SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. _ )
Filed by the Registrant [X]
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Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
(Name of Registrant as Specified In Its Charter)
TITANIUM METALS CORPORATION
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
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Rule 0-11(a)(2) and identify the filing for which the offsetting fee
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statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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[Logo]
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
March 29, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders of
Titanium Metals Corporation ("TIMET" or the "Company"), which will be held on
Tuesday, May 7, 2002, at 11:30 a.m. (local time), at the offices of Valhi, Inc.
located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas. In
addition to matters to be acted on at the meeting, which are described in detail
in the attached Notice of Annual Meeting of Stockholders and Proxy Statement, we
will update you on the Company. I hope that you will be able to attend.
Whether or not you plan to attend the meeting, please complete, date, sign and
return the enclosed proxy card or voting instruction form in the accompanying
envelope so that your shares are represented and voted in accordance with your
wishes. Your vote, whether given by proxy or in person at the meeting, will be
held in confidence by the Inspector of Election for the meeting in accordance
with TIMET's Bylaws.
Sincerely,
J. Landis Martin
Chairman of the Board,
President and Chief Executive Officer
THIS PAGE INTENTIONALLY LEFT BLANK
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2002
To the Stockholders of Titanium Metals Corporation:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the "Annual
Meeting") of Titanium Metals Corporation, a Delaware corporation ("TIMET" or the
"Company"), will be held on Tuesday, May 7, 2002, at 11:30 a.m. (local time), at
the offices of Valhi, Inc. located at Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas, for the following purposes:
(1) To elect six directors to serve until the 2003 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 Annual Meeting or any adjournment or postponement thereof.
The Board of Directors of the Company set the close of business on March 18,
2002, as the record date (the "Record Date") for the Annual 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
Annual 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 Annual Meeting will be available for examination during normal business
hours by any TIMET stockholder, for purposes related to the Annual Meeting, for
a period of ten days prior to the Annual Meeting, at TIMET's corporate offices
located at 1999 Broadway, Suite 4300, Denver, Colorado.
You are cordially invited to attend the Annual Meeting. Whether or not you plan
to attend the Annual 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 Annual 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 Annual Meeting, will be held in confidence by the Inspector of
Election for the Annual Meeting.
By order of the Board of Directors,
Joan H. Prusse
Vice President,
Deputy General Counsel and Secretary
Denver, Colorado
March 29, 2002
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
2002 Annual Meeting of Stockholders of the Company to be held on Tuesday, May 7,
2002, at 11:30 a.m. (local time), at the offices of Valhi, Inc. located at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas, and at any
adjournment or postponement thereof (the "Annual 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 5, 2002.
PURPOSE OF THE ANNUAL MEETING
Stockholders of the Company represented at the Annual Meeting will consider and
vote upon (i) the election of six directors to serve until the 2003 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 Annual Meeting. The Company is not aware of any business to be presented for
consideration at the Annual 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 Annual Meeting is necessary to
constitute a quorum for the conduct of business at the Annual Meeting. Shares of
TIMET Common Stock that are voted to abstain from any business coming before the
Annual Meeting and broker/nominee non-votes will be counted as being in
attendance at the Annual Meeting for purposes of determining whether a quorum is
present.
At the Annual 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
Annual Meeting and entitled to vote, a vote withheld from a particular nominee
will not affect the election of such nominee.
Except as otherwise required by the Company's Restated Certificate of
Incorporation, any other matter that may be submitted to a stockholder vote will
require the affirmative vote of a majority of the shares represented at the
Annual 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
Annual Meeting and
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broker/nominee non-votes will not be counted as votes for or against the
approval of any such other matter.
EquiServe Trust Company, N.A. ("EquiServe"), 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 Annual Meeting. All
proxies and ballots delivered to EquiServe will be kept confidential by
EquiServe in accordance with the Company's Bylaws.
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting was the
close of business on March 18, 2002 (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 Annual Meeting. As of the Record Date, there were 31,861,338
shares of TIMET Common Stock issued and outstanding, each of which will be
entitled to one vote on each matter that comes before the Annual Meeting.
AS OF THE RECORD DATE, TREMONT CORPORATION ("TREMONT") AND OTHER ENTITIES
RELATED TO HAROLD C. SIMMONS HELD, IN THE AGGREGATE, APPROXIMATELY 41.6% OF THE
OUTSTANDING SHARES OF TIMET COMMON STOCK. TREMONT AND SUCH OTHER ENTITIES HAVE
INDICATED THEIR INTENTION TO HAVE SUCH SHARES REPRESENTED AT THE ANNUAL MEETING
AND TO VOTE SUCH SHARES "FOR" THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTOR
SET FORTH IN THIS PROXY STATEMENT. IF ALL OF SUCH SHARES ARE VOTED AS INDICATED
AND ALL OTHER OUTSTANDING SHARES OF TIMET COMMON STOCK ARE REPRESENTED AND VOTED
AT THE ANNUAL MEETING, THE ADDITIONAL AFFIRMATIVE VOTE OF APPROXIMATELY 8.5% OR
MORE OF THE TIMET COMMON STOCK ENTITLED TO VOTE WILL ASSURE THE ELECTION OF EACH
OF THE DIRECTOR NOMINEES SET FORTH BELOW. 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 AND SUCH OTHER ENTITIES.
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
distribution of this Proxy Statement, at a cost that the Company estimates will
be approximately $3,000. In addition, 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 previously been revoked, be voted in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
such shares will be voted (a) "FOR" the election of each of the six nominees set
forth below as directors and (b) to the extent allowed by federal securities
laws, in the discretion of the proxy holders on any other matter that may
properly come before the Annual Meeting. Each holder of record of TIMET Common
Stock giving the proxy enclosed with this Proxy Statement
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may revoke it at any time, prior to the voting thereof at the Annual Meeting, by
(i) delivering to EquiServe a written revocation of the proxy, (ii) delivering
to EquiServe a duly executed proxy bearing a later date, or (iii) voting in
person at the Annual Meeting. Attendance by a stockholder at the Annual 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 a minimum of three and a maximum of seventeen persons, as determined
from time to time by the Board of Directors in its discretion. The number of
directors is currently set at seven and will be set at six effective as of the
Annual Meeting. The six directors elected at the Annual Meeting will hold office
until the 2003 Annual Meeting of Stockholders of the Company and until their
successors are duly elected and qualified.
Each nominee other than Norman N. Green is currently a director of the Company
whose term will expire at the Annual Meeting. Mr. Edward C. Hutcheson, Jr., 56,
a director of the Company since 1996 and Mr. Patrick M. Murray, 59, a director
of the Company since June 2001, have indicated their intention not to stand for
re-election. All nominees have agreed to serve if elected. If any nominee is not
available for election at the Annual 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 Annual Meeting and will serve if elected.
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.
Norman N. Green, 67, in 1997 became an original Director and one of the
principal investors in Sage Telecom, a private, full service local and long
distance telecommunications company operating in several southern states. Prior
to this, Mr. Green was active in commercial real estate investment, development
and management for over 40 years. Until 1995, Mr. Green was Chairman and sole
owner of Stewart, Green Properties Ltd., which owned a group of private
companies specializing in the development and management of major shopping
centers in Canada and the U.S. operating approximately 5 million square feet of
commercial real estate. Mr. Green as a co-investor bought the Atlanta Flames, a
National Hockey League franchise, in 1979 (the team became the Calgary Flames),
and he was 100% owner of the Minnesota North Stars beginning in 1990, which he
moved to Dallas in 1993 (the team then became the Dallas Stars), until sale of
the club in 1996 at which time he became a consultant to the club. Teams that
Mr. Green owned went to the Stanley Cup Finals several times during Mr. Green's
tenure and won the Stanley Cup Championships in 1989 and 1999. Mr. Green was a
member of the National Hockey League Board of Governors from 1979 to 1996,
serving on all the strategic committees. He is a member of the executive
committee of the board for the Edwin L. Cox School of Business at Southern
Methodist University and has been active in philanthropic and community service
activities for over 30 years.
J. Landis Martin, 56, has been Chairman of the Board of TIMET since 1987, Chief
Executive Officer of TIMET since 1995 and President since 2000 and previously
from 1995 to 1996. Mr. Martin has served as Chairman of the Board 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,
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Mr. Martin has served as President and Chief Executive Officer, and, since 1986,
as a director of NL Industries, Inc. ("NL"), a manufacturer of titanium dioxide
pigments. Tremont and NL may be deemed to be affiliates of TIMET. Mr. Martin is
also a director of Halliburton Company, Apartment Investment and Management
Company, Crown Castle International Corporation and Special Metals Corporation.
Albert W. Niemi, Jr., Ph.D., 59, has been a director of TIMET since December
2001. Dr. Niemi is the dean of the Edwin L. Cox School of Business at Southern
Methodist University, where he also holds the Tolleson Chair in Business
Leadership. Before joining SMU, Dr. Niemi served as dean of the Terry College of
Business at the University of Georgia from 1982-1996. Dr. Niemi graduated cum
laude from Stonehill College with an A.B. in economics, and earned an M.A. and
Ph.D. in economics from the University of Connecticut. Dr. Niemi is a member of
the Business Accreditation Committee of the American Assembly of Collegiate
Schools of Business, and has chaired or served as a member on the Accreditation
Review Teams to more than twenty universities. Dr. Niemi recently completed a
term on the Board of Governors of the American Association of University
Administrators and is currently on the Board of Beta Gamma Sigma. Dr. Niemi also
serves on the boards of Mayer Electric Supply Company and American Plumbing and
Mechanical, and )], and on the Advisory Boards of TXU Dallas and Crossroads
Investment Company. Dr. Niemi is a member of TIMET's Audit Committee, Management
Development and Compensation Committee ("Compensation Committee") and Pension
and Employee Benefits Committee ("Pension Committee").
