the
"Director Plan") and the 1998 Incentive Plan, and (ii) 21 shares of
Common Stock held by Mr. Peak's wife with respect to which Mr. Peak
disclaims beneficial ownership.
(6) The shares of Common Stock shown as beneficially owned include 8,000
shares which Glenn R. Simmons has the right to acquire by exercise of
options within 60 days of the Record Date under the 1998 Incentive Plan.
(7) The shares of Common Stock shown as beneficially owned by Harold C.
Simmons include 69,475 shares held by Harold C. Simmons' wife with
respect to which beneficial ownership is disclaimed by Mr. Simmons and
8,000 shares which Mr. Simmons has the right to acquire by exercise of
options within 60 days of the Record Date under the 1998 Incentive Plan.
(8) The shares of Common Stock shown as beneficially owned include 4,000
shares which General Thomas P. Stafford has the right to acquire by
exercise of options within 60 days of the Record Date under the 1998
Incentive Plan.
(9) The shares of Common Stock shown as beneficially owned include 2,000
shares of Common Stock which Mr. Watson has the right to acquire by
exercise of options within 60 days of the Record Date under the
Incentive Plans.
(10) The shares of Common Stock shown as beneficially owned include 256,400
shares of Common Stock which Dr. Lawrence A. Wigdor has the right to
acquire by exercise of options within 60 days of the Record Date under
the Incentive Plans.
(11) The shares of Common Stock shown as beneficially owned include 13,137
shares credited to Ms. Alderton's account under the Savings Plan.
(12) The shares of Common Stock shown as beneficially owned include (i)
138,000 shares of Common Stock which David B. Garten has the right to
acquire by exercise of options within 60 days of the Record Date under
the Incentive Plans, and (ii) 22,335 shares held by Mr. Garten and his
wife as joint tenants.
(13) The shares of Common Stock shown as beneficially owned include (i)
73,000 shares of Common Stock which Robert D. Hardy has the right to
acquire by exercise of options within 60 days of the Record Date under
the Incentive Plans, and (ii) 16,344 shares held by Mr. Hardy and his
wife as joint tenants.
Ownership of Valhi and Tremont Common Stock. The following table and
accompanying notes set forth as of the Record Date (i) the beneficial ownership,
as defined above, of Valhi Common Stock held by (a) each director or nominee for
director of NL, (b) each person listed in the Summary Compensation Table below,
and (c) all current executive officers and directors of NL as a group, and (ii)
the beneficial ownership, as defined above, of Tremont Common Stock held by (a)
each director or nominee for director of NL, (b) each person listed in the
Summary Compensation Table below, and (c) all current executive officers and
directors of NL as a group. See note (3) to the table following the caption
"Ownership of NL Common Stock" above, for information concerning individuals and
entities who may be deemed to indirectly beneficially own those shares of Common
Stock directly beneficially held by Tremont and Valhi. Except as described in
note (3) above and the table below and the accompanying notes, no equity
securities of NL's parent companies are beneficially owned by any director,
nominee for director or executive officer of NL. All information is taken from
or based upon ownership filings made by such persons with the Commission or
information provided by such persons to NL.
Tremont Common Stock Valhi Common Stock
-------------------- ------------------
Amount and Nature Percent Amount and Nature Percent
of Beneficial of of Beneficial of
Name of Beneficial Owner Ownership(1) Class(2) Ownership(1) Class(2)
- ------------------------ ----------------- -------- ----------------- --------
Ann Manix -0- -- -0- --
J. Landis Martin 20,788 -- -0- --
Kenneth R. Peak -0- -- -0- --
George E. Poston -0- -- -0- --
Glenn R. Simmons 19 (3)(6) -- 203,183 (3)(5)(6) --
Harold C. Simmons -0- (3) -- 80,383 (3)(7) --
General Thomas P. Stafford (retired) 4,000 (4) -- -0- --
Steven L. Watson 4,474 (3) -- 188,635 (3)(5) --
Dr. Lawrence A. Wigdor -0- -- -0- --
Susan E. Alderton 727 (8) -- -0- --
David B. Garten 500 -- -0- --
Robert D. Hardy 318 -- -0- --
-- --
All current directors and executive
officers of the Company as a
group (10 persons) 30,099 (3)(4)(5)(6) -- 472,201 (3)(5)(6)(7) --
- ------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%. For purposes
of calculating the percent of class owned, 1,186,200 shares of Valhi
Common Stock held by a subsidiary of NL and 1,000,000 shares of Valhi
Common Stock held by Valmont are excluded from the amount of Valhi
Common Stock outstanding. The Company understands that, pursuant to
Delaware law, Valhi treats these excluded shares as treasury stock for
voting purposes.
(3) Excludes certain shares that may be deemed to be indirectly beneficially
owned by such individual as to which he disclaims beneficial ownership.
See note (3) to the table following "Ownership of NL Common Stock"
above.
(4) The shares of Tremont Common Stock shown as beneficially owned by Thomas
P. Stafford include 4,000 shares which General Stafford has the right to
acquire by exercise of options within 60 days of the Record Date.
(5) Includes shares that such person or group could acquire upon the
exercise of stock options within 60 days of the Record Date. During such
60-day period, options for 200,000 shares of Valhi Common Stock are
exercisable by Glenn R. Simmons, and options for 170,000 shares of Valhi
Common Stock are exercisable by Steven L. Watson, all of which shares
are included in the amount outstanding for purposes of calculating the
percent of class owned by such persons. Also includes 3,035 shares held
in Mr. Watson's individual retirement account.
(6) Includes 2,383 shares of Valhi Common Stock and 19 shares of Tremont
Common Stock held in Glenn R. Simmons' individual retirement account.
The Valhi shares also include 800 shares held in a retirement account
for Mr. Simmons' wife, with respect to all of which beneficial ownership
is disclaimed by Mr. Simmons.
(7) Includes 77,000 shares of Valhi Common Stock held by Harold C. Simmons'
wife, with respect to which beneficial ownership is disclaimed by Mr.
Simmons.
(8) The shares of Tremont Common Stock shown as beneficially owned by Susan
E. Alderton include 11 shares held by the trustee for the benefit of Ms.
Alderton under the Savings Plan.
