SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. _ )
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(Name of Registrant as Specified In Its Charter)
TITANIUM METALS CORPORATION
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[LOGO]
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
April 4, 2003
Dear Stockholder:
You are cordially invited to attend the 2003 Annual Meeting of Stockholders of
Titanium Metals Corporation ("TIMET" or the "Company"), which will be held on
Tuesday, May 20, 2003, at 1:00 p.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 By-laws.
Sincerely,
J. Landis Martin
Chairman of the Board,
President and Chief Executive Officer
TITANIUM METALS CORPORATION
1999 Broadway, Suite 4300
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 2003
To the Stockholders of Titanium Metals Corporation:
NOTICE IS HEREBY GIVEN that the 2003 Annual Meeting of Stockholders (the "Annual
Meeting") of Titanium Metals Corporation, a Delaware corporation ("TIMET" or the
"Company"), will be held on Tuesday, May 20, 2003, at 1:00 p.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 seven directors to serve until the 2004 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 24,
2003, 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 By-laws, 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, General Counsel and Secretary
Denver, Colorado
April 4, 2003
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 (referred to herein as the "Board of
Directors") of Titanium Metals Corporation, a Delaware corporation (referred to
herein as "TIMET" or the "Company"), for use at the 2003 Annual Meeting of
Stockholders of the Company to be held on Tuesday, May 20, 2003, at 1:00 p.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 (referred to herein as 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
(referred to herein as "TIMET Common Stock"), on or about April 7, 2003.
PURPOSE OF THE ANNUAL MEETING
Stockholders of the Company represented at the Annual Meeting will consider and
vote upon (i) the election of seven directors to serve until the 2004 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 Amended and Restated Certificate
of Incorporation, any other matter that may be submitted to a stockholder vote
will require the affirmative vote of a majority of the shares represented at the
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 broker/nominee non-votes will not be counted as votes for or
against the approval of any such other matter.
1
EquiServe Trust Company, N.A. (referred to herein as "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 By-laws.
On February 4, 2003, the stockholders of TIMET approved a 1-for-10 reverse split
of the TIMET Common Stock. The reverse stock split was effective at 5:00 p.m.
E.S.T. on February 14, 2003, at which time each ten shares of TIMET Common Stock
outstanding immediately prior to the reverse stock split were combined into one
share of TIMET Common Stock immediately after the reverse stock split. All of
the share numbers for TIMET Common Stock in this proxy statement reflect this
1-for-10 reverse split, even if the date as to which such share number speaks to
was prior to the effective date of the reverse stock split.
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 24, 2003 (referred to herein as 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 3,180,182 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.
Prior to February 7, 2003, Tremont Corporation (referred to herein as "Tremont
Corporation") held approximately 39.7% of the shares of TIMET Common Stock
outstanding. On February 7, 2003, Valhi, Inc. completed a merger with Tremont
Corporation whereby, in a series of transactions, Tremont Corporation was merged
into Tremont LLC (referred to herein as "Tremont LLC"), a wholly owned
subsidiary of Valhi, Inc. For ease of reference, this series of transactions is
called the Tremont Merger throughout this Proxy Statement.
AS OF THE RECORD DATE, TREMONT LLC AND OTHER ENTITIES RELATED TO HAROLD C.
SIMMONS HELD, IN THE AGGREGATE, APPROXIMATELY 48.7% OF THE OUTSTANDING SHARES OF
TIMET COMMON STOCK. TREMONT LLC 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 1.4% OF THE OUTSTANDING SHARES OF
THE TIMET COMMON STOCK ENTITLED TO VOTE WILL BE REQUIRED TO 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 LLC 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.
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King & Co., Inc. to aid in the distribution of this Proxy Statement, at a cost
that the Company estimates will be approximately $3,500. 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 seven 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 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 By-laws 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. The seven directors elected at the Annual
Meeting will hold office until the 2004 Annual Meeting of Stockholders of the
Company and until their successors are duly elected and qualified.
