SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _ )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
(Name of Registrant as Specified In Its Charter)
TITANIUM METALS CORPORATION
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(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 the 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:
Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
April 16, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders of
Titanium Metals Corporation ( TIMET or the Company ), which will be held on
Friday, May 9, 1997, at 10:00 a.m., Mountain Daylight Time, at The Brown Palace
Hotel, 321 Seventeenth Street, Denver, Colorado. In addition to matters to be
acted on at the meeting, which are described in detail in the attached Notice of
Annual Meeting of Stockholders and Proxy Statement, we will update you on the
Company. I hope that you will be able to attend.
Whether or not you plan to attend the meeting, please complete, date, sign and
return the enclosed proxy card or voting instruction form in the accompanying
envelope so that your shares are represented and voted in accordance with your
wishes. Your vote, whether given by proxy or in person at the meeting, will be
held in confidence by the Inspector of Election for the meeting in accordance
with TIMET s Bylaws.
Sincerely,
J. Landis Martin
Chairman of the Board and
Chief Executive Officer
Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Notice of Annual Meeting of Stockholders
To Be Held May 9, 1997
To the Stockholders of Titanium Metals Corporation:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders (the
Meeting ) of Titanium Metals Corporation, a Delaware corporation ( TIMET or
the Company ), will be held on Friday, May 9, 1997, at 10:00 a.m., Mountain
Daylight Time, at The Brown Palace Hotel, 321 Seventeenth Street, Denver,
Colorado, for
the following purposes:
(1) To elect six directors to serve until the 1998 Annual Meeting of
Stockholders and until their successors are duly elected and qualified;
(2) To consider and vote on the Company s 1996 Long Term Performance Incentive
Plan;
(3) To consider and vote on the Company s Senior Executive Incentive
Compensation Plan; and
(4) To transact such other business as may properly come before the Meeting or
any adjournment or postponement thereof.
The Board of Directors of the Company set the close of business on March 19,
1997, as the record date (the Record Date ) for the Meeting. Only holders of
TIMET s common stock, $.01 par value per share, at the close of business on the
Record Date, are entitled to notice of, and to vote at, the Meeting. The stock
transfer books of the Company will not be closed following the Record Date. A
complete list of stockholders entitled to vote at the Meeting will be available
for examination during normal business hours by any TIMET stockholder, for
purposes related to the Meeting, for a period of ten days prior to the Meeting,
at TIMET s corporate offices located at 1999 Broadway, Suite 4300, Denver,
Colorado.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting in person, please complete, date and sign the accompanying
proxy card or voting instruction form and return it promptly in the enclosed
envelope to ensure that your shares are represented and voted in accordance with
your wishes. You may revoke your proxy by following the procedures set forth in
the accompanying Proxy Statement. If you choose, you may still vote in person at
the Meeting even though you previously submitted your proxy.
In accordance with the Company s Bylaws, your vote, whether given by proxy or in
person at the Meeting, will be held in confidence by the Inspector of Election
for the Meeting.
By order of the Board of Directors,
Robert E. Musgraves
Vice President, General Counsel and Secretary
Denver, Colorado
April 16, 1997
Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Proxy Statement
General Information
This Proxy Statement and the accompanying proxy card or voting instruction form
are being furnished in connection with the solicitation of proxies by and on
behalf of the Board of Directors (the Board of Directors ) of Titanium Metals
Corporation, a Delaware corporation ( TIMET or the Company ), for use at the
1997 Annual Meeting of Stockholders of the Company to be held on Friday, May 9,
1997, at 10:00 a.m., Mountain Daylight Time, at The Brown Palace Hotel, 321
Seventeenth Street, Denver, Colorado, and at any adjournment or postponement
thereof (the Meeting ). This Proxy Statement and the accompanying proxy card or
voting instruction form were first mailed to the holders of TIMET s common
stock, $.01 par value per share ( TIMET Common Stock ), on or about April 16,
1997.
Purpose of the Meeting
Stockholders of the Company represented at the Meeting will consider and vote
upon (i) the election of six directors to serve until the 1998 Annual Meeting of
Stockholders of the Company and until their successors are duly elected and
qualified, (ii) a proposal to approve the Company s 1996 Long Term Performance
Incentive Plan (the TIMET Stock Incentive Plan ), (iii) a proposal to approve
the Company s Senior Executive Incentive Compensation Plan (the Senior
Executive Cash Incentive Plan ), and (iv) such other business as may properly
come before the Meeting.
The Company is not aware of any business to be presented for consideration at
the Meeting other than as set forth in items (i)-(iii) above.
Voting Rights and Quorum
The presence, in person or by proxy, of the holders of a majority of the shares
of TIMET Common Stock entitled to vote at the Meeting is necessary to constitute
a quorum for the conduct of business at the Meeting. Shares of TIMET Common
Stock that are voted to abstain from any business coming before the Meeting and
broker/nominee non-votes will be counted as being in attendance at the Meeting
for purposes of determining whether a quorum is present.
At the Meeting, directors of the Company will be elected by a plurality of the
affirmative vote of the outstanding shares of TIMET Common Stock present (in
person or by proxy) and entitled to vote. The accompanying proxy card or voting
instruction form provides space for a stockholder to withhold authority to vote
for any or all nominees for the Board
of Directors. Neither shares as to which authority to vote on the election of
directors has been withheld nor broker/
nominee non-votes will be counted as affirmative votes to elect nominees for the
Board of Directors. However, since director nominees need only receive the vote
of a plurality of the shares represented (in person or by proxy) at the Meeting
and entitled to vote, a vote withheld from a particular nominee will not affect
the election of such nominee.
Except as otherwise required by the Company s Restated Certificate of
Incorporation, any other matter that may be submitted to a stockholder vote,
including the approval of the TIMET Stock Incentive Plan and the Senior
Executive Cash Incentive Plan, will require the affirmative vote of a majority
of the shares represented at the Meeting (in person or by proxy) and entitled to
vote. Shares of TIMET Common Stock that are voted to abstain from any business
coming before the Meeting and broker/nominee non-votes will not be counted as
votes for or against the approval of the TIMET Stock Incentive Plan and the
Senior Executive Cash Incentive Plan or any other matter coming before the
Meeting.
First Chicago Trust Company of New York ( First Chicago ), the transfer agent
and registrar for TIMET Common Stock, has been appointed by the Board of
Directors to ascertain the number of shares represented, receive proxies and
ballots, tabulate the vote and serve as Inspector of Election at the Meeting.
All proxies and ballots delivered to First Chicago shall be kept confidential by
First Chicago in accordance with the Company s Bylaws.
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Meeting is the close of
business on March 19, 1997 (the Record Date ). Only holders of shares of TIMET
Common Stock at the close of business on the Record Date are entitled to vote at
the Meeting. As of the Record Date, there were 31,456,655 shares of TIMET Common
Stock issued and outstanding, each of which will be entitled to one vote on each
matter that comes before the Meeting.
As of the Record Date, Tremont Corporation ( Tremont ) held approximately 30% of
the outstanding shares of TIMET Common Stock. Tremont has indicated its
intention to have such shares represented at the Meeting and to vote such shares
FOR the election of all of the nominees for director set forth in this Proxy
Statement and FOR the approval of the TIMET Stock Incentive Plan and the
Senior Executive Cash Incentive Plan. By agreement, the shares of TIMET Common
Stock held by an affiliate of IMI plc ( IMI ), constituting approximately 6.4%
of the TIMET Common Stock outstanding, are required to be voted in favor of the
four nominees being proposed by Tremont (Messrs. Martin, Dixey, and Compofelice
and Gen. Stafford; collectively the Tremont Representatives ). See Shareholder
Agreements and Security Ownership below. If all of such shares are voted as
indicated and all other outstanding shares of TIMET Common Stock are represented
and voted at the Meeting, (a) the additional affirmative vote of 20% or more of
the TIMET Common Stock entitled to vote will assure the election of the director
nominees other than the Tremont Representatives for director and the approval of
the TIMET Stock Incentive Plan and the Senior Executive Cash Incentive Plan and
(b) the additional affirmative vote of 14% or more of the TIMET Common Stock
entitled to vote will assure the election of the Tremont Representatives. In
addition, all of such nominees for director will be elected if no other person
receives the vote of more shares than the number of shares voted by Tremont.
Proxy Solicitation
This proxy solicitation is being made by and on behalf of the Board of Directors
of the Company. The Company will pay all expenses of this proxy solicitation,
including charges for preparing, printing, assembling and distributing all
materials delivered to stockholders. In addition to solicitation by mail,
directors, officers and regular employees of the Company may solicit proxies by
telephone or personal contact for which such persons will receive no additional
compensation. The Company has retained D.F. King & Co., Inc. to aid in the
solicitation of proxies, at a cost that the Company estimates will not exceed
$2,000. Upon request, the Company will reimburse banking institutions, brokerage
firms, custodians, trustees, nominees and fiduciaries for their reasonable out-
of-pocket expenses incurred in distributing proxy materials and voting
instructions to the beneficial owners of TIMET Common Stock held of record by
such entities.
All shares of TIMET Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instruction indicated in such proxies. If no instructions are indicated,
such shares will be voted (i) FOR the election of the six nominees set forth
below as directors, (ii) FOR approval of the TIMET Stock Incentive Plan, (iii)
FOR approval of the Senior Executive Cash Incentive Plan, and (iv) in the
discretion of the proxy holders on any other matter that may properly come
before the Meeting. Each holder of record of TIMET Common Stock giving the proxy
enclosed with this Proxy Statement may revoke it at any time, prior to the
voting thereof at the Meeting, by (i) delivering to First Chicago a written
revocation of the proxy, (ii) delivering to First Chicago a duly executed proxy
bearing a later date, or (iii) by voting in person at the Meeting. Attendance by
a stockholder at the Meeting will not in itself constitute the revocation of a
proxy previously given.
Proposal-Election of Directors
The Bylaws of the Company currently provide that the Board of Directors shall
consist of six persons. The Bylaws may be amended by the Board of Directors or
by a resolution adopted by the holders of a majority of the shares of TIMET
Common Stock entitled to vote for the election of directors. The six directors
elected at the Meeting will hold office until the 1998 Annual Meeting of
Stockholders of the Company and until their successors are duly elected and
qualified.
All of the nominees set forth below, except Mr. Mikami, are currently directors
of the Company whose term will expire at the Meeting. Mr. Yukiji Tadokoro, a
director of the Company since 1990 and a representative of Union Titanium Sponge
Corporation ( UTSC ), the holder of approximately 10% of the TIMET Common Stock
outstanding, has indicated his intention not to stand for re-election. Pursuant
to an existing agreement with the Company
(see Shareholder Agreements below), UTSC designated Mr. Mikami to take Mr.
Tadokoro s position on the Board, subject to approval by the Company s
stockholders at the Meeting. All nominees have agreed to serve if elected. If
any nominee is not available for election at the Meeting, the proxy will be
voted for an alternate nominee to be selected by the Board of Directors, unless
the stockholder executing such proxy withholds authority to vote for the
election of directors.
The Board of Directors believes that all of its present nominees will be
available for election at the Meeting and will serve if elected.
The Board of Directors recommends a vote FOR the nominees identified below.
Nominees for Director
The following information has been provided by the respective nominees for
election to the Board of Directors:
J. Landis Martin, 51, has been Chairman of the Company and a director since 1987
and Chief Executive Officer of the Company since 1995. He also served as
President of the Company from 1995 to 1996. Mr. Martin has served as Chairman of
Tremont since 1990, as Chief Executive Officer and a director of Tremont since
1988, and except for a period in 1990, President of Tremont since 1987. Mr.
Martin has served as President and Chief Executive Officer of NL Industries,
Inc. ( NL ), a manufacturer of titanium dioxide pigment and specialty chemicals,
since 1987 and as a director of NL since 1986. NL may be deemed to be an
affiliate of the Company. From 1990 until its acquisition by Dresser Industries,
Inc. ( Dresser ) in 1994, Mr. Martin served as Chairman of the Board and Chief
Executive Officer of Baroid Corporation ( Baroid ), an oilfield services
company. Baroid may have been deemed to have been an affiliate of NL and Tremont
for a portion of such period. In addition to Tremont and NL, Mr. Martin is a
director of Dresser, which is engaged in the petroleum services, hydrocarbon
processing and engineering industries, and Apartment Investment Management
Corporation, a real estate investment trust.
Andrew R. Dixey, 47, has been President, Chief Operating Officer and a director
of the Company since February 1996. Prior to this appointment, Mr. Dixey was,
from 1995, Managing Director of IMI Titanium Ltd. ( IMI Titanium ), where he had
responsibility for the titanium interests of IMI in both Europe and North
America. During 1995, Mr. Dixey was Chief Executive Officer of Helix plc, which
is engaged in the scholastic supplies business, and from 1971 to 1994, Mr. Dixey
held various executive positions in the GKN plc Group of companies, a
manufacturer of automobile components.
Joseph S. Compofelice, 47, has been Vice President and Chief Financial Officer
of the Company since 1996 and has been a director of the Company since 1994
(except for the period from March 1996 to July 1996). Since 1994, he has also
been Vice President and Chief Financial Officer of Tremont and NL and, since
1995, a director of NL. Since 1994, Mr. Compofelice has also been Executive Vice
President of Valhi, Inc. ( Valhi ), which is engaged in component products and
waste control and, through NL, in the titanium dioxide pigment and specialty
chemicals industries. Valhi may be deemed to be an affiliate of the Company.
From 1990 until 1993, Mr. Compofelice was Vice President and Chief Financial
Officer of Baroid.
Edward C. Hutcheson, Jr., 51, has been a director of the Company since April
1996. Mr. Hutcheson is co-founder and a director of Castle Tower Corporation
( Castle Tower ), an owner and manager of wireless communication antenna sites
and transmission facilities, since October 1994. He served as Chairman of the
Board of Castle Tower from October 1996 to April 1997 and was President and
Chief Executive Officer of Castle Tower from 1994 through October 1996. From
January 1994 until September 1994, he was involved in private investment
activities leading to the creation of Castle Tower. From 1990 until 1993, Mr.
Hutcheson served as the President, Chief Operating Officer and a director of
Baroid.
Hiroomi Mikami, 57, has been Associate Director and General Manager of the
Investment Planning and Administration Department, Corporate Planning Division
of Mitsui & Co., Ltd. since 1996. From 1994 to 1996,
Mr. Mikami was General Manger of the Investment Planning and Administration
Department, Corporate Planning Division of Mitsui & Co., Ltd. From 1992 to 1994,
Mr. Mikami was General Manager of the Newer Metals Division, Non-Ferrous Metals
Group of Mitsui & Co., Ltd.
General Thomas P. Stafford (retired), 66, has been a director of the Company
since April 1996. Gen. Stafford has served as co-founder of Stafford, Burke and
Hecker, Inc., a Washington-based consulting firm, since 1982. Gen. Stafford
graduated from the United States Naval Academy in 1952. He was commissioned as
an officer in the United States Air Force ( USAF ) and attended the USAF
Experimental Flight Test School in 1958. He was selected as an astronaut in
1962, piloted Gemini VI in 1965 and commanded Gemini IX in 1966. In 1969, Gen.
Stafford was named Chief of the Astronaut Office and was the Apollo X commander
for the first lunar module flight to the moon. He commanded the Apollo-Soyuz
joint mission with the Soviet cosmonauts in 1975. After his retirement from the
USAF in 1979 as Lieutenant General, in which his last assignment was Deputy
Chief of Staff for research, development and acquisitions, he became Chairman of
Gibraltar Exploration Limited, an oil and gas exploration and production
company, and served in that position until 1984, when he joined General
Technical Services, Inc., a consulting firm. Gen. Stafford has served as a
director of Tremont since 1989. Gen. Stafford is also a director of Allied-
Signal Inc., CMI Corporation, Fischer Scientific, Inc., Pacific Scientific
Corporation, Seagate Technologies, Inc., The Wackenhut Corporation and
Wheelabrator Technologies, Inc., and is Chairman of the Board of the Omega Watch
Corporation of America, the United State affiliate of the Omega Watch Company.
For information concerning legal proceedings and certain transactions to which
certain director nominees are parties and other matters, see Certain
Litigation and Certain Relationships and Transactions below.
Board Meetings
The Board of Directors held five meetings in 1996 and took action by written
consent in lieu of a meeting six times in 1996. Each of the directors
participated in at least 75% of the total number of such meetings and of the
committee meetings held during the period for committees on which they served.
Board Committees
The Board of Directors has established the following standing committees:
Audit Committee. The principal responsibilities and authority of the Audit
Committee are to review and recommend to the Board of Directors the selection of
the Company s independent auditors; to review with the independent auditors the
scope and results of the annual auditing engagement and the system of internal
accounting controls; and,
to direct and supervise special audit inquiries. The current members of the
Audit Committee are Gen. Thomas P. Stafford (Chairman), Edward C. Hutcheson, Jr.
and Y. Tadokoro. The Audit Committee held one meeting in 1996.