The Company understands that Valhi, Tremont and related entities may
consider acquiring or disposing of shares of 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 the Common Stock in the market, an assessment of the business
of and prospects for the Company, financial and stock market conditions and
other factors deemed relevant by such entities. The Company does not presently
intend, and understands that neither Valhi nor Tremont presently intends, to
engage in any transaction or series of transactions that would result in the
Common Stock becoming eligible for termination of registration under the
Securities Exchange Act of 1934, as amended, or ceasing to be traded on a
national securities exchange.
The Company further understands that approximately 30 million shares of
Common Stock held by Valhi (61.4% of the shares of Common Stock outstanding) are
pledged to secure bank borrowings by Valhi. Foreclosure by the lender on this
pledge in the event of Valhi's default on the loan, which Valhi has advised the
Company is unlikely, may at a subsequent date result in a change in control of
the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors, and persons who own
beneficially more than 10% of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Commission, the New York Stock Exchange, the Pacific Exchange and the Company.
Based solely on a review of copies of the Section 16(a) reports furnished to the
Company and written representations by certain reporting persons, the Company
believes that all of the Company's executive officers, directors and greater
than 10% beneficial owners filed on a timely basis all reports required during
and with respect to the fiscal year ended December 31, 2001.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors
During 2001, fees were paid to each director who was not an employee of
the Company or a subsidiary of the Company. Fees consisted of an annual retainer
of $15,000, payable in quarterly installments and 1,000 shares of Common Stock
granted pursuant to the 1998 Incentive Plan, plus an attendance fee of $1,000
for each meeting of the Board or a committee at which the director was present.
Such directors also received a fee of $1,000 per day for each day spent on NL
business at the request of the Board or the Chairman of the Board, other than
the day of Board or committee meetings. Directors are reimbursed for reasonable
expenses incurred in attending Board of Directors and committee meetings. If any
director who is not an officer or employee of NL or any subsidiary or affiliate
of NL dies while in active service, his or her designated beneficiary or estate
will be entitled to receive a life insurance benefit equal to the annual
retainer then in effect. Nominees for election as Director who received fees for
serving on the Board of Directors in 2001 are Ms. Manix, Messrs. G. Simmons, H.
Simmons, and Watson, and General Stafford. See "Certain Relationships and
Transactions." In addition, General Stafford receives an annual payment of
$15,000 as a result of his service on the Board in the period prior to 1987.
In 2001, Messrs. Peak, G. Simmons, H. Simmons, and Watson, and General
Stafford each were granted an option pursuant to the 1998 Incentive Plan to
purchase 2,000 shares of Common Stock at an exercise price of $20.513 per share,
representing the average of the high and low sales prices of Common Stock on the
New York Stock Exchange Composite Tape on the date of the grant. These options
become exercisable one year after the date of grant and expire on the fifth
anniversary following the date of the grant.
Summary of Cash and Certain Other Compensation of Executive Officers
The Summary Compensation Table set forth below provides certain summary
information concerning annual and long-term compensation awarded to, earned by,
or paid to or on behalf of the Company's Chief Executive Officer and each of its
other four most highly compensated executive officers for services rendered
during the years ended December 31, 2001, 2000 and 1999.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation (1) Compensation (1)
----------------------- ----------------
Awards
------
Other Restricted Securities
Name and Annual Stock Underlying All Other
Principal Position Year Salary Bonus(2) Compensation Awards Options Compensation
------------------ ---- ------ --------- ------------ -------- ---------- ------------
($) ($) (3)($) ($) (#) (5)($)
J. Landis Martin 2001 600,000 600,000 67,806 -0- 100,000 152,040
President and Chief 2000 600,000 900,000 13,420 -0- 100,000 96,840
Executive Officer (4) 1999 500,000 500,000 17,281 -0- 99,000 125,320
Dr. Lawrence A. 2001 750,000 1,350,000 2,729 -0- 100,000 351,658
Wigdor 2000 750,000 2,625,000 6,815 -0- 100,000 132,038
Executive Vice 1999 650,000 650,000 8,833 -0- 99,000 171,073
President
Susan E. Alderton 2001 350,000 550,000 -0- -0- 50,000 79,482
Vice President, 2000 295,833 443,700 -0- -0- 45,000 48,579
Chief Financial 1999 225,000 225,000 -0- -0- 45,000 52,944
Officer and
Treasurer (Former)(6)
David B. Garten 2001 425,000 525,000 -0- -0- 50,000 93,309
Vice President, 2000 325,000 987,500 -0- -0- 45,000 100,252
General Counsel and 1999 325,000 325,000 -0- -0- 45,000 69,427
Secretary
Robert D. Hardy 2001 300,000 550,000 -0- -0- 50,000 93,868
Vice President, 2000 275,000 662,500 -0- -0- 30,000 38,061
Chief Financial 1999 200,000 147,500 -0- -0- 30,000 34,531
Officer, Controller,
and Treasurer
(1) No payouts under any long-term incentive plans (as defined by applicable
federal securities regulations) were made during 2001, 2000 or 1999.
Therefore the column for such compensation otherwise required by
applicable federal securities regulations has been omitted.
(2) Amounts paid with respect to each year pursuant to the Variable
Compensation Plan and, for 2000 and 2001, special discretionary bonuses.
See "Compensation Committee's Report on Executive Compensation" below.
(3) Includes the amount which exceeds 120% of the applicable federal long-term
interest rate accrued on deferred compensation. In the case of Mr. Martin
in 2001, the amount shown includes $8,114 of such excess interest and
$50,518 in value attributed to use of the Company's aircraft by him.
(4) During 2001, 2000 and 1999, Mr. Martin also served as an executive officer
of Tremont and TIMET. Mr. Martin is expected to continue to serve as an
executive officer of NL, TIMET and Tremont in 2002 and to be compensated
directly by NL for services to NL and by TIMET for services to TIMET and
Tremont. Mr. Martin is expected to continue to devote approximately
one-half of his working time to his duties as President and Chief
Executive Officer of NL. See "Certain Relationships and Transactions."
(5) "All Other Compensation" amounts represent (i) matching contributions made
or accrued by the Company pursuant to the savings feature of the Savings
Plan, (ii) retirement contributions made or accrued by the Company
pursuant to the Savings Plan, (iii) life insurance premiums paid by the
Company, and (iv) amounts accrued by the Company under the Supplemental
Executive Retirement Plan ("SERP") for 2000 and 1999, and paid by the
Company under the SERP in 2001. See "Compensation Committee's Report on
Executive Compensation" and "Certain Relationships and Transactions -
Distribution of Accrued SERP Amounts."