Gen. Thomas P. Stafford, 72, a director of the Company since 1996, has indicated
his intention not to stand for re-election. Except for Terry N. Worrell, all of
the nominees are currently directors of TIMET whose terms will expire at the
Annual Meeting. 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, 68, has been a director of TIMET since 2002. In 1997, Mr. Green
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
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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. Mr. Green is a member of TIMET's
Management Development and Compensation Committee (referred to herein as the
"Compensation Committee"), Nominations Committee, and Pension and Employee
Benefits Committee (referred to herein as the "Pension Committee").
J. Landis Martin, 57, 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 served as Chairman of the Board of Tremont
Corporation from 1990 until the Tremont Merger in 2003, as Chief Executive
Officer and a director of Tremont Corporation from 1988 until the Tremont Merger
in 2003 and as President of Tremont Corporation from 1987 (except for a period
in 1990) until the Tremont Merger in 2003. Since 1987, Mr. Martin has served as
President and Chief Executive Officer, and, since 1986, as a director of NL
Industries, Inc. (referred to herein as "NL"), a manufacturer of titanium
dioxide pigments. NL may be deemed to be an affiliate 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., 60, has been a director of TIMET since 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, American Plumbing and Mechanical, and
Bank of Texas, and on the Advisory Boards of TXU Dallas and Crossroads
Investment Company. Dr. Niemi is the Chair of TIMET's Audit Committee and a
member of the Compensation Committee, Pension Committee, and Nominations
Committee.
Glenn R. Simmons, 75, has been a director of TIMET since 1999. Mr. Simmons is
Chairman of the Board of Keystone Consolidated Industries, Inc. (referred to
herein as "Keystone"), a steel fabricated wire products, industrial wire and
carbon steel rod company, and CompX International Inc. (referred to herein as
"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. (referred to herein as "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 (referred to herein as "Contran"), a
diversified holding company that directly and indirectly holds approximately 90%
of the outstanding shares of common stock of Valhi (referred to herein as "Valhi
Common Stock") and 47% of the outstanding shares of common stock of Keystone.
Valhi holds all of the outstanding membership interests of Tremont LLC. Valhi
and Tremont LLC hold approximately 63.2% and 21.4%, respectively, of the
outstanding shares of common stock of NL (referred to herein as "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 NL, and served as a director of Tremont Corporation until the
Tremont Merger in 2003. Keystone, Valhi, Tremont LLC and CompX may be
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deemed to be affiliates of TIMET. Mr. Simmons is Chair of TIMET's Pension
Committee. Mr. Simmons is a brother of Harold C. Simmons.
Steven L. Watson, 52, 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 NL, CompX and Keystone and served as a director of Tremont
Corporation until the Tremont Merger in 2003. Mr. Watson serves as Chair of
TIMET's Nominations Committee.
Terry N. Worrell, 58, is being nominated to the TIMET Board for the first time.
Mr. Worrell has been with Worrell Investments, Inc., a real estate investment
company, since 1989. Prior to that Mr. Worrell was President and CEO of Sound
Warehouse of Dallas Inc. from 1974 to 1989. Mr. Worrell also serves as a
director of Regency Centers, a publicly traded developer/operator of shopping
centers. Mr. Worrell served as director of Tremont Corporation from May 2002
until the Tremont Merger in 2003.
Paul J. Zucconi, 62, has been a director of TIMET since December 2002. In 2001,
Mr. Zucconi retired after 33 years at KPMG LLP where he was most recently an
audit partner. Mr. Zucconi is a member of the American Institute of Certified
Public Accountants Quality Control Inquiry Committee and is involved in
instructing AICPA Professional Development Institute courses. Mr. Zucconi also
serves on the Board of Directors and Audit Committee of Torchmark Corporation, a
major life and health insurance company. Mr. Zucconi serves as a member of
TIMET's Audit 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 four meetings and took action by written consent
seven times in 2002. 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 2002.
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 Dr. Niemi (Chair), Gen. Stafford and Mr.
Zucconi. The Audit Committee held nine meetings in 2002. 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,
5
stock appreciation rights and awards of restricted stock under the 1996 Long
Term Performance Incentive Plan of Titanium Metals Corporation adopted by the
Company and approved by the Company's stockholders (referred to herein as 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 Gen. Stafford (Chair), Dr.
Niemi and Mr. Green. The Compensation Committee held one meeting and took action
by written consent two times in 2002.