Management Development and Compensation Committee. The principal
responsibilities and authority of the Management Development and Compensation
Committee (the Compensation Committee ) are to review and approve certain
matters involving executive compensation, including making recommendations to
the Board of Directors regarding certain compensation matters involving the
Chief Executive Officer; to review and approve grants of stock options, stock
appreciation rights and awards of restricted stock under the Company s incentive
plans; except as otherwise delegated by the Board of Directors, to review and
recommend adoption of or revisions to compensation plans and employee benefit
programs; to review and recommend compensation policies and practices and to
prepare such compensation committee disclosures as may be required; to review
and recommend any executive employment contract; and, to provide counsel on key
personnel selection, organization strategies and such other matters as the Board
of Directors may from time to time direct. The current members of the
Compensation Committee are Edward C. Hutcheson, Jr. (Chairman) and Gen. Thomas
P. Stafford. The Compensation Committee held two meetings in 1996 and took
action by written consent three times in 1996.
Nominations Committee. The principal responsibilities and authority of the
Nominations Committee are to review and make recommendations to the Board of
Directors regarding such matters as the size and composition of the Board of
Directors, criteria for director nominations, director candidates, the term of
office for directors and such other related matters as the Board of Directors
may request from time to time. The current members of the Nominations Committee
are Gen. Thomas P. Stafford (Chairman) and Edward C. Hutcheson, Jr. The
Nominations Committee held no meetings in 1996. In 1997, the Nominations
Committee reviewed and made its recommendations to the Board of Directors with
respect to the election of directors at the Meeting. The Nominations Committee
will consider recommendations by stockholders of the Company with respect to the
election of directors if such recommendations are submitted in writing to the
Secretary of the Company and received not later than December 31 of the year
prior to the next annual meeting of stockholders.
Pension and Employee Benefits Committee. The Pension and Employee Benefits
Committee (the Benefits Committee ) is established to oversee the
administration of the Company s pension and employee benefit plans (other than
the TIMET Stock Incentive Plan). The Benefits Committee is currently composed of
Joseph S. Compofelice (Chairman), Robert E. Musgraves (non-director member), and
Mark A. Wallace (non-director member). The Benefits Committee held one meeting
during 1996.
Members of the standing committees will be appointed at the meeting of the Board
of Directors immediately following the Meeting. The Board of Directors has
previously established, and from time to time may establish, other committees to
assist it in the discharge of its responsibilities.
Compensation of Directors
Directors of the Company who are not employees of the Company are paid an annual
retainer of $8,000 in cash plus 400 shares of TIMET Common Stock. In addition,
non-employee directors receive an attendance fee of $1,000 per day for each day
on which they attend in person a meeting of the Board of Directors or a
committee of the Board
of Directors ($350 for telephonic participation). Directors are also reimbursed
for reasonable expenses incurred in attending Board of Directors and committee
meetings.
The Company has adopted a non-employee director compensation plan pursuant to
which each non-employee director was granted, upon consummation of the June 1996
initial public offering of TIMET Common Stock (the IPO ), an option to acquire
625 shares of TIMET Common Stock at $23 per share (the initial public offering
price in the IPO). Non-employee directors were also granted an option to acquire
625 shares on December 30, 1996 at $32.875 per share, and commencing in 1998
will be granted annually on the third trading day after the Company s earnings
release for its previous fiscal year, an option to acquire 1,500 shares at the
last reported sales price of TIMET Common Stock on the Nasdaq National Market on
such date.
Security Ownership
Ownership of TIMET Common Stock
The following table and notes set forth, as of the Record Date, the beneficial
ownership, as defined by the regulations of the Securities and Exchange
Commission (the Commission ), of TIMET Common Stock held by (a) each person or
group of persons known to TIMET to beneficially own more than 5% of the
outstanding shares of TIMET Common Stock, (b) each director or nominee for
director of TIMET, (c) each executive officer of TIMET listed in the Summary
Compensation Table below who is not a director or nominee for director of TIMET
( Named Executive Officers ) and (d) all current executive officers and
directors of TIMET as a group. See footnote 1 for information concerning
individuals and entities which may be deemed to indirectly beneficially own
those shares of TIMET Common Stock directly beneficially owned by Tremont.
Information concerning ownership of Tremont, which may be deemed to be the
Company s parent company, is contained in footnote 1 and under the heading
Ownership of Tremont Common Stock below. Except as set forth in footnote 6
below and under the heading Ownership of TIMET Trust Securities below, no
securities of TIMET s subsidiaries or less than majority owned affiliates
are beneficially owned by any director, nominee for director or executive
officer of TIMET. All information is taken from or based upon ownership
filings made by such persons with the Commission or upon information
provided by such persons to TIMET.
TIMET Common Stock
Name and Address of Amount and Nature of Percent
of
Beneficial Owner Beneficial Ownership TIMET Common Stock
Greater than 5% Stockholders
Tremont Corporation(1)(2) 11,033,075 35.1%
1999 Broadway, Suite 4300
Denver, Colorado 80202
Union Titanium Sponge
Corporation(2) 3,653,230 11.6%
c/o Toho Titanium Company Ltd.
2-13-31 Kohnan
Minato-ku
Tokyo 108, Japan
IMI Americas, Inc.(2)(3) 2,011,305 6.4%
One Cornelius Place
Anoka, Minnesota 55104
Alliance Capital Management L.P. and
The Equitable Companies Incorporated(4)
787 7th Avenue
New York, New York 10019 1,817,000 5.7%
Directors and Nominee
J. Landis Martin(6) 41,267 *
Joseph S. Compofelice(6) 22,353 *
Andrew R. Dixey 17,925 *
Edward C. Hutcheson, Jr. 1,800 *
Hiroomi Mikami -0- *
Gen. Thomas P. Stafford 1,100 *
Named Executive Officers(5)
John P. Monahan 7,100 *
Robert E. Musgraves 8,500 *
All Directors and Executive Officers as a group
(16 persons)(5)(6) 123,945 *
(1) As of the Record Date, Contran Corporation ( Contran ) was the holder of
approximately 3.2% of Tremont s outstanding common stock, $1.00 par value per
share ( Tremont Common Stock ). As of the Record Date, Valhi Group, Inc. ( VGI )
and National City Lines, Inc. ( National ) were the holders of approximately
31.5% and 4.7%, respectively, of the outstanding Tremont Common Stock. In
addition, as of the Record Date, NL and Valmont Insurance Company ( Valmont )
were the holders of 36,167 and 30,490 shares, respectively, of Tremont Common
Stock, representing less than 1% of the outstanding Tremont Common Stock.
Valhi is the holder of 100% of the outstanding common stock of Valmont. Valhi
and Tremont are the holders of approximately 55.6% and 17.7%, respectively, of
the outstanding common stock of NL and together may be deemed to control NL.
VGI, National and Contran are the holders of approximately 74.9%, 10.0% and
6.8%, respectively, of the outstanding common stock of Valhi, and The Combined
Master Retirement Trust (the Master Trust ) is the holder of approximately 0.1%
of the outstanding common stock of Valhi. National, NOA, Inc. ( NOA ) and Dixie
Holding Company ( Dixie Holding ) are the holders of approximately 73.3%, 11.4%
and 15.3%, respectively, of the outstanding common stock of VGI. Contran and NOA
are the holders of approximately 85.7% and 14.3%, respectively, of the
outstanding common stock of National. Contran and Southwest Louisiana Land
Company, Inc. ( Southwest ) are the holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice Agricultural
Corporation, Inc. ( Dixie Rice ) is the holder of 100% of the outstanding common
stock of Dixie Holding. Contran is the holder of approximately 88.7% and 54.3%
of the outstanding common stock of Southwest and Dixie Rice, respectively.
Substantially all of Contran s outstanding voting stock is held by trusts
established for the benefit of Harold C. Simmons children and grandchildren
(the Trusts ), of which Harold C. Simmons is the sole trustee. As sole trustee
of the Trusts, Harold C. Simmons has the power to vote and direct the
disposition of the shares of Contran common stock held by the Trusts. However,
Mr. Simmons disclaims beneficial ownership thereof. The Master Trust is a trust
formed by Valhi to permit the collective investment by trusts that maintain the
assets of certain employee benefit plans adopted by Valhi and related companies.
Harold C. Simmons is the sole trustee of the Master Trust and sole member of the
trust investment committee for the Master Trust. The trustee and members of the
trust investment committee for the Master Trust are selected by Valhi s Board of
Directors. Harold C. Simmons and Glenn R. Simmons are each members of Valhi s
Board of Directors and are participants in one or more of the employee benefit
plans which invest through the Master Trust. However, each such person disclaims
beneficial ownership of the Valhi common stock and Tremont Common Stock held by
the Master Trust, except to the extent of his individual vested beneficial
interest in the assets held by the Master Trust.
Contran s ownership percentages of Valhi and Tremont reported above include 0.2%
of the outstanding shares of Valhi common stock and 2.1% of the outstanding
shares of Tremont Common Stock, respectively, which shares are directly held by
the Contran Deferred Compensation Trust No. 2 (the CDCT No. 2 ). NationsBank
of Texas, N.A. serves as trustee (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 is owes to Harold C.
Simmons. If the CDCT No. 2 assets are insufficient to satisfy such obligations,
Contran must satisfy the balance of such obligations. Pursuant to the terms of
the CDCT No. 2, Contran (i) retains the power to vote the shares held by the
CDCT No. 2, (ii) shares dispositive power with the Trustee over such shares and
(iii) may be deemed the indirect beneficial owner of such shares.
Harold C. Simmons is Chairman of the Board of NL, Chairman of the Board,
President and Chief Executive Officer of Contran, Dixie Holding, NOA, National,
VGI and Valhi, Chairman of the Board and Chief Executive Officer of Dixie Rice
and Southwest, and a director of Tremont. By virtue of the holding of the
offices, the stock ownership and his service as trustee, all as described above,
Mr. Simmons may be deemed to control these entities, and Mr. Simmons and certain
of such entities may be deemed to possess indirect beneficial ownership of the
TIMET Common Stock directly held by Tremont and the Tremont Common Stock held by
certain of such other entities. However, Mr. Simmons disclaims beneficial
ownership of the shares of TIMET Common Stock and Tremont Common Stock
beneficially owned, directly and indirectly, by any of such entities.
In addition, 3,747 shares of Tremont Common Stock are held by Mr. Simmons
spouse, 3,506 shares of Tremont Common Stock are held by the Master Trust, and
250,000 shares of Tremont Common Stock are held by The Harold Simmons
Foundation, Inc. (the Foundation ). The Foundation is a tax exempt foundation
organized and existing exclusively for charitable purposes, of which Mr. Simmons
is Chairman of the Board and Chief Executive Officer. Mr. Simmons disclaims
beneficial ownership of all such shares of Tremont Common Stock (except to the
extent of his individual vested benefiacial interest in the assets held by the
Master Trust).
(2) The shares of TIMET Common Stock shown as beneficially owned by Tremont and
UTSC include 1,508,075 shares and 503,230 shares, respectively, obtainable
within 60 days of the Record Date upon exercise of an option (the IMI Option )
expiring February 15, 1999 granted by IMI Americas Inc. to Tremont (25% of which
was concurrently assigned to UTSC) in connection with the February 1996
acquisition by TIMET of the IMI titanium business (the IMI Titanium
Acquisition ) from IMI at an exercise price of $7.95 per share. In connection
with the IPO, Tremont relinquished its right to acquire 1,615 shares under the
IMI Option, which were sold by IMI in the IPO. UTSC s portion of the IMI Option
reverts to Tremont if not exercised by UTSC on or prior to February 11, 1999.
UTSC is a Delaware corporation, the stockholders of which are Toho Titanium
Company, Ltd. ( Toho ), Nippon Mining and Metals Company, Ltd. ( NMMS ), Nippon
Steel Corporation ( NSC ), Mitsui & Co., Ltd. ( Mitsui Japan ) and Mitsui & Co.
(U.S.A.), Inc. ( Mitsui USA ). The stockholders of UTSC may be deemed to share
beneficial ownership of the TIMET Common Stock held of record by UTSC by virtue
of being stockholders of UTSC, but each expressly disclaims such beneficial
ownership. The business address for Toho is Shinagawa NSS Building 2-13-31,
Kohnan, Minato-ku, Tokyo 108, Japan; for NMMS is 10-1, Toranomon 2-chome,
Minato-ku, Tokyo 105, Japan; for NSC is 6-3 Ohtemachi 2-chome, Chiyoda-ku, Tokyo
100-71, Japan; for Mitsui Japan is 2-1 Ohtemachi 1-chome, Chiyoda-ku, Tokyo,
Japan; and for Mitsui USA is 200 Park Avenue, New York, New York 10166-0130.
(3) All of the outstanding capital stock of IMI Americas Inc. is held, directly
or indirectly, by IMI.
(4) As reported in a Statement on Schedule 13G as filed with the Commission on
February 12, 1997, on behalf of Alliance Capital Management L.P., The Equitable
Companies Inc. and related companies.
(5) The address of all such persons is 1999 Broadway, Suite 4300, Denver,
Colorado 80208. The shares of TIMET Common Stock shown as beneficially owned by
Mr. Martin include 400 shares held by Mr. Martin s daughters, beneficial
ownership of which is disclaimed by Mr. Martin. The shares of TIMET Common Stock
shown as beneficially owned by Mr. Monahan include 100 shares held by Mr.
Monahan s son, beneficial ownership of which is disclaimed by Mr. Monahan. The
shares of TIMET Common Stock shown as beneficially owned by Mr. Musgraves
include
(i) 1,000 shares held by Mr. Musgraves and his wife as joint tenants, and (ii)
1,000 shares held by Mr. Musgraves mother-in-law, beneficial ownership of which
is disclaimed by Mr. Musgraves.
(6) Mr. Martin and Mr. Compofelice are the holders of 3,000 and 2,000,
respectively, of the 65 8% Convertible Preferred Securities, Beneficial
Unsecured Convertible Securities (the TIMET Trust Securities ) of the TIMET
Capital
Trust I. See Ownership of TIMET Trust Securities below. Such TIMET Trust
Securities are convertible into
4,017 and 2,678 shares of TIMET Common Stock, respectively, which amounts are
included in the TIMET Common Stock ownership numbers shown for Mr. Martin and
Mr. Compofelice. No other director or executive officer of the Company holds any
TIMET Trust Securities.
Ownership of Tremont Common Stock
The following table and notes set forth the beneficial ownership, as of the
Record Date, of Tremont Common Stock held by (i) each director or nominee for
director of TIMET, (ii) each Named Executive Officer and (iii) all executive
officers and directors of TIMET as a group. All information has been taken from
or based upon ownership filings made by such persons with the Commission or upon
information provided by such persons to Tremont.
Tremont Common Stock
Name of Amount and Nature of Percent
of
Beneficial Owner Beneficial Ownership Tremont Common Stock
Directors and Nominee
J. Landis Martin(1) 190,918 2.5%
Joseph S. Compofelice(2) 25,000 *
Andrew R. Dixey -0-
Edward C. Hutcheson, Jr. -0-
Hiroomi Mikami -0-
Gen. Thomas P. Stafford(2) 2,000 *
Named Executive Officers
John P. Monahan(2) 14,000 *
Robert E. Musgraves(2) 18,010 *
All directors and executive officers as a group
(16 persons)(1)(2) 243,800 3.3%
(1) The shares of Tremont Common Stock shown as beneficially owned by J. Landis
Martin include 60,000 shares which Mr. Martin has the right to acquire by
exercise of options within 60 days of the Record Date under the Tremont 1988
Long Term Performance Incentive Plan (the Tremont Stock Incentive Plan ) and
510 shares held for the benefit of Mr. Martin under the Savings Plan for
Employees of NL. Such shares also include 2,300 shares held by Mr. Martin s
wife, 1,900 shares held by the Martin s Children Trust No. II of which Mr.
Martin is trustee, and 100 shares held by one of Mr. Martin s daughters, with
respect to all of which shares beneficial ownership is disclaimed by Mr. Martin.
(2) The shares of Tremont Common Stock shown as beneficially owned by Gen.
Thomas P. Stafford, Joseph S. Compofelice, John P. Monahan and Robert E.
Musgraves and all directors and executive officers as a group include 2,000,
15,000, 14,000, 18,000, and 96,500 shares, respectively, which such persons have
the right to acquire by the exercise of options granted pursuant to the Tremont
Corporation 1992 Non-Employee Director Stock Option Plan, in the case of Gen.
Stafford, and under the Tremont Stock Incentive Plan, in the case of the others,
within 60 days of the Record Date. In the case of Mr. Musgraves, such number
also includes 10 shares held by his mother-in-law, beneficial ownership of which
is disclaimed by Mr. Musgraves. See Certain Relationships and
Transactions - Contractual Relationships.
Ownership of TIMET Trust Securities
The TIMET Capital Trust I (the TIMET Trust ) is a statutory business trust
formed under the laws of the State
of Delaware, all of whose common securities are owned by the Company. The TIMET
Trust Securities represent undivided beneficial interests in the TIMET Trust.
The TIMET Trust exists for the sole purpose of issuing the
TIMET Trust Securities and investing in an equivalent amount of 65 8%
Convertible Junior Subordinated Debentures due 2026 (the Debentures ) of TIMET.