Year Martin Wigdor Alderton Garten Hardy
---- ------ ------ -------- ------ -----
Savings Match ($) 2001 6,800 6,800 6,800 6,800 6,800
2000 10,200 10,200 10,200 10,200 10,200
1999 6,400 6,400 6,400 6,400 6,400
Retirement Contribution ($) 2001 12,240 14,110 9,350 9,350 6,800
2000 12,240 14,110 9,350 9,350 6,800
1999 9,920 11,680 7,200 7,200 4,800
Life Insurance ($) 2001 -0- 10,248 962 2,909 1,018
2000 -0- 9,328 962 2,302 861
1999 -0- 6,493 924 1,827 801
SERP ($) 2001 133,000 320,500 62,370 74,250 79,250
2000 74,400 98,400 28,067 78,400 20,200
1999 109,000 146,500 38,420 54,000 22,530
(6) Ms. Alderton left the Company's employment in February 2002.
Stock Option Grants
The following table provides information with respect to the individual
stock option grants to the persons named in the Summary Compensation Table set
forth above under the 1998 Incentive Plan during fiscal year 2001.
OPTION GRANTS IN LAST FISCAL YEAR(4)
Number of Percent of Total Exercise Potential Realizable
Securities Options Granted or Base Value at Assumed Rates
Underlying Options to Employees Price(2) Expiration of Stock Appreciation
Name Granted (#)(1) in Fiscal Year ($/Share) Date for Option Term (3)
---- ------------------ -------------- --------- ---------- ----------------------
5%($) 10%($)
------ -------
J. Landis Martin 100,000 21.1% $20.11 2/7/11 1,264,707 3,205,016
Lawrence A. Wigdor 100,000 21.1% $20.11 2/7/11 1,264,707 3,205,016
Susan E. Alderton 50,000 10.5% $20.11 2/7/11 632,354 1,602,508
David B. Garten 50,000 10.5% $20.11 2/7/11 632,354 1,602,508
Robert D. Hardy 50,000 10.5% $20.11 2/7/11 632,354 1,602,508
(1) Grants of options to purchase shares of Common Stock under the Incentive
Plan vest over five years from the date of grant, at a rate of 40% on
the second anniversary of the date of grant, and 20% on each of the next
three succeeding anniversary dates. The options expire on the tenth
anniversary date of the date of grant.
(2) Exercise price is equal to the mean of the high and low prices of the
Common Stock on the New York Stock Exchange Composite Tape on the date
of grant.
(3) Pursuant to the rules of the Commission, these amounts reflect the
calculations at assumed 5% and 10% annual appreciation rates. Such
calculations are not intended to forecast future appreciation, if any,
and do not necessarily reflect the actual value, if any, that may be
realized. The actual value of such options, if any, would be realized
only upon the exercise of such options and depends upon the future
performance of the Common Stock. No assurance can be made that the
amounts reflected in these columns will be achieved. The potential
realizable value was computed as the difference between the appreciated
value (at the end of the ten-year term of the options) of the Common
Stock into which the listed options are exercisable and the aggregate
exercise price of such options. The appreciated value per share at the
end of the ten-year term would be $32.76 and $52.16 at the assumed 5%
and 10% rates, respectively, with respect to options granted to named
executive officers.
(4) As a director, Harold C. Simmons was granted an option to purchase 2,000
shares of Common Stock representing 0.4% of the total options granted to
employees during the fiscal year at an exercise price of $20.513,
representing the average of the high and low sales prices of Common
Stock on the New York Stock Exchange Composite Tape on the date of the
grant. The option became exercisable one year after the date of grant,
expires 2/1/06, and has a potential realizable value at an assumed 5%
and 10% rate of stock appreciation of $11,353 and $25,069, respectively.
See "Compensation of Directors and Executive Officers and Other
Information - Compensation of Directors."
Stock Option Exercises and Holdings
The following table provides information with respect to the persons
named in the Summary Compensation Table, as set forth above, concerning the
exercise of options during the last fiscal year and the value of unexercised
options held as of December 31, 2001. None of such persons exercised options
during 2001 as shown in the table below. No stock appreciation rights have been
granted under the Incentive Plans.
AGGREGATED OPTION EXERCISES IN 2001 AND 12/31/01 OPTION VALUES
Number of
Securities Value of Unexercised,
Underlying Unexercised In-the-Money Options
Shares Options at 12/31/01 at 12/31/01
Acquired on Value (Exercisable/ (Exercisable/
Name Exercise (#) Realized ($) Unexercisable)(#)(1) Unexercisable) ($)(1)
---- ------------ ------------ ---------------------- ---------------------
J. Landis Martin -0- -0- 228,600 / 325,400 216,939 / 233,659
Lawrence A. Wigdor -0- -0- 163,600 / 310,400 118,549 / 227,914
Susan E. Alderton -0- -0- 63,000 / 140,000 57,435 / 101,558
David B. Garten -0- -0- 93,000 / 149,000 101,945 / 107,303
Robert D. Hardy -0- -0- 43,000 / 116,000 45,124 / 87,847
(1) Mr. Harold Simmons did not exercise any options during 2001. At
12/31/01, he had 6,000 exercisable options and 2,000 unexercisable
options. The value of his exercisable and unexercisable in-the-money
options at 12/31/01 was $7,160 and $0, respectively.
Pension Plan
The Retirement Program of NL Industries, Inc. for its U.S. employees
(the "Pension Plan") provides lifetime retirement benefits to eligible
employees. In 1996, the Company approved the suspension of all future accruals
under the salaried component of the Pension Plan. The Pension Plan covers each
person named in the Summary Compensation Table set forth above. No amounts were
paid or distributed to any of such persons in 2001. The estimated accrued annual
benefits payable under the Pension Plan upon retirement at normal retirement age
for Dr. Wigdor, Ms. Alderton, and Messrs. Martin, Garten, and Hardy are $29,439,
$34,419, $50,277, $26,410, and $12,348, respectively.
Severance Agreements
Mr. Martin had an executive severance agreement with the Company which
expired in December 2001. The agreement provided that he could be terminated at
any time by action of the Board of Directors. The executive severance agreement
also provided that the following payments would be made to Mr. Martin in the
event Mr. Martin's employment was terminated by the Company without cause (as
defined in the agreement) or Mr. Martin terminated his employment with the
Company for good reason (as defined in the agreement): (i) two times Mr.