Glenn R. Simmons, 74, has been a director of TIMET since 1999. Mr. Simmons is
Chairman of the Board of Keystone Consolidated Industries, Inc. ("Keystone"), a
steel fabricated wire products, industrial wire and carbon steel rod company,
and CompX International Inc. ("CompX"), a manufacturer of ergonomic computer
support systems, precision ball bearing slides and security products. CompX is a
majority-owned, indirect subsidiary of Valhi, Inc. ("Valhi"), which is engaged
in the manufacture of titanium dioxide pigments through its majority interest in
NL and component products through its majority interest in CompX and also
engaged in waste management. Since 1987, Mr. Simmons has been Vice Chairman of
the Board of Valhi and of Contran Corporation ("Contran"), a diversified holding
company that directly and indirectly holds approximately 94% of the outstanding
shares of common stock of Valhi ("Valhi Common Stock") and 47% of the
outstanding shares of common stock of Keystone. Valhi, together with other
persons or entities related to Harold C. Simmons, holds approximately 80.2% of
the outstanding shares of common stock of Tremont ("Tremont Common Stock").
Valhi and Tremont hold approximately 61.7% and 20.9%, respectively, of the
outstanding shares of common stock of NL ("NL Common Stock"). Mr. Simmons has
been an executive officer and/or director of various companies related to Valhi
and Contran since 1969. Mr. Simmons is also a director of Tremont and NL.
Keystone, Valhi and CompX may be deemed to be affiliates of TIMET. Mr. Simmons
is a member of TIMET's Nominations Committee and Chair of the Pension Committee.
Mr. Simmons is a brother of Harold C. Simmons.
General Thomas P. Stafford (retired), 71, has been a director of TIMET since
1996. Gen. Stafford was a co-founder of and has been affiliated with Stafford,
Burke and Hecker, Inc., a Washington-based consulting firm, since 1982. He was
selected as an astronaut in 1962, piloted Gemini VI in 1965 and commanded Gemini
IX in 1966. In 1969, Gen. Stafford was named Chief of the Astronaut Office and
was the Apollo X commander for the first lunar module flight to the moon. He
commanded the Apollo-Soyuz joint mission with the Soviet cosmonauts in 1975.
After his retirement from the United States Air Force in 1979 as Lieutenant
General, he became Chairman of Gibraltar Exploration Limited, an oil and gas
exploration and production company, and served in that position until 1984, when
he joined General Technical Services, Inc., a consulting firm. In addition to
serving as a director of Tremont and NL, Gen. Stafford is a director of The
Wackenhut Corp. Gen. Stafford serves as Chair of TIMET's Nominations Committee
and is a member of TIMET's Audit, Pension and Compensation Committees.
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Steven L. Watson, 51, has been a director of TIMET since 2000. Mr. Watson has
been President and a director of Valhi and Contran since 1998 and has served as
an executive officer and/or director of Valhi, Contran and various companies
related to Valhi and Contran since 1980. Mr. Watson also serves on the board of
directors of Tremont, NL, CompX and Keystone. Mr. Watson serves as a member of
TIMET's Nominations Committee.
For information concerning certain transactions to which certain director
nominees are parties and other matters, see "Certain Relationships and
Transactions" below.
Board Meetings
The Board of Directors held seven meetings and took action by written consent
one time in 2001. Each of the directors participated in at least 75% of the
total number of such meetings and of the committee meetings (for committees on
which they served) held during their period of service in 2001.
Board Committees
The Board of Directors has established the following standing committees:
Audit Committee. The responsibilities and authority of the Audit Committee are,
among other things, to review and recommend to the Board of Directors the
selection of the Company's independent auditors, to consider the independence
and effectiveness of the independent auditors, to review with the independent
auditors the scope and results of the annual auditing engagement and the system
of internal accounting controls, to review the Company's Annual Report on Form
10-K, including annual financial statements, to review and discuss with
management the Company's interim financial statements and to direct and
supervise special audit inquiries. The Company's Board of Directors has adopted
a written charter for the Audit Committee, a copy of which was attached as
Appendix A to the Company's Proxy Statement dated April 11, 2001. The Company
believes that each of the members of the Audit Committee is independent, in
accordance with the requirements of the New York Stock Exchange. The current
members of the Audit Committee are Mr. Murray (Chair), Dr. Niemi, Gen. Stafford
and Mr. Hutcheson. The Audit Committee held seven meetings in 2001. See
"Independent Auditor Matters" below.
Management Development and Compensation Committee. The principal
responsibilities and authority of the Compensation Committee are to review and
approve certain matters involving employee compensation (including executives),
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 1996 Long Term Performance Incentive Plan of Titanium
Metals Corporation (the "TIMET Stock Incentive Plan"), except as otherwise
delegated by the Board of Directors, to review and recommend adoption of or
revision to compensation plans and employee benefit programs, to review and
recommend compensation policies and practices and to prepare such compensation
committee disclosures as may be required, to review and recommend any executive
employment contract, and to provide counsel on key personnel selection,
organization strategies and such other matters as the Board of Directors may
from time to time direct. The current members of the Compensation Committee are
Mr. Hutcheson (Chair), Dr. Niemi and Gen. Stafford. The Compensation Committee
held two meetings in 2001.
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
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time. The current members of the Nominations Committee are Gen. Stafford
(Chair), Mr. Simmons, Mr. Hutcheson and Mr. Watson. The Nominations Committee
held three meetings in 2001. In March 2002, the Nominations Committee reviewed
and made its recommendations to the Board of Directors with respect to the
election of directors at the Annual Meeting. The Nominations Committee will
consider recommendations by 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 Committee is established to
oversee the administration of the Company's pension and employee benefit plans
other than the TIMET Stock Incentive Plan. The Pension Committee is currently
composed of Mr. Simmons (Chair), Mr. Hutcheson, Gen. Stafford and Dr. Niemi. The
Pension Committee held one meeting during 2001.
Members of the standing committees will be appointed at the meeting of the Board
of Directors immediately following the Annual 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 2001, under the compensation plan for
non-employee directors adopted by the Company (the "Director Compensation
Plan"), directors of the Company who were not employees of the Company received
an annual retainer of $15,000 in cash plus 1,000 shares of TIMET Common Stock.
In addition, non-employee directors receive an attendance fee of $1,000 per
meeting for each meeting of the Board of Directors or a committee of the Board
of Directors attended in person ($350 for telephonic participation). Committee
Chairs receive an additional attendance fee of $1,000 for each committee meeting
attended in person ($350 for telephonic participation). Directors are also
reimbursed for reasonable expenses incurred in attending Board of Directors and
committee meetings.
In addition, during 2001, each of Mr. Hutcheson, Mr. Simmons, Gen. Stafford and
Mr. Watson was granted an option to acquire 5,000 shares of TIMET Common Stock
at $14.21 per share, Mr. Murray was granted an option to acquire 5,000 shares of
TIMET Common Stock at $11.97 per share and Dr. Niemi was granted an option to
acquire 5,000 shares of TIMET Common Stock at $3.60 per share.
EXECUTIVE OFFICERS
Set forth below is certain information relating to the current executive
officers of the Company. Biographical information with respect to J. Landis
Martin is set forth under "Election of Directors" above. See also "Certain
Relationships and Transactions" below.
Name Age Position(s)
-------------------------------------------------------
J. Landis Martin 56 Chairman of the Board, President and Chief Executive Officer;
Chairman of the Board, President and Chief Executive Officer
of Tremont; President and Chief Executive Officer of NL
Dr. Charles H. Entrekin, Jr. 53 Executive Vice President-Commercial
Christian Leonhard 56 Executive Vice President-Operations
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Robert E. Musgraves 47 Executive Vice President and General Counsel; Vice President,
General Counsel and Secretary of Tremont
Mark A. Wallace 44 Executive Vice President, Chief Financial Officer and
Treasurer; Vice President, Chief Financial Officer and
Treasurer of Tremont
Charles H. Entrekin, Jr., Ph.D., 53, has served as Executive Vice
President-Commercial of TIMET since 2000. Dr. Entrekin was Vice President of
TIMET from 1997 to 2000 and President-North American Mill Products Operations
from 1999 to 2000. From 1997 to 1999, he was President of the Company's wholly
owned subsidiary Titanium Hearth Technologies, Inc. ("THT"), from 1993 to 1997
he was Vice President-Commercial of THT and from 1985 to 1993 he was Vice
President-Technology of THT.
Christian Leonhard, 56, has served as Executive Vice President-Operations of
TIMET since 2000. Mr. Leonhard joined TIMET in 1988 as General Manager of TIMET
France. He was promoted to President of TIMET Savoie in 1996 and President of
TIMET's European Operations in 1997.