The TIMET Trust Securities are convertible, at the option of the holder thereof,
into an aggregate of approximately 5.4 million shares of TIMET Common Stock at a
conversion rate of
1.339 shares of TIMET Common Stock for each TIMET Trust Security. The Company
has effectively fully and unconditionally guaranteed repayment of all amounts
due on the TIMET Trust Securities.
The TIMET Trust Securities were issued pursuant to an offering exempt from
registration under the Securities Act of 1933, as amended, (the Securities
Act ). Pursuant to an agreement with the original purchasers of the TIMET Trust
Securities, TIMET has filed a registration statement (the BUCS Registration
Statement ) under the Securities Act to register, among other things, the TIMET
Trust Securities, the Debentures, the TIMET Common Stock issuable upon the
conversion of the TIMET Trust Securities, and certain other shares of TIMET
Common Stock which are held
by, or may be acquired by, Tremont and UTSC. See Certain Relationships and
Transactions - Registration Rights below. Except as set forth in footnote 6 to
the table under the heading Ownership of TIMET Common Stock no director,
nominee for director or executive officer of TIMET are known to own any TIMET
Trust Securities.
The Company understands that Tremont and related entities may consider acquiring
or disposing of shares of TIMET 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
TIMET Common Stock in the market, an assessment of the business of and prospects
for the Company, financial and stock market conditions and other factors. The
Company may similarly consider such acquisitions of shares of TIMET Common Stock
and acquisition or disposition of securities issued by related parties. Neither
Tremont nor the Company presently intends to engage in any transaction or series
of transactions which would result in the TIMET Common Stock becoming eligible
for termination of registration under the Securities Exchange Act of 1934, as
amended (the Exchange Act ) or ceasing to be traded on a national securities
exchange.
Executive Compensation
Summary of Cash and Certain Other Compensation of Executive Officers
The following table sets forth certain information regarding the compensation
paid by the Company to (i) the Company s Chief Executive Officer and (ii) the
Company s four other most highly compensated executive officers, in each case
for services rendered during the fiscal year ended December 29, 1996.
Summary Compensation Table(1)
Long Term
Compensation
Awards
Securities
Annual Compensation Underlying
All Other
Salary Bonus(5)(6) Options Compensation(7)(8)
Name and Position Year ($) ($) (#) ($)
J. Landis Martin 1996 225,000 940,331 54,000 21,028
Chairman of the Board and 1995 120,000 -0- -0- 2,650
Chief Executive Officer(2)
Andrew R. Dixey 1996 218,750 636,415 45,000 86,600
President and 1995 - - - -
Chief Operating Officer(3)
Joseph S. Compofelice 1996 120,000 410,969 25,500 14,263
Vice President and 1995 90,000 100,000 -0- 4,476
Chief Financial Officer(2)(4)
Robert E. Musgraves 1996 160,000 277,092 18,000 15,338
Vice President, General 1995 120,000 31,200 -0- 5,018
Counsel and Secretary(2)
John P. Monahan 1996 150,000 259,292 18,000 16,896
Vice President- 1995 120,000 31,200 -0- 5,160
Sales and Marketing
(1) Columns required by the regulations of the Commission which would contain no
entries have been omitted. Amounts are shown only for 1995 and 1996 in
accordance with regulations of the Commission based upon the timing of the IPO.
(2) J. Landis Martin, the Company s Chairman and Chief Executive Officer, Joseph
S. Compofelice, the Company s Vice President and Chief Financial Officer, Robert
E. Musgraves, the Company s Vice President and General Counsel, and Mark A.
Wallace, the Company s Vice President-Strategic Change, also serve as officers
of Tremont.
The amounts shown as salary and bonus for Messrs. Martin, Compofelice and
Musgraves represent the full amount paid by the Company for services rendered by
such persons on behalf of TIMET and Tremont during 1995 and 1996. Pursuant to an
intercorporate services arrangement, Tremont reimbursed the Company for
approximately 50% of such amounts in 1995. Mr. Compofelice was not an executive
officer of the Company during 1995. In 1996, pursuant to an intercorporate
services agreement, Tremont reimbursed (or will reimburse) TIMET for
approximately $120,000, $64,000, and $72,000 of the compensation paid to Messrs.
Martin, Compofelice and Musgraves, respectively. The amounts shown for Mr.
Martin do not include a special bonus of $2 million awarded by Tremont in 1996.
Of this amount, $955,000 was paid by Tremont to Mr. Martin in 1996 and the
balance was deferred for future payment (with interest on the unpaid balance at
8.75% per annum).
The Company expects that each of Messrs. Martin, Compofelice and Musgraves will
each devote approximately 10% of his total TIMET/Tremont time during 1997 to
Tremont matters. Accordingly, Tremont will reimburse the Company for such
proportionate percentage of the 1997 salary and bonus paid by TIMET to such
individuals (plus a share of applicable estimated fringe benefits and overhead
expense for each) pursuant to an intercorporate services agreement. See Certain
Relationships and Related Transactions-Contractual Relationships.
Messrs. Martin and Compofelice also serve as officers of NL and are compensated
directly by NL for such services. Mr. Compofelice also serves as an executive
officer of Valhi, which reimburses NL for a proportionate part of
Mr. Compofelice s NL compensation.
(3) Mr. Dixey commenced employment with the Company effective February 15, 1996.
The amounts shown represent amounts paid or accrued either by the Company or the
Company s wholly owned subsidiary, TIMET UK, Ltd. ( TIMET UK ). The portion of
Mr. Dixey s compensation paid by TIMET UK was paid in British Pounds Sterling.
The exchange rate used was L1 = $1.62.
(4) Based upon the recommendation of the Chief Executive Officer and TIMET s and
Tremont s Management Development and Compensation Committees, the TIMET and
Tremont Boards approved a bonus of $100,000 for Mr. Compofelice with respect to
his services on behalf of TIMET and Tremont during 1995.
(5) Under the Company s variable incentive compensation plan applicable to
Messrs. Musgraves and Monahan (the Employee Cash Incentive Plan ), a portion of
the compensation payable to the Company s officers who participate in the
Employee Cash Incentive Plan is based upon the Company s financial performance.
The balance of the compensation payable to the company s officers under the
Employee Cash Incentive Plan is based on the assessed performance of the
individual officer.
Based on the Company s 1995 financial results, all compensation paid under the
Employee Cash Incentive Plan to Messrs. Musgraves and Monahan for such year
related solely to individual performance and no compensation was payable with
respect to the Company s performance. For 1996, the payments under the Employee
Cash Incentive Plan to Messrs. Musgraves and Monahan ($140,800 and $123,000,
respectively) were based upon a combination
of Company performance and assessed individual performance.
None of Messrs. Martin, Dixey or Compofelice has participated in the Employee
Cash Incentive Plan. In February 1996, the Company s Board adopted the Senior
Executive Cash Incentive Plan (the Senior Executive Cash Incentive Plan ),
which is currently applicable to Messrs. Martin, Dixey and Compofelice. Such
plan provides for payments based solely upon Company performance. For 1996,
awards of $272,500, $302,500, and $145,200
were made to Messrs. Martin, Dixey and Compofelice under this plan, which
amounts are included in the Bonus column. The Senior Executive Cash Incentive
Plan is being proposed for approval by the Company s stockholders at the
Meeting. See Proposal III-Senior Executive Cash Incentive Plan below.
(6) In February 1996, in connection with the IMI Titanium Acquisition, the
Company made special cash and stock bonus (the Management Shares ) awards to
certain of its executive officers. Applying the fair value of TIMET Common Stock
at the effective date of grant of the Management Shares, aggregate cash and
stock awards totaling $667,831, $333,915, $265,769, $136,292, and $136,292 were
made to Messrs. Martin, Dixey, Compofelice, Musgraves and Monahan, respectively.
Such amounts are included in the Bonus column.
(7) Such amounts represent (i) matching contributions made or accrued by the
Company pursuant to the savings feature of the Company s Thrift/Retirement Plan,
(ii) retirement contributions made or accrued by the Company pursuant to the
Thrift/Retirement Plan and (iii) life insurance premiums paid by the Company, as
follows:
Savings Match Retirement Contribution Life Insurance
1995 1996 1995 1996 1995 1996
Martin $ 150 $ 13,378 $ 2,400 $ 7,650 -0- -0-
Dixey - - - - - -
Compofelice 900 7,237 3,000 6,450 576 576
Musgraves 1,230 9,000 3,000 5,550 576 788
Monahan 1,200 8,286 3,000 7,650 960 960
(8) The amount for Mr. Dixey represents the amount contributed or accrued by
TIMET UK with respect to Mr. Dixey s TIMET UK pension and supplemental pension
plans. See Pension Plans below.
Pension Plans
The Defined Benefit Retirement Plan for Salaried Employees of Titanium Metals
Corporation (the TIMET Defined Benefit Retirement Plan ) covers substantially
all of the Company s salaried employees who were employed by the Company as of
or prior to December 31, 1988. Such employees generally became eligible to
receive a vested retirement benefit under such plan after completion of five
years of service. Benefits under the TIMET Defined Benefit Retirement Plan are
generally based upon the number of years of service credit, up to 40 years, the
final average compensation of each individual employee, and a percentage of such
employee s eligible earnings. Final average compensation is calculated using the
highest 60 consecutive calendar months of compensation during the last 120
months prior to the date of calculation. Effective December 31, 1988, employees
ceased accruing additional years
of service credit under the TIMET Defined Benefit Retirement Plan. Effective
April 2, 1994, employees also ceased accruing additional credit for increases in
salary under such plan. John P. Monahan, the only individual named in
the Summary Compensation Table above who participated in the TIMET Defined
Benefit Retirement Plan, will be entitled to receive annual payments of
approximately $24,000 pursuant to the TIMET Defined Benefit Retirement Plan upon
reaching age 65.
The TIMET UK Limited Pension Plan (the TIMET UK Pension Plan ) covers
substantially all of TIMET UK s senior salaried employees. Such employees
generally became eligible to receive a retirement benefit under such plan after
completion of two years of service. Benefits under the TIMET UK Pension Plan are
generally formulated on the basis of a straight life annuity based upon the
number of years of pensionable service credited to the participant, up to a
maximum of 32 years, divided by 48 years and multiplied by the final pensionable
pay of the participant after deducting a basic state pension offset. Final
pensionable pay is calculated using the average pay during the highest three
years of employment.
The following table lists annual benefits under the TIMET UK Pension Plan for
the pensionable pay and years of pensionable service set forth below:
Years of Pensionable Service
Final Pensionable Pay 15 20 25 30 35
L82,200 L41,100 L54,800 L54,800 L54,800 L54,800
Final pensionable pay pursuant to the TIMET UK Pension Plan is capped at
L82,200. As of December 31, 1996, Andrew R. Dixey is the only executive named in
the Summary Compensation Table who participates in the TIMET UK Pension Plan.
Because Mr. Dixey s compensation exceeds the earnings cap under the TIMET UK
Pension Plan, his pensionable pay under the TIMET UK Pension Plan is equal to
the earnings cap. As of December 31, 1996,
Mr. Dixey was credited with 1.25 years of pensionable service under the TIMET UK
Pension Plan.
In addition to the TIMET UK Pension Plan, Mr. Dixey participates in a
supplemental pension plan through TIMET UK. The TIMET UK supplemental plan
requires monthly contributions by TIMET UK of 1 12 of 20% of Mr. Dixey s basic
monthly salary over the TIMET UK Pension Plan earnings cap and 20% of Mr.
Dixey s bonus paid during such month in excess of the earnings cap. Upon Mr.
Dixey s retirement, TIMET UK s contributions to the plan are required to be paid
to Mr. Dixey.
Stock Option/SAR Grants in Last Fiscal Year
The following table provides information, with respect to the executive officers
of the Company named in the Summary Compensation Table above, concerning the
grant of stock options under the TIMET Stock Incentive Plan during fiscal year
1996. No stock appreciation rights ( SARs ) have been granted under the TIMET
Stock Incentive Plan. The TIMET Stock Incentive Plan is being proposed for
approval by the Company s stockholder at the Meeting. See Proposal II-TIMET
Stock Incentive Plan.
Potential Realizable
Number of Percent of Value at Assumed Annual
Securities Total Options Rate of Stock Price
Underlying Granted to Exercise or Appreciation for Option
Options Employees in Base Price Expiration Term(5) ($)
Name Granted(1) Fiscal Year ($/share) Date 5% 10%
J. Landis Martin 18,000 10.1% 23.00(2) 6/4/2006 260,362 659,809
18,000 26.00(3) 6/4/2006 206,362 605,809
18,000 29.00(4) 6/4/2006 152,362 551,809
Andrew R. Dixey 15,000 8.4% 23.00(2) 6/4/2006 216,969 549,841
15,000 26.00(3) 6/4/2006 171,969 504,841
15,000 29.00(4) 6/4/2006 126,969 459,841
Joseph S. Compofelice 8,500 4.8% 23.00(2) 6/4/2006 122,949 311,577
8,500 26.00(3) 6/4/2006 97,449 286,077
8,500 29.00(4) 6/4/2006 71,949 260,577
Robert E. Musgraves 6,000 3.4% 23.00(2) 6/4/2006 86,787 219,936
6,000 26.00(3) 6/4/2006 68,787 201,936
6,000 29.00(4) 6/4/2006 50,787 183,936
John P. Monahan 6,000 3.4% 23.00(2) 6/4/2006 86,787 219,936
6,000 26.00(3) 6/4/2006 68,787 201,936
6,000 29.00(4) 6/4/2006 50,787 183,936
(1) Options become exercisable 40% on the second anniversary of the date of
grant and 20% on each of the third, fourth, and fifth anniversaries.
(2) Exercise price is the market value of TIMET Common Stock on the grant date,
calculated as the price to the public in the IPO (the IPO Price ) on such date.
(3) Exercise price is equal to the IPO Price plus $3.00.
(4) Exercise price is equal to the IPO Price plus $6.00.
(5) Pursuant to the rules of the Commission, these amounts reflect the
calculations at assumed 5% and 10% appreciation rates from the IPO Price on the
date of grant. 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 will depend upon the actual
future performance of TIMET Common Stock. No assurance can be made that the
amounts reflected in these columns will be achieved. The potential realizable
value was computed as the difference between the appreciated value
(at the end of the ten-year term of the options) of TIMET Common Stock into
which the 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 $37.46 and $59.66 at the assumed 5% and 10% rates, respectively.
Stock Option Exercises and Holdings
No TIMET stock options were exercised (or exercisable) during the last fiscal
year and no SARs have been granted. Accordingly, the table showing information
concerning the exercise of stock options during the last fiscal year and the
value of unexercised options at the end of the fiscal year has been omitted.
Agreements with Executives
In connection with the employment of Andrew R. Dixey by the Company in February
1996, the Company entered into an agreement with Mr. Dixey which provides, among
other things, that Mr. Dixey may be terminated by the Company at any time. In
the event that such termination is without cause (as defined in the
agreement), the Company has agreed to pay Mr. Dixey one year s base salary upon
termination.
Compensation Committee Interlocks and Insider Participation
Prior to July 1996, the Company s Compensation Committee included, at various
times, former directors Susan E. Alderton, Dr. Ralph L. Cotton, and R. Barry
Pointon, along with J. Landis Martin, the Company s Chairman and Chief Executive
Officer. Since July 1996, the Compensation Committee has been composed of Edward
C. Hutcheson, Jr. (Chairman) and Gen. Thomas P. Stafford.
During 1996, J. Landis Martin served as President and Chief Executive Officer
and a director of NL, Joseph S. Compofelice, the Company s Vice President and
Chief Financial Officer and a director, served as Vice President and Chief
Financial Officer and a director of NL, and Susan E. Alderton, a director of the
Company, served as Vice President and Treasurer of NL. See Certain
Relationships and Transactions-Relationships with Related Parties.
In addition, during 1996, Mr. Martin served as a director of Castle Tower and a
member of the compensation committee of that company s board. For a portion of
1996, Mr. Hutcheson served as President and Chief Executive Officer of Castle
Tower.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company s Board of Directors presents the
following report on executive compensation.
The Compensation Committee is composed of directors who are neither officers nor
employees of the Company, its subsidiaries or affiliates and who are not
eligible to participate in any of the employee benefit plans administered by it.
The Compensation Committee reviews and recommends compensation policies and is
responsible for approving all compensation paid directly by the Company to the
Company s executive officers other than base salary of the Chief Executive
Officer (the CEO ). Any action regarding the base salary of the CEO is reviewed
and approved by the Board after recommendation by the Compensation Committee.
Compensation Program Objectives
The Compensation Committee believes that the Company s primary goal is to
increase stockholder value, as measured by dividends paid on and appreciation in
the value of the Company s equity securities. It is the Compensation Committee s
policy that compensation programs be designed to attract, retain, motivate and
reward employees, including executive officers, who can lead the Company in
accomplishing this goal. It is also the Compensation Committee s policy that
compensation programs maintain a strong risk/reward ratio, with a large
component of cash compensation being tied to the Company s financial results,
creating a performance-oriented environment that rewards employees for achieving
pre-set financial performance levels and increasing stockholder value, thereby
contributing to the long-term success of the Company.