Martin's annual base salary plus target bonus (which target bonus would not be
less than the amount of his annual salary); (ii) accrued salary and bonus
through the date of termination; and (iii) certain other benefits.
Dr. Wigdor has an executive severance agreement with the Company which
provides that he may be terminated at any time by action of the Board of
Directors. The executive severance agreement also provides that the following
payments shall be made to Dr. Wigdor in the event Dr. Wigdor's employment is
terminated by the Company without cause (as defined in the agreement) or Dr.
Wigdor terminates his employment with the Company for good reason (as defined in
the agreement): (i) the greater of two times Dr. Wigdor's annual base salary
plus target bonus (which target bonus shall not be less than the amount of his
annual salary) or Dr. Wigdor's actual salary and bonus for the two years prior
to termination; (ii) accrued salary and bonus through the date of termination;
(iii) an amount in cash or Common Stock equal to the fair market value of
outstanding stock options granted to Dr. Wigdor in excess of the exercise price
and unvested restricted stock grants; (iv) an amount equal to unvested Company
contributions together with an amount equal to the Company's matching
contributions to Dr. Wigdor's account under the Savings Plan for a period of two
years; (v) an amount equal to the vested and unvested portions of Dr. Wigdor's
account under the SERP; and (vi) certain other benefits. This agreement is
automatically extended for a one-year term commencing each January 1, unless the
Company and Dr. Wigdor agree otherwise in writing.
INDEPENDENT AUDITOR MATTERS
Independent Auditors. The firm of PricewaterhouseCoopers LLP served as
NL's independent auditor for the year ended December 31, 2001, and has been
appointed to review NL's quarterly unaudited consolidated financial statements
to be included in its Quarterly Reports on Form 10-Q for the first three
quarters of 2002 and to audit NL's annual consolidated financial statements for
the year ending December 31, 2002. Representatives of PricewaterhouseCoopers LLP
are not expected to attend the Meeting.
Audit Committee Report. NL's management is responsible for preparing
NL's consolidated financial statements in accordance with accounting principles
generally accepted in the United States. NL's independent auditors,
Pricewaterhouse Coopers LLP, are responsible for auditing NL's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America. Our responsibility as NL's Audit Committee is to
monitor and review these auditing, accounting and financial reporting
processes. However, we are not professionally engaged in the practice of
accounting or auditing and are not experts in the fields of accounting or
auditing. We have relied, without independent verification, on management's
representation that the financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States of America and on the representations of
PricewaterhouseCoopers LLP included in their report on the Company's financial
statements.
We have reviewed and discussed NL's audited consolidated financial
statements for the year ended December 31, 2001 with NL's management and
PricewaterhouseCoopers LLP. We discussed with PricewaterhouseCoopers LLP the
matters required by Statement on Auditing Standards No. 61 ("Communication with
Audit Committees"), received from PricewaterhouseCoopers LLP written disclosures
required by Independence Standards Board Standard No. 1 ("Independence
Discussions with Audit Committees") and discussed with PricewaterhouseCoopers
LLP its independence. We also considered whether provision by
PricewaterhouseCoopers LLP of non-audit services to NL and its subsidiaries is
compatible with such auditor's independence. Additionally, we discussed with
NL's management and PricewaterhouseCoopers LLP such other matters as we deemed
appropriate. Based on our review of NL's audited consolidated financial
statements and our discussions with NL's management and PricewaterhouseCoopers
LLP, we recommended to the Board of Directors that NL's audited consolidated
financial statements for the year ended December 31, 2001 be included in NL's
Annual Report on Form 10-K for the year ended December 31, 2001, which has been
filed with the Commission.
Kenneth R. Peak Ann Manix General Thomas P. Stafford (retired)
Chairman of the Member of the Member of the
Audit Committee Audit Committee Audit Committee
Audit and Other Fees. The aggregate fees that PricewaterhouseCoopers LLP
has billed or is expected to bill to the Company for services rendered for 2001
for audit fees is $512,911. The amount for audit fees includes, without
duplication, (a) fees for the audit of the Company's consolidated financial
statements for the year ended December 31, 2001, (b) reviews of the unaudited
quarterly consolidated financial statements appearing in the Company's Form 10-Q
for each of the first three quarters of 2001, and (c) the estimated
out-of-pocket costs PricewaterhouseCoopers LLP incurred in such audits and
reviews. The Company reimburses PricewaterhouseCoopers LLP for such
out-of-pocket costs.
Financial Information Systems Design and Implementation
No fees were billed or expected to be billed by PricewaterhouseCoopers
LLP for services performed in 2001 for financial information systems design and
implementation.
All Other Fees
The aggregate fees that PricewaterhouseCoopers LLP has billed or is
expected to bill to the Company for services rendered for 2001 for fees other
than audit fees is $124,476, primarily related to pension plan audits and tax
consulting services.
COMPENSATION COMMITTEE'S REPORT ON EXECUTIVE COMPENSATION
The Company's Management Development and Compensation Committee (the
"MDC Committee") consists of individuals who are neither officers nor employees
of the Company or its subsidiaries and who are not eligible to participate in
any of the employee benefit plans administered by the MDC Committee.
The MDC Committee annually reviews and recommends compensation policies
and practices related to the Company's executive officers, including the Chief
Executive Officer (the "CEO"). The MDC Committee also was responsible for
reviewing and approving all compensation actions during 2001, including
stock-based compensation, involving the Company's executive officers. However,
any action in connection with the CEO's base salary is reviewed and approved by
the Board after recommendation by the MDC Committee.
The Company's executive compensation system with respect to its
executive officers, including the CEO, generally consists of three primary
components: base salary, annual variable compensation provided by the Variable
Compensation Plan, and the grant of stock options, restricted stock and/or stock
appreciation rights. Through the use of the foregoing, the Committee seeks to
achieve a balanced compensation package that will attract and retain
high-quality key executives, appropriately reflect each such executive officer's
individual performance, contributions, and general market value, and provide
further incentives to the officers to maximize annual operating performance and
long-term shareholder value.
