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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
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(Name of Registrant as Specified in its Charter)
Titanium Metals Corporation
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which the transaction applies:
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(3) Per-unit price of other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(4) Date Filed:
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[TIMET LOGO]
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
April 15, 1998
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of Stockholders of
Titanium Metals Corporation ("TIMET" or the "Company"), which will be held on
Tuesday, May 19, 1998, at 10:00 a.m. (Mountain 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,
/s/ J. LANDIS MARTIN
J. Landis Martin
Chairman of the Board and
Chief Executive Officer
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TITANIUM METALS CORPORATION
1999 BROADWAY, SUITE 4300
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1998
To the Stockholders of Titanium Metals Corporation:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Meeting") of Titanium Metals Corporation, a Delaware corporation ("TIMET" or
the "Company"), will be held on Tuesday, May 19, 1998, at 10:00 a.m. (Mountain
Time), at The Brown Palace Hotel, 321 Seventeenth Street, Denver, Colorado, for
the following purposes:
(1) To elect five directors to serve until the 1999 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The Board of Directors of the Company set the close of business on March 23,
1998, 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,
/s/ ROBERT E. MUSGRAVES
Robert E. Musgraves
Vice President, General Counsel and Secretary
Denver, Colorado
April 15, 1998
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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
1998 Annual Meeting of Stockholders of the Company to be held on Tuesday, May
19, 1998, at 10:00 a.m. (Mountain 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 will first be mailed to the holders of TIMET's common
stock, $.01 par value per share ("TIMET Common Stock"), on or about April 24,
1998.
PURPOSE OF THE MEETING
Stockholders of the Company represented at the Meeting will consider and vote
upon (i) the election of five directors to serve until the 1999 Annual Meeting
of Stockholders of the Company and until their successors are duly elected and
qualified, and (ii) 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 the election of directors.
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 Amended and Restated Certificate
of Incorporation, any other matter that may be submitted to a stockholder vote
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 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.
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The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Meeting was the close of
business on March 23, 1998 (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 31,457,905 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 30.3%
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. 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 "Certain Relationships and
Transactions--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 19.8% 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 (b) the additional affirmative vote of 13.4% 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
$4,000. 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 (a) "FOR" the election of all of the five nominees set
forth below as directors and (b) 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) 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.
ELECTION OF DIRECTORS
The Bylaws of the Company currently provide that the Board of Directors shall
consist of six persons. Mr. Hiroomi Mikami, a director of the Company since
1997, has indicated his intention not to stand for re-election. Therefore, the
Board of Directors recently took action to amend the Bylaws to reduce the number
of directors to five effective with Mr. Mikami's resignation. The Bylaws may be
amended either 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 five directors elected at the Meeting will hold
office until the 1999 Annual Meeting of Stockholders of the Company and until
their successors are duly elected and qualified.
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All of the nominees are currently directors of the Company whose term will
expire 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.
Directors of the Company will be elected at the Meeting by a plurality of the
affirmative vote of the outstanding shares of TIMET Common Stock represented and
voting. Unless otherwise specified, the agents designated in the proxy will vote
the shares covered thereby at the Meeting "FOR" the election of the nominees
named below. Tremont owns 30.3% of the outstanding shares of TIMET Common Stock
and has indicated its intention to vote all of such shares "FOR" the election of
each of the nominees named below. In addition, Tremont has the contractual right
to have an additional 6.4% of the outstanding shares voted "FOR" the nominees
who are the Tremont Representatives (Messrs. Martin, Dixey and Compofelice and
Gen. Stafford).
The Board of Directors recommends a vote "FOR" each of 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, 52, 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 as President of Tremont since 1987 (except for a period in 1990). Since
1987, Mr. Martin has also served as President and Chief Executive Officer of NL
Industries, Inc. ("NL"), a manufacturer of titanium dioxide, and, since 1986, as
a director of NL. Tremont and NL may be deemed to be affiliates of the Company.
From 1990 to 1994, Mr. Martin served as Chairman of the Board, Chief Executive
Officer and a director of Baroid Corporation ("Baroid"), an oilfield services
company. In 1994, Baroid became a wholly-owned subsidiary of Dresser Industries,
Inc. ("Dresser"), a publicly-held company engaged in the petroleum drilling
services, hydrocarbon processing and engineering industries, and Mr. Martin
became a director of Dresser. Additionally, Mr. Martin is a director of
Apartment Investment and Management Corporation, a real estate investment trust.
ANDREW R. DIXEY, 48, has been President, Chief Operating Officer and a director
of the Company since 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, 48, was Vice President and Chief Financial Officer of the
Company from 1996 until February 1998 and has been a director of the Company
since 1994 (except for a brief period during 1996). In February 1998, Mr.
Compofelice was elected Chairman of the Board and Chief Executive Officer of
CompX International Inc. ("CompX"), a majority-owned, indirect subsidiary of
Valhi, Inc. ("Valhi"), engaged in the manufacture of ergonomic computer support
systems, precision ball bearing drawer slides and medium-security mechanical
locks for office furniture and other applications. From 1994 until February
1998, he was also Vice President and Chief Financial Officer of Tremont and NL.
Mr. Compofelice has also served as a director of NL since 1995. Since 1994, Mr.
Compofelice has also been Executive Vice President of Valhi, which is engaged in
waste control, in component products through CompX, and, through NL, in the
titanium dioxide industry. CompX and Valhi may be deemed to be affiliates of the
Company. From 1990 until 1993, Mr. Compofelice was Vice President and Chief
Financial Officer of Baroid. Mr. Compofelice serves on the Company's Pension and
Employee Benefits Committee (Chairman).