During 1996, the Company s compensation program with respect to its executive
officers, including the CEO, consisted of three primary components: base salary,
variable compensation based upon company and, in certain cases, individual
performance, and non-cash incentive compensation in the form of stock options
granted under the TIMET Stock Incentive Plan.
Base Salaries
The Compensation Committee, in consultation with the CEO, reviews base salaries
for the executive officers other than the CEO generally no more frequently than
annually. The CEO s recommendation and the Compensation Committee s actions in
1996 regarding base salaries were based primarily upon a subjective evaluation
of past and potential future individual performance and contributions and
alternative opportunities that might be available to the executives in question.
Also reviewed was compensation data from companies employing executives in
positions similar to those whose salaries were being reviewed, as well as market
conditions for executives in general with similar skills, background and
performance, both inside and outside of the metals industry (such companies
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.
Effective January 1, 1996, based upon the recommendation of the CEO, the
Compensation Committee approved base salary increases for the following TIMET
Vice Presidents: for Mr. Compofelice from $90,000 to $120,000 (including
compensation for Tremont-related services), for Messrs. Bania and Wallace from
$100,00 to $135,000, for Messrs. Buck and Monahan from $120,000 to $150,000 and
for Mr. Musgraves, from $120,000 to $160,000 (including compensation for
Tremont- related services). The Compensation Committee also approved the base
salary of Mr. Dixey upon his employment as President and Chief Operating Officer
in February 1996, of $250,000 per annum (increasing to $300,000 per annum
effective January 1, 1997).
Cash Incentive Plans
Awards under TIMET s Employee Cash Incentive Plan represent a significant
portion of the potential annual cash compensation to employees of TIMET (from 0%
to 88% of base salary for 1996, depending upon the position held by such
employee) and consist of a combination of awards based on the financial
performance of TIMET and, in some cases, on individual performance. All of the
company s executive officers, other than Mr. Martin, Mr. Dixey and Mr.
Compofelice, were eligible to receive benefits under the Employee Cash Incentive
Plan for 1996.
Potential awards under the Employee Cash Incentive Plan attributable solely to
the performance of TIMET in 1996 were based on TIMET s achieving certain pre-set
return on equity goals, which the Company believes should increase stockholder
value over time if they are met. Performance Levels A, B, C or D are tied to the
Company s achieving a corporate-wide return on equity rate of 3%, 6%, 12% or
24%, respectively. In 1996, the Company achieved a 24.2% return on equity, as
calculated under the Employee Cash Incentive Plan, resulting in a Company-
performance based payout at the D or highest level. Payments made to Named
Executive Officers under this portion of the Employee Cash Incentive Plan for
services rendered in 1996 are included under the Bonus column of the Summary
Compensation Table.
An individual performance award may be made to an executive of TIMET under the
Employee Cash Incentive Plan if such executive s performance objectives were met
during the prior fiscal year. Payments made to Named Executive Officers under
this portion of the Employee Cash Incentive Plan for services rendered in 1995
and 1996 are included under the Bonus column set forth therein.
In 1996, the Board established the Senior Executive Cash Incentive Plan, which
is currently applicable to Mr. Martin, Mr. Dixey and Mr. Compofelice. The Senior
Executive Cash Incentive Plan provides for payments based solely upon Company
performance ranging between 0% for corporate returns on equity of less than 10%
up to 150% of base salary for corporate returns on equity at 30% or greater.
Payments made to these individuals based upon the Company s return on equity of
24.2% for 1996 are included under the column Bonus set forth in the Summary
Compensation Table. The Senior Executive Cash Incentive Plan is being proposed
for approval by the Company s stockholders at the Meeting. See Proposal
IISenior Executive Cash Incentive Plan below.
Apart from the foregoing plans, the Compensation Committee or the Board may from
time to time award other bonuses as the Compensation Committee or Board deems
appropriate from time to time under its general authority or under a separate
discretionary plan.
Stock-Based Compensation
The TIMET Stock Incentive Plan supports the goal of the Compensation Committee
to maximize long-term stockholder value by providing for stock-based
compensation, the value of which is directly related to increases in stockholder
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 Compensation Committee believes that compensation
linked to stock price performance helps focus the executives attention on
management of the Company from the stockholders perspective.
Option grants are intended to provide incentives to increase stockholder value
in the future and to reward past performance by the executive. In 1996, the
Compensation Committee reviewed recommendations by the CEO regarding option
grants to executive officers. Options were granted to executive officers,
including the CEO, in the Compensation Committee s discretion based on a
subjective evaluation regarding each executive s performance and
responsibilities.
In 1996, the Compensation 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
1996 are reported in the Stock Option/SAR Grants in Last Fiscal Year table set
forth above.
To help assure a focus on long-term creation of stockholder value, the
Compensation 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. In 1996, the Compensation Committee granted options to
executive officers in three exercise price tranches. One-third of such options
granted in 1996 are exercisable at the fair market value of the Common Stock
on the date of grant (which was the offering price to the public in the IPO).
The remaining two-thirds of the options are exercisable at levels that are above
the market price on the date of grant. See the Stock Option/SAR Grants During
Last Fiscal Year table above. Although permitted under the TIMET Stock Incentive
Plan, the Compensation Committee did not make or recommend any grants of
restricted stock, stock appreciation rights or other equity-based awards in
1996.
To encourage growth in stockholder value, the Compensation Committee believes
that executives who are in a position to make a substantial contribution to the
long-term success of the Company should have a significant stake in its ongoing
success. Therefore, the Compensation Committee recently established the
following voluntary goals for minimum Common Stock ownership for executive
officers to encourage executives to build their Common Stock ownership.
Executives are encouraged to achieve these ownership goals over the next two
years, and the Committee intends to take into consideration in making future
grants under the TIMET Stock Incentive Plan after 1998, among other things,
whether or not an executive has achieved his or her ownership goals.
The goals established are as follows:
Position Goal (as a multiple of base salary)
Chief Executive Officer 4x
Chief Operating Officer 3x
Chief Financial Officer 3x
Other Vice Presidents 2x
While the foregoing guidelines did not become effective until 1997, the
following chart shows the ownership level of each person named in the Summary
Compensation Table based upon actual year-end 1996 beneficial ownership and base
salary level:
Ownership Actual
Name Multiple Goal Ownership Multiple
J. Landis Martin 4x 6.0x(1)(2)
Andrew R. Dixey 3x 2.4x
Joseph S. Compofelice 3x 6.1x(2)
Robert E. Musgraves 2x 1.5x(1)
John P. Monahan 2x 1.6x(1)
(1) Does not include certain shares as to which individual disclaims
beneficial ownership. See footnote (5) to table appearing under the heading
Security Ownership-Ownership of TIMET Common Stock.
(2) Includes certain TIMET Trust Securities as though converted into
TIMET Common Stock. See footnote (6) to table appearing under the heading
Security Ownership-Ownership of TIMET Common Stock.
Tax Code Limitation on Executive Compensation Deductions
In 1993, Congress amended the Internal Revenue Code of 1986, as amended (the
Tax Code ) to impose 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 transition rules and exceptions for compensation
received pursuant to non-
discretionary performance-based plans approved by such company s stockholders.
The Company is seeking stockholder approval with respect to the TIMET Stock
Incentive Plan and the Senior Executive Cash Incentive Plan at the Meeting. The
Compensation Committee believes that payments made pursuant to these two plans,
assuming their approval by stockholders at the Meeting, will qualify for
exemption from the deductibility limit as performance-based compensation. The
Compensation Committee does not currently believe that any other existing
compensation program of the Company could give rise to a deductibility
limitation at current executive compensation levels. The Compensation Committee
intends to periodically review the compensation plans of the Company to
determine whether further action in respect of this limitation is warranted.
Chief Executive Officer Compensation
In 1996, the Board approved, upon the recommendation of the Compensation
Committee, a base annual salary increase for Mr. Martin from $120,000 to
$225,000 (including compensation for Tremont-related services). The Compensation
Committee and the Board took into account a number of factors, including those
set forth above
with respect to other executive officers, along with the increased amount of
time Mr. Martin was now devoting to the Company, the lack of any increase in his
base salary since it was initially established in 1992, and the recently
improved financial performance of the Company.
The foregoing report on executive compensation has been furnished by the
Company s Compensation Committee of the Board of Directors.
Management Development and Compensation Committee
Edward C. Hutcheson, Jr. (Chairman)
General Thomas P. Stafford
Proposal II-TIMET Stock Incentive Plan
General
The Board believes that long-term stock-based incentives are an important
element of compensation in order to attract and retain high quality employees
and to maximize long-term stockholder values by tying the value of the
compensation directly to increase in stockholder values. Consequently, in
conjunction with the IPO in 1996, the Compensation Committee recommended, and
the Board and the Company s pre-IPO stockholders approved, the TIMET Stock
Incentive Plan. Prior to this date, certain employees of the Company, including
executive officers, had been granted stock-based awards under a similar plan
maintained by Tremont.
As previously discussed, certain provisions of the federal tax laws would
increase the cost to the Company of making stock-based compensation payments in
future years by eliminating the deductibility by the Company of annual
compensation paid to certain executive officers in excess of $1 million. Certain
exceptions are made for compensation which qualifies as performance-based
compensation under the Tax Code and, on a transitional basis, for companies
which have undertaken recent public offerings.
While the approvals of the TIMET Stock Incentive Plan received in 1996 will
afford the Company the benefit of a short-term transitional exception from these
limitations, in order that payments under the TIMET Stock Incentive Plan qualify
long-term as performance-based compensation, among other criteria, the TIMET
Stock Incentive Plan must be approved by stockholders of the Company following
the IPO. Consequently, the TIMET Stock Incentive Plan is being presented to
stockholders for their consideration at the Meeting.
The following summary of the TIMET Stock Incentive Plan is qualified in its
entirety by reference to the complete text of such plan, a copy of which is
attached to this Proxy Statement as Appendix A.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF TIMET COMMON
STOCK PRESENT (IN PERSON OR BY PROXY) AND ENTITLED TO VOTE AT THE MEETING IS
NECESSARY TO CONSTITUTE APPROVAL OF THE TIMET STOCK INCENTIVE PLAN BY
STOCKHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
TIMET STOCK INCENTIVE PLAN.
Summary Description of the Plan
General
The Stock Incentive Plan was approved in 1996 by the Board of Directors and the
stockholders of the Company prior to the IPO. The purpose of the TIMET Stock
Incentive Plan is to advance and promote the interests of the Company and its
employees and stockholders by encouraging and enabling the acquisition of TIMET
Common Stock by its key employees or individuals who perform significant
services for the benefit of the Company. The TIMET Stock Incentive Plan is also
intended as a further means of attracting and retaining outstanding employees
and of promoting a closer commonality of interests between employees and
stockholders of the Company. The TIMET Stock Incentive Plan authorizes the
issuance of up to 3,125,000 shares of TIMET Common Stock (which may be
authorized and unissued shares, treasury shares or a combination thereof) and
authorizes grants of shares of TIMET Common Stock containing vesting and other
restrictions ( Restricted Stock ), nonqualified stock options ( Nonqualified
Stock Options ), incentive stock options ( ISOs and, together with Nonqualified
Stock Options, Options ) and stock appreciation rights ( SARs ) or any
combination of such grants as the Compensation Committee determines in its sole
discretion to grant to eligible employees of the Company and its subsidiaries or
individuals who perform significant services for the benefit of the Company
during the term of effectiveness of the TIMET Stock Incentive Plan.
Officers and key employees of the Company or any subsidiary, including officers
who are members of the Board
of Directors and individuals who perform significant services for the benefit of
the Company, are eligible to participate in the TIMET Stock Incentive Plan. No
member of the Compensation Committee is eligible to be granted an award under
the TIMET Stock Incentive Plan while serving on the Compensation Committee. No
director is eligible to serve on the Compensation Committee if he is eligible to
receive grants under the TIMET Stock Incentive Plan or a similar plan of the
Company during the year preceding his election. The total number of persons who
may receive grants of Options, SARs or awards of Restricted Stock under the
TIMET Stock Incentive Plan will be designated by the Compensation Committee at
its sole discretion and is estimated by the Company to be approximately 150
persons. All grants or awards under the TIMET Stock Incentive Plan will be made
in consideration of services rendered or to be rendered by the recipients
thereof.
The TIMET Stock Incentive Plan provides for adjustments to reflect any future
stock dividends, stock splits or other relevant capitalization changes. The
TIMET Stock Incentive Plan provides that the aggregate number of underlying
shares issuable pursuant to grants of Nonqualified Stock Options, ISOs, SARs and
Restricted Stock awards to a given individual pursuant to the TIMET Stock
Incentive Plan may not exceed 250,000 during any fiscal year. Options and SARs
are not transferrable except by will or under the laws of descent and
distribution, except that the Compensation Committee may permit transfer to
immediate family members and trusts or partnerships for family members of
grantees.
Nonqualified Stock Options
Nonqualified Stock Options (those that are not qualified under Section 422 of
the Tax Code) to be granted under
the TIMET Stock Incentive Plan generally become exercisable only after specified
periods of service subsequent to the grant (for example, 40% after two years,
60% after three years, 80% after four years and 100% after five years) and may
be exercised in any sequence, regardless of the date of award or the existence
of any outstanding Nonqualified
Stock Option or ISO. The Compensation Committee shall have the authority to
accelerate the date on which a Nonqualified Stock Option shall become
exercisable by the grantee. The number of shares and other terms of the grant of
Nonqualified Stock Options are determined by the Compensation Committee at the
time of the award.
A Nonqualified Stock Option may be granted to an eligible employee either alone
or with an attached SAR. Nonqualified Stock Options will be exercisable for not
more than ten years from the date of the grant (unless extended within the
discretion of the Compensation Committee for a further period of up to three
years). No Nonqualified Stock Option will be granted at a price of less than
100% of the fair market value per share of TIMET Common Stock at the time the
Nonqualified Stock Option is granted. As determined by the Compensation
Committee in granting any Nonqualified Stock Option, upon exercise of such
Nonqualified Stock Option, the Nonqualified Stock Option price, and any
withholding tax required by law, may be paid in cash, or, at the discretion of
the Compensation Committee, shares of TIMET Common Stock (valued at their fair
market value on the date of exercise) or by a combination of cash and such
shares. The Compensation Committee may grant to one or more holders of
Nonqualified Stock Options, in exchange for their voluntary surrender and the
cancellation of such Nonqualified Stock Options and their corresponding SARs, if
any, new Options having different exercise prices than the exercise prices
provided in the Nonqualified Stock Options so surrendered and canceled and
containing such other terms and conditions as the Compensation Committee may
deem appropriate.
Incentive Stock Options
An ISO may be granted to an employee either alone or with an attached SAR. The
number of shares and other terms of grant are determined at the time of the
grant, provided, however, that in no event shall the term of an ISO be more than
ten years (no more than five years in the case of a more-than-10% stockholder).
The price payable upon exercise shall be not less than 100% of the fair market
value of shares at the time of grant (110% for a more-than-10% stockholder), and
may be paid either in cash or with other shares of TIMET Common Stock or a
combination of cash and shares.
In the absence of acceleration by the Compensation Committee or otherwise under
the TIMET Stock Incentive Plan, ISOs generally become exercisable only after
specified periods of service subsequent to the grant (for example, 50% after
three years or 100% after four years). The aggregate fair market value (at the
time an ISO is granted) of shares with respect to which ISOs become exercisable
for the first time during any calendar year may not exceed $100,000.
If an ISO is granted with an attached SAR, the features of such SAR will be
similar to those discussed below under -Stock Appreciation Rights, but it will
be subject to the same terms as the related ISO as to date of expiration,
difference between fair market value on the Appreciation Date (defined below)
and date of award, transferability and eligibility to exercise. In addition,
such SAR may be exercised only when the market price of the shares subject to
the ISO exceeds the option exercise price.
Stock Appreciation Rights
The TIMET Stock Incentive Plan authorizes the Compensation Committee to grant a
SAR to eligible employees either separately or attached to an Option. In the
case of a SAR that is related to an Option, such SAR may be granted either at
the time of grant of such Option or at any time thereafter and would be
exercisable only to the extent the related Option is exercisable. Each grantee
of SARs is permitted to designate an appreciation date ( Appreciation Date )
with respect to which stock appreciation will be measured. Upon the exercise of
a SAR, the holder is entitled to receive from the Company without the payment of
any cash (except for any withholding taxes) an amount equal to the product of
(i) the excess of (x) the per share market value of TIMET Common Stock at the
Appreciation Date, over (y) the per share fair market value on the date of
grant, and (ii) the number of shares of TIMET Common Stock subject to such SAR.
The right to designate an Appreciation Date generally arises only after
specified periods of service which are the same as the periods for exercise of
an Option. The Compensation Committee shall, however, have the authority to
advance the grantee s right to designate an Appreciation Date. Generally, the
SAR terminates ten years from the date of grant. Payment with respect to a SAR
may be made in cash, shares of TIMET Common Stock or a combination of both as
determined by the Compensation Committee. Upon the exercise of a SAR, the
related Option (if any), or the portion thereof for which such SAR is exercised,
shall terminate. Upon the exercise or expiration of an Option related to a SAR,
such SAR, or such portion thereof for which such Option is exercised, shall
terminate.