Base Salaries
The MDC Committee reviews recommendations by the CEO regarding changes
in base salaries for executive officers, including the CEO. These
recommendations are made by the CEO after consultation with the Chairman of the
Board. When recommendations regarding changes in base salary levels are made by
the CEO, the MDC Committee may take such actions, including any modifications,
as it deems appropriate. The CEO's recommendations and the MDC Committee's
actions in 2001 were based primarily on a subjective evaluation of past and
potential future individual performance and contributions, and alternative
opportunities that might be available to the executives in question. The
Committee also had available to it compensation data from companies employing
executives in positions similar to those whose salaries were being reviewed as
well as, with respect to certain executives, compensation information for
executives in general with similar skills, background and performance levels,
both inside and outside of the chemicals industry (such companies may have
included companies contained in the peer group index plotted on the Performance
Graph following this report), and other companies with similar financial and
business characteristics as the Company, or where the executive in question has
similar responsibilities. In 2001, the MDC Committee approved a base annual
salary increase for Ms. Alderton from $325,000 to $350,000, a base annual salary
increase for Mr. Garten from $325,000 to $425,000, and a base annual salary
increase for Mr. Hardy from $275,000 to $300,000. Ms. Alderton subsequently left
the Company's employment in February 2002. In approving these increases, the MDC
Committee reviewed the recommendations of the CEO and an independently prepared
compensation survey report. The MDC Committee also considered the Chairman of
the Board's approval of these increases and the fact that the Company had
performed well in fiscal 2000 as compared to its operating targets. The CEO's
base salary, which was not changed in 2001, was not set based on any specific
relationship to Company performance.
No action was taken with respect to the base salaries of any of the
other named executive officers of the Company during 2001.
Variable Compensation Plan
Awards under the Variable Compensation Plan constitute a significant
portion of an executive's potential annual cash compensation (between 0% and
150% of base salary for the CEO and executive officers). Awards are based on
Kronos achieving annual predetermined operating income goals. The Company's
management makes recommendations to the Board regarding the operating income
plan for the year after reviewing market conditions and the Company's
operations, competitive position, marketing opportunities, and strategies for
maximizing financial performance. The Board approves this recommendation with
modifications it deems appropriate. Based on the business plan for the year, the
MDC Committee sets the Company's and its business segment's operating income
goals at three levels which are designed to help focus the Company's executives
on achieving superior annual operating results in light of existing conditions:
a threshold level, which is the minimum operating income level for any award to
be made under the Variable Compensation Plan (the "Minimum Level"), a target
level (the "Target Level"), and a maximum level (the "Maximum Level"). The
Variable Compensation Plan, in combination with base salary, is designed to
result in executive officers and other eligible participants receiving annual
cash compensation below competitive compensation levels if the Minimum Level is
not achieved.
Pursuant to the Variable Compensation Plan, if operating income is below
the Minimum Level, no variable compensation is paid. If the Minimum Level is
met, executive officers are eligible to receive a variable compensation payment
of 50% of base salary. If the Target Level is reached, the variable compensation
payment is 100% of base salary. If the Maximum Level is reached or exceeded,
executives are eligible to receive a variable compensation payment of 150% of
base salary. In view of the achievement of operating income above the Target
Level during 2001, the MDC Committee in 2002 approved Target Level payments
under the Variable Compensation Plan to the executive officers, including the
CEO. Such awards to the CEO and the four other highest paid executive officers
under the Variable Compensation Plan are reported in the bonus column in the
Summary Compensation Table set forth above. In addition, Target levels for
operating income performance were utilized by the MDC Committee and the Board,
as applicable, for determining the contributions by the Company to the accounts
of eligible participants, including the CEO and the executive officers, under
the Savings Plan, the Pension Plan, and the SERP.
Stock-Based Compensation
The 1998 Incentive Plan further supports the goal of maximizing
long-term shareholder value by providing for stock-based compensation, the value
of which is directly related to increases in shareholder value. Stock option
grants, in particular, are considered a significant element of the Company's
total compensation package for the CEO and the other executive officers of the
Company. The Committee believes that compensation linked to stock price
performance helps focus the executives' attention on management of the Company
from the shareholders' perspective.
Option grants are intended to provide incentives to increase shareholder
value in the future and to reward past performance by the executive. In 2001,
the MDC Committee reviewed recommendations by the CEO regarding option grants to
executive officers other than the CEO. Options were granted to executive
officers, including the CEO, in the MDC Committee's discretion based on a
subjective evaluation regarding each executive's performance and
responsibilities. In 2001, the MDC Committee included in its determination
regarding the number of options to be granted to each executive officer,
including the CEO, the amount and terms of options already held by such
officers. Grants made in 2001 are reported in the Option Grants in Last Fiscal
Year Table set forth above.
To help assure a focus on long-term creation of shareholder value, the
MDC Committee granted ten year options, which vest 40%, 60%, 80% and 100% on the
second, third, fourth and fifth anniversary dates of the date of grant,
respectively. Although permitted under the Incentive Plan, the MDC Committee in
2001 did not make or recommend any grants of restricted stock, stock
appreciation rights or other equity-based awards.
Special Discretionary Bonuses
Apart from the Variable Compensation Plan, the MDC Committee may award
other bonuses as the Committee deems appropriate from time to time under its
general authority or under a separate discretionary plan. During 2001, the
Committee made awards to Ms. Alderton of $200,000, Mr. Garten of $100,000, and
Mr. Hardy of $250,000 in recognition of their performance during the year. In
addition during 2001, the Committee awarded Dr. Wigdor $1,500,000 in recognition
of his performance during 2000 and $600,000 in recognition of his performance in
2001. Such awards are reported in the bonus column in the Summary Compensation
Table set forth above.
SERP Distribution
In 2001, the Committee determined that the Company would distribute to
participants in the SERP the accrued balance in each participant's account, and
that future benefits under the SERP would be paid to participants as accrued,
thus reducing the Company's interest costs. See "Certain Relationships and
Transactions - Distribution of Accrued SERP Amounts."
Tax Code Limitation on Executive Compensation Deductions
The Internal Revenue Code imposes a $1 million deduction limit on
compensation paid to the CEO and the four other most highly compensated
executive officers of public companies, subject to certain exceptions for
compensation received pursuant to non-discretionary performance-based plans
approved by such company's shareholders. The Company's Variable Compensation
Plan and 1998 Incentive Plan, which have been approved by the Company's
shareholders, permit variable compensation paid or awards or grants made to
executives pursuant to such plans to qualify for deductibility by the Company.
In addition, executive compensation is generally structured to attempt to
minimize the impact of the deduction limit.
The foregoing report on executive compensation has been furnished by the
Company's MDC Committee of the Board of Directors.