Robert E. Musgraves, 47, has served as Executive Vice President of TIMET since
2000 and has been General Counsel since 1990. Mr. Musgraves was Vice President
from 1990 to 2000 and Secretary of TIMET from 1991 to 2000. Mr. Musgraves has
served as General Counsel and Secretary of Tremont since 1993 and as Vice
President of Tremont since 1994.
Mark A. Wallace, 44, has served as Executive Vice President, Chief Financial
Officer and Treasurer of TIMET since 2000. Mr. Wallace served as Vice
President-Finance and Treasurer of TIMET from 1992 to 1997 and Vice
President-Strategic Change and Information Technology of TIMET from 1997 to
2000. Mr. Wallace has served as Vice President, Chief Financial Officer and
Treasurer of Tremont since 2000 and was Vice President-Controller and Treasurer
of Tremont from 1992 to 1997.
SECURITY OWNERSHIP
Ownership of TIMET Common Stock
The following table and accompanying notes set forth, as of the Record Date, the
beneficial ownership, as defined by the regulations of the Securities and
Exchange Commission (the "Commission"), of 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
and (d) all executive officers and directors of TIMET as a group. See note (3)
following the table immediately below for information concerning individuals and
entities that may be deemed to indirectly beneficially own those shares of TIMET
Common Stock directly beneficially owned by Tremont and the Combined Master
Retirement Trust. All information has been taken from or is based upon ownership
filings made by such persons with the Commission or upon information provided by
such persons to TIMET.
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Ownership of TIMET Common Stock
TIMET Common Stock
-----------------------------------
Amount and
Nature of
Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class (2)
------------------------- ------------------- ------------
Greater than 5% Stockholders
Tremont Corporation (3)(4) 12,280,005 38.5%
Combined Master Retirement Trust (3) 980,000 3.1%
Dimensional Fund Advisors Inc. (5) 2,718,800 8.5%
ICM Asset Management, Inc. and James M. Simmons (6) 1,825,413 5.7%
Directors and Nominees
Norman M. Green -0- ---
Edward C. Hutcheson, Jr. (7) 4,400 ---
J. Landis Martin (3)(8) 422,017 1.3%
Patrick M. Murray 1,000 ---
Dr. Albert W. Niemi, Jr. 1,000 ---
Glenn R. Simmons (3) 7,000 ---
Gen. Thomas P. Stafford (3)(9) 5,100 ---
Steven L. Watson (3) (10) 14,500 ---
Other Executive Officers
Dr. Charles H. Entrekin, Jr. (11) 68,200 ---
Christian Leonhard (12) 59,000 ---
Robert E. Musgraves (13) 103,150 ---
Mark A. Wallace (14) 86,500 ---
All Directors and Executive Officers of the Company as a group
(11 persons) (3)(7)(8)(9)(10)(11)(12)(13)(14)(15) 771,867 2.4%
------------
(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 and shares each
individual may acquire by conversion of convertible securities.
(3) Tremont and the Combined Master Retirement Trust (the "CMRT") directly
beneficially own approximately 38.5% and 3.1%, respectively, of the
outstanding shares of TIMET Common Stock. Valhi established the CMRT
to permit the collective investment by master 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 CMRT and a
member of the trust investment committee of the CMRT. Valhi's board of
directors selects the trustee and members of the trust investment
committee for the CMRT. Harold C. Simmons, Glenn R. Simmons and Steven
L. Watson are each members of Valhi's board of directors and are
participants in one or more of the employee benefit plans that invest
through the CMRT. However, each such person disclaims beneficial
ownership of the shares of TIMET Common Stock held by the CMRT, except
to the extent of his individual, vested beneficial interest in the
assets held by the CMRT.
Tremont Group, Inc. ("TGI"), Tremont Holdings, LLC ("TRE Holdings")
and Valhi are the direct
8
holders of approximately 80.0%, 0.1% and 0.1%, respectively, of the
outstanding shares of Tremont Common Stock. Valhi and TRE Holdings are
the direct holders of 80.0% and 20.0%, respectively, of the
outstanding common stock of TGI. NL is the sole member of TRE
Holdings.
Valhi and Tremont are the direct holders of approximately 61.7% and
20.9%, respectively, of the outstanding shares of NL Common Stock.
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"), and
Contran are the holders of approximately 81.7%, 9.5%, and 2.1%,
respectively, of the outstanding shares of Valhi Common Stock.
National, NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie
Holding") are the direct holders of approximately 73.3%, 11.4% and
15.3%, respectively, of the outstanding common stock of VGI. Contran
and NOA are the direct holders of approximately 85.7% and 14.3%,
respectively, of the outstanding common stock of National. Contran and
Southwest Louisiana Land Company, Inc. ("Southwest") are the direct
holders of approximately 49.9% and 50.1%, respectively, of the
outstanding common stock of NOA. Dixie Rice Agricultural Corporation,
Inc. ("Dixie Rice") is the direct holder of 100% of the outstanding
common stock of Dixie Holding. Contran is the holder of 100% of the
outstanding common stock of Dixie Rice and approximately 88.9% of the
outstanding common stock Southwest. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit
of certain children and grandchildren of Harold C. Simmons (the
"Trusts"), of which Mr. Simmons is the sole trustee. As sole trustee
of the Trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any Contran shares
held by the Trusts.
Harold C. Simmons is Chairman of the Board and Chief Executive Officer
of TGI, Valhi, VGI, National, NOA, Dixie Holding, Dixie Rice,
Southwest and Contran. Mr. Simmons is also Chairman of the Board of NL
and a director of Tremont.
By virtue of the holding of the offices, the stock ownership, and his
service as trustee, all as described above, Mr. Simmons may be deemed
to control the entities described above, and Mr. Simmons and certain
of such entities may be deemed to possess indirect beneficial
ownership of the shares of Tremont, Valhi, NL and TIMET Common Stock
held directly by certain of such other entities. Mr. Simmons, however,
disclaims beneficial ownership of such shares beneficially owned,
directly or indirectly, by any of such entities, except to the extent
otherwise expressly indicated in this note.
Glenn R. Simmons and Steven L. Watson are directors of NL, Valhi and
Contran, J. Landis Martin is a director of NL and all of such persons
are directors of TGI and Tremont. Gen. Thomas P. Stafford is a
director of NL and Tremont. Each of such persons disclaims beneficial
ownership of the shares of Tremont Common Stock that TGI, NL, Valhi or
Contran directly or indirectly beneficially holds and the shares of
TIMET Common Stock held by Tremont.
The Harold Simmons Foundation, Inc. (the "Foundation") directly holds
approximately 0.5% of the outstanding shares of Valhi Common Stock.
The Foundation is a tax-exempt foundation organized for charitable
purposes. Harold C. Simmons is Chairman of the Board and Chief
Executive Officer of the Foundation and may be deemed to control the
Foundation. Mr. Simmons, however, disclaims beneficial ownership of
any shares of Valhi Common Stock held by the Foundation.
The CMRT also directly holds approximately 0.1% of the outstanding
shares of Valhi Common Stock. Harold C. Simmons, Glenn R. Simmons and
Steven L. Watson each disclaim beneficial ownership of the shares of
Valhi Common Stock held by the CMRT, except to the extent of his
individual, vested beneficial interest in the assets held by the CMRT.
The Contran Deferred Compensation Trust No. 2 (the "CDCT No. 2")
directly holds approximately 0.4% of the outstanding shares of Valhi
Common Stock. U.S. Bank National Association serves as the trustee of
the CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable
"rabbi trust" to assist Contran in meeting certain deferred
compensation obligations that it owes to Harold C. Simmons. If the
CDCT No. 2 assets are insufficient to satisfy such obligations,
Contran must satisfy the balance of such
9
obligations as they come due. Pursuant to the terms of the CDCT No. 2,
Contran retains the power to vote the shares of Valhi Common Stock
held by the CDCT No. 2, retains dispositive power over such shares and
may be deemed the indirect beneficial owner of such shares. Mr.
Simmons, however, disclaims beneficial ownership of the shares owned,
directly or indirectly, by the CDCT No. 2, except to the extent of his
interest as a beneficiary of the CDCT No. 2.
Valmont Insurance Company ("Valmont") and a subsidiary of NL directly
own 1,000,000 shares and 1,186,200 shares, respectively, of the
outstanding shares of Valhi Common Stock. Valhi directly holds 100% of
the outstanding common stock of Valmont. Pursuant to Delaware law,
Valhi treats the shares of Valhi Common Stock owned by Valmont and the
subsidiary of NL as treasury stock for voting purposes. For the
purposes of this footnote, such shares are not deemed outstanding.
Harold C. Simmons' spouse is the direct owner of 77,000 shares of
Valhi Common Stock and 69,475 shares of NL Common Stock. Mr. Simmons
may be deemed to share indirect beneficial ownership of such shares.
However, Mr. Simmons disclaims all such beneficial ownership.
The business address of TGI, Valhi, VGI, National, NOA, Dixie Holding,
Contran, the CMRT and the Foundation is Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697. The business address of
Dixie Rice is 600 Pasquiere Street, Gueydan, Louisiana 70542. The
business address of Southwest is 402 Canal Street, Houma, Louisiana
70360. The business address of TRE Holdings is 16825 Northchase Drive,
Suite 1200, Houston, Texas 77060.