Restricted Stock
The Compensation Committee will have the authority to award Restricted Stock and
to determine the terms, conditions and restrictions in connection with the
issuance or transfer of Restricted Stock, including the period during which the
restrictions are applicable. The terms, conditions and restrictions, including
the lapse of such restrictions, may differ with respect to each grantee. In
addition, awards of Restricted Stock may be made on a selective basis. Shares of
Restricted Stock awarded under the TIMET Stock Incentive Plan will be restricted
as to transfer and subject to
forfeiture during a specified period or periods. Shares awarded, and the right
to vote such shares and to receive dividends thereon, may not be sold, assigned,
transferred, pledged or otherwise encumbered during the period of restriction
applicable to such shares other than by will or by the laws of descent and
distribution. During such period of restriction, the recipient has all other
rights of a stockholder, including but not limited to the right to receive
dividends and vote such Restricted Stock. The Compensation Committee has the
discretion to remove any or all restrictions whenever it may determine that such
action is appropriate. Generally, the restriction period expires three years
from the date of the original grant. No award of Restricted Stock may be made
under the TIMET Stock Incentive Plan after the tenth anniversary of the
effective date of the TIMET Stock Incentive Plan.
Termination and Amendment
The Board may amend or terminate the TIMET Stock Incentive Plan at any time, but
no such action may affect or in any way impair any rights which have accrued
under the TIMET Stock Incentive Plan, and no amendment may increase the total
number of shares which may be issued under the TIMET Stock Incentive Plan,
reduce the minimum purchase price for shares subject to options, or extend the
period during which Options, SARs and Restricted Stock may be granted without
the approval of the holders of a majority of shares of the TIMET Common Stock.
Federal Income Tax Consequences
The following is a summary of the principal current federal income tax
consequences of transactions under the TIMET Stock Incentive Plan. It does not
describe all federal tax consequences under the TIMET Stock Incentive Plan, nor
does it describe state, local or foreign tax consequences.
ISOs. No taxable income is realized by the optionee upon the grant or exercise
of an ISO. However, the exercise of an ISO may result in alternative minimum tax
liability for the optionee. If no disposition of shares issued to an optionee
pursuant to the exercise of an ISO is made by the optionee within two years from
the date of grant or within one year after the transfer of such shares to the
optionee, then upon sale of such shares, any amount realized in excess of the
exercise price will be taxed to the optionee as a long-term capital gain and any
loss sustained will be a long-term capital loss, and no deduction will be
allowed to the Company for federal income tax purposes.
If the shares of TIMET Common Stock acquired upon the exercise of an ISO are
disposed of prior to the expiration of the two-year and one-year holding periods
described above, generally the optionee will realize ordinary income in the year
of disposition in an amount equal to the excess (if any) of the fair market
value of the shares at exercise (or, if less, the amount realized on an arms -
length sale of such shares) over the exercise price thereof, and the Company
will be entitled to deduct such amount. Any further gain realized will be taxed
as short-term or long-term capital gain and will not result in any deduction by
the Company. Special rules may apply where all or a portion of the exercise
price of the incentive stock option is paid by tendering shares of TIMET Common
Stock.
If an ISO is exercised at a time when it no longer qualifies for the tax
treatment described above, the Option is treated as a Nonqualified Stock Option.
Generally, an ISO will not be eligible for the tax treatment described above if
it is exercised more than three months following termination of employment (one
year following termination of employment by reason of permanent and total
disability), except in certain cases where the ISO is exercised after the death
of an optionee.
Nonqualified Stock Options. With respect to Nonqualified Stock Options granted
under the TIMET Stock Incentive Plan, no income is realized by the optionee at
the time the Option is granted. Generally, at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise,
and
the Company receives a tax deduction for the same amount, and at disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss, depending on how long the shares
have been held.
SARs. The grant of an SAR does not result in income for the grantee or in a
deduction for the Company. Upon the exercise of an SAR, the grantee generally
recognizes ordinary income and
the Company is entitled to a deduction measured by the fair market value of the
shares plus any property received by the grantee.
Restricted Stock. A recipient of Restricted Stock generally will be subject to
tax at ordinary income rates on the fair market value of the stock at the time
the stock is either transferable or is no longer subject to forfeiture, less any
amount paid for such stock. The Company is entitled to a corresponding tax
deduction for the amount of ordinary income recognized by the recipient.
However, a recipient who so elects under Section 83(b) of the Tax Code, within
30 days of the date of issuance of the Restricted Stock will realize ordinary
income on the date of issuance equal to the fair market value of the shares of
Restricted Stock at that time (measured as if the shares were unrestricted and
could be sold immediately), less any amount paid for such stock. If the shares
subject to such election are forfeited, the recipient will not be entitled to
any deduction, refund or loss for tax purposes with respect to the forfeited
shares. Upon sale of the shares after the forfeiture period has expired, the
appreciation or depreciation since the shares became transferable or free from
risk of forfeiture (or, if a Section 83(b) election was made, since the shares
were issued) will be treated as long-term or short-term capital gain or loss.
The holding period to determine whether the recipient has long-term or short-
term capital gain or loss begins when the restriction period expires (or upon
earlier issuance of the shares, if the recipient elected immediate recognition
of income under Section 83(b)). If Restricted Stock is received in connection
with another award under the TIMET Stock Incentive Plan (for example, upon
exercise of an Option), the income and the deduction, if any, associated with
such award may be deferred in accordance with the rules described above for
Restricted Stock.
Previous Awards
The TIMET Stock Incentive Plan was first effective in 1996. Grants of Options
made in 1996 to the executive officers named in the Summary Compensation Table
above are set forth under the heading Stock Option/SAR Grants in Last Fiscal
Year above. No SARs or Restricted Stock have been awarded under the TIMET Stock
Incentive Plan. No Options have yet become exercisable under the TIMET Stock
Incentive Plan.
Proposal III-Senior Executive Cash Incentive Plan
General
The Board believes that short-term cash incentive compensation is an important
element of compensation in order to attract and retain high quality employees
and to provide incentives to such employees to maximize the Company s annual
financial performance and thereby increase stockholder value. Consequently, the
Company has maintained for a number of years the Employee Cash Incentive Plan
applicable to a significant portion of TIMET s domestic workforce and certain
key managers in foreign locations.
As previously discussed, certain provisions of the federal tax laws would
increase the cost to the Company of making such cash incentive compensation
payments in future years by eliminating the deductibility by the Company of
annual compensation paid to certain executive officers in excess of $1 million.
Certain exceptions are made for compensation which qualifies as performance-
based compensation under the Tax Code and, on a transitional basis, for
companies which have undertaken recent public offerings.
To this end, during 1996 the Compensation Committee recommended and the Board
approved the Senior Executive Cash Incentive Plan, a separate cash incentive
program applicable only to certain senior executives of the Company.
Participation in the Senior Executive Cash Incentive Plan is in lieu of
participation in the Employee Cash Incentive Plan. In order that payments under
the Senior Executive Cash Incentive Plan qualify as performance-based
compensation under the Tax Code, among other criteria, the Senior Executive
Cash Incentive Plan must be approved by stockholders of the Company.
Consequently, the Senior Executive Cash Incentive Plan is being presented to
stockholders for their consideration at the Meeting.
The following summary of the Senior Executive Cash Incentive Plan is qualified
in its entirety by reference to the complete text of such plan, a copy of which
is attached to this Proxy Statement as Appendix B.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF TIMET COMMON
STOCK PRESENT (IN PERSON OR BY PROXY) AND ENTITLED TO VOTE AT THE MEETING IS
NECESSARY TO CONSTITUTE APPROVAL OF THE SENIOR EXECUTIVE CASH INCENTIVE PLAN BY
STOCKHOLDERS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
SENIOR EXECUTIVE CASH INCENTIVE PLAN.
Summary Description of Plan
The individuals eligible to participate in the Senior Executive Cash Incentive
Plan will be those executive officers of the Company (Vice President or above)
determined by the Compensation Committee from time to time. Currently, Messrs.
Martin, Dixey and Compofelice are the only participants in the Senior Executive
Cash Incentive Plan. The Senior Executive Cash Incentive Plan provides that
participants in such plan are not also eligible to participate in the Employee
Cash Incentive Plan.
The Compensation Committee (or such other committee as is designated by the
Board from time to time which consists of two or more members meeting the
requirements of Section 162(m) of the Tax Code) shall be responsible for
administration of the Senior Executive Cash Incentive Plan. Except as may
otherwise be required in the future by Section 162(m) of the Tax Code from time
to time, the Compensation Committee, acting in its sole discretion and without
the need for any notice, at any time and from time to time, may modify or amend
the Senior Executive Cash Incentive Plan or suspend or terminate such plan in
its entirety.
Cash awards under the Senior Executive Cash Incentive Plan are based strictly
upon the Company s financial performance in a given fiscal year and not on any
individual performance criteria. Prior to the 90th day of the current fiscal
year, the Compensation Committee will establish the applicable objective
financial performance criteria for determining the Company performance levels.
Currently, under the plan, the financial performance of the Company is
determined based upon corporate-wide return on equity (as calculated under the
Senior Executive Cash Incentive Plan). Initially, at a return on equity of less
than 10%, no bonus is payable. At returns on equity of more than 10% and up to
30%, awards range from 50% to 150% of the participant s eligible earnings, with
each 1% increase in return on equity above 10% resulting in an increase in award
of 5% of eligible earnings over the 50% minimum for this level (e.g., a return
on equity of 15% results in an award equal to 75% of eligible earnings). Awards
are capped at 150% of eligible earnings. No participant may receive payments
under the Senior Executive Cash Incentive Plan
in excess of $2 million annually. The amounts that any participant in the Senior
Executive Cash Incentive Plan will receive is not determinable in advance prior
to the completion of the Company s fiscal year and the certification by the
Compensation Committee of the actual performance level achieved by the Company
for such year.
Within 90 days of the end of each fiscal year, the Compensation Committee
determines and certifies the performance level achieved by the Company for such
fiscal year. Awards are paid in cash as soon as practicable thereafter.
Except in the case of death or disability (as determined under the plan) or
except as otherwise determined by the Compensation Committee, a participant must
be employed by the Company on the last day of the fiscal year to be eligible to
receive any award under the Senior Executive Cash Incentive Plan with respect to
such fiscal year.
Nothing in the Senior Executive Cash Incentive Plan shall interfere with or
limit in any way the right of the Company to terminate or change a participant s
employment at any time or confer on any participant any right to continue in the
employ of the Company for any period of time or to continue such participant s
present or any other rate of compensation. No participant shall have any right
to future continued participation in the Senior Executive Cash Incentive Plan.
No right or interest of any participant in the Senior Executive Cash Incentive
Plan shall be assignable or transferable, or subject to any lien, directly, by
operation of law or otherwise, including execution, levy, garnishment,
attachment, pledge, or bankruptcy.
Previous Awards
The Senior Executive Cash Incentive Plan was first effective for fiscal year
1996. Awards under the program for 1996, based upon a calculated return on
equity of 24.2%, were $272,500 to Mr. Martin, $302,500 to Mr. Dixey,
and $145,200 to Mr. Compofelice. Such amounts are included in the Bonus column
of the Summary Compensation Table above. No other directors, nominees for
director, executive officers, or employees of TIMET are currently participants
in the Senior Executive Cash Incentive Plan.
Performance Graph
Set forth below is a line graph comparing the cumulative total stockholder
return on TIMET Common Stock against the cumulative total return of (a) the S&P
Composite 500 Index and (b) a self-selected peer group for the period commencing
June 4, 1996 (the date upon which TIMET Common Stock was first registered under
Section 12 of the Exchange Act) through December 31, 1996. The self-selected
peer group is comprised of RMI Titanium Company and Oregon Metallurgical
Corporation, TIMET s principal domestic competitors in the titanium metals
industry for whom meaningful stock performance data is available. The graph
shows the value at December 31, 1996, assuming an original investment of $100
and reinvestment of cash dividends and other distributions to stockholders.
Comparison of Cumulative Return Among Titanium Metals Corporation,
the S&P Composite 500 Index and the Self-Selected Peer Group
Self-Selected
TIMET S&P 500 Peer Group
June 4, 1996 $100 $100 $100
December 31, 1996 $143 $111 $122
Certain Relationships and Transactions
Relationships with Related Parties
As set forth under the caption Security Ownership, the Company may be deemed
to be controlled by Harold C. Simmons. The companies and other entities that may
be deemed to be controlled by or related to Mr. Simmons sometimes engage in (i)
intercorporate transactions with related companies such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint
ventures, partnerships, loans, options, advances or funds on open account, and
sales, leases and exchanges of assets, including securities issued by both
related and unrelated parties and (ii) 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 minority equity interest in another related party. The Company
continuously considers, reviews and evaluates, and understands that Contran,
Tremont and related entities consider, review and evaluate such transactions.
Depending upon the business, tax and other objectives then relevant, 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 which are, in the opinion of the Company, no less
favorable to the Company than could be obtained from unrelated parties.
J. Landis Martin, Chairman of the Board and Chief Executive Officer of the
Company, is also currently Chairman of the Board, Chief Executive Officer and
President of Tremont. Mr. Martin also serves as a director, and President and
Chief Executive Officer of NL. Joseph S. Compofelice, Vice President and Chief
Financial Officer and a director, is also Vice President and Chief Financial
Officer of Tremont, Vice President and Chief Financial Officer and a director of
NL and Executive Vice President of Valhi. Robert E. Musgraves, Vice President
and General Counsel of the Company, is also Vice President and General Counsel
of Tremont. Mark A. Wallace, Vice President-Strategic Change of the Company, is
also Vice President and Controller of Tremont. Such management
interrelationships and intercorporate relationships may lead to possible
conflicts of interest. These possible conflicts of interest may arise from the
duties of loyalty owed by persons acting as corporate fiduciaries to two or more
companies under circumstances in which such companies may have conflicts of
interest. Such individuals divide their time among the companies for which they
serve as executive officers.
Although no specific procedures are in place which govern the treatment of
transactions among the Company and Tremont, the board of directors of each
includes one or more members who are not officers or directors of any entity
that may be deemed to be related to the Company. Additionally, under applicable
principles of law, in the absence of stockholder ratification or approval by
directors who may be deemed disinterested, transactions involving contracts
among companies under common control must be fair to all companies involved.
Furthermore, directors and officers owe fiduciary duties of good faith and fair
dealing to all stockholders of the companies for which they serve.
The Company understands that Tremont and related entities may consider acquiring
or disposing of shares of TIMET 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 TIMET Common Stock in the market, an assessment of the business of and
prospects for the Company, financial and stock market conditions and other
factors. The Company does not presently intend, and understands that Tremont
does not presently intend, to engage in any transaction or series of
transactions which would result in the TIMET Common Stock becoming eligible for
termination of registration under the Exchange Act, or ceasing to be traded on a
national securities exchange.
Contractual Relationships
Effective January 1, 1996, the Company and Tremont entered into an
intercorporate services agreement which provides that the parties will render
certain management, financial, tax and administrative services to each other,
including provision for the reimbursement by Tremont to TIMET for payments for
salary, bonus and stock-bond compensation for executive officers of Tremont. The
term of the agreement is one year, subject to renewal on a quarterly basis. The
Company charged Tremont a net amount of approximately $.4 million under the
intercorporate services agreement in 1996. Tremont expects to pay TIMET a net
amount of approximately $.4 million for services in 1997.
TIMET expects to enter into an intercorporate services agreement with NL in 1997
for the provision of certain financial risk management, tax and administrative
services. TIMET expects to pay to NL approximately $.4 million for such services
provided to TIMET by NL.
As a result of the IPO, the Company repaid certain loans to Tremont in the
aggregate principal amount of $17.7 million together with accrued but unpaid
interest of $4.8 million.
In 1996 in connection with the IPO, IMI and UTSC entered into separate
agreements with the Company and Tremont whereby IMI and UTSC each agreed to
reimburse Tremont for a potion of the cost to Tremont associated with the
exercise of certain Tremont stock options issued to employees of TIMET pursuant
to the Tremont Stock Incentive Plan. The payments are calculated by multiplying
(x) the number of Tremont Common Stock covered by such exercised option by (y)
the difference between (i) the closing sale price of Tremont Common Stock on the
NYSE Composite Tape on the date of exercise not to exceed $34 minus (ii) $16.625
and multiplying the resulting product by (z) 0.16 in the case of UTSC and 0.34
in the case of IMI. The maximum aggregate payments to be made by IMI and UTSC to
Tremont under such agreements are limited to $1.1 million and $520,000,
respectively.
In connection with the operations of the Company s Henderson, Nevada facility,
the Company purchases utility services from Basic Investments, Inc. and its
subsidiaries (collectively, BII ) pursuant to various agreements. During 1995,
the aggregate amount paid by the Company to BII was less than $1 million. A
company 75%-owned by Tremont and 25%-owned by UTSC owns approximately 32% of
BII.