Mr. Kenneth R. Peak (Chairman)
General Thomas P. Stafford (Retired)
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total shareholder return on the Common Stock against the cumulative
total return of the S & P Composite 500 Stock Index and the S & P Chemicals
Index for the period commencing December 31, 1996 and ending December 31, 2001.
The graph shows the value at December 31 of each year assuming an original
investment of $100 and reinvestment of dividends and other distributions to
shareholders.
[GRAPHIC OMITTED - GRAPH DESCRIPTION] a line graph plotting the points
shown in the chart below which compares the yearly percentage change in the
cumulative total shareholder return on the Common Stock against the cumulative
total return of the S&P Composite 500 Stock Index and S & P Chemical Index for
the period commencing December 31, 1996 and ending December 31, 2001.
1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ----
NL Industries, Inc. $100 $125 $131 $141 $235 $155
S & P 500 $100 $133 $171 $208 $189 $166
S & P Chemicals $100 $123 $112 $146 $122 $120
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties
As set forth under the caption "Security Ownership," Harold C. Simmons,
through Valhi and Tremont, may be deemed to control NL. The Company and other
entities that may be deemed to be controlled by or affiliated with Mr. Simmons
sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, tax
sharing agreements, joint ventures, partnerships, loans, options, advances of
funds on open account, and sales, leases and exchanges of assets, including
securities issued by both related and unrelated parties, and (b) common
investment and acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases, and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions which resulted in the acquisition by one related
party of a publicly-held equity interest in another related party. The Company
from time to time considers, reviews and evaluates, and understands that
Contran, Valhi and related entities consider, review and evaluate, such
transactions. Depending upon the business, tax and other objectives then
relevant, including, without limitation, restrictions under certain indentures
and other agreements of the Company, it is possible that the Company might be a
party to one or more such transactions in the future. It is the policy of the
Company to engage in transactions with related parties on terms, in the opinion
of the Company, no less favorable to the Company than could be obtained from
unrelated parties.
Harold C. Simmons and Glenn R. Simmons, each a director of NL, are also
directors and executive officers of Valhi and Contran. Each of the foregoing
persons and Mr. Martin and General Stafford are directors of Tremont. Mr.
Martin, the Company's President and Chief Executive Officer, serves as an
executive officer and director of Tremont and TIMET. General Stafford and Glenn
R. Simmons serve as directors of TIMET. Glenn R. Simmons also serves as Chairman
of the Board of Keystone and CompX. Mr. Watson, a director and Assistant
Secretary of NL, is also an executive officer of Contran and Valhi and a
director of Valhi, Contran, Tremont, TIMET, Keystone and CompX. Ms. Manix is a
director of CompX. Mr. Garten and Mr. Watson serve as assistant secretaries of
Tremont, and Mr. Hardy serves as assistant treasurer of Tremont and TIMET. Such
persons served in their current capacities in 2001 and expect to continue to
serve in their current capacities in 2002. Such management interrelationships
and the existing intercorporate relationships may lead to possible conflicts of
interest. These possible conflicts may arise from the duties of loyalty owed by
persons acting as corporate fiduciaries of two or more companies under
circumstances where such companies may have adverse interests. Mr. Martin
devotes approximately one-half of his working time to NL and the remainder of
his working time to TIMET and Tremont. See "Certain Contractual Relationships
and Transactions" below.
Although no specific procedures are in place that govern the treatment
of transactions among the Company, Valhi, TIMET, Tremont and related entities,
the boards of directors of each of the Company, Valhi, TIMET and Tremont include
one or more members who are not officers or directors of any other entity that
may be deemed to be related to the Company. Additionally, under applicable
principles of law, in the absence of shareholder ratification or approval by
directors of the Company who may be deemed disinterested, transactions involving
contracts among the Company and any other companies under common control with
the Company must be fair to all companies involved. Furthermore, each director
and officer of the Company owes fiduciary duties of good faith and fair dealing
with respect to all shareholders of the company or companies for which they
serve.
Certain Contractual Relationships and Transactions
Intercorporate Services Agreements. The Company and Contran are parties
to an intercorporate services agreement (the "Contran ISA") whereby Contran
makes available to the Company (i) the services of Harold C. Simmons to consult
with the Company and assist in the development and implementation of the
Company's strategic plans and objectives, (ii) certain management, financial and
administration services, and (iii) certain insurance and risk management
services to the Company, and the Company provides to Contran certain
administrative support services. The services provided by Contran do not include
major corporate acquisitions, divestitures and other special projects outside
the scope of the Company's business as it has been conducted in the past. NL
paid total net fees of approximately $1,195,000 in 2001 for services pursuant to
the Contran ISA (of which approximately $950,000 was attributable to the
services of Mr. Simmons) and expects to pay a slightly higher amount in 2002 for
such services. The Company paid fees of $950,000 under the Contran ISA in each
of 2000 and 1999 attributable to the services of Mr. Simmons. The Contran ISA is
subject to automatic renewal and may be terminated by either party pursuant to a
written notice delivered 30 days prior to a quarter-end. The Company will
continue to pay directors' fees and expenses separately to Harold C. Simmons,
Glenn R. Simmons, and Steven L. Watson. See "Compensation of Directors and
Executive Officers and Other Information" above.
The Company and Tremont are parties to an intercorporate services
agreement (the "Tremont ISA") whereby the Company made available to Tremont
certain services with respect to Tremont's tax compliance and consulting needs
and use of the Company's corporate aircraft. Tremont paid fees of approximately
$135,131 to the Company pursuant to the Tremont ISA during 2001. The Tremont ISA
is subject to automatic renewal and may be terminated by either party pursuant
to a written notice delivered 30 days prior to a quarter-end.
The Company and TIMET are parties to an intercorporate services
agreement (the "TIMET ISA") whereby the Company made available to TIMET certain
services with respect to TIMET's tax compliance and consulting needs and use of
the Company's corporate aircraft. TIMET paid fees of approximately $436,358
pursuant to the TIMET ISA during 2001. The TIMET ISA is subject to automatic
renewal and may be terminated by either party pursuant to a written notice
delivered 30 days prior to a quarter-end.
The Company and CompX were parties to an intercorporate services
agreement (the "CompX ISA") whereby the Company made available to CompX certain
services with respect to CompX's occupancy, accounting, computer support and
internal audit needs. CompX paid fees of approximately $23,245 for services
pursuant to the CompX ISA during 2001. The CompX ISA was terminated in the first
quarter of 2001.