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EDWARD C. HUTCHESON, JR., 52, has been a director of the Company since 1996. In
1997, he became a principal of HWG Capital, LLC ("HWG Capital"), an affiliate of
the Houston-based investment banking firm of Harris Webb & Garrison. HWG Capital
acts as a principal in merchant banking transactions with its focus on the area
of industry consolidations. Since October 1994, Mr. Hutcheson has served as a
director and was a co-founder of Crown Castle International Corp. ("Crown
Castle"), a leading provider of communication sites and wireless network
services. Crown Castle owns, operates and manages wireless transmission towers
and rooftop sites throughout the U.S. and in international markets. During 1994,
he was involved in private investment activities leading to the creation of
Crown Castle. From 1990 to 1993, Mr. Hutcheson served as the President, Chief
Operating Officer and a director of Baroid. Mr. Hutcheson also serves on the
board of directors of Trico Marine Services, Inc. and Pinnacle Management &
Trust Co. Mr. Hutcheson serves on the Company's Audit Committee, Management
Development and Compensation Committee (Chairman) and Nominations Committee.
GENERAL THOMAS P. STAFFORD (RETIRED), 67, has been a director of the Company
since 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. In addition to serving as a
director of Tremont since 1989, Gen. Stafford also serves as a director of
Allied-Signal Inc., CMI Corporation and Seagate Technologies, Inc. Gen. Stafford
serves on the Company's Audit Committee (Chairman), Management Development and
Compensation Committee and Nominations Committee (Chairman).
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 1997 and took action by written
consent in lieu of a meeting once in 1997. 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 Hiroomi Mikami. The Audit Committee held one
meeting in 1997.
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
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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. During 1997,
the Compensation Committee held one meeting and took action by written consent
two times.
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 one meeting in 1997. In February 1998, 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), Leslie P. Lundberg (non-director member), and
Robert E. Musgraves (non-director member). The Benefits Committee held no
meetings during 1997.
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
During 1997, directors of the Company who were not also employees of the Company
("Non-Employee Directors") received an annual retainer of $8,000 in cash plus
400 shares of TIMET Common Stock. In addition, Non-Employee Directors received
an attendance fee of $1,000 per day for each day on which they attended in
person a meeting of the Board of Directors or a committee of the Board of
Directors ($350 for telephonic participation) and were reimbursed for reasonable
expenses incurred in attending Board of Directors and committee meetings.
The Company has adopted a director compensation plan (the "Director Compensation
Plan") pursuant to which each Non-Employee Director was granted in each of 1996
and 1997 an option to acquire 625 shares of TIMET Common Stock at an exercise
price of $23.00 and $29.50 per share, respectively, and, in 1998, an option to
acquire 1,500 shares of TIMET Common Stock at an exercise price of $26.125 per
share, the exercise price in each case representing the market value of TIMET
Common Stock on the date of grant, calculated as the last reported sale price of
TIMET Common Stock on the Nasdaq National Market on such date. Options granted
pursuant to the Director Compensation Plan become exercisable one year after the
date of grant and, beginning with the grants made in 1998, expire on the tenth
anniversary of the date of grant (five years after the date of grant for grants
made in 1996 and 1997).
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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
("Other Named Executive Officers") and (d) all executive officers and directors
of TIMET as a group. See footnote (3) 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 (3) and under the heading
"Ownership of Tremont Common Stock" below. Except as set forth in footnote (9)
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, except that Paul J. Bania, the Company's Vice President-Quality &
Technology, owns 10% of the equity interests in TioPro LLC, an 80%-owned
subsidiary of the Company. 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
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Name and Address of Amount and Nature of Percent of TIMET
Beneficial Owner Beneficial Ownership(1) Common Stock(2)
- ---------------------------------------------------------------------------------------------------------------------------
GREATER THAN 5% STOCKHOLDERS
Tremont Corporation(3)(4) 11,033,075 35.1%
Franklin Resources, Inc. and
Templeton Global Advisors Limited(5) 4,155,549 13.2%
IMI Americas, Inc.(4)(6) 2,011,305 6.4%
DIRECTORS
J. Landis Martin(7)(8)(9) 41,267 --
Joseph S. Compofelice(9)(10) 22,353 --
Andrew R. Dixey(7) 17,925 --
Edward C. Hutcheson, Jr.(11) 3,050 --
Hiroomi Mikami(12) -0- --
Gen. Thomas P. Stafford(13) 2,350 --
OTHER NAMED EXECUTIVE OFFICERS
William C. Acton(7) 2,750 --
Robert E. Musgraves(7)(14) 8,400 --
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(17 persons)(8)(9)(10)(11)(13)(14)(15) 128,695 --
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(1) All beneficial ownership is sole and direct unless otherwise noted.
(2) No percent of class is shown for holdings of less than 1%. For purposes of
calculating individual and group percentages, the number of shares treated
as outstanding for each individual includes stock options exercisable by
such individual (or all individuals included in the group) within 60 days
of the Record Date.
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(3) As of the Record Date, Valhi, Valhi Group, Inc. ("VGI"), National City
Lines, Inc. ("National"), NL and Valmont Insurance Company ("Valmont") were
the holders of approximately 1.5% (103,900 shares), 34.9% (2,361,300
shares), 5.2% (350,360 shares), 0.5% (36,167 shares) and 0.5% (30,490
shares), respectively, of the shares of Tremont Common Stock, $1.00 par
value per share ("Tremont Common Stock"), outstanding.
Valhi is the holder of 100% of the outstanding common stock of Valmont.