(4) The address of Tremont Corporation is 1999 Broadway, Suite 4300,
Denver, Colorado 80202.
(5) As reported in Amendment No. 2 to Statement on Schedule 13G filed with
the Commission dated January 30, 2002. The address of Dimensional Fund
Advisors Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(6) As reported in Amendment No. 4 to Statement on Schedule 13G filed with
the Commission dated February 5, 2002. The address of ICM Asset
Management, Inc. and James M. Simmons is W. 601 Main Avenue, Suite
600, Spokane, Washington 99201.
(7) The shares of TIMET Common Stock shown as beneficially owned by Edward
C. Hutcheson, Jr. include 1,500 shares that Mr. Hutcheson has the
right to acquire by the exercise of stock options within 60 days of
the Record Date under the Director Compensation Plan.
(8) The shares of TIMET Common Stock shown as beneficially owned by J.
Landis Martin include (i) 340,600 shares that Mr. Martin has the right
to acquire by the exercise of stock options within 60 days of the
Record Date under the TIMET Stock Incentive Plan and (ii) 400 shares
held by Mr. Martin's daughters, beneficial ownership of which is
disclaimed by Mr. Martin. Mr. Martin is also the holder of 3,000
shares of the 6-5/8% Convertible Preferred Securities, Beneficial
Unsecured Convertible Securities ("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 shares
of TIMET Common Stock, which amount is included in the TIMET Common
Stock ownership number shown for Mr. Martin. No other director,
nominee for director or executive officer of TIMET is known to hold
any TIMET Trust Securities.
(9) The shares of TIMET Common Stock shown as beneficially owned by Thomas
P. Stafford include 1,500 shares that Gen. Stafford has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under the Director Compensation Plan.
(10) The shares of TIMET Common Stock shown as beneficially owned by Steven
L. Watson include 5,000 shares that Mr. Watson has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under the Director Compensation Plan.
10
(11) The shares of TIMET Common Stock shown as beneficially owned by
Charles H. Entrekin, Jr. include (i) 28,000 shares that Dr. Entrekin
has the right to acquire by the exercise of stock options within 60
days of the Record Date under the TIMET Stock Incentive Plan and (ii)
24,000 shares of TIMET Common Stock that represent restricted shares
under the terms of the TIMET Stock Incentive Plan with respect to
which shares Dr. Entrekin has the power to vote and receive dividends.
(12) The shares of TIMET Common Stock shown as beneficially owned by
Christian Leonhard include (i) 17,800 shares that Mr. Leonhard has the
right to acquire by the exercise of stock options within 60 days of
the Record Date under the TIMET Stock Incentive Plan and (ii) 24,000
shares of TIMET Common Stock that represent restricted shares under
the terms of the TIMET Stock Incentive Plan with respect to which
shares Mr. Leonhard has the power to vote and receive dividends.
(13) The shares of TIMET Common Stock shown as beneficially owned by Robert
E. Musgraves include (i) 52,800 shares that Mr. Musgraves has the
right to acquire by the exercise of stock options within 60 days of
the Record Date under the TIMET Stock Incentive Plan, (ii) 200 shares
held by members of Mr. Musgraves' household, beneficial ownership of
which is disclaimed by Mr. Musgraves and (iii) 24,000 shares of TIMET
Common Stock that represent restricted shares under the terms of the
TIMET Stock Incentive Plan with respect to which shares Mr. Musgraves
has the power to vote and receive dividends. Of the shares of TIMET
Common Stock shown as beneficially owned by Mr. Musgraves, 14,400
shares are pledged to TIMET to secure repayment of loans from TIMET
used to purchase such shares or pay taxes with respect to restricted
shares on which the restrictions have lapsed. See "Certain
Relationships and Transactions--Contractual Relationships--TIMET
Executive Stock Ownership Loan Plan" below.
(14) The shares of TIMET Common Stock shown as beneficially owned by Mark
A. Wallace include (i) 48,000 shares that Mr. Wallace has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under the TIMET Stock Incentive Plan and (ii) 24,000 shares of
TIMET Common Stock that represent restricted shares under the terms of
the TIMET Stock Incentive Plan with respect to which shares Mr.
Wallace has the power to vote and receive dividends.
(15) The shares of TIMET Common Stock shown as beneficially owned by "All
Directors and Executive Officers as a group" include 495,200 shares
that members of this group have the right to acquire by the exercise
of stock options within 60 days of the Record Date under the TIMET
Stock Incentive Plan or the TIMET Director Compensation Plan, 4,017
shares that members of this group have the right to acquire by the
conversion of TIMET Trust Securities and 96,000 shares of TIMET Common
Stock that are restricted shares with respect to which members of the
group have the power to vote and receive dividends.
TIMET 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 TIMET, financial and stock market conditions and other factors. TIMET may
similarly consider such acquisitions of shares of TIMET Common Stock and
acquisition or disposition of securities issued by related parties. TIMET does
not, and understands that Tremont also does not, presently intend to engage in
any transaction or series of transactions that would result in the TIMET Common
Stock's 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 and Valhi Common Stock
By virtue of the share ownership described above, for purposes of the
Commission's regulations, each of Tremont and Valhi may be deemed to be the
parent of TIMET. The following table and accompanying notes set forth the
beneficial ownership, as of the Record Date, of Tremont Common
11
Stock ($1.00 par value per share) and Valhi Common Stock ($.01 par value per
share) held by (i) each director or nominee for director of TIMET, (ii) each
executive officer identified in the table under the heading "Ownership of TIMET
Common Stock" and (iii) all directors and executive officers of TIMET as a
group. Except as set forth below and under the heading "Ownership of TIMET Trust
Securities" below, no securities of TIMET's subsidiaries or less than majority
owned affiliates are beneficially owned by any director, nominee for director or
executive officer of TIMET. All information has been taken from or is based
upon, ownership filings made by such persons with the Commission or upon
information provided by such persons to TIMET or Tremont.
Ownership of Tremont and Valhi Common Stock
Tremont Common Stock Valhi Common Stock
--------------------------------- ---------------------------------
Amount and Nature Amount and Nature
of of
Beneficial Percent of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class (2) Ownership (1) Class (2)
------------------------- -------------------- ------------ -------------------- ------------
Directors and Nominees
Norman M. Green -0- --- -0- ---
Edward C. Hutcheson, Jr. -0- --- -0- ---
J. Landis Martin (3) 20,788 --- -0- ---
Patrick M. Murray -0- --- -0- ---
Dr. Albert W. Niemi, Jr. -0- --- -0- ---
Glenn R. Simmons (3)(4) 19 --- 203,183 ---
Gen. Thomas P. Stafford (3)(5) 4,000 --- -0- ---
Steven L. Watson (3)(7) 4,474 --- 188,635 ---
Other Executive Officers
Dr. Charles H. Entrekin, Jr. -0- --- -0- ---
Christian Leonhard -0- --- -0- ---
Robert E. Musgraves (7) 9,500 --- -0- ---
Mark A. Wallace -0- --- -0- ---
All Directors and Executive Officers of the
Company as a group (11 persons) 38,781 --- 391,818 ---
(3)(4)(5)(6)(7)(8)
-------------
(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.
(3) TGI, TRE Holdings and Valhi are the direct holders of approximately
80.0%, 0.1% and 0.1%, respectively, of the outstanding shares of
Tremont Common Stock. See note (3) to the table appearing under the
heading "Ownership of TIMET Common Stock" above for information
concerning individuals and entities that may be deemed to indirectly
beneficially own the shares of Tremont Common Stock directly
beneficially owned by such entities. Gen. Thomas P. Stafford, Glenn R.
Simmons, Harold C. Simmons, Steven L. Watson and J. Landis Martin
disclaim beneficial ownership of all of the shares of Tremont Common
Stock owned by such entities, except as otherwise noted in such note
(3).
12
(4) The shares of Valhi Common Stock shown as beneficially owned by Glenn
R. Simmons include 200,000 shares that Mr. Simmons has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under stock option plans adopted by Valhi. In addition, such
shares include 800 shares held in a retirement account for Mr.
Simmons' wife, beneficial ownership of which is disclaimed by Mr.
Simmons.
(5) The shares of Tremont Common Stock shown as beneficially owned by
Thomas P. Stafford include 4,000 shares that Gen. Stafford has the
right to acquire by the exercise of stock options within 60 days of
the Record Date.
(6) The shares of Valhi Common Stock shown as beneficially owned by Steven
L. Watson include 170,000 shares that Mr. Watson has the right to
acquire by the exercise of stock options within 60 days of the Record
Date under stock option plans adopted by Valhi.
(7) The shares of Tremont Common Stock shown as beneficially owned by
Robert E. Musgraves represent shares that Mr. Musgraves has the right
to acquire by the exercise of stock options within 60 days of the
Record Date under the Tremont Stock Incentive Plan.
(8) The shares of Tremont and Valhi Common Stock shown as beneficially
owned by "All Directors and Executive Officers of the Company as a
group" include 13,500 shares and 370,000 shares, respectively, that
members of this group have the right to acquire by the exercise of
stock options within 60 days of the Record Date as described in notes
(4), (5), (6) and (7) above.