Insurance Sharing Agreement. Tall Pines Insurance Company ("Tall
Pines"), a wholly owned captive insurance company of Tremont, has assumed the
obligations of the issuer of certain reinsurance contracts that relate to
primary insurance policies issued by a third-party insurance company in favor of
Tremont and the Company. The Company and Tall Pines are parties to an insurance
sharing agreement with respect to such reinsurance contracts (the "Insurance
Sharing Agreement"). Under the terms of the Insurance Sharing Agreement, the
Company will reimburse Tall Pines with respect to certain loss payments and
reserves established by Tall Pines that (a) arise out of claims against the
Company and its subsidiaries (the "NL Liabilities"), and (b) are subject to
payment by Tall Pines under its reinsurance contracts with the third-party
insurance company. Also pursuant to the Insurance Sharing Agreement, Tall Pines
is to credit the Company with respect to certain underwriting profits or
recoveries that Tall Pines receives from independent reinsurers that relate to
the NL Liabilities. As of December 31, 2001, the Company had current accounts
payable to Tall Pines of approximately $552,741 with respect to such Agreement.
At December 31, 2001, the Company had $1.7 million of restricted cash
equivalents that collateralized letters of credit relating to the NL Liabilities
issued and outstanding on behalf of Tall Pines pursuant to the Insurance Sharing
Agreement.
Insurance Matters. Tall Pines, Valmont Insurance Company ("Valmont") and
EWI RE, Inc. ("EWI, Inc.") provide for or broker certain of the Company's, its
joint venture's and its affiliates' insurance policies. Valmont is a wholly
owned captive insurance company of Valhi. During 2001, one of the daughters of
Harold C. Simmons and a wholly owned subsidiary of Contran owned, directly or
indirectly, 57.8% and 42.2%, respectively, of the outstanding common stock of
EWI, Inc. and of the membership interests of EWI, Inc.'s management company, EWI
RE, Ltd. (collectively with EWI, Inc., "EWI"). Through December 31, 2000, a
son-in-law of Harold C. Simmons, managed the operations of EWI. Subsequent to
December 31, 2000, pursuant to an agreement that terminates on December 31,
2002, such son-in-law provides advisory services to EWI as requested by EWI, for
which the son-in-law is paid $11,875 per month and receives certain other
benefits under EWI's benefit plans. Consistent with insurance industry
practices, Tall Pines, Valmont and EWI receive commissions from the insurance
and reinsurance underwriters for the policies that they provide or broker. The
Company and its joint venture paid approximately $10.1 million in 2001 for
policies provided or brokered by Tall Pines, Valmont and EWI. These amounts
principally included payments for reinsurance and insurance premiums paid to
unrelated third parties, but also included commissions paid to Tall Pines,
Valmont and EWI. In the Company's opinion, the amounts that the Company paid for
these insurance policies and the allocation among the Company and its affiliates
of relative insurance premiums are reasonable and similar to those they could
have obtained through unrelated insurance companies and/or brokers. The Company
expects that these relationships with Tall Pines, Valmont and EWI will continue
in 2002.
In January 2002, the Company purchased EWI from its previous owners for
an aggregate cash purchase price of approximately $9 million, and EWI became a
wholly owned subsidiary of the Company. The purchase was approved by a special
committee of the Company's Board of Directors consisting of two of its
independent directors, and the purchase price was negotiated by the special
committee based upon its consideration of relevant factors, including but not
limited to, due diligence performed by independent consultants and an appraisal
of EWI conducted by an independent third party selected by the special
committee.
Tremont Registration Rights Agreement. In connection with the 1991
purchase by Tremont of 7.8 million shares of Common Stock from Valhi, the
Company entered into a Registration Rights Agreement pursuant to which Tremont
received certain registration rights with respect to the purchased shares. The
agreement expired in December 2001.
Tax Sharing Agreement. Effective January 1, 2001, the Company and its
qualifying subsidiaries will be included in the consolidated United States
federal tax return of Contran (the "Contran Tax Group"). As a member of the
Contran Tax Group, the Company is a party to a tax sharing agreement (the
"Contran Tax Agreement"). The Contran Tax Agreement provides that the Company
compute its provision for U.S. income taxes on a separate-company basis using
the tax elections made by Contran. Pursuant to the Contran Tax Agreement and
using the tax elections made by Contran, the Company will make payments to or
receive payments from Valhi in amounts it would have paid to or received from
the Internal Revenue Service had it not been a member of the Contran Tax Group.
Refunds are limited to amounts previously paid under the Contran Tax Agreement
unless the Company was entitled to a refund from the U.S. Internal Revenue
Service on a separate-company basis. At December 31, 2001, the Company had a
$2.2 million receivable from Valhi pursuant to the terms of the Contran Tax
Agreement.
Investment in Tremont. During 2000 the Company purchased 1,000,000
shares of Tremont Common Stock in market transactions for an aggregate of $26
million. Before the close of business on December 31, 2000, the Company held 16%
of the outstanding Tremont Common Stock, including approximately 36,000 shares
previously held by the Company, and Valhi held an additional 64% of the
outstanding Tremont Common Stock. Effective with the close of business on
December 31, 2000, the Company contributed substantially all of its Tremont
Common Stock, and Valhi contributed all of its Tremont Common Stock, to a newly
formed company, TGI, in return for a 20% and 80% respective ownership interest
in TGI. After the contributions, TGI held the 80% of Tremont Common Stock
previously owned by the Company and Valhi. The Company's stock of TGI is
redeemable at the option of the Company for fair value based upon the value of
the underlying Tremont Common Stock.
Tremont Loan Agreement. In February 2001, NL Environmental Management
Services, Inc., ("EMS") a majority-owned subsidiary of the Company, made a
revolving loan of $13.4 million to Tremont. The amount available under the
revolving loan is reduced from the original principal amount by $250,000 each
quarter beginning June 30, 2001, bears interest of 2% above the prime rate,
carries a commitment fee of 1/2 of 1% per annum of the unused line and is due
March 31, 2003. The loan is collateralized by 10.2 million shares of NL Common
Stock owned by Tremont. The creditworthiness of Tremont is dependent in part on
the value of the Company as Tremont's interest in the Company is one of
Tremont's more substantial assets. At December 31, 2001, the outstanding loan
balance was $12.7 million.