In connection with the 1996 acquisition of IMI Titanium, the Company issued $20
million of subordinated debt to IMI in exchange for a like amount of debt
previously owed to IMI by IMI Titanium Ltd. A portion of the proceeds of the IPO
was used to prepay such debt.
TIMET UK leases its manufacturing facility in Witton, England from an affiliate
of IMI. The leases on the principal facilities are for 30-year terms. TIMET UK
pays aggregate rental thereunder of approximately L650,000 per year, which
amount is subject to adjustment every five years based on changes in the Retail
Prices Index for all items excluding housing as published by HM Government s
Central Statistical Office. The Company has guaranteed the obligations of TIMET
UK under these leases.
In connection with the construction and financing of the Company s Vacuum
Distillation Production ( VDP ) Plant in Henderson, Nevada, UTSC licensed
certain technology to the Company and received, among other consideration, the
right to acquire 4.4 million pounds (5.4 million pounds in 2008) of the
Company s annual production capacity of VDP sponge at agreed-upon prices through
early 1997 and higher formula-determined prices thereafter through 2008. The
Company believes its selling prices to UTSC to be below fair market value and
that such discount represents consideration to UTSC for the licensed technology.
Sales to UTSC in 1993, 1994, 1995 and 1996 were $1 million, $2 million, $9
million and $12 million, respectively.
Toho Titanium Company, Ltd., a stockholder of UTSC, through an intermediary
trading company, is a party to a contract with TIMET UK pursuant to which TIMET
UK purchases titanium sponge. The contract covers up to 3.2 million pounds
during 1996 at firm prices.
The Company believes that the terms of the foregoing intercorporate services
agreement and other transactions with related parties were no less favorable to
the Company than it might have obtained from unaffiliated third parties.
Shareholder Agreements
In connection with the investment by UTSC in the Company, the Company, Tremont,
UTSC, and the stockholders
of UTSC entered into an agreement dated May 30, 1990, as amended (the
Investors Agreement ), that regulates certain aspects of the governance of the
Company. The Investors Agreement provides, among other things, that so long as
UTSC and its stockholders hold at least 10% of the Adjusted Outstanding TMC
Voting Securities : (i) the Board of the Company shall be composed of seven or
fewer members, of whom one shall be designated by UTSC;
(ii) UTSC s approval shall be required for the dissolution or liquidation of the
Company or any of its subsidiaries or the filing by the Company of a petition in
bankruptcy or the commencement by the Company of any other proceeding seeking
relief from its creditors; and (iii) UTSC shall be entitled to receive certain
periodic information about the Company. Adjusted Outstanding TMC Voting
Securities means: (i) all TIMET Common Stock outstanding prior to the IPO
(other than 92,950 shares issued to certain members of management in 1996), (ii)
all shares of TIMET Common Stock issued in the IPO, and (iii) shares of TIMET
Common Stock issued following the IPO (unless the issuance of such shares would
cause UTSC to lose its rights associated with owning 10% of the Adjusted
Outstanding TMC Voting Securities or the termination of the Investors
Agreement, in which case such shares will be counted only if UTSC is afforded
certain pre-emptive rights to avoid such dilution), but does not include shares
issued in connection with any existing or future employee or director stock
option or compensation plan.
The Investors Agreement also provides for: (i) mutual rights of indemnification
between UTSC and the Company
for losses arising from any material breach of a covenant or agreement contained
in the Investors Agreement with respect to various representations and
warranties made in connection with UTSC s investment in the Company;
(ii) certain limitations on the right of UTSC to transfer its shares of TIMET
Common Stock; (iii) a right of first refusal, under certain circumstances, in
favor of Tremont on certain proposed transfers of UTSC s TIMET Common Stock;
(iv) provisions for the arbitration of certain disputes arising under the
Investors Agreement; and (v) termination of the nvestors Agreement in the
event that UTSC and its stockholders or their affiliates, as a group, hold less
than
5% of the Adjusted Outstanding TMC Voting Securities.
In connection with the IMI Titanium Acquisition, the Company, Tremont, IMI and
two of its affiliates, IMI Kynoch Ltd. and IMI Americas Inc., entered into an
agreement dated February 15, 1996, as amended March 29, 1996 (the Shareholders
Agreement ) to regulate certain matters relating to the governance of the
Company as among the Company, Tremont and its affiliates, and IMI and its
affiliates. UTSC is not a party to the Shareholders Agreement and has no rights
or obligations as a party to the Shareholders Agreement. Certain rights granted
to Tremont and IMI and their permitted transferees ( Holders ) under the
Shareholders Agreement depend on the percentage of TIMET Common Stock held at
any given time. With respect to representation on the Company s Board of
Directors, the Shareholders Agreement generally provides that each party shall
vote its TIMET Common Stock in favor of four nominees of Tremont for the Board
of Directors so long as Tremont holds at least 30% of the outstanding TIMET
Common Stock. In addition, each party shall vote its TIMET Common Stock in favor
of two nominees of any Holder of 20% or more of the outstanding TIMET Common
Stock (a 20% Holder ); and one nominee of a Holder of 10% or more of the
outstanding TIMET Common Stock (a 10% Holder ).
The Company has agreed in the Shareholders Agreement that, without the approval
of each 20% and 10% Holder,
it shall not cause or permit the dissolution or liquidation of the Company or
any of its subsidiaries or the filing by the Company of a petition in bankruptcy
or the commencement by the Company of any other proceeding seeking relief from
its creditors. The Company has also agreed to provide each 10% Holder certain
periodic information about the Company and its subsidiaries, which right is
subject to confidentiality restrictions.
The Shareholders Agreement also provides for: (i) rights of indemnification
among the Company, Tremont and IMI with respect to various representations and
warranties made in connection with the IMI Titanium Acquisition;
(ii) certain limitations on the rights of a Holder to transfer its shares of
TIMET Common Stock; (iii) restrictions on the ability of a Holder to transfer
certain of the rights accorded by the Shareholders Agreement; (iv) agreements
not to engage in competition with the Company if the Holder is a 20% Holder; (v)
grant of the IMI Option described
below; (vi) the arbitration of certain disputes arising under the Shareholders
Agreement; and (vii) termination of
the Shareholders Agreement in the event no Holder of 5% of the outstanding
TIMET Common Stock exists.
In connection with the IMI Titanium Acquisition, IMI Americas, Inc. granted
Tremont the IMI Option, giving Tremont the right to acquire 2,012,920 shares of
TIMET Common Stock. Concurrently with the grant of the IMI Option, Tremont
assigned to UTSC certain rights to acquire 503,230 shares of TIMET Common Stock
from IMI.
See Security Ownership above.
Registration Rights
Under the Investors Agreement and subject to certain limitations, so long as
UTSC or its stockholders hold at least 5% of the outstanding TIMET Common Stock,
UTSC and its stockholders are entitled to certain rights with respect to
registration under the Securities Act of the shares of TIMET Common Stock that
are held by UTSC. UTSC holds 3,150,000 shares (10% of the outstanding TIMET
Common Stock) and, pursuant to the IMI Option, has the right to acquire an
additional 503,230 shares of TIMET Common Stock from IMI. The Investors
Agreement provides that
(i) UTSC and its stockholders and their permitted transferees have one right
(the Demand Right ) to request the Company to register under the Securities Act
at least 50% of the shares of TIMET Common Stock and any equity securities of
the Company convertible into, or exercisable or exchangeable for, any shares of
TIMET Common Stock held by them or their permitted transferees (the Registrable
Securities ); and (ii) if the Company proposes to register any Securities under
the Securities Act (other than a registration on Form S-4 or Form S-8, or any
successor or similar form), whether or not pursuant to registration rights
granted to other holders of its securities and whether or not for sale for its
own account, UTSC and its stockholders and their permitted transferees have two
rights to request the Company to include in such registration the Registrable
Securities held by them or their permitted transferees (the Piggyback Right ),
provided that such Piggyback Right shall remain in effect if the Company fails
to effect
the registration of all Registrable Securities requested to be registered. Under
most circumstances, substantially all
of the expenses for a registration pursuant to a Demand Right are to be borne by
UTSC, and substantially all of the expenses for a registration pursuant to a
Piggyback Right are to be borne by the Company, other than underwriting
commissions and discounts on, and incremental registration fees relating to, the
Registrable Securities included in
the registration. Under certain circumstances, the number of shares included in
such registrations may be limited. The Company has agreed to indemnify the
holders of any Registrable Securities being registered by the Company pursuant
to the Investors Agreement, as well as the holder s directors and officers and
any underwriters and selling agents, against certain liabilities, including
liabilities under the Securities Act. Pursuant to these requirements, UTSC has
requested registration of 3,653,230 shares of TIMET Common Stock (consisting of
shares currently held by UTSC and shares UTSC can obtain upon exercise of the
IMI Option) in connection with the BUCS Registration Statement recently filed by
the Company.
Under the Shareholders Agreement, IMI, Tremont and their affiliates are
entitled to certain rights with respect to
the registration under the Securities Act of the shares of TIMET Common Stock
that are held by each of them.
The Shareholders Agreement generally provides, subject to certain limitations,
that (i) 10% Holders shall have two rights, only one of which can be on Form S-
1, to request the Company to register under the Securities Act an amount of not
less than $25 million of Registrable Securities; and (ii) if the Company
proposes to register any securities under the Securities Act (other than a
registration on Form S-4 or Form S-8, or any successor or similar form), whether
or not pursuant to Registration Rights granted to other holders of its
securities and whether or not for sale for its own account, IMI, Tremont and
their affiliates have the right to request the Company to include in such
registration the Registrable Securities held by them or their permitted
transferees so long as each holds in excess of 5%
of the outstanding shares of TIMET Common Stock (or to sell the entire balance
of any such Registrable Securities even though less than 5%). The Company is
obligated to pay all registration expenses in connection with a registration
under the Shareholders Agreement. Under certain circumstances, the number of
shares included in such registrations may be limited. The Company has agreed to
indemnify the holders of any Registrable Securities to be covered by a
registration statement pursuant to the Shareholders Agreement, as well as the
holder s directors and officers and any underwriters and selling agents, against
certain liabilities, including liabilities under the Securities Act. Pursuant to
these requirements, Tremont has requested registration of 1,508,075 shares of
TIMET Common Stock (equivalent to the number of shares Tremont can obtain upon
exercise of the IMI Option) in connection with the BUCS Registration Statement
recently filed by the Company.
Pursuant to registration rights granted to the original purchasers of the TIMET
Trust Securities, the Company recently filed the BUCS Registration Statement.
That Registration Statement has not yet become effective.
Certain Litigation
Certain directors of TIMET are parties to the litigation described below:
In September 1996, a purported stockholder derivative suit was filed in the
Chancery Division of the New Jersey Superior Court, Bergen County (Seinfeld v.
Simmons et al., Civ. Action No. C-336-96) challenging the NL s 1991 purchase of
approximately 10.9 million shares of NL common stock from Valhi in connection
with a dutch auction tender offer to all stockholders. The complaint names as
defendants NL, Valhi, and seven persons who served on NL s Board of Directors in
1991, including J. Landis Martin, the Company s Chairman and Chief Executive
Officer. The complaint alleges that NL s purchase of the shared in the dutch
auction constituted a breach of the defendants fiduciary duties to NL s
stockholders. The complaint seeks rescission of the purchase from Valhi and
monetary damages. NL and the other defendants have answered the complain and
have denied all allegations of wrongdoing. The Company understands that each of
the defendants intend to defend the action vigorously. Trial is scheduled to
begin in November 1997.
In November 1991, a purported derivative complaint was filed in the Court of
Chancery of the State of Delaware, New Castle County (Kahn v. Tremont Corp., et
al., No. 12339), in connection with Tremont s purchase of 7.8 million shares of
NL common stock form Valhi in 1991. The complaint named as defendants Valhi and
all the members of the Board of Directors of Tremont, including Mr. Martin and
Gen. Stafford, and alleged that Tremont s purchase of the NL common stock
constituted a waste of Tremont s assets and a breach of fiduciary duties by
Tremont s board. A trial in this matter was held in June 1995 and in March
1996, the Court issued its opinion ruling in favor of the defendants concluding
that the purchase of the interest in NL was entirely fair to Tremont. Plaintiff
has appealed the decision to the Delaware Supreme Court, which has not yet ruled
on the matter.
The Company is not a party to either of the foregoing actions.
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 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,
1996, except that the Company understands that Mr. Martin and Mr. Compofelice
were inadvertently late, by less than one month, in filing reports with respect
to their single purchases in November 1996 of TIMET Trust Securities which are
convertible into TIMET Common Stock in the future.
Independent Public Accountants
The firm of Coopers & Lybrand, L.L.P. served as the Company s independent public
accountants for the year ended December 31, 1996 and is currently expected to be
considered for appointment by the Board of Directors as such
for the year ended December 31, 1997. Representatives of Coopers & Lybrand,
L.L.P. are expected to attend the Meeting. They will have an opportunity to make
a statement, if they desire to do so, and will be available to respond to
appropriate questions.
Stockholder Proposals for 1998 Annual Meeting
Stockholders may submit proposals on matters appropriate for stockholder action
at the Company s annual stockholder meetings, consistent with rules adopted by
the Commission. Such proposals must be received by the Company no later than
December 20, 1997, to be considered for inclusion in the proxy statement and
form of proxy relating to the 1998 Annual Meeting of Stockholders. Any such
proposals should be addressed to: Corporate Secretary, Titanium Metals
Corporation, 1999 Broadway, Suite 4300, Denver, Colorado 80202.
Other Matters
The Board of Directors knows of no other business which will be presented for
consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their best
judgment.
1996 Annual Report on Form 10-K
A copy of TIMET s 1996 Annual Report on Form 10-K, as filed with the Commission,
may be obtained by stockholders without charge on request by writing: Investor
Relations Department, Titanium Metals Corporation, 1999 Broadway, Suite 4300,
Denver, Colorado 80202.
TITANIUM METALS CORPORATION
Denver, Colorado
April 16, 1997
Appendix A
1996 Long Term Performance
Incentive Plan of Titanium Metals Corporation
Section 1. Introduction
1.1 Purpose
The purpose of the 1996 Long Term Performance Incentive Plan of Titanium Metals
Corporation (the Plan ) is to advance and promote the interest of Titanium
Metals Corporation (the Company ) and its employees and stockholders by
encouraging the acquisition of its Common Stock by key employees and individuals
who perform significant services for the benefit of the Company. Accordingly,
the Plan is intended as a means of attracting and retaining outstanding
employees and also to promote a close commonality of interest between employees
and stockholders.
1.2 Definitions
The following terms shall have the meanings set forth below:
(a) Appreciation Date. The date designated by a Grantee of Stock Appreciation
Rights as defined herein for measurement of the appreciation in the value of
rights awarded to him or her which date shall be the date notice of such
designation is received by the Administrator of the Plan.
(b) Code. The Internal Revenue Code of 1986, as amended.
(c) Committee. The Board of Directors of the Company or a committee consisting
of at least two members designated by the Board of Directors of the Company.
(d) Common Stock. The Common Stock of Titanium Metals Corporation, $.01 par
value.
(e) Disability. Complete and permanent disability as defined in Section
22(e)(3) of the Code.
(f) Employee. Any of the officers or other employees of the Company or any
Subsidiary including officers who are members of the Board of Directors.
(g) Fair Market Value. The mean of the highest and lowest sales prices of
Common Stock as reported on the consolidated tape of a national securities
exchange on any relevant date for valuation, or, if there be no such sale, the
mean of the highest and lowest sales prices of such Common Stock as so reported
on the nearest preceding date upon which such sales took place. In the event the
shares of Common Stock are no longer listed on a national securities exchange,
the Fair Market Value of such shares shall be determined by the Committee in its
sole discretion.
(h) Grantee. Any individual (including an Employee) who in the opinion of the
Board of Directors performs significant services in the benefit of the Company
and who is granted awards under the plan.
(i) Incentive Stock Option. A stock option granted by the Committee to an
Grantee under the Plan which is designated by the Committee as an Incentive
Stock Option and intended to qualify as an Incentive Stock Option under Section
422A of the Code.
(j) Nonqualified Stock Option. A stock option granted by the Committee to a
Grantee under the Plan, which is not designated by the Committee as an Incentive
Stock Option.
(k) Option. An Incentive Stock Option or Nonqualified Stock Option granted by
the Committee to a Grantee under the Plan.
(l) Option Expiration Date. The date on which an Option becomes unexercisable
by reason of the lapse of time
or otherwise.
(m) Plan Administrator. The Controller or Assistant Controller of the Company
or his or her designee.
(n) Restricted Stock. Shares of Common Stock issued or transferred to a
Grantee subject to the restrictions set forth in Section 4.2.
(o) Restricted Stock Award. An authorization by the Committee to issue or
transfer Restricted Stock to a Grantee.
(p) Restriction Period. The period of time determined by the Committee during
which Restricted Stock is subject to the restrictions under the Plan.
(q) Retirement. The termination of employment constituting retirement (other
than disability retirement) under the terms of any formal retirement plan of the
Company or any of its Subsidiaries.