Valhi and Tremont are the holders of approximately 58.3% and 17.7%,
respectively, of the outstanding common stock of NL and together may be
deemed to control NL. VGI, National and Contran Corporation ("Contran") are
the holders of approximately 74.8%, 9.5% and 7.6%, respectively, of the
outstanding common stock of Valhi. 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 88.8% 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 certain of
Harold C. Simmons' children and grandchildren (the "Simmons Trusts"), of
which Harold C. Simmons is the sole trustee. As sole trustee of the Simmons
Trusts, Harold C. Simmons has the power to vote and direct the disposition
of the shares of Contran common stock held by the Simmons Trusts. However,
Mr. Simmons disclaims beneficial ownership of such shares.
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.
Of Contran's ownership percentages reported above, 0.2% of the outstanding
shares of Valhi common stock and 3.5% of the outstanding shares of Tremont
Common Stock are directly held by the Contran Deferred Compensation Trust
No. 2 (the "CDCT No. 2"). Boston Safe Deposit and Trust Company 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 it owes to Harold C. Simmons. If the
assets of the CDCT No. 2 are insufficient to satisfy such obligations,
Contran must satisfy the balance of such obligations as they come due.
Pursuant to the terms of the CDCT No. 2, Contran (i) retains the power to
vote the shares held by the CDCT No. 2, (ii) retains dispositive power 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 holding
such 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,
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directly and indirectly, by all of such entities (except to the extent of
his vested, beneficial interest as a beneficiary of the CDCT No. 2).
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 owned by such entities or persons (except to the extent of his
individual vested beneficial interest in the assets held by the Master
Trust).
(4) The shares of TIMET Common Stock shown as beneficially owned by Tremont
include 1,508,075 shares obtainable within 60 days of the Record Date upon
exercise of an option (the "IMI Option") at an exercise price of $7.95 per
share and expiring February 15, 1999, granted by IMI Americas Inc. to
Tremont in connection with the 1996 acquisition by TIMET of the IMI
titanium business (the "IMI Titanium Acquisition") from IMI. Tremont
concurrently assigned 25% of the IMI Option, representing the right to
acquire 503,230 shares, to Union Titanium Sponge Corporation ("UTSC"),
which held 25% of the Company's common stock outstanding at the time. In
connection with the Company's 1996 initial public offering (the "IPO"),
Tremont relinquished its right to acquire 1,615 shares under the original
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. The address of Tremont Corporation is 1999 Broadway, Suite 4300,
Denver, Colorado 80202.
(5) As reported in a Statement on Schedule 13G/A filed with the Commission on
February 10, 1998 on behalf of Franklin Resources, Inc., Templeton Global
Advisors Limited, Charles B. Johnson and Rupert H. Johnson, Jr. The address
of Franklin Resources, Inc. and Messrs. Johnson is 777 Mariners Island
Blvd., San Diego, California 94404. The address of Templeton Global
Advisors Limited is Lyford Cay, P.O. Box N-7759, Nassau, Bahamas.
(6) All of the outstanding capital stock of IMI Americas, Inc. is held,
directly or indirectly, by IMI. The address of IMI Americas, Inc. is One
Cornelius Place, Anoka, Minnesota 55104.
(7) The address for each such person is 1999 Broadway, Suite 4300, Denver,
Colorado 80202.
(8) 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.
(9) Mr. Martin and Mr. Compofelice are the holders of 3,000 and 2,000,
respectively, of the 6 5/8% 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, nominee for director or executive officer of the Company
holds any TIMET Trust Securities.
(10) The shares of TIMET Common Stock shown as beneficially owned by Joseph S.
Compofelice are held by Mr. Compofelice and his wife as joint tenants. The
address for Mr. Compofelice is 16825 Northchase Drive, Suite 1200, Houston,
Texas 77060.
(11) The shares of TIMET Common Stock shown as beneficially owned by Mr.
Hutcheson include 1,250 shares that Mr. Hutcheson has the right to acquire
by the exercise of options within 60 days of the Record Date under the
Director Compensation Plan. The address for Mr. Hutcheson is 5599 San
Felipe, Suite 301, Houston, Texas 77056.
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(12) The address for Mr. Mikami is Toho Titanium Co., Ltd., Nss Building,
2-13-31, Kohnan, Minatoku, Tokyo 108, Japan.
(13) The shares of TIMET Common Stock shown as beneficially owned by Gen.
Stafford include 1,250 shares that Gen. Stafford has the right to acquire
by the exercise of options within 60 days of Record Date under the Director
Compensation Plan. The address for Gen. Stafford is Coral Harbor Club,
88181 Old Highway, MM88, Unit C-44, Islamarada, Florida 33036.
(14) 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) 900 shares held by other members of Mr. Musgraves'
household, beneficial ownership of which is disclaimed by Mr. Musgraves.
(15) The shares of TIMET Common Stock shown as beneficially owned by all
directors and executive officers as a group include 2,500 shares that
members of this group have the right to acquire pursuant to the exercise of
stock options within 60 days of the Record Date.
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.
OWNERSHIP OF TREMONT COMMON STOCK
The following table and notes set forth the beneficial ownership, as of March
18, 1998, of Tremont Common Stock held by (i) each director or nominee for
director of TIMET, (ii) each Other Named Executive Officer and (iii) all
directors and executive officers 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 Tremont
Beneficial Owner Beneficial Ownership(1) Common Stock(2)
- ---------------------------------------------------------------------------------------------------------------------------
DIRECTORS
J. Landis Martin(3) 210,418 3.1%
Joseph S. Compofelice 12,200 --
Andrew R. Dixey -0- --
Edward C. Hutcheson, Jr. -0- --
Hiroomi Mikami -0- --
Gen. Thomas P. Stafford(4) 2,000 --
OTHER NAMED EXECUTIVE OFFICERS
William C. Acton -0- --
Robert E. Musgraves(5) 21,010 --
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP
(17 persons)(3)(4)(5)(6) 273,955 4.0%
- ------------------------------------
(1) All beneficial ownership is sole and direct unless otherwise noted.