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 TIMET. 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. TIMET has, in effect, 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 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 that are held by, or may be
acquired by, Tremont. See "Certain Relationships and Transactions--Contractual
Relationships--Registration Rights" below. Except as set forth in note (8) to
the table under the heading "Ownership of TIMET Common Stock" above, no
director, nominee for director or executive officer of TIMET is known to hold
any TIMET Trust Securities.
13
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation of Executive Officers The
following table and accompanying notes set forth certain information regarding
the compensation paid by TIMET to (i) TIMET's Chief Executive Officer and (ii)
TIMET's four other most highly compensated executive officers serving as
executive officers at the end of the last completed fiscal year, in each case
for services rendered during each of the fiscal years 1999, 2000 and 2001
(regardless of the year in which actually paid).
Summary Compensation Table (1)(2)
Long Term Compensation
Awards
Restricted Securities All Other
Annual Compensation Stock Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($)(3) Awards ($)(4) Options (#) ($) (5)
--------------------------- ---- ---------- ------ ------ ----------- -------
Executive Officers
J. Landis Martin (6) 2001 500,000 1,000,000 -0- -0- 22,046
Chairman of the Board and
Chief Executive Officer
2000 500,000 -0- -0- 250,000 22,046
1999 500,000 -0- -0- 111,000 18,135
Dr. Charles H. Entrekin, Jr. 2001 250,000 135,000 -0- -0- 16,445
Executive Vice
President-Commercial
2000 245,833 30,000 185,000 -0- 16,450
1999 200,000 40,000 -0- 18,000 13,786
Christian Leonhard (7) 2001 250,000 135,000 -0- -0- 51,978
Executive Vice
President-Operations
2000 244,121 30,000 185,000 -0- 108,295
1999 184,772 -0- -0- 18,000 55,568
Robert E. Musgraves (6) 2001 250,000 330,000 -0- -0- 16,034
Executive Vice President and
General Counsel
2000 247,917 30,000 185,000 -0- 15,966
1999 225,000 45,000 -0- 27,000 14,390
Mark A. Wallace (8) 2001 250,000 130,000 -0- -0- 52,134
Executive Vice President, Chief
Financial Officer and Treasurer
2000 245,833 40,000 185,000 -0- 13,906
1999 200,000 40,000 -0- 30,000 12,499
---------------
(1) Columns required by the regulations of the Commission that would
contain no entries have been omitted.
(2) J. Landis Martin, Robert E. Musgraves, and Mark A. Wallace also
currently serve as executive officers of Tremont. The amounts shown as
salary and bonus for Mr. Martin, Mr. Musgraves and Mr. Wallace
represent the full amount paid by TIMET for services rendered by such
persons on behalf of both TIMET and Tremont during 1999, 2000 and
2001. Pursuant to an intercorporate services agreement, in each of
1999, 2000 and 2001 Tremont reimbursed TIMET for approximately 10% of
the TIMET salary and regular bonus of each of Mr. Martin and Mr.
Musgraves, and, in 2000 and 2001, of Mr. Wallace, plus, in each case,
a proportionate share of applicable estimated fringe benefits and
overhead expense for each, as follows:
Year Martin Musgraves Wallace
2001 $60,000 $45,600 $45,600
2000 $60,000 $33,360 $31,570
1999 $60,000 $32,760 $-0-
14
TIMET expects that Mr. Martin, Mr. Musgraves and Mr. Wallace will each
devote approximately 10% of his total TIMET/Tremont time during 2002
to Tremont matters. Accordingly, it is anticipated that Tremont will
reimburse TIMET for such proportionate percentage of the 2002 salary
and regular bonus paid by TIMET to such individuals (plus a
proportionate share of applicable estimated fringe benefits and
overhead expense for each) pursuant to an intercorporate services
agreement. See "Certain Relationships and Related
Transactions--Contractual Relationships--Tremont Intercorporate
Services Agreement" below.
(3) Under TIMET's variable incentive compensation plan (the "Employee Cash
Incentive Plan") applicable during 1999 and 2000 to Dr. Entrekin, Mr.
Leonhard, Mr. Musgraves and Mr. Wallace, a portion of the compensation
payable to such individuals under this plan is based upon TIMET's
financial performance, while the balance is based on the assessed
performance of the individual officer. (Mr. Leonhard was under a
variation of this program in Europe during 1999.) In lieu of
participating in the TIMET Employee Cash Incentive Plan, Mr. Martin
participates in TIMET's Senior Executive Cash Incentive Plan (the
"Senior Executive Cash Incentive Plan") which provides for payments
based solely upon TIMET's financial performance. Except as indicated
in this note and as reflected in note (6) below, the amounts shown in
the "Bonus" column for 1999 and 2000 represent amounts paid under the
Employee Cash Incentive Plan or the Senior Executive Cash Incentive
Plan, as applicable to such individual. Except as reflected in note
(6) below, the amounts shown in the "Bonus" column for 2001 for Dr.
Entrekin, Mr. Leonhard, Mr. Musgraves and Mr. Wallace were paid
pursuant to a special discretionary bonus program for TIMET employees
approved by the TIMET Board of Directors.
(4) The amounts shown for Dr. Entrekin, Mr. Leonhard, Mr. Musgraves and
Mr. Wallace under the heading "Long Term
Compensation--Awards--Restricted Stock Awards" represent 40,000 shares
each of restricted TIMET Common Stock granted to such individuals
under the TIMET Stock Incentive Plan effective as of February 23,
2000, valued at the closing price for TIMET Common Stock on such date
($4.625 per share). As of December 31, 2001, each such person held
32,000 shares of restricted TIMET Common Stock (valued at $127,680
each at the $3.99 per share closing price of TIMET Common Stock on
such date). The restrictions lapse as to 20% of such shares on each of
the first five anniversaries of such grant date. Any shares as to
which restrictions have not lapsed are subject to forfeiture in the
event of the termination of the individual's employment with TIMET
(for reasons other than death, disability or retirement). Holders of
restricted stock are entitled to vote and receive dividends with
respect to such shares prior to the date restrictions lapse thereon.
(5) Except as otherwise indicated in notes (7) and (8) below, "All Other
Compensation" amounts represent (i) matching contributions made or
accrued by TIMET pursuant to the savings feature of TIMET's Retirement
Savings Plan, (ii) retirement contributions made or accrued by TIMET
pursuant to the Retirement Savings Plan, (iii) life insurance premiums
paid by TIMET and (iv) long-term disability insurance premiums paid by
TIMET, as follows:
15
Year Martin Entrekin Leonhard Musgraves Wallace
Savings Match ($) 2001 5,000 6,877 -0- 2,530 2,500
2000 5,000 4,920 -0- 2,509 2,456
1999 1,600 3,946 -0- 1,600 1,600
Retirement 2001 8,670 7,500 -0- 6,290 5,100
Contribution ($)
2000 8,670 7,350 -0- 6,290 5,100
1999 8,160 4,800 -0- 5,920 4,800
Life Insurance ($) 2001 -0- 1,620 1,620 1,599 1,444
2000 -0- 490 563 1,552 1,368
1999 -0- 1,350 -0- 1,253 1,053
Long-Term Disability 2001 8,376 448 4,233 5,615 5,101
Insurance ($)
2000 8,376 448 -0- 5,615 4,982
1999 8,375 448 -0- 5,617 5,046
(6) The amount shown as "Bonus" for Mr. Martin for 2001 represents a
special award made by TIMET's Board of Directors in connection with
the favorable settlement of certain litigation involving the Company.
Of the total amount awarded, $550,000 was paid in 2001. All remaining
portions of Mr. Martin's special bonus were paid in 2002 (with accrued
interest at 7% per annum; $19,275 in accrued interest was outstanding
at December 31, 2001). Tremont also awarded Mr. Martin a $1,000,000
bonus in respect of the same litigation settlement. The Tremont bonus
is to be paid in five annual installments of $200,000 each beginning
in 2002, with interest accruing on unpaid portions at 7% per annum
($39,000 in interest accrued at December 31, 2001). Of the amount
shown as "Bonus" for Mr. Musgraves for 2001, $200,000 represents a
special bonus awarded by TIMET's Board of Directors in connection with
the same litigation settlement. The total amount of such bonus award
was $360,000, $200,000 of which was earned and paid in 2001, and the
balance of which will be paid in two installments of $80,000 each in
2002 and 2003, subject to Mr. Musgraves' satisfaction of certain
conditions.
(7) The amounts shown as "Annual Compensation" for Mr. Leonhard for 1999
and 2000 include amounts paid or accrued by TIMET, TIMET's wholly
owned subsidiary, TIMET UK, Ltd. ("TIMET UK"), or TIMET UK's 70%-owned
subsidiary, TIMET Savoie, S.A. ("TIMET Savoie"). The portion of Mr.
Leonhard's compensation paid by TIMET UK was paid in British pounds
sterling. The exchange rate used was (pound)1 = $1.62 for 1999 and
(pound)1 = $1.52 for 2000. The portion of Mr. Leonhard's compensation
paid by TIMET Savoie was paid in French francs. The exchange rate used
was FF1 = $.16 for 1999 and FF1 = $.15 for 2000. The amounts shown as
"All Other Compensation" for Mr. Leonhard include $46,125 in 2001,
$107,732 in 2000 and $55,568 in 1999 paid to or on behalf of Mr.