(r) Stock Appreciation Right ( SAR ). A right to earn additional compensation
for the performance of future services, based on the stock market performance of
the Common Stock.
(s) SAR Expiration Date. The date on which a Stock Appreciation Right becomes
unexercisable by reason of the lapse of time or otherwise in accordance with the
Plan.
(t) Subsidiary. Any corporation (whether now or hereafter existing) of which
constitutes a subsidiary of the Company, as defined in Section 425(f) of the
Code.
1.3 Operation of Plan
(a) The Committee hall have authority, acting in its sole discretion, to grant
to such Employees, or any other individual who in the opinion of the Board of
Directors performs significant services for the benefit of the Company, as it
may designate, Options, SARs, Restricted Stock Awards or any combination of such
grants, on the terms and conditions hereinafter set forth. In the event an
Option is granted, the Committee shall also have authority to determine whether
such option is a Nonqualified Stock Option or Incentive Stock Option and whether
a SAR shall be granted in connection with any such Option.
(b) No member of the Committee shall be eligible nor shall any member at any
time within one year prior to election as a member of the Committee have been
eligible for the grant of an Option, a SAR or Restricted Stock Award under the
Plan or for selection as a person to whom Common Stock may be allocated or to
whom Stock Options or SARs may be granted pursuant to any other employee benefit
plan of the Company or any Subsidiary entitling the participants therein to
acquire Common Stock, Options or SARs of the Company or any Subsidiary.
1.4 Maximum Number of Shares
Notwithstanding anything contained herein to the contrary, the maximum number of
shares of Common Stock available for issuance or transfer to all Grantees
pursuant to the Plan shall be 2,500,000 shares; provided, however, that such
aggregate number of shares shall be subject to adjustment in accordance with
Section 5.5. Shares of Common Stock issued under the Plan shall be, when issued,
fully paid and nonassessable. The Common Stock available for issuance on
transfer under the Plan shall be made available from shares now or hereafter
held in the treasury of
the Company or from authorized but unissued shares. If any outstanding Stock
Option under the Plan expires or is terminated for any reason then the Common
Stock allocable to the unexercised portion of such Stock Option shall not be
charged against the limitation of this Section 1.4 and may again become the
subject of a Stock Option granted under the Plan.
1.5 Individual Grant Limitation
The aggregate number of underlying shares of Common Stock issuable pursuant to
grants of Options, SARs and/or for Restricted Stock Awards to a particular
individual pursuant to the Plan shall not exceed 250,000 shares of Common Stock
during any fiscal year of the Company.
Section 2. Stock Options
2.1 Grant of Options
(a) The Committee may grant Options to Grantees for the purchase of shares of
Common Stock.
(b) The purchase price per share of Common Stock under each Option shall be
not less than 100 percent of the Fair Market Value per share of such stock on
the date the Option is granted, as determined by the Committee, except as
otherwise provided in this Plan. An option may be exercised only when the Fair
Market Value of the shares subject to the option exceeds the exercise price of
the option.
(c) Stock Options granted under the Plan may be exercised in any order,
regardless of the date of grant or the existence of any outstanding Option,
except as otherwise provided in this Plan.
2.2 Incentive Stock Options
(a) Except as otherwise determined by the Committee, each Incentive Stock
Option shall become exercisable by the Grantee in accordance with the following
schedule:
Cumulative Percentage of
Shares Covered by
Completed Years Incentive Stock Option
From Date of Grant Which May Be Exercised
Less than 3 years Zero percent
3 but less than 4 years Up to fifty percent
Four or more years Up to one hundred percent
(b) At or prior to the time an Incentive Stock Option is granted, the
Committee shall fix the term of such option which shall be not more than ten
years from the date of grant. In the event the Committee takes no action to fix
the term, such option shall expire seven years from the date of grant.
(c) Anything in the Plan notwithstanding, the aggregate Fair Market Value
(determined as of the time the Incentive Stock Option is granted) of the shares
of Common Stock with respect to which Incentive Stock Options are exercisable
for the first time by any Grantee during any single calendar year under the Plan
and any other Incentive Stock Option plans of the Company and its Subsidiaries
or any parent corporation, as defined in Section 425(e) of the Code, of the
Company (a Parent Corporation ) shall not exceed $100,000.
(d) Anything in the Plan notwithstanding, an Incentive Stock Option shall not
be granted to any Grantee who,
at the time such Incentive Stock Option is granted, owns (including constructive
ownership as described in Section 425(d) of the Code) shares of stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company, a Subsidiary or a Parent Corporation; provided, however, that this
restriction shall not apply if, at the time such Incentive Stock Option is
granted, (i) the per share exercise price of such Option is at least 110% of the
Fair Market Value of the shares of Common Stock subject to such Option, and
(ii) such Option is by its terms not exercisable after the expiration of five
years from the date of grant of
such Option.
(e) The Grantee shall give prompt notice to the Company of any disposition of
Common Stock acquired upon exercise of an Incentive Stock Option (and such
information regarding such disposition as the Company may reasonably request) if
such disposition occurs within either two years after the date of grant or one
year of the receipt of such common stock by the Grantee.
2.3 Nonqualified Stock Options
(a) Each Nonqualified Stock Option, unless otherwise established by the
Committee, shall become exercisable by the Grantee in accordance with the
following schedule:
Cumulative Percentage of
Shares Covered by
Completed Years Nonqualified Stock Option
From Date of Grant Which May Be Exercised
Less than 2 years Zero percent
2 but less than 3 years Up to forty percent
3 but less than 4 years Up to sixty percent
4 but less than 5 years Up to eighty percent
Five or more years Up to one hundred percent
(b) The Committee shall fix the term of each Nonqualified Stock Option which
shall be not more than ten years from the date of grant. In the event no term is
fixed, such term shall be ten years from the date of grant. The Committee may,
from time to time, extend the Option Expiration Date of any Nonqualified Stock
Option upon such terms and conditions as the Committee shall determine;
provided, however, that no such extension or extensions shall extend the
Nonqualified Stock Option for an aggregate period in excess of three years from
the date of the original Option Expiration Date of such Nonqualified Stock
Option and no such Nonqualified Stock Option shall be extended within six months
after the date on which the Nonqualified Stock Option was originally granted or
within six months prior to the Option Expiration Date of such Nonqualified Stock
Option as the same may have been extended.
(c) The Committee may grant to one or more holders of Nonqualified Stock
Options, in exchange for their voluntary surrender and the cancellation of such
Options and their corresponding SARs, if any, new Options having different
Option prices than the Option prices provided in the Options so surrendered and
canceled and containing such other terms and conditions as the Committee may
deem appropriate.
2.4 SARs Attached to Options
(a) The Committee may award a SAR with respect to any shares covered by any
Option granted under the Plan. Except as otherwise provided in this Section, the
terms and procedures set forth in Section 3.1 shall be applicable to SARs with
respect to shares covered by a related Option.
(b) Each SAR shall be subject to the same terms and conditions as the related
Option with respect to date of expiration, difference between Fair Market Value
on the Appreciation Date and the date of the award, limitations on
transferability, and eligibility to exercise. When a SAR is awarded with respect
to shares covered by a related Incentive Stock Option, such SAR may be exercised
only when the Market Price of the shares subject to the Option exceeds the
exercise price of such Option.
(c) Any extension of the Option Expiration Date of a Nonqualified Stock Option
shall also extend the related SAR, and any acceleration of the exercise date of
an Option shall likewise accelerate the exercise date of the related SAR.
(d) Upon the exercise of a SAR, the related Option shall cease to be
exercisable as to the shares with respect to which such right was exercised, and
the related Option shall be considered to have been exercised to that extent.
Upon the exercise or Option Expiration Date of a related Option, the SAR granted
with respect thereto shall terminate.
2.5 Payment for Common Stock
(a) Payment for shares of Common Stock purchased upon the exercise of an
Option shall be made in cash, in shares of Common Stock valued at the then Fair
Market Value thereof, or by a combination of cash and shares of the Company
Common Stock.
(b) The proceeds received by the Company from the sale of shares of Common
Stock pursuant to the Plan will be used for general corporate purposes.
Section 3. Stock Appreciation Rights Awards
(a) The Committee shall have authority to award SARs to Grantees and to
determine the number of SARs to be awarded to each Grantee.
(b) The Committee shall have sole discretion to determine whether payment of
SARs shall be made wholly in cash, wholly in shares of Common Stock or by a
combination of cash and shares of Common Stock. In the event no action is taken
by the Committee to determine the method of payment, the amount due shall be
paid half in cash and half in shares of Common Stock. In the event shares of
Common Stock are issued, the Committee shall fix the amount of consideration
represented by the past services performed by the grantee with respect to such
shares.
(c) The amount of additional compensation which may be received pursuant to
the award of one SAR is the excess of the Fair Market Value of one share of
Common Stock at the Appreciation Date over that on the date the SAR was awarded.
(d) A Grantee may designate an Appreciation Date in accordance with the
following schedule, unless otherwise changed by the Committee, by filing an
irrevocable written notice with the Plan Administrator of the Company specifying
the number of SARs to which the Appreciation Date relates, and the date on which
such SARs
were awarded:
Cumulative Percentage of
SARs Awarded for Which
Completed Years Appreciation Date
From Date of Grant May be Designated
Less than 2 years Zero percent
2 but less than 3 years Up to forty percent
3 but less than 4 years Up to sixty percent
4 but less than 5 years Up to eighty percent
Five or more years Up to one hundred percent
The Appreciation Date shall be the date the notice is received by the Plan
Administrator.
(e) In the event that a payment is made to a Grantee pursuant to a SAR in
whole or in part in the form of shares of Common Stock, the shares shall be
valued at their Fair Market Value on the Appreciation Date.
(f) Except as otherwise provided in the case of SARs granted in connection
with Options, the SAR Expiration Date shall be a date designated by the
Committee which is not later than ten years after the date on which the SAR was
awarded.
(g) On the SAR Expiration Date, the SAR shall terminate, the amount of
additional compensation represented thereby shall become zero, and all rights
relating to the SAR shall expire.
Section 4. Restricted Stock
4.1 Restricted Stock Awards
(a) The Committee shall have the authority (i) to grant Restricted Stock
Awards, (ii) to issue or transfer Restricted Stock to Grantees, and (iii) to
establish terms, conditions and restrictions in connection with the issuance or
transfer of Restricted Stock, including the Restriction Period, which may differ
with respect to each Grantee.
(b) The Grantee of Restricted Stock shall execute and deliver to the Plan
Administrator of the Company an Incentive Plan Agreement under Section 5.1(a),
an escrow agreement satisfactory to the Committee and the appropriate blank
stock powers with respect to the Restricted Stock covered by such agreements.
The Committee shall then cause stock certificates registered in the name of the
Grantee to be issued and deposited together with the stock powers with an escrow
agent to be designated by the Committee. The Committee shall cause the escrow
agent to issue to the Grantee a receipt evidencing any stock certificate held by
it registered in the name of the Grantee.
4.2 Restrictions
(a) Restricted Stock awarded to a Grantee shall be subject to the following
restrictions until the expiration of the Restriction Period: (i) a Grantee shall
be issued, but shall not be entitled to delivery of the stock certificate;
(ii) the shares of Common Stock of the Company shall, except as otherwise
determined by the Committee, be subject to the restrictions on transferability
set forth in Section 5.2; (iii) the shares of Common Stock of the Company shall
be forfeited and the stock certificates shall be returned to the Company and all
rights of the Grantee to such shares and as a shareholder shall terminate
without further obligation on the part of the Company on the earlier of (i) the
date the employment of Grantee terminates, or (ii) the date Grantee is given
written notice of his or her discharge from such employment, except in the case
of Disability or death; and
(iv) any other restrictions which the Committee may determine in advance are
necessary or appropriate, including termination of Restricted Stock Awards to
Grantees other than employees.
(b) The Committee shall have the authority to remove any or all of the
restrictions on the Restricted Stock whenever it may determine that, by reason
of changes in applicable laws or other changes in circumstances arising after
the date of the Restricted Stock Award, such action is appropriate.
4.3 Restriction Period
The Restriction Period of Restricted Stock shall commence on the date of grant
and unless otherwise established by the Committee in the Agreement setting forth
the terms of the award of Restricted Stock or advanced pursuant to Section
6.2(c), shall expire from time to time as that part of the Restricted Stock
Award determined in accordance with the following schedule:
Percentage of Each
Restricted Stock Award
Completed Years for Which Restriction
From Date of Grant Period Expires
Less than 1 year Zero percent
1 but less than 2 years Up to thirty percent
2 but less than 3 years Up to sixty percent
Three or more years Up to one hundred percent
4.4 Delivery of Shares of Common Stock
Subject to Section 6.4, at the expiration of the Restriction Period, a stock
certificate evidencing the Restricted Stock with respect to which the
Restriction Period has expired (to the nearest full share) shall be delivered
without charge to the Grantee, or his personal representative, free of all
restrictions under the Plan.
Section 5. Provisions Relating to Plan Participation
5.1 Plan Conditions
(a) Each Grantee to whom an Option, SAR Award or Restricted Stock Award is
granted under the Plan shall be required to enter into an Incentive Plan
Agreement with the Company in a form provided by the Committee, including
provisions that the Grantee (i) shall not disclose any trade or secret data or
any other confidential information of the Company acquired during employment by
the Company or a Subsidiary, or after the termination of employment or
Retirement, (ii) shall abide by all the terms and conditions of the Plan and
such other terms and conditions as may be imposed by the Committee, and (iii)
shall not interfere with the employment of any other Company employee. Options,
SARs and Restricted Stock Awards may contain such terms and conditions, not
inconsistent with the Plan, as shall be determined from time to time by the
Committee.
(b) The Plan shall not create any employment rights in any Grantee and the
Company shall have no liability for terminating the employment of a Grantee
before the Grantee becomes entitled to designate an Appreciation Date with
respect to any SAR, before the exercise date of any Option, or during the
Restriction Period of any Restricted Stock.
5.2 Transferability
(a) Options, SARs and Restricted Stock Awards are not transferable other than
by will or by the laws of descent and distribution; provided, however, that the
Committee may grant Options, SARs and Restricted Stock Awards that are
transferable, without payment of consideration, to immediate family members of
the Grantee or to trusts or partnerships for such family members, and may amend
outstanding Options, SARs and Restricted Stock Awards to provide for such
transferability. No transfer by will or by the laws of descent and distribution
shall be effective to bind the Company unless the Committee shall have been
furnished with a copy of the deceased Grantee s will or such other evidence as
the Committee may deem necessary to establish the validity of the transfer.
(b) Except as otherwise determined by the Committee, only the Grantee (or his
or her guardian if the Grantee becomes Disabled), or in the event of his death,
his legal representative or beneficiary, may exercise Options, designate
Appreciation Dates and receive cash payments and deliveries of shares or
otherwise exercise rights under the Plan.
5.3 Rights as a Stockholder
(a) A Grantee of an Option, a SAR Award or Restricted Stock or a transferee of
such Grantee shall have no rights
as a stockholder with respect to any shares of Common Stock until the issuance
of a stock certificate for such shares. Except as otherwise provided by Section
5.5, no adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities, or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued.
(b) A Grantee of Restricted Stock or a transferee of such Grantee shall, upon
the date certificates for the Restricted Stock are issued, have all of the
rights of a shareholder including the right to vote such shares and to receive
dividends, subject however to the restrictions established by the Committee
pursuant to Section 4.2.
5.4 Listing and Registration of Shares of Common Stock
The Company, in its discretion, may postpone the issuance and/or delivery of
shares of Common Stock upon any exercise of an Option or pursuant to a SAR or
Restricted Stock Award until completion of such stock exchange listing, or
registration, or other qualification of such shares under any state and/or
federal law, rule or regulation as the Company may consider appropriate, and may
require any Grantee to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of the
shares in compliance with applicable laws, rules and regulations.
5.5 Change in Stock and Adjustments
(a) In the event the outstanding shares of the Common Stock, as constituted
from time to time, shall be changed
as a result of a change in capitalization of the Company or a stock split or
stock dividend or a combination, merger, or reorganization of the Company into
or with any other corporation or any other transaction with similar effects,
there then shall be substituted for each share of Common Stock theretofore
subject, or which may become subject, to issuance or transfer under the Plan,
the number and kind of shares of Common Stock or other securities or other
property into which each outstanding share of Common Stock shall be changed or
for which each such share shall be exchanged and the Committee may make other
equitable adjustments which it deems to be warranted.
(b) In the event of any change in applicable laws or any change in
circumstances which results in or would result in any dilution of the rights
granted under the Plan, or which otherwise warrants equitable adjustment because
it interferes with the intended operation of the Plan, then, if the Committee
shall, in its sole discretion, determine that such change equitably requires an
adjustment in the number or kind of shares of stock or other securities or other
property theretofore subject, or which may become subject, to issuance or
transfer under the Plan or in the terms and conditions of outstanding Options,
SARs or Restricted Stock Awards, such adjustment shall be made in accordance
with such determination. Any adjustment of an Incentive Stock Option under this
paragraph shall be made only to the extent not constituting a modification
within the meaning of Section 425(h)(3) of the Code. The Committee shall give
notice to each Grantee, and upon notice such adjustment shall be effective and
binding for all purposes of the Plan.