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(2) No percent of class is shown for holdings of less than 1%. For purposes of
calculating individual and group percentages, the number of shares treated
as outstanding for each individual includes stock options exercisable by
such individual (or all individuals included in the group) within 60 days
of the Record Date.
(3) The shares of Tremont Common Stock shown as beneficially owned by J. Landis
Martin include (i) 75,500 shares that Mr. Martin has the right to acquire
by exercise of options within 60 days of March 18, 1998 under the Tremont
1988 Long Term Performance Incentive Plan (the "Tremont Stock Incentive
Plan") and (ii) 510 shares held for the benefit of Mr. Martin under the
Savings Plan for Employees of NL. Such shares also include (iii) 1,800
shares held by Mr. Martin's wife, (iv) 2,400 shares held by the Martin's
Children Trust No. II of which Mr. Martin is trustee, and (v) 100 shares
held by one of Mr. Martin's daughters, with respect to all of which shares
beneficial ownership is disclaimed by Mr. Martin.
(4) The shares of Tremont Common Stock shown as beneficially owned by Gen.
Thomas P. Stafford represent shares that Gen. Stafford has the right to
acquire by the exercise of options within 60 days of March 18, 1998 under
the Tremont Corporation 1992 Non-Employee Director Stock Option Plan.
(5) The shares of Tremont Common Stock shown as beneficially owned by Robert E.
Musgraves represent (i) 21,000 shares that Mr. Musgraves has the right to
acquire by the exercise of options within 60 days of March 18, 1998 under
the Tremont Stock Incentive Plan and (ii) 10 shares held by a member of his
household, beneficial ownership of which shares are disclaimed by Mr.
Musgraves.
(6) The shares of Tremont Common Stock shown as beneficially owned by all
directors and executive officers as a group include 122,600 shares that
members of this group have the right to acquire pursuant to the exercise of
stock options within 60 days of the Record Date.
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 6 5/8% 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 (9) to the table under the heading "Ownership of TIMET
Common Stock," no director, nominee for director or executive officer of TIMET
is known to own any TIMET Trust Securities.
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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 during 1997, in
each case for services rendered during the years 1995-1997.
Summary Compensation Table(1)
Long Term
Compensation
Awards
Annual Compensation Securities
--------------------------------------- Underlying All Other
Salary Bonus(2)(3) Options Compensation(4)(5)
Name and Position Year ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
J. Landis Martin 1997 500,000 565,000 60,000 20,273
Chairman of the Board and 1996 225,000 940,331 54,000 21,028
Chief Executive Officer(6) 1995 120,000 -0- -0- 2,650
Andrew R. Dixey 1997 300,000 339,000 36,000 53,450
President and 1996 218,750 636,415 45,000 82,300
Chief Operating Officer(7) 1995 -- -- -- --
Joseph S. Compofelice 1997 170,000 192,100 24,000 17,656
Vice President and 1996 120,000 410,969 25,500 14,263
Chief Financial Officer(6)(8) 1995 90,000 100,000 -0- 4,476
William C. Acton 1997 200,000 106,726 -0- 11,339
Vice President; President- 1996 164,700 183,120 25,000 7,061
North Am. Mill Operations(9) 1995 -- -- -- --
Robert E. Musgraves 1997 160,000 107,600 15,000 15,361
Vice President, General 1996 160,000 277,092 18,000 15,338
Counsel and Secretary(6) 1995 120,000 31,200 -0- 5,018
- -----------------------
(1) Columns required by the regulations of the Commission that would contain no
entries have been omitted.
(2) Under the Company's variable incentive compensation plan applicable to Mr.
Acton and Mr. Musgraves (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 Mr. Musgraves for such year related
solely to individual performance and no compensation was payable with
respect to the Company's performance. For 1996 and 1997, the payments under
the Employee Cash Incentive Plan to Mr. Musgraves ($140,800 and $107,600,
respectively) were based upon a combination of Company performance and
assessed individual performance.
Mr. Acton's participation in the Employee Cash Incentive Plan commenced in
June 1997. For 1996 and a portion of 1997, Mr. Acton's bonus was determined
under a separate plan maintained by the Company's subsidiary, Titanium
Hearth Technologies, Inc. ("THT"). Payments under such plan are based upon
that unit's operating performance against business plan. For 1997, Mr.
Acton's bonus included a prorated portion of his bonus under the THT plan
($29,770) and a prorated portion of his bonus under the Employee Cash
Incentive Compensation Plan ($76,956).
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None of Messrs. Martin, Dixey or Compofelice has participated in the
Employee Cash Incentive Plan. In 1996, the Company's Board adopted the
Senior Executive Cash Incentive Plan, which is currently applicable only to
Mr. Martin and Mr. Dixey (Mr. Compofelice was a participant during 1996 and
1997). The Company's stockholders approved such plan in 1997. 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. For 1997, awards of $565,000,
$339,000, and $192,100 were made to Messrs. Martin, Dixey and Compofelice
under this plan. All such amounts are included in the "Bonus" column for
the year in question.
(3) 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, and
$136,292 were made to Messrs. Martin, Dixey, Compofelice, and Musgraves,
respectively. All such amounts are included in the "Bonus" column for 1996.