Leonhard in connection with his foreign assignments (including housing
and car allowance, tax equalization payments, relocation costs and
income taxes with respect to certain of such payments).
(8) "All Other Compensation" for Mr. Wallace for 2001 includes a country
club initiation fee of $38,000.
Stock Option/SAR Grants in Last Fiscal Year
No stock options or stock appreciation rights ("SARs") were granted under the
TIMET Stock Incentive Plan in 2001.
Stock Option Exercises and Holdings
Prior to the commencement of public trading of TIMET Common Stock in 1996,
executive officers of TIMET were from time to time granted stock options
pursuant to the Tremont Stock Incentive Plan with respect to their TIMET
service. Since 1996, such executive officers have been granted stock options
only pursuant to the TIMET Stock Incentive Plan. The following table and
accompanying notes provide information, with respect to the executive officers
of TIMET listed in the "Summary Compensation
16
Table" above, concerning the exercise of TIMET and Tremont stock options during
the last fiscal year and the value of unexercised TIMET and Tremont stock
options held as of December 31, 2001. None of Dr. Entrekin, Mr. Leonhard or Mr.
Wallace holds any Tremont stock options. No SARs have been granted under the
TIMET Stock Incentive Plan or the Tremont Stock Incentive Plan. See also
"Certain Relationships and Transactions--Contractual Relationships--Option
Reimbursement Agreement" below.
Aggregated Option Exercises in 2001 and 12/31/01 Option Values
Number of Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
Shares at 12/31/01 (#) Options at
Acquired on Value Exercisable/ 12/31/01 ($)
Name Exercise (#) Realized ($) Unexercisable Exercisable/
---- ------------ ------------ -------------
Unexercisable
TIMET
J. Landis Martin -0- -0- 191,400/358,600 -0-/-0-
Dr. Charles H. Entrekin, Jr. -0- -0- 22,600/14,400 -0-/-0-
Christian J. M. Leonhard 7,200 29,592 11,800/15,000 -0-/-0-
Robert E. Musgraves -0- -0- 41,400/25,200 -0-/-0-
Mark A. Wallace 12,000 54,391 36,600/26,400 -0-/-0-
Tremont
J. Landis Martin (1) -0- 1,098,900 -0-/-0- -0-/-0-
Robert E. Musgraves -0- -0- 9,500/-0- 174,394/-0-
---------------
(1) Pursuant to an agreement with Tremont in 2001, Mr. Martin's remaining
vested Tremont stock options were cancelled for a deferred cash
payment equal to the difference between the market price of Tremont
common stock on that date and respective exercise prices of the
options cancelled, multiplied by the respective number of such options
cancelled. Amounts owing to Mr. Martin under this agreement are
payable on such dates and in such amounts as directed by Tremont's
Management Development & Compensation Committee, but in any event no
later than December 19, 2006; provided, however, that if the payment
of any such amount would not be deductible by Tremont for tax purposes
under the provisions of Section 162(m) of the Internal Revenue Code of
1986, as amended, or any successor provision, Tremont may, in its sole
discretion, defer such payment until the earliest time at which the
payment of such amount would be deductible by it. Unpaid amounts
accrue interest at seven percent (7%) per annum, compounded quarterly
($2,740 in interest accrued at December 31, 2001).
Severance Arrangements
In 1999, the Company adopted a policy applicable to certain executive officers
of the Company, including Mr. Martin, Mr. Musgraves and Mr. Wallace, providing
that the following payments will be made to each such individual in the event
his or her employment is terminated by TIMET without cause (as defined in the
policy) or such individual terminates his or her employment with TIMET for good
reason (as defined in the policy): (i) one times such individual's annual TIMET
base salary paid in the form of salary continuation, (ii) prorated bonus for the
year of termination and (iii) certain other benefits.
Dr. Entrekin is party to an agreement with THT providing for payment of one
times Dr. Entrekin's salary as a lump sum and certain other benefits in the
event his employment is terminated without cause (as defined in the agreement)
or Dr. Entrekin terminates his employment for good reason (as defined in the
agreement).
17
Mr. Leonhard is party to an agreement with TIMET Savoie and is eligible for
benefits under the statutory French indemnity scheme, pursuant to which he would
receive certain severance benefits if his employment were terminated without
cause, including: (i) six months' advance notice or payment of salary in lieu
thereof by TIMET Savoie and (ii) other severance payments that would be computed
based upon his age, seniority with the Company and his salary plus bonus at the
time of employment termination, a portion of which would be paid by TIMET Savoie
and a portion by the French government.
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 compensation matters involving the Chief
Executive Officer (the "CEO"). Any action regarding compensation matters
involving the CEO is reviewed and approved by the Board after recommendation by
the Compensation Committee.
Compensation Program Objectives
The Compensation Committee believes that the Company's primary goal is to
increase stockholder value, as measured by dividends paid on and appreciation in
the value of the Company's equity securities. It is the Compensation Committee's
policy that compensation programs be designed to attract, retain, motivate and
reward employees, including executive officers, who can lead the Company in
accomplishing this goal. It is also the Compensation Committee's policy that
compensation programs tie a large component of cash compensation 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 2001, the Company's compensation program with respect to its executive
officers, including the CEO, consisted of two primary components: base salary
and variable compensation based upon Company and, in certain cases, individual
performance.
Base Salaries
The Compensation Committee, in consultation with the CEO, reviews base salaries
for the executive officers other than the CEO generally no more frequently than
annually. The CEO's recommendation and the Compensation Committee's actions in
2001 regarding base salaries were based primarily upon a subjective evaluation
of past and potential future individual performance and contributions, changes
in individual responsibilities, 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 (including 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. No changes to the base
salary of the CEO or of any of the persons identified in the Summary
Compensation Table were made or proposed in 2001.
18
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, depending upon the position held by such employee) and
consist of a combination of awards based on the financial performance of TIMET
and, in some cases, on individual performance. All of the company's executive
officers, other than Mr. Martin, were eligible to receive benefits under the
Employee Cash Incentive Plan for 2001.
Potential awards under the Employee Cash Incentive Plan attributable solely to
the performance of TIMET in 2001 were based on TIMET's achieving certain pre-set
return on equity (ROE) 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 ROE as follows:
Performance
ROE Level
----------------------------------------------
less than 3% --
3%-6% A
6%-12% B
12%-24% C
over 24% D
In 2001, the Company achieved a return on equity of less than 3%, as calculated
under the Employee Cash Incentive Plan, resulting in no Company-performance
based payout.
In February 2002, the Compensation Committee and the Board approved a
discretionary bonus program payable in 2002 with respect to service in 2001
covering all of those employees who participate in either the TIMET Employee
Cash Incentive Plan or the Senior Executive Cash Incentive Plan, including
senior executives, all other U.S. salaried personnel, certain U.S. hourly
personnel, and certain European salaried personnel. This step was taken in part
out of recognition that the Company's existing cash incentive plans have not
made Company-performance based payments since 1998. The Committee and the Board
felt that adopting the discretionary program was critical to their goal of
retaining and attracting talented personnel, particularly higher level employees
for whom variable compensation tends to represent a significant portion of total
compensation in the market generally. Payments made to the Company's executive
officers under this discretionary program for services rendered in 2001 are
included under the "Bonus" column of the Summary Compensation Table and are
described in note (3) thereto. No payment was made to Mr. Martin under this
program.
In 1996, the Board established the Senior Executive Cash Incentive Plan, which
was approved by the Company's stockholders in 1997 and remained effective
through 2001. This plan was applicable only to Mr. Martin in 2001. The Senior
Executive Cash Inventive Plan provided 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. No
payments were made to Mr. Martin for 2001 under this plan based upon the
Company's return on equity of less than 10%.
Apart from the foregoing plans, the Compensation Committee or the Board may from
time to time award such other bonuses as the Compensation Committee or Board
deems appropriate from time to time under its general authority or under a
separate discretionary plan. In 2001, the Board approved special bonuses of
$1,000,000 for Mr. Martin ($550,000 of which was paid in 2001, with the balance
paid in 2002 with interest) and $360,000 for Mr. Musgraves ($200,000 of which
was paid in 2001, and the balance of which may be payable in 2002 and 2003
subject to Mr. Musgraves' satisfaction of certain
19
conditions) relating to the favorable settlement of certain litigation involving
the Company. These amounts are reflected in the Summary Compensation Table and
are described in note (6) thereto.
Long-Term Incentive Compensation
The Compensation Committee recognizes the value of long-term incentive
compensation that provides a benefit over an extended period of time. The
Compensation Committee has, from time to time, utilized the TIMET Stock
Incentive Plan to provide long-term incentives in the form of grants of stock
options and restricted stock. No grants of stock options or restricted stock
were made in 2001. In the future, the Compensation Committee may also consider
using long-term cash incentives tied to performance or other criteria.
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 CEO and the four other most highly
compensated executive officers of public companies, subject to certain
transition rules and exceptions for compensation received pursuant to
non-discretionary performance-based plans approved by such company's
stockholders. The Company'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 currently qualify for exemption from the deductibility limit as
"performance-based compensation" (although re-approval by stockholders of the
Senior Executive Cash Incentive Plan will be required to continue that plan's
tax qualification in the future). The Compensation Committee does not currently
believe that any other existing compensation program of the Company could give
rise to a deductibility limitation at current executive compensation levels. The
Compensation Committee intends to periodically review the compensation plans of
the Company to determine whether further action in respect of this limitation is
warranted.