(c) In the event (i) the number of shares of Common Stock to be delivered upon
the exercise in full of any Option granted under the Plan is reduced for any
reason, (ii) any Option granted under the Plan can no longer under any
circumstances be exercised, or (iii) shares awarded as Restricted Stock are
forfeited, the number of shares no longer subject to such Option or forfeited
shall thereupon be released and shall thereafter be available for new Option or
SAR grants, or new Restricted Stock Awards under the Plan; provided, however,
that a surrender of all or part of an Option pursuant to Section 2.4 shall not
be considered a lapse or termination for purposes of this provision.
5.6 Termination of Employment and Death
(a) If an Employee s employment is terminated for any reason whatsoever, any
Option or SAR granted pursuant to the Plan outstanding at the time and all
rights thereunder shall wholly and completely terminate 90 days after the
earlier of (i) the date the employment of Grantee terminates, or (ii) the date
Grantee is given written notice of his or her discharge from such employment,
except as provided in (b), (c) or (d) below; provided, however, that no Option
or SAR shall continue to vest in accordance with the provisions of Sections 2.2,
2.3 and 3 beyond the date Grantee s employment with the Company terminates or,
in the case of written notice of discharge, the date of such notice. The
determination of termination of any Option or SAR grant to a Grantee other than
an Employee prior to the grant designated expiration date is at the sole
discretion of the Committee.
(b) Upon the normal Retirement of an Employee:
(i) any unvested portion of any outstanding Restricted Stock, Option or SAR
grant shall be canceled and no further vesting will occur; and,
(ii) any portion of an Option or SAR grant which vested on or before the normal
Retirement date shall expire on the earlier of: (A) the Option Expiration Date
or the SAR Expiration Date as the case may be, or (B) the expiration of three
years from the normal Retirement date, or (C) one year from the date of death of
a retiree in the event of death after normal Retirement.
(c) Upon termination of employment as a result of death or Disability:
(i) all outstanding grants of Restricted Stock, Options or SARs shall vest
notwithstanding the original vesting schedule; and,
(ii) any vested Option or SAR (including those vested pursuant to Section
5.6(c)(i)) shall expire upon the earlier of (A) the Option Expiration Date or
SAR Expiration Date (as applicable) or (B) the first anniversary of such
termination.
(d) Notwithstanding the termination of employment of a Grantee, the Committee,
by action taken within 90 days of the date of such termination, may extend the
duration of any Option or SAR for such period as the Committee may determine to
be appropriate, provided that such period shall not exceed the date of
termination provided for in the original grant (which period is subject to one
or more further extensions as the Committee may determine to be appropriate).
(e) Anything to the contrary herein notwithstanding, in no event shall an
Incentive Stock Option terminate later than ten years after the date of grant.
Section 6. Administration
6.1 Effective Date and Grant Period
The Plan shall become effective on the consummation of the initial public
offering under the Securities Act of 1933,
as amended, of the Company ( Effective Date ), provided, however, that the Plan
shall lapse if the Effective Date has not occurred on or prior to December 31,
1996, and any Options, SARs or Restricted Stock granted under the Plan prior to
the Effective Date shall be conditioned upon the occurrence of the Effective
Date. No Nonqualified Stock Options, SARs or Restricted Stock Awards may be
granted under the Plan after ten years from the Effective Date.
6.2 Committee Authority
(a) In addition to other authority granted to the Committee in the Plan, the
Committee shall prescribe such forms and make such rules as it deems necessary
for the proper administration of the Plan, shall correct any defect, supply any
omission and reconcile any inconsistency in the Plan or in any Option, SAR or
Restricted Stock Award in the manner and to the extent the Committee deems
desirable to carry the Plan, Option, SAR or Restricted Stock Award into effect.
(b) The Committee may interpret or construe the Plan and any Option, SAR or
Restricted Stock Award granted, and any interpretation or construction made by
it in good faith shall be conclusive on the Company, its Subsidiaries, their
successors and assigns, the Company s stockholders, the participants in the Plan
and their transferees, and other employees of the Company and its Subsidiaries.
(c) The Committee shall have the authority to advance (i) the Grantee s right
to designate an Appreciation Date for any SAR, (ii) the date on which an Option
shall become exercisable by the Grantee, and (iii) the date on which the
Restriction Period of any Restricted Stock shall expire; provided, however, that
no Option shall be exercised and no Appreciation Date shall be designated by an
officer or director of the Company until the expiration of six months from the
date of grant.
6.3 Funding
Except as provided under Section 4.1(b), no provision of the Plan shall require
or permit the Company, for the purpose of satisfying any obligations under the
Plan, to purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Company maintain separate bank accounts, books, records or other evidence of the
existence of a segregated or separately maintained or administered fund for such
purposes. Grantees shall have no rights under the Plan other than as unsecured
general creditors of
the Company except that insofar as they may have become entitled to payment of
additional compensation by performance of services, they shall have the same
rights as other employees under general law.
6.4 Withholding Taxes
(a) Whenever shares are to be issued or delivered pursuant to the Plan, the
Company shall have the right, in its
sole discretion, to either (i) require the Grantee to remit to the Company or
(ii) withhold from any salary, wages or other compensation payable by the
Company to the Grantee, an amount sufficient to satisfy federal, state
and local withholding tax requirements prior to the delivery of any certificate
or certificates for such shares. Whenever payments are to be made in cash, such
payments shall be net of an amount sufficient to satisfy federal, state and
local withholding tax requirements and authorized deductions.
(b) With respect to shares received by a Grantee pursuant to the exercise of
an Incentive Stock Option, if such Grantee disposes of any such shares within
two years from the date of grant of such option or within one year after the
transfer of such shares to the Grantee, the Company shall have the right to
withhold from any salary, wages or other compensation payable by the Company to
the Grantee an amount sufficient to satisfy federal, state and local withholding
tax requirements attributable to such disposition.
.5 Amendment and Termination
(a) The Plan may be amended or terminated by the Board of Directors of the
Company by the affirmative vote of
a majority of the directors in office. The Plan, however, shall not be amended,
without approval of the shareholders, to increase the number of shares which may
be issued or transferred to Grantees or transferees, to modify the eligibility
requirements of the Plan pertaining to Incentive Stock Options, to extend the
right of the Committee to grant Options, SARs and Restricted Stock Awards beyond
ten years from the Effective Date, to reduce any Option price except to the
extent authorized in this Plan, or to alter any other feature of Incentive Stock
Options as to which federal law requires shareholder approval as a condition for
incentive stock option treatment.
(b) No amendment or termination of the Plan shall impair any rights which have
accrued under the Plan. However, any shares of the Company theretofore reserved
for Options not granted prior to such termination and any shares that have been
awarded as Restricted Stock that are forfeited shall be released.
(c) The Plan shall be construed in accordance with the laws of the State of
Colorado, except to the extent inconsistent with federal securities law and
applicable provisions of the Code and the regulations issued thereunder.
Appendix B
Titanium Metals Corporation
Senior Executive Cash Incentive Plan
I. Purpose
The purpose of the Titanium Metals Corporation Senior Executive Cash Incentive
Plan is to attract and retain high quality senior executives and to provide
incentives to such executives to maximize the annual financial performance of
Titanium Metals Corporation and its related entities and thereby increase
shareholder value. The Titanium Metals Corporation Senior Executive Cash
Incentive Plan is intended to qualify for the exception to the deduction limit
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
Code ), for qualified performance-based compensation.
II. Effective Date of Plan
The effective date of the Plan shall be January 1, 1996.
III. Definitions
(a) Compensation Committee shall mean the committee comprised solely of two
or more outside directors of the Company which shall have the authority to
administer the Plan. No member of the Compensation Committee shall be a current
employee of the Company, a former employee who is currently receiving
compensation from the Company for prior services (other than benefits under a
tax-qualified retirement plan), a current or former officer of the Company, or
shall receive or have received remuneration from the Company within the meaning
of Treas. Reg. 1.62-27(e)(3), either directly or indirectly, in any capacity
other than as a director.
(b) Company shall mean Titanium Metals Corporation.
(c) Disability shall mean disability by bodily injury or disease, either
occupational or nonoccupational in cause, permanently preventing the
Participant, on the basis of medical evidence satisfactory to the Compensation
Committee, from engaging in any occupation or employment with the Company.
(d) Eligible Earnings shall mean the aggregate base salary actually paid to
a Participant with respect to a given Plan Year.
(e) Participant for a particular Plan Year shall mean those individuals
designated by the Compensation Committee to be eligible to receive Performance-
Based Compensation Awards under Section V for that Plan Year. The Compensation
Committee shall determine the individuals who shall be Participants for a
particular Plan Year by January 1 of that Plan Year (or date of original
approval of the Plan by the Committee for 1996).
(f) Performance-Based Compensation Award shall mean the cash award as
determined by the application of Section V of the Plan.
(g) Plan shall mean the Titanium Metals Corporation Senior Executive Cash
Incentive Plan.
(h) Plan Year shall mean the 12 consecutive month period coinciding with the
Company s fiscal year.
(i) Return on Equity shall mean the ratio expressed as a percentage rounded
to the nearest tenth of the Company s Net Income for the Plan Year to its
Average Equity for such Plan Year. Net Income shall mean the Company s net
income for the Plan Year, determined in accordance with generally accepted
accounting principles and as reported in the Company s annual audited
consolidated financial statements. Average Equity shall mean the arithmetic
average of the Company s stockholders equity at the end of the Plan Year and
the end of the immediately preceding Plan Year. Stockholders equity shall be
determined in accordance with generally accepted accounting principles, shall be
deemed to include foreign currency translations that have been deferred in
accordance with Statement on Financial Accounting Standards No. 52, and as
reported in the Company s annual audited consolidated financial statements.
IV. Eligibility
Employees who are Participants for a Plan Year are not eligible for payments
under the Titanium Metals Corporation Employee Cash Incentive Plan for the same
Plan Year.
Except in the case of the Participant s death or disability, a Participant must
be employed by the Company on the last day of the Plan Year in order to be
eligible to receive a Performance-Based Compensation Award under the Plan.
However, in the event a Participant is not employed on the last day of the Plan
Year because of the Participant s death or disability, any payment of a
Performance-Based Compensation Award made in accordance with Section V shall be
paid to the Participant s estate or to the disabled Participant at the time the
other Performance-Based Compensation Awards are paid to Participants under the
Plan.
V. Calculation of Performance-Based Compensation Award
Initially, calculation of Performance-Based Compensation Awards is based solely
upon the Company s Return on Equity during each Plan Year. Currently, no
Performance-Based Compensation Award shall be payable if the Company s Return on
Equity is less than 10%, and no award shall be made under this Section in an
amount exceeding 150% of any Participant s Eligible Earnings. Performance-Based
Compensation Awards shall be payable solely in accordance with the following
schedule, except that no Performance-Based Compensation Award for a Participant
shall exceed $2,000,000 for a Plan Year:
Return on Equity Award As Percentage of Eligible Earnings
Less than 10% 0%
10% or more but less than 30% Percentage equal to Return on Equity times five
(5)
30% or more 150%
The above schedule for any Plan Year may be set or changed by the Compensation
Committee during the first ninety days of such Plan Year. In the event the
Compensation Committee takes no action prior to the ninetieth day of such Plan
Year to change, amend, or rescind the above schedule in effect for the
immediately preceding Plan Year, the Return on Equity schedule for such Plan
Year shall be deemed to be the above schedule for such immediately preceding
Plan Year.
After that period, the Compensation Committee shall have no discretion to make
Performance-Based Compensation Awards except in accordance with the above or any
revised schedule, except that the Compensation Committee has discretion to award
a lesser Performance-Based Compensation Award to a Participant than that set
forth in the above schedule. Any Performance-Based Compensation Award shall be
paid in a single cash payment as soon as practicable following the completion of
the Company s audit for a given Plan Year and certification by the Compensation
Committee as set forth in Section VI below.
VI. Certification by Compensation Committee
Notwithstanding any other provision of the Plan to the contrary, no Performance-
Based Compensation Award may be paid to a Participant under the Plan until the
Compensation Committee certifies in writing that the Company has achieved a
Return on Equity of more than 10%, that the award corresponds to the Return on
Equity achieved by the Company for the applicable Plan Year in accordance with
the schedule in Section V or any revision thereof (unless, in its discretion,
the Compensation Committee chooses to make a lower award to a Participant), and
that all of the other conditions under the Plan for payment of the award have
been met. For the purposes of this Section, the approved minutes of the
Compensation Committee meeting in which the certification is made shall be
treated as written certification.
VII. Administration
The Plan shall be administered by the Compensation Committee. The Compensation
Committee shall have full authority to construe and interpret this Plan within
the established rules for its administration which are contained in this Plan.
The Compensation Committee shall act by the unanimous consent of all of its
members.
The Compensation Committee shall have the authority to amend the Plan at any
time without notice, provided that any amendment which changes the material
terms of the performance goals shall be subject to the approval of the Company s
shareholders. The Compensation Committee may revise the terms of the performance
goals set forth in Section V which must be met before Performance-Based
Compensation Awards may be paid under the Plan; however the revised performance
goals must be approved by the shareholders of the Company before the amendment
is effective. The material terms of a performance goal are approved by
shareholders if, in a separate vote, a majority
of the shares present (in person or by proxy) and entitled to vote on the issue
are cast in favor of approval. The Compensation Committee shall have the
authority to suspend or terminate the Plan at any time without notice.
VIII. Miscellaneous
The Plan is not a contract of employment. No term of the Plan shall be construed
to restrict the right of the Company to terminate or change the terms of any
Participant s employment with the Company at any time or to confer on any
Participant the right to continue in the employ of the Company for any period of
time or to continue any Participant s present or any other rate of compensation.
No Participant shall have any right to future participation in the Plan.
No right or interest of any Participant in the Plan shall be assignable or
transferrable or be subject to any lien, directly, by operation of law, or
otherwise, including by execution, levy, garnishment, attachment, pledge, or
bankruptcy.
The Company shall have the right to deduct from all payments under the Plan any
foreign, federal, state or local taxes required by law to be withheld with
respect to any such payments.
This instrument contains the entire understanding between the Company and the
employees participating in the Plan relating to the Plan, and supersedes any
prior agreement between the parties, whether written or oral. Neither this Plan
nor any provision of the Plan may be waived, modified, amended, changed,
discharged or terminated without action by the Compensation Committee.
This Plan shall be construed in accordance with, and shall be governed by the
laws of the State of Colorado.
To the extent that any one or more of the provisions of the Plan shall be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired.
The section headings are for convenience only and shall not be used in
interpreting or construing the Plan.
The Company hereby agrees to the provisions of this Plan, and in witness of its
agreement, the Company by its duly authorized officer has executed this Plan, on
the date written below.
Titanium Metals Corporation
By:
Title:
Date:
Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 9, 1997
The undersigned hereby appoints Robert E. Musgraves and J. Thomas Montgomery,
and each of them, proxy and attorney-in-fact for the undersigned, with full
poser of substitution, to vote on behalf of the undersigned at the 1997 Annual
Meeting of Stockholders (the Meeting ) of Titanium Metals Corporation, a
Delaware corporation ( TIMET ), to be held at The Brown Palace Hotel, 321
Seventeenth Street, Denver, Colorado on Friday, May 9, 1997, at 10:00 a.m.
(local time), and at any adjournment or postponement of said Meeting, all of the
shares of Common Stock ($.01 par value) of TIMET standing in the name of the
undersigned or which the undersigned may be entitled to vote on the matters
described on the reverse side of this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TITANIUM METALS
CORPORATION. PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side) SEE REVERSE SIDE
/X/ Please mark your votes as in this example.
This proxy, if properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR all nominees named in
Item 1 below, FOR approval of the Stock Incentive Plan as set forth in Item 2,
and FOR the Senior Executive Cash Incentive Plan as set forth in Item 3.
The Board of Directors recommends a vote FOR each of the director nominees
named in Item #1 below and FOR the proposals set forth in Items #2 and #3
below.
1. Election of Six Directors FOR ALL WITHHELD AS TO ALL
(except as marked below)
/ / / /
Vote withheld as to the following nominee(s): Nominees
Andrew R. Dixey, Joseph S.
Compofelice, Edward C.
Hutcheson, Jr., J. Landis
Martin, Hiroomi Mikami, and Gen.
Thomas P. Stafford
_____________________________________
FOR AGAINST ABSTAIN
2. Approval of the Stock Incentive Plan / / / / / /
3. Approval of the Senior Executive
Cash Incentive Plan / / / / / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment of
postponement thereof; hereby revoking any proxy or proxies heretofore given by
the undersigned.
Please sign exactly as your name appears on this card. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign full corporate
name and sign authorized officer s name and title. If a partnership, please
sign in partnership name and sign authorized person s name and title.
The undersigned hereby revokes all proxies heretofore given by the undersigned
to vote at such meeting and any adjournment or postponements thereof.
________________________________
________________________________
SIGNATURE(S) DATE