(4) "All Other Compensation" amounts represent (except for Mr. Dixey) (i)
matching contributions made by the Company pursuant to the savings feature
of the Company's Thrift/Retirement Plan (or a comparable THT Plan), (ii)
retirement contributions made by the Company pursuant to the
Thrift/Retirement Plan (or a comparable THT Plan), and (iii) life insurance
premiums paid by the Company for the 1995-1997 compensation years, as
follows:
Martin Dixey Compofelice Acton Musgraves
- ---------------------------------------------------------------------------------------------------------------------------
Year
----
Savings 1997 $ 8,606 -0- $ 10,200 $ 5,222 $ 8,096
Match 1996 $ 13,378 -0- $ 7,237 $ 1,125 $ 9,000
1995 $ 150 -- $ 900 -- $ 1,230
Retirement 1997 $ 11,667 -0- $ 6,800 $ 4,800 $ 6,477
Contribution 1996 $ 7,650 -0- $ 6,450 $ 4,299 $ 5,550
1995 $ 2,400 -- $ 3,000 -- $ 3,000
Life 1997 $ -0- -0- $ 576 $ 1,317 $ 788
Insurance 1996 $ -0- -0- $ 576 $ 1,637 $ 788
1995 $ -0- -- $ 576 -- $ 576
(5) For Mr. Dixey, "All Other Compensation" represents the amount contributed
or accrued by TIMET UK with respect to Mr. Dixey's TIMET UK pension. See
footnote (7) and "Pension Plans" below.
(6) J. Landis Martin, the Company's Chairman and Chief Executive Officer, J.
Thomas Montgomery, Jr., the Company's Vice President-Finance and Treasurer,
and Robert E. Musgraves, the Company's Vice President, General Counsel and
Secretary, also currently serve as officers of Tremont. In addition, during
1997, Joseph S. Compofelice, the Company's former Vice President and Chief
Financial Officer, and, for a portion of 1997, Mark A. Wallace, the
Company's Vice President-Strategic Change and Information Technology, also
served 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, 1996,
and 1997. Pursuant to an intercorporate service 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).
Pursuant to an intercorporate services agreement, Tremont reimbursed TIMET
for approximately $120,000, $64,000, and $72,000 of the compensation paid
to Messrs. Martin, Compofelice and Musgraves, respectively, in 1996, and
approximately $128,000, $44,000, and $32,000 of such individuals'
respective compensation for 1997. 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, $900,000 was
paid in 1997, and the balance was paid in 1998 (together with interest on
the unpaid balances in 1997 and 1998 at 8.75% per annum).
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16
The Company expects that each of Mr. Martin and Mr. Musgraves will devote
approximately 10% of his total TIMET/Tremont time during 1998 to Tremont
matters. Accordingly, it is anticipated that Tremont will reimburse the
Company for such proportionate percentage of the 1998 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. Mr. Compofelice's service as an officer of both TIMET
and Tremont ended in February 1998. See "Certain Relationships and Related
Transactions--Contractual Relationships."
Mr. Martin and Mr. Compofelice also served as officers of NL during
1995-1997 and were separately compensated directly by NL for such services.
Mr. Compofelice also served as an executive officer of Valhi during a
portion of this period. Valhi reimbursed NL for a proportionate part of Mr.
Compofelice's NL compensation (except for a $500,000 bonus paid to Mr.
Compofelice by Valhi in 1997).
(7) Mr. Dixey commenced employment with the Company effective in February 1996.
Consequently, no amounts are shown for Mr. Dixey for 1995. The amounts
shown for 1996 and 1997 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 L.1 = $1.62 for 1996
and L.1 = $1.64 for 1997.
(8) Based upon the recommendation of TIMET's 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.
(9) Mr. Acton's services as an executive officer of the Company commenced in
December 1996. Consequently, no information is shown for Mr. Acton in 1995.
The amounts shown for 1996 represent payments by THT and its predecessor,
Axel Johnson Metals, Inc., which became a wholly-owned subsidiary of the
Company in October 1996.
Pension Plans
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-line 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
--------------------------------------------------------------------------------
15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------------------
Final Pensionable Pay
(maximum of L.84,000) L.43,800 L.58,400 L.58,400 L.58,400 L.58,400
Final pensionable pay pursuant to the TIMET UK Pension Plan is capped at
L.84,000. As of December 31, 1997, Andrew R. Dixey is the only executive named
in the Summary Compensation Table who participates in the TIMET UK Pension Plan.
Since 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, 1997, Mr. Dixey was credited with
approximately 2 years of pensionable service under the TIMET UK Pension Plan.
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17
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 (for 1996, this
calculation also included Mr. Dixey's bonus). Upon Mr. Dixey's retirement, TIMET
UK's contributions to the plan are required to be paid to Mr. Dixey.
Except as discussed above for Mr. Dixey, none of the individuals named in the
Summary Compensation Table above is entitled to receive a defined benefit
pension from the Company or any of its subsidiaries.
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
1997. No stock appreciation rights ("SARs") have been granted under the TIMET
Stock Incentive Plan.
Potential Realizable
Value at Assumed Annual
Number of Percent of Rate of Stock Price
Securities Total Options Appreciation for
Underlying Granted to Exercise or Option Term(3) ($)
Options Employees in Base Price Expiration ---------------------------
Name Date Granted(1) Fiscal Year ($/share)(2) Date 5% 10%
- ---------------------------------------------------------------------------------------------------------------------------
J. Landis Martin 2/13/97 20,000 5.5% 28.00 2/13/2007 352,181 892,496
2/13/97 20,000 5.5% 31.00 2/13/2007 292,181 832,496
2/13/97 20,000 5.5% 34.00 2/13/2007 232,181 772,496
Andrew R. Dixey 2/13/97 12,000 3.3% 28.00 2/13/2007 211,309 535,497
2/13/97 12,000 3.3% 31.00 2/13/2007 175,309 499,497
2/13/97 12,000 3.3% 34.00 2/13/2007 139,309 463,497
Joseph S. Compofelice 2/13/97 8,000 2.2% 28.00 2/13/2007 140,872 356,998
2/13/97 8,000 2.2% 31.00 2/13/2007 116,872 332,998
2/13/97 8,000 2.2% 34.00 2/13/2007 92,872 308,998
William C. Acton - 0 -
Robert E. Musgraves 2/13/97 5,000 1.4% 28.00 2/13/2007 88,045 223,124
2/13/97 5,000 1.4% 31.00 2/13/2007 73,045 208,124
2/13/97 5,000 1.4% 34.00 2/13/2007 58,045 193,124
- ----------------
(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 of such
date.