Chief Executive Officer Compensation
No changes to the compensation of Mr. Martin, as Chairman and CEO, were made or
proposed for 2001.
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. (Chair)
Dr. Albert W. Niemi, Jr.
General Thomas P. Stafford
20
INDEPENDENT AUDITOR MATTERS
Independent Auditors
The firm of PricewaterhouseCoopers LLP served as TIMET's independent auditors
for the year ended December 31, 2001, has been appointed to review TIMET's
quarterly unaudited consolidated financial statements to be included in its
Quarterly Reports on Form 10-Q for the first three quarters of 2002 and is
expected to be considered for appointment to audit TIMET's annual consolidated
financial statements for the year ending December 31, 2002. Representatives of
PricewaterhouseCoopers LLP are not expected to attend the Annual Meeting.
Audit Committee Report
TIMET's Management is responsible for the financial reporting process, including
the system of internal controls, and for the preparation of consolidated
financial statements in accordance with generally accepted accounting
principles. TIMET's independent auditors are responsible for auditing those
financial statements and expressing an opinion as to their conformity with
generally accepted accounting principles. The Audit Committee's responsibility
is to monitor and review these processes on behalf of the Board of Directors.
However, the members of the Audit Committee are not professionally engaged in
the practice of accounting or auditing and are not experts in the fields of
accounting or auditing. The Audit Committee relies, without independent
verification, on the information provided to us and on the representations made
by management and the independent auditors.
The Audit Committee has reviewed and discussed TIMET's audited consolidated
financial statements for the year ended December 31, 2001 with TIMET's
management and independent auditors. In fulfilling its oversight
responsibilities, the Audit Committee also discussed with the independent
auditors the quality, not just the acceptability, of the accounting principles,
the reasonableness of significant judgments and the clarity of disclosures in
the financial statements, as required by Statement on Auditing Standards No. 61.
The Audit Committee also received written disclosures from the independent
auditors required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and discussed with the independent auditors
their independence from management and the Company. The Audit Committee also
considered whether the independent auditors' provision of non-audit services to
TIMET and its subsidiaries is compatible with such auditors' independence.
Additionally, the Audit Committee discussed with TIMET's management and the
independent auditors such other matters as the Audit Committee deemed
appropriate. Based on the Audit Committee's review of TIMET's audited
consolidated financial statements and the Audit Committee's discussions with
TIMET's management and independent auditors of the matters identified above, the
Audit Committee recommended to the Board of Directors that TIMET's audited
consolidated financial statements for the year ended December 31, 2001 be
included in TIMET's Annual Report on Form 10-K for the year ended December 31,
2001, which has been filed with the Commission.
Audit Committee
Patrick M. Murray (Chair)
Edward C. Hutcheson, Jr.
Dr. Albert W. Niemi, Jr.
Gen. Thomas P. Stafford
21
Audit Fees, Financial Information Systems Design and Implementation Fees, and
Other Fees PricewaterhouseCoopers LLP has billed or is expected to bill to TIMET
for services rendered for 2001 as follows: Audit fees of $502,500 and $112,750
for all other fees (including $66,750 for tax consulting services, $25,000 for
compensation studies and $21,000 for evaluation of potential investments). TIMET
did not incur fees for financial information systems design and implementation
services during 2001. The Audit Fees include (a) fees for the audit of TIMET's
consolidated financial statements for the year ended December 31, 2001, (b)
reviews of the unaudited quarterly financial statements appearing in TIMET's
Forms 10-Q for each of the first three quarters of 2001 and (c) estimated
out-of-pocket costs PricewaterhouseCoopers LLP incurred in such audits and
reviews for which TIMET reimburses PricewaterhouseCoopers LLP.
PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period December 31, 1996
through December 31, 2001, the cumulative total stockholder return on TIMET
Common Stock against the cumulative total return of (a) the S&P Composite 500
Stock Index and (b) a self-selected peer group, comprised solely of RTI
International Metals, Inc. (NYSE: RTI) (formerly RMI Titanium Company), the
principal U.S. competitor of TIMET in the titanium metals industry for which
meaningful, same-period stockholder return information 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,
S&P Composite 500 Stock Index and Self-Selected Peer Group
[Graph]
Copyright(C)2002 Standard & Poor's, a division of The
McGraw-Hill Companies, Inc. All rights reserved.
22
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties
As set forth under the heading "Security Ownership" above, TIMET may be deemed
to be controlled by Harold C. Simmons. Tremont 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, tax
sharing agreements, joint ventures, partnerships, loans, options, advances of
funds on open account, and sales, leases and exchanges of assets, including
securities issued by both related and unrelated parties, and (b) common
investment and acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases, and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions that resulted in the acquisition by one related party
of a publicly held, minority equity interest in another related party. TIMET
continuously considers, reviews and evaluates, and understands that Contran,
Valhi, NL, 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 TIMET might be a party to one or more of such
transactions in the future. It is the policy of TIMET to engage in transactions
with related parties on terms that are, in the opinion of TIMET, no less
favorable to TIMET than could be obtained from unrelated parties.
J. Landis Martin, Chairman of the Board, President and Chief Executive Officer
of TIMET, is also Chairman of the Board, President and Chief Executive Officer
of Tremont. Mr. Martin also serves as a director and President and Chief
Executive Officer of NL. Glenn R. Simmons, a director of TIMET, is also Chairman
of the Board of Keystone and CompX, Vice Chairman of the Board of Contran and
Valhi and a director of Tremont and NL. General Thomas P. Stafford, a director
of TIMET, is also a director of Tremont and NL. Steven L. Watson, a director of
TIMET, is also an executive officer of Contran and Valhi, and a director of
Contran, CompX, Keystone, Valhi, NL and Tremont and an Assistant Secretary of
Tremont. Robert E. Musgraves, Executive Vice President and General Counsel of
TIMET, is also Vice President, General Counsel and Secretary of Tremont. Mark A.
Wallace, Executive Vice President, Chief Financial Officer and Treasurer of
TIMET, is also Vice President, Chief Financial Officer and Treasurer of Tremont.
Joan H. Prusse, Vice President, Deputy General Counsel and Secretary of TIMET,
is also Assistant General Counsel and Assistant Secretary of Tremont. Robert D.
Hardy is an Assistant Treasurer of both TIMET and Tremont and is also Vice
President, Chief Financial Officer, Controller, Treasurer and Assistant
Secretary of NL. Sandra K. Goebel is an Assistant Secretary of both TIMET and
Tremont. Elizabeth Maercklein is an Assistant Treasurer of both TIMET and
Tremont. TIMET understands that all such persons are expected to continue to
serve in such capacities in 2002. Such individuals divide their time among the
companies for which they serve as officers. 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.
Although no specific procedures are in place that govern the treatment of
transactions among TIMET, Tremont, Contran, Valhi, and NL, the board of
directors of each of these companies (with the exception of Contran) includes
one or more members who are not officers or directors of any entity that may be
deemed to be related to TIMET. 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.
23
Contractual Relationships
Tremont Intercorporate Services Agreement
TIMET and Tremont are parties to an intercorporate services agreement (the
"Tremont ISA") that provides that TIMET will render certain management,
financial, tax and administrative services to Tremont, including provision for
the reimbursement by Tremont to TIMET of a portion of the salary, regular bonus
and overhead expense for the executive officers of Tremont. The Tremont ISA is
subject to automatic renewal and may be terminated by either party pursuant to
written notice delivered at least 30 days prior to a quarter-end. During 2001,
fees for services provided by TIMET to Tremont were approximately $0.4 million.
TIMET expects to enter into a similar agreement for 2002 providing for
comparable services and payments.
NL Intercorporate Services Agreement
TIMET and NL are parties to an intercorporate services agreement (the "NL ISA")
whereby NL makes available to TIMET certain services with respect to TIMET's tax
compliance and consulting needs and use of NL's corporate aircraft. TIMET paid
NL fees of approximately $0.4 million for services pursuant to the NL ISA during
2001. The NL ISA is subject to automatic renewal and may be terminated by either
party pursuant to written notice delivered at least 30 days prior to a
quarter-end. TIMET expects to enter into a similar agreement for 2002 providing
for comparable services and payments.
Utility Services
In connection with the operations of TIMET's Henderson, Nevada facility, TIMET
purchases certain utility services from Basic Management, Inc. and its
subsidiaries (collectively, "BMI") pursuant to various agreements. A wholly
owned subsidiary of Tremont owns approximately 32% of the outstanding equity
securities of BMI (representing 26% of the voting securities of BMI). During
2001, fees for such utility services provided by BMI to TIMET were approximately
$1.5 million.