Nominations Committee. The principal responsibilities and authority of the
Nominations Committee are to review and make recommendations to the Board of
Directors regarding such matters as the size and composition of the Board of
Directors, criteria for director nominations, director candidates, the term of
office for directors and such other related matters as the Board of Directors
may request from time to time. The current members of the Nominations Committee
are Mr. Watson (Chair), Mr. Green and Dr. Niemi. The Nominations Committee held
one meeting and took action by written consent one time in 2002. In February
2003, 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. Green and Dr. Niemi. The Pension Committee
held no meetings and took action by written consent one time during 2002.
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 2002, under the compensation plan for non-employee directors adopted by
the Company and adopted by the Company's stockholders (referred to herein as 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 100 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 2002, each of Mr. Green, Dr. Niemi, Mr. Simmons, Gen.
Stafford and Mr. Watson was granted an option to acquire 500 shares of TIMET
Common Stock at $38.60 per share, and Mr. Zucconi was granted an option to
acquire 500 shares of TIMET Common Stock at $16.60 per share.
6
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 57 Chairman of the Board, President and Chief Executive Officer;
President and Chief Executive Officer of NL
Christian Leonhard 57 Chief Operating Officer - Europe
Robert E. Musgraves 48 Chief Operating Officer - North America
Christian Leonhard, 57, served as Executive Vice President-Operations of TIMET
from 2000 to December 2002 when he became Chief Operating Officer - Europe. 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 European
Operations in 1997.
Robert E. Musgraves, 48, has served as Chief Operating Officer - North America
since December 2002. Prior to that Mr. Musgraves served as Executive Vice
President of TIMET from 2000 to December 2002 and served as General Counsel from
1990 to December 2002. Mr. Musgraves was Vice President from 1990-2000 and
Secretary of TIMET from 1991 to 2000. Mr. Musgraves also served as General
Counsel and Secretary of Tremont Corporation from 1993 and as Vice President of
Tremont Corporation from 1994 until the Tremont Merger in 2003.
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 (referred to herein as the "Commission"), of TIMET Common
Stock held by (i) each person or group of persons known to TIMET to beneficially
own more than 5% of the outstanding shares of TIMET Common Stock, (ii) each
director or nominee for director of TIMET, (iii) each current and former
executive officer of TIMET listed in the Summary Compensation Table below who is
not a director or nominee for director of TIMET and (iv) all current and former
executive officers and directors and nominees for director 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 LLC 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 LLC (3) 1,261,850 39.7%
Combined Master Retirement Trust (3) 286,520 9.0%
Dimensional Fund Advisors Inc. (4) 242,410 7.6%
Directors and Nominees
Norman N. Green (5) 600 ---
J. Landis Martin (3)(6) 152,260 4.7%
Dr. Albert W. Niemi, Jr. (7) 1,200 ---
Glenn R. Simmons (3)(8) 1,800 ---
Gen. Thomas P. Stafford (3)(9) 1,610 ---
Steven L. Watson (3) (10) 2,550 ---
Terry N. Worrell -0- ---
Paul J. Zucconi 100 ---
Current Executive Officers
Christian Leonhard (11) 6,840 ---
Robert E. Musgraves (12) 11,155 ---
Former Executive Officers
Dr. Charles H. Entrekin, Jr. (13) 3,600 ---
Mark A. Wallace (14) 5,450 ---
All Directors and Nominees and Executive Officers (Current and
Former) of the Company as a group (12 persons)
(3)(5)(6)(7)(8)(9)(10)(11)(12)(13)(14)(15) 187,165 5.8%
------------
(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 and shares each individual may acquire by conversion of
convertible securities.
(3) Tremont LLC, The Combined Master Retirement Trust (referred to herein as
the "CMRT"), Harold C. Simmons' spouse and Contran are the direct holders
of approximately 39.7%, 9.0%, 4.0% and
8
2.9%, respectively, of the outstanding shares of TIMET Common Stock. Harold
C. Simmons' spouse and Contran directly hold 1,000,000 and 700,000,
respectively, 6-5/8% Convertible Preferred Securities, Beneficial Unsecured
Convertible Securities of the TIMET Capital Trust I (referred to herein as
"TIMET Trust Securities"), which are convertible into 133,900 and 93,730
shares, respectively, of TIMET Common Stock. The percentage ownership of
TIMET Common Stock shown for Harold C. Simmons' spouse and Contran assumes,
in each case, the full conversion of only each such holder's TIMET Trust
Securities. TIMET Trust Securities are not entitled to vote on matters
submitted to the holders of TIMET Common Stock prior to the conversion of
TIMET Trust Securities into shares of TIMET Common Stock.