(2) The exercise price of $28.00 per share represents the "fair market value"
of TIMET Common Stock on the grant date, calculated as the mean of the
highest and lowest sales prices on such date (the "Grant Date FMV"). The
exercise prices of $31.00 and $34.00 per share represent the Grant Date FMV
plus $3.00 and $6.00 per share, respectively.
(3) Pursuant to the rules of the Commission, these amounts reflect the
calculations at assumed 5% and 10% appreciation rates from the Grant Date
FMV. 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 $45.61 and $72.62 at the assumed 5% and 10%
appreciation rates, respectively.
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STOCK OPTION EXERCISES AND HOLDINGS
No TIMET stock options were exercised (or were 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 1996, the
Company entered into an agreement with Mr. Dixey which provides, among other
things, that Mr. Dixey's employment 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 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. Any action regarding the base salary of the Chief Executive Officers 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 1997, the Company's compensation program with respect to its executive
officers, including the Chief Executive Officer, 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 Chief Executive Officer,
reviews base salaries for the executive officers other than the Chief Executive
Officer generally no more frequently than annually. The Chief Executive
Officer's recommendation and the Compensation Committee's actions in 1997
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.
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Effective January 1, 1997, based upon the foregoing principles and the
recommendation of the Chief Executive Officer, the Compensation Committee
approved base salary increases for certain of the executives, including
increases for Messrs. Dixey, Compofelice, and Acton, as reflected in the Summary
Compensation Table.
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 85% of base salary for 1997, 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 Messrs. Martin, Dixey, Compofelice,
Entrekin and, for a portion of 1997, Acton, were eligible to receive benefits
under the Employee Cash Incentive Plan for 1997. Mr. Entrekin and, for a portion
of 1997, Mr. Acton (see footnote (2) to the Summary Compensation Table above)
participated in a separate bonus plan sponsored by THT, under which payments are
based upon the performance of that Company subsidiary against its business plan.
Potential awards under the Employee Cash Incentive Plan attributable solely to
the performance of TIMET in 1997 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 are tied to the Company's
corporate-wide return on equity (ROE) as follows:
ROE Performance Level
------------------------------------------------------------------------------
less than 3% --
3%-5.9% A
6%-11.9% B
12%-23.9% C
24% or more D
In 1997, the Company achieved a 22.6% return on equity, as calculated under the
Employee Cash Incentive Plan, resulting in a Company performance-based payout at
the C level. Payments made for services rendered in 1997 to Mr. Musgraves and,
for a portion of 1997, Mr. Acton under this portion of the Employee Cash
Incentive Plan 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 for services rendered in 1995-1997
to Mr. Musgraves and, for a portion of 1997, Mr. Acton under this portion of the
Employee Cash Incentive Plan are also included under the "Bonus" column.
In 1996, the Board established the Senior Executive Cash Incentive Plan, which
was approved by the Company's stockholders in 1997. This plan is currently
applicable only to Mr. Martin and Mr. Dixey (Mr. Compofelice was a participant
during 1996 and 1997). The Senior Executive Cash Inventive 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 22.6% for 1997 are included under the
"Bonus" column for each such individual in the Summary Compensation Table.
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.
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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 Chief Executive Officer 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 1997, the
Compensation Committee reviewed recommendations by the Chief Executive Officer
regarding option grants to executive officers. Options were granted to executive
officers, including the Chief Executive Officer, in the Compensation Committee's
discretion based on a subjective evaluation regarding each executive's
performance and responsibilities. Grants made in 1997 to individuals named in
the Summary Compensation Table 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%, 20%, 20% and
20% on the second, third, fourth and fifth anniversary dates of the date of
grant, respectively. In 1997, the Compensation Committee granted options to
executive officers in three exercise price tranches. One-third of such options
granted in 1997 are exercisable at the fair market value of the Common Stock on
the date of grant. The remaining two-thirds of the options are exercisable at
levels that are above the market price on the date of grant. The purpose of
setting a portion of the option exercise price at above-market levels is to
assure that the options will not have value unless a certain minimum return for
shares is achieved. 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 1997.
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, in 1997, the Compensation Committee established the
following goals for minimum TIMET Common Stock ownership for executive officers
to encourage executives to build their TIMET Common Stock ownership. Executives
who received special stock grants in 1996 are expected to achieve these
ownership goals prior to 1999. Other current executives and new executives are
now expected to meet their targets within five full years of becoming an
officer. The Committee intends to take into consideration in making future
grants under the TIMET Stock Incentive Plan, among other things, whether or not
an executive has achieved his or her ownership goals in this time frame and
whether progress is being made in the years leading up to the target date for
the accomplishment of the goal. The Compensation Committee has recently
recommended, and the full Board has approved, a loan program designed to assist
executives in meeting these goals on a timely basis.