Shareholders' Agreement
In connection with the acquisition by TIMET in 1996 of IMI Titanium, TIMET,
Tremont, IMI, plc ("IMI") and two of IMI's affiliates, IMI Kynoch Ltd. and IMI
Americas Inc., entered into an agreement dated February 15, 1996, as amended
March 29, 1996 (the "Shareholders' Agreement"). The Shareholders' Agreement
contains provisions that regulate certain matters relating to the governance of
TIMET originally as among TIMET, Tremont and its affiliates and IMI and its
affiliates. TIMET agreed in the Shareholders' Agreement that, among other
things, so long as Tremont (as the only remaining shareholder party) continues
to hold at least 10% of the outstanding shares of TIMET Common Stock, TIMET will
not, without the approval of Tremont, cause or permit the dissolution or
liquidation of itself or any of its subsidiaries or the filing by itself of a
petition in bankruptcy, or the commencement by TIMET of any other proceeding
seeking relief from its creditors. TIMET also agreed to provide Tremont certain
periodic information about TIMET and its subsidiaries, which right is subject to
confidentiality restrictions.
Registration Rights
Under the Shareholders' Agreement, Tremont is entitled to certain rights with
respect to the registration under the Securities Act of the shares of TIMET
Common Stock that Tremont holds. The Shareholders' Agreement generally provides,
subject to certain limitations, that (i) Tremont has two rights, only one of
which can be on Form S-1, to require TIMET to register under the Securities Act
an amount of not less than $25 million of registrable securities, and (ii) if
TIMET 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
24
for sale for its own account, Tremont has the right to require TIMET to include
in such registration the registrable securities held by Tremont or its permitted
transferees so long as Tremont 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%). TIMET 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 a
registration may be limited. TIMET 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.
Option Reimbursement Agreement
Prior to the commencement of public trading of TIMET Common Stock in 1996, TIMET
employees were from time to time granted stock options by Tremont with respect
to their TIMET service. With respect to such Tremont stock options, TIMET has
previously agreed to reimburse Tremont for the difference between the market
price of Tremont Common Stock on the date of exercise of such Tremont stock
options (up to $16.625 per share) and the exercise price of such options. During
2001, TIMET reimbursed Tremont approximately $379,000 with respect to the
exercise of such Tremont stock options by TIMET employees.
Insurance Matters
Tall Pines Insurance Company ("Tall Pines"), Valmont, and EWI RE, Inc. ("EWI,
Inc.") provide for or broker certain of TIMET's and Tremont's insurance
policies. Tall Pines is a wholly owned captive insurance company of Tremont.
Valmont is a wholly owned captive insurance company of Valhi. During 2001, one
of the daughters of Harold C. Simmons and a wholly owned subsidiary of Contran
owned, directly or indirectly, 57.8% and 42.2%, respectively, of the outstanding
common stock of EWI, Inc. and of the membership interests of EWI, Inc.'s
management company, EWI RE, Ltd. (collectively with EWI, Inc., "EWI"). Through
December 31, 2000, a son-in-law of Harold C. Simmons managed the operations of
EWI. Subsequent to December 31, 2000, pursuant to an agreement that terminates
on December 31, 2002, such son-in-law provides advisory services to EWI as
requested by EWI, for which the son-in-law is paid $11,875 per month and
receives certain other benefits under EWI's benefit plans. Consistent with
insurance industry practices, Tall Pines, Valmont and EWI, Inc. receive
commissions from the insurance and reinsurance underwriters for the policies
that they provide or broker. During 2001, TIMET and Tremont paid approximately
$2.8 million and $0.04 million, respectively, for policies provided or brokered
by Tall Pines, Valmont and/or EWI, Inc. These amounts principally included
payments for reinsurance and insurance premiums paid to unrelated third parties,
but also included commissions paid to Tall Pines, Valmont and EW, Inc. In
TIMET's opinion, the amounts that TIMET paid for these insurance policies are
reasonable and similar to those it could have obtained through unrelated
insurance companies and/or brokers. TIMET understands that Tremont takes the
same view with respect to the amounts paid by Tremont. TIMET expects that these
relationships with Tall Pines, Valmont, and EWI will continue in 2002.
In January 2002, NL purchased EWI from its previous owners for an aggregate cash
purchase price of approximately $9 million, and EWI became a wholly owned
subsidiary of NL. The purchase was approved by a special committee of NL's Board
of Directors consisting of two of its independent directors, and the purchase
price was negotiated by the special committee based upon its consideration of
relevant factors, including but not limited to due diligence performed by
independent consultants and an appraisal of EWI conducted by an independent
third party selected by the special committee.
25
TIMET Executive Stock Ownership Loan Plan
Under TIMET's Executive Stock Ownership Loan Plan, approved by the TIMET Board
of Directors in 1998 and the TIMET stockholders in 2000, TIMET's executive
officers may borrow funds to purchase TIMET Common Stock or to pay taxes payable
with respect to vesting shares of restricted stock. Each executive may borrow up
to 50% of his or her base salary per calendar year and 200% of such base salary
in the aggregate. Interest accrues at a rate equal to .0625% per annum above
TIMET's effective borrowing rate at the time of the loan, subject to annual
adjustment, and is payable quarterly. The effective interest rate in 2001 was
8.22625% (4.025% for 2002). Principal is repayable in five equal annual
installments commencing on the sixth anniversary of the loan. Repayment of the
loans is secured by the stock purchased with the loan proceeds or the stock for
which loan proceeds were used to pay taxes. The loans are "full recourse" to the
executive personally, except that in the case of a sale of all of the collateral
by TIMET upon an event of default or upon the termination of the executive's
employment, whether for cause or otherwise, the borrower's personal liability
for repayment of the loan is limited to 70% of the principal amount remaining
after sale and application of the proceeds from the sale of the stock. The
following table identifies the executive officers of TIMET who were indebted to
TIMET under this program during 2001 and as of the Record Date:
Maximum Principal Amount Principal Outstanding as of
Name Outstanding during 2001 ($) March 18, 2002($)
---- -------------------------- -----------------
Charles H. Entrekin, Jr. 46,755 -0-
Robert E. Musgraves 113,708 113,708
Mark A. Wallace 26,313 -0-
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires TIMET's executive officers,
directors, and persons who own beneficially more than 10% of a registered class
of TIMET's equity securities to file reports of ownership and changes in
ownership with the Commission and TIMET. Based solely on a review of copies of
the Section 16(a) reports furnished to TIMET and written representations by
certain reporting persons, TIMET believes that all of TIMET's executive
officers, directors and greater than 10% beneficial owners filed on a timely
basis all reports required during and with respect to the fiscal year ended
December 31, 2001, except for a late report on Form 4 by each of Christian
Leonhard and Mark A. Wallace.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder action
at TIMET's annual stockholder meetings, consistent with rules adopted by the
Commission. Such proposals must be received by TIMET no later than December 12,
2002 to be considered for inclusion in the proxy statement and form of proxy
relating to the 2003 Annual Meeting of Stockholders. Any such proposals should
be addressed to: Corporate Secretary, Titanium Metals Corporation, 1999
Broadway, Suite 4300, Denver, Colorado 80202.
26
OTHER MATTERS
The Board of Directors knows of no other business to be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual 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.
2001 ANNUAL REPORT ON FORM 10-K; ADDITIONAL COPIES
TIMET's 2001 Annual Report on Form 10-K, as filed with the Commission, is
included as a part of TIMET's 2001 Annual Report which accompanies this Proxy
Statement. The Company will promptly deliver a separate copy of the 2001 Annual
Report or this Proxy Statement to any stockholder at a shared address to which a
single copy of such documents were delivered, upon written or oral request of
such stockholder. Additional copies of such documents are available to
stockholders without charge upon request by telephone: (303) 296-5600, or by
writing: Investor Relations Department, Titanium Metals Corporation, 1999
Broadway, Suite 4300, Denver, Colorado 80202.
TITANIUM METALS CORPORATION
Denver, Colorado
March 29, 2002
27
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[Logo]
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
PROXY
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
Proxy for Annual Meeting of Stockholders
May 7, 2002
The undersigned hereby appoints Robert E. Musgraves, Joan H. Prusse and Mark A.
Wallace, 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 2002
Annual Meeting of Stockholders (the "Annual Meeting") of Titanium Metals
Corporation, a Delaware corporation ("TIMET"), to be held at the offices of
Valhi, Inc., 5430 LBJ Freeway, Suite 1700, Dallas, Texas on Tuesday, May 7,
2002, at 11:30 a.m. local time, and at any adjournment or postponement of said
Annual Meeting, all of the shares of Common Stock ($.01 par value) of TIMET
standing in the name of the undersigned or which the undersigned may be entitled
to vote on the matters described on the reverse side of this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TITANIUM METALS
CORPORATION. PLEASE COMPLETE, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
(Continued and to be signed on the reverse side)
SEE REVERSE SIDE
[X] Please mark your votes as in this example.
This proxy, if properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted "FOR" all nominees named in
Item 1 below.
The Board of Directors recommends a vote "FOR" each of the director nominees
named in Item 1 below.
1. Election of Six Directors FOR ALL WITHHELD AS TO ALL
(except as marked below)
[_] [_]
Nominees:
Norman N. Green, J. Landis Martin,
Dr. Albert W. Niemi, Jr., Glenn R. Simmons,
General Thomas P. Stafford, Steven L. Watson
Vote withheld as to the following nominee(s):_________________________________
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the Annual Meeting and any
adjournment or postponement thereof.
[_] Check this box if you consent to delivery of all future corporate
communications, including proxy statements and annual reports to
shareholders, electronically through TIMET's Internet Website.
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.
--------------------------------
2002
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SIGNATURE(S) DATE