Trust Loan Agreement. In May 2001, a wholly owned subsidiary of EMS
loaned $20 million to the Harold C. Simmons Family Trust No. 2 (the "Family
Trust") under a $25 million revolving credit agreement. The loan was approved by
special committees of the Company's and EMS's Boards of Directors. The loan
bears interest at the prime rate (6% at December 31, 2001), is due on demand
upon sixty days notice and is collateralized by 13,749 shares, or approximately
35%, of Contran's outstanding Class A voting common stock and 5,000 shares, or
100%, of Contran's Series E Cumulative preferred stock, both of which are owned
by the Family Trust. The value of this collateral is dependent in part on the
value of the Company as Contran's interest in the Company, through its
beneficial ownership of Valhi, is one of Contran's more substantial assets. At
December 31, 2001, $5 million was available for additional borrowing by the
Family Trust. At December 31, 2001, the outstanding loan balance was $20
million.
Distribution of Accrued SERP Amounts. In 2001, the MDC Committee
directed that the Company amend the SERP to provide for the distribution of the
accrued balance in each SERP participant's account and the payment of future
SERP benefits to participants as accrued, thus reducing the Company's interest
costs. In connection with the amendment, the Company paid $1,761,661, $195,986,
$1,739,924, $481,164, and $176,692, to Dr. Wigdor, Ms. Alderton, and Messrs.
Martin, Garten and Hardy, respectively, which represented the accrued vested
balance in each of their SERP accounts with interest. These accrued amounts were
previously reported as compensation in the years accrued as discussed in Note 5
to the Summary Compensation Table.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order to be included in the Company's 2002 Proxy Statement and form
of proxy, shareholder proposals for the 2002 Annual Meeting of Shareholders must
be received at the principal executive offices of the Company, 16825 Northchase
Drive, Suite 1200, Houston, Texas 77060, Attention: Mr. David B. Garten,
Secretary, not later than December 15, 2002. All such proposals shall be treated
in accordance with applicable rules administered by the Commission.
2001 ANNUAL REPORT ON FORM 10-K; HOUSEHOLDING
A copy of the Company's 2001 Annual Report on Form 10-K, as filed with
the Commission, may be obtained without charge by writing: Investor Relations
Department, NL Industries, Inc., 16825 Northchase Drive, Suite 1200, Houston,
Texas 77060. The Annual Report on Form 10-K may also be accessed on the
Company's website at www.nl-ind.com. The SEC recently approved a new rule
concerning the delivery of annual reports and proxy statements. It permits a
single set of these reports to be sent to any household at which two or more
stockholders reside if they appear to be members of the same family. Each
stockholder continues to receive a separate proxy card. This procedure, referred
to as householding, reduces the volume of duplicate information stockholders
receive and reduces mailing and printing expenses. A number of brokerage firms
have instituted householding. In accordance with a notice sent earlier this year
to certain beneficial shareholders who share a single address, only one annual
report and proxy statement will be sent to that address unless any stockholder
at that address gave contrary instructions. However, if any such beneficial
stockholder residing at such an address wishes to receive a separate annual
report or proxy statement in the future, please contact the company at the above
address or call (281) 423-3332.
OTHER MATTERS
The Board does not know of any business except as described above which
may be presented for consideration at the Annual Meeting. If any business not
described in this Proxy Statement should properly come before the Annual
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on those matters in accordance with their best
judgment.
NL INDUSTRIES, INC.
Houston, Texas
March 28, 2002
NL INDUSTRIES, INC.
16825 NORTHCHASE DRIVE, SUITE 1200
HOUSTON, TEXAS 77060
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 8, 2002
The undersigned hereby appoints David B. Garten and Robert D. Hardy and each of
them, the proxy and attorney-in-fact for the undersigned, with full power of
substitution in each, to represent the undersigned and to vote on behalf of the
undersigned at the Annual Meeting of Shareholders of NL Industries, Inc. to be
held on May 8, 2002, and at any adjournment or postponement of such meeting (the
"Annual Meeting"), all shares of Common Stock of NL Industries, Inc. standing in
the name of the undersigned or which the undersigned may be entitled to vote on
the matters described on the reverse side.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NL INDUSTRIES,
INC.
You are encouraged to specify your voting choices by marking the appropriate
boxes on the reverse side of this card but you need not mark any boxes if you
wish to vote in accordance with the Board of Directors' recommendations. The
above-named proxies cannot vote your shares unless you sign, date and promptly
return this card. Please use the enclosed return envelope. This proxy may be
revoked by a proxy accepted at a later date or otherwise as set forth in the NL
Industries, Inc. Proxy Statement that accompanied this proxy card.
SEE REVERSE
SIDE
/X/ Please mark your vote as in this example
This proxy, if properly executed, will be voted as specified below by the
shareholder. If no direction is given, this proxy will be voted "FOR" all
nominees for Director listed below.
The Board of Directors recommends a vote "FOR" all nominees for Director listed
below.
1. Election of Directors.
For Withheld Election of Directors.
/ / / / Nominees: 01. Ann Manix, 02. J. Landis Martin,
03. George E. Poston, 04. Glenn R. Simmons,
05. Harold C. Simmons, 06. General Thomas P. Stafford,
and 07. Steven L. Watson
Withhold authority to vote for the following individual nominees:
- -----------------------------------------------------------------
2. In their discretion, proxies are authorized to vote upon other such
business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
Please sign exactly as shareholder's name appears
on this card. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation or partnership, please sign
full corporate or partnership name and sign
authorized person's name and title.
The undersigned shareholder hereby revokes all
proxies heretofore given by the undersigned to
vote at the Annual Meeting or any adjournments or
postponements thereof.
--------------------------------------------------
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SIGNATURE(S) DATE
Dear Stockholder:
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 the telephone. This eliminates the need to return the
proxy card.
To vote your shares electronically, you must use the control number printed in
the box above, just below the perforation. The series of numbers that appear in
the box above must be used to access the system.
1. To vote over the Internet:
Log on to the Internet and go the Web site
http://www.eproxyvote.com/nl. Internet voting will be available until
12:01 A.M. on May 8, 2002.
2. To vote over the telephone:
On a touch-tone telephone, call 1-877-PRX-VOTE (1-877-779-8683) 24
hours a day, seven days a week. Telephone voting will be available
until 12:01 A.M. on May 8, 2002.
Non-U.S. stockholders should call 1-201-536-8073
Your electronic vote authorizes the named Proxies in the same manner as if you
marked, signed, dated and returned the proxy card. If you vote your shares
electronically, do not mail back your proxy card.
Your vote is important. Thank you for voting.