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
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The following chart shows the ownership level of each person named in the
Summary Compensation Table based upon actual year-end 1997 beneficial ownership
and base salary level, and using the closing price of TIMET Common Stock on
December 31, 1997 of $28.875 (according to the Nasdaq National Market Composite
Tape):
Ownership Actual
Name Multiple Goal Ownership Multiple
---------------------------------------------------------------------------------
J. Landis Martin 4x 2.4x(1)(2)
Andrew R. Dixey 3x 1.7x
Joseph S. Compofelice 3x 3.8x(2)
William C. Acton 2x 0.3x
Robert E. Musgraves 2x 1.4x(1)
(1) Does not include certain shares as to which such individual disclaims
beneficial ownership. See footnotes (8) and (14) 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 (9) 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 to impose a $1 million
deduction limit on compensation paid to the chief executive officer 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 companies'
stockholders. The Company's stockholders have previously approved the TIMET
Stock Incentive Plan and the Senior Executive Cash Incentive Plan. Therefore,
the Compensation Committee believes that payments made pursuant to these two
plans 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 review the compensation plans of the Company
periodically to determine whether further action in respect of this limitation
is warranted.
CHIEF EXECUTIVE OFFICER COMPENSATION
In 1997, the Board approved, upon the recommendation of the Compensation
Committee, a base annual salary increase for Mr. Martin from $225,000 to
$500,000 (including compensation for Tremont-related services that is reimbursed
by Tremont to TIMET). 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
devoting to the Company, the expansion of the size and scope of the Company's
operations, and the significantly 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)
Gen. Thomas P. Stafford
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return at year-end 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, 1997 on TIMET Common Stock against the cumulative total
return of (a) the S&P Composite 500 Index and (b) a self-selected peer group
comprised of RMI Titanium Company (NYSE: RTI) and Oregon Metallurgical
Corporation (NASDAQ: OREM), TIMET's principal domestic competitors in the
titanium metals industry for which meaningful stock performance data is
available. The graph shows the value at December 31 of each year, assuming an
original investment of $100 in each 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
[GRAPH]
Valut at 6/4/96 12/31/96 12/31/97
(value in $)
- ---------------------------------------------------------------------------------
TIMT 100 128 112
- ---------------------------------------------------------------------------------
S&P 500 100 110 144
- ---------------------------------------------------------------------------------
RTI 100 145 104
- ---------------------------------------------------------------------------------
OREM 100 101 105
- ---------------------------------------------------------------------------------
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 (a)
intercorporate transactions with related companies such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint
ventures, partnerships, loans, options, advances of funds on open account, and
sales, leases and exchanges of assets, including securities issued by both
related and unrelated parties and (b) common investment and acquisition
strategies, business combinations, reorganizations, recapitalizations,
securities repurchases, and purchases and sales (and other acquisitions and
dispositions) of subsidiaries, divisions or other business units, which
transactions have involved both related and unrelated parties and have included
transactions which resulted in the acquisition by one related party of a
publicly-held, minority equity interest in another related party. The Company
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continuously considers, reviews and evaluates, and understands that Contran,
Tremont and related entities also 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. In connection with these activities, the Company may
consider issuing additional equity securities or incurring additional
indebtedness. The Company's acquisition activities may in the future include
participation in the acquisition or restructuring activities conducted by
Contran, NL and other companies that may be deemed to be controlled by Harold C.
Simmons. 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, a director of the Company
and its former Vice President and Chief Financial Officer, also served until
February 1998 as Vice President and Chief Financial Officer of both Tremont and
NL. He continues to serve as Chief Executive Officer of CompX, a director of NL
and Executive Vice President of Valhi. J. Thomas Montgomery, Jr., Vice
President-Finance and Treasurer of the Company, is also Vice
President-Controller and Treasurer of Tremont. Robert E. Musgraves, Vice
President, General Counsel and Secretary of the Company, is also Vice President,
General Counsel and Secretary of Tremont. For a portion of 1997, Mark A.
Wallace, the Company's Vice President-Strategic Change and Information
Technology, also served as Vice President and Controller of Tremont. Robert D.
Hardy, the Company's Assistant Treasurer, is also Assistant Treasurer of Tremont
and Vice President-Tax of NL. William A. Kirschner, the Company's Assistant
Treasurer, is also Assistant Treasurer of Tremont. Joan H. Prusse, the Company's
Assistant General Counsel and Assistant Secretary, is also Assistant General
Counsel and Assistant Secretary 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
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 stockholders of all the companies for which they serve.
CONTRACTUAL RELATIONSHIPS
Effective January 1, 1997, 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-based compensation for executive officers of Tremont.
The term of the agreement is one year, subject to renewal on a quarterly basis.
Tremont paid the Company approximately $360,000 under the intercorporate
services agreement in 1997 and expects to enter into a similar agreement for
1998 providing for comparable services and payments.
Effective January 1, 1997, the Company and NL entered into an intercorporate
services agreement which provides for NL to provide certain tax, insurance, risk
management, real property, internal audit and executive secretarial services to
the Company. The term of the agreement is one year, subject to renewal on a
quarterly basis. The Company paid NL approximately $519,000 under the
intercorporate services agreement in 1997 and expects to enter into a similar
agreement for 1998 providing for comparable services and comparable or lower
payments.
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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 portion 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 shares 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 (z) multiplying the resulting product by (i) 0.16
in the case of UTSC and (ii) 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. Pursuant to this agreement, IMI and
UTSC made payments to Tremont of $653,588 and $307,571, respectively, during
1997.
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 1997,
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 the
outstanding equity securities of BII (representing 26% of the voting
securities).
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 (pound)650,000 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 formula-determined prices
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 1997 were approximately $17 million.
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. Purchases by TIMET UK in 1997 were approximately
(pound)15.2 million.
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 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. Certain rights granted to Tremont and IMI and their permitted
transferees ("Holders") under the Shareholders' Agreement depend on the
percentage of the outstanding shares 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 shares of 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 shares of TIMET Common
Stock (a "20% Holder"); and one nominee of a Holder of 10% or more of the
outstanding shares of TIMET Common Stock (a "10% Holder").