Valhiis the direct holder of 100% of the outstanding membership interests
of Tremont LLC. Valhi Group, Inc. (referred to herein as "VGI"), National
City Lines, Inc. (referred to herein as "National"), Contran, the Harold
Simmons Foundation, Inc. (referred to herein as the "Foundation"), the
Contran Deferred Compensation Trust No. 2 (referred to herein as the "CDCT
No. 2") and the CMRT are the direct holders of 77.6%, 9.1%, 2.8%, 1.3%,
0.4% and 0.1%, respectively, of the outstanding shares of Valhi Common
Stock. National, NOA, Inc. (referred to herein as "NOA") and Dixie Holding
Company (referred to herein as "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.
(referred to herein as "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. (referred to herein as "Dixie
Rice") is the direct holder of 100% of the outstanding common stock of
Dixie Holding. Contran is the holder of 100% of the outstanding common
stock of Dixie Rice and approximately 88.9% of the outstanding common stock
of Southwest.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold
C. Simmons (referred to herein as the "Trusts"), of which Mr. Simmons is
the sole trustee. As sole trustee of each of the Trusts, Mr. Simmons has
the power to vote and direct the disposition of the shares of Contran stock
held by each of the Trusts. Mr. Simmons, however, disclaims beneficial
ownership of any shares of Contran stock that the Trusts hold.
The CMRT directly holds approximately 0.1% of the outstanding shares of
Valhi Common Stock. Valhi established the CMRT as a trust to permit the
collective investment by master trusts that maintain the assets of certain
employee benefit plans Valhi and related companies adopt. Harold C. Simmons
is the sole trustee of the CMRT and a member of the trust investment
committee for the CMRT. Valhi's board of directors selects the trustee and
members of the trust investment committee for the CMRT. Harold C. Simmons,
Glenn R. Simmons and Steven L. Watson are each members of Valhi's board of
directors and participants in one or more of the employee benefit plans
that invest through the CMRT. Each such person, however, disclaims
beneficial ownership of any shares the CMRT holds, except to the extent, if
any, of his individual, vested beneficial interest in the assets the CMRT
holds.
The Foundation directly holds approximately 1.3% of the outstanding shares
of Valhi Common Stock. The Foundation is a tax-exempt foundation organized
for charitable purposes. Harold C. Simmons is the Chairman of the Board of
the Foundation 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.
9
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 is obligated to satisfy
the balance of such obligations as they come due. Pursuant to the terms of
the CDCT No. 2, Contran (i) retains the power to vote the shares of Valhi
Common Stock held directly by the CDCT No. 2, (ii) retains dispositive
power over such shares and (iii) may be deemed the indirect beneficial
owner of such shares. 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 (referred to herein as "Valmont"), NL and a
subsidiary of NL directly own 1,000,000 shares, 3,522,967 shares and
1,186,200 shares, respectively, of Valhi Common Stock. Valhi is the direct
holder of 100% of the outstanding common stock of Valmont. Valhi and
Tremont LLC are the direct holders of 63.2% and 21.4%, respectively, of the
outstanding shares of NL Common Stock. Pursuant to Delaware law, Valhi
treats the shares of Valhi Common Stock that Valmont, NL and the subsidiary
of NL own as treasury stock for voting purposes and for the purposes of
this note such shares are not deemed outstanding.
Harold C. Simmons is chairman of the board of Tremont LLC, NL, Valhi, VGI,
National, NOA, Dixie Holding, Dixie Rice, Southwest and Contran.
By virtue of the offices held, the stock ownership and his services as
trustee, all as described above, (a) Harold C. Simmons may be deemed to
control the entities described above and (b) Mr. Simmons and certain of
such