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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 shares of 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 a registration rights agreement entered into with UTSC in 1990, in 1997
the Company completed a shelf registration of the 3,653,230 shares of TIMET
Common Stock owned by UTSC (consisting of all of the shares then owned by UTSC,
along with the shares obtainable by UTSC upon exercise of its portion of the IMI
Option). In June 1997, UTSC sold 2.5 million shares under such registration
statement.
Under the Shareholders' Agreement, IMI, Tremont and each of 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
require 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 each of their affiliates have
the right to require 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
holders' directors and officers and any underwriters and selling agents, against
certain liabilities, including liabilities under the Securities Act. Pursuant to
these requirements, in 1997 the Company registered 1,508,075 shares of TIMET
Common Stock on behalf of Tremont (equivalent to the number of shares Tremont
can obtain upon exercise of the IMI Option), which shares have not yet been
sold.
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CERTAIN LITIGATION
Certain directors of TIMET are parties to the litigation described below.
In November 1991, a purported shareholder derivative suit 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's outstanding Common Stock from 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 shares 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. 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 appealed this decision and, upon appeal, the Delaware Supreme Court
reversed and remanded the case to the Chancery Court for further consideration
of the fairness of the transaction. In March 1998, Tremont and Valhi executed
and filed with the court a proposed stipulation of settlement to the case. Under
the proposed settlement, which is subject to court approval, Valhi agreed to
transfer to Tremont 1.2 million shares of NL Common Stock, subject to adjustment
depending upon the average sales price of the shares during a fifteen trading
day period ending five trading days prior to the transfer, up to a maximum of
1.4 million shares and down to a minimum of 1 million shares. Valhi has the
option, in lieu of transferring the shares, of transferring cash or cash
equivalents equal to the product of the number of shares that would otherwise
have been transferred to Tremont and the average price. If approved by the
court, the transfer of shares or cash is expected to occur in the second or
third quarter of 1998. Pursuant to the proposed settlement and subject to court
approval, Tremont will reimburse plaintiffs for attorneys' fees of up to $5
million and related costs. TIMET is not a party to this action.
In September 1996, a purported shareholder 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 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 shareholders. The complaint names as
defendants NL, Valhi, and seven persons who served on NL's Board of Directors in
1991, including Mr. Martin. The complaint alleges, among other things, that the
NL purchase of the shares in the Dutch auction was an unfair and wasteful
expenditure of NL funds that constituted a breach of the defendants' fiduciary
duties to NL's stockholders. The complaint seeks, among other things, rescission
of the purchase from Valhi pursuant to the Dutch auction and plaintiff has
stated that damages sought are $149 million. NL and the other defendants
answered the complaint and denied all allegations of wrongdoing. In February
1998, NL and Valhi executed and filed with the court a proposed stipulation of
settlement of the case. Under the proposed settlement, which is subject to court
approval, Valhi agreed to transfer to NL 750,000 shares of NL Common Stock,
subject to adjustment depending on the average sales price of the shares during
a fifteen trading day period ending five trading days prior to the transfer, up
to a maximum of 825,000 shares and down to a minimum of 675,000 shares. Valhi
has the option, in lieu of transferring the shares, of transferring cash or cash
equivalents equal to the product of the number of shares that would otherwise
have been transferred to NL and the average price. If approved by the court, the
transfer of shares or cash is expected to occur in the second or third quarter
of 1998. Pursuant to the proposed settlement and subject to court approval, NL
will reimburse plaintiffs for attorneys' fees of up to $3 million and related
costs. TIMET is not a party to this action.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act 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
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ended December 31, 1997, except that the Company understands that Mr. Montgomery
was inadvertently late in filing a report with respect to a single purchase of
TIMET Common Stock in December 1997 and Mr. Acton was inadvertently late in
filing his original Form 3 in December 1996. Both filings were made promptly
upon discovery of the omissions.
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, 1997 and is currently expected to be
considered for appointment by the Board of Directors as such for the year ended
December 31, 1998. 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 1999 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 16, 1998, to be considered for inclusion in the proxy statement and
form of proxy relating to the 1999 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.
1997 ANNUAL REPORT ON FORM 10-K
A copy of TIMET's 1997 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. Substantial portions of TIMET's 1997 Annual Report on
Form 10-K are included as a part of the Company's 1997 Annual Report which
accompanies this Proxy Statement.
TITANIUM METALS CORPORATION
Denver, Colorado
April 15, 1998
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[TIMET LOGO]
Titanium Metals Corporation
1999 Broadway
Suite 4300
Denver, Colorado 80202
(303) 296-5600
30
P
R
O
X
Y
Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 19, 1998
The undersigned hereby appoints J. Thomas Montgomery, Jr., Robert E. Musgraves,
and Joan H. Prusse, and each of them, proxy and attorney-in-fact for the
undersigned, with full power of substitution, to vote on behalf of the
undersigned at the 1998 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 Tuesday, May 19,
1998, at 10:00 a.m. (Mountain 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.
SEE REVERSE
SIDE
(Continued and to be signed on the reverse side)
31
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.
The Board of Directors recommends a vote "FOR" each of the director nominees
named in Item #1.
1. Election of Five Directors FOR ALL WITHHELD AS TO ALL
(except as marked below)
Vote withheld as to the following nominee(s): Nominees:
Joseph S. Compofelice
Andrew R. Dixey
Edward C. Hutcheson, Jr.
J. Landis Martin
Gen. Thomas P. Stafford
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2. 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.
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 show full corporate
name and sign authorized officer's name and title. If a partnership, please show
full 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.
--------------------------------
----------------------------1998
SIGNATURE(S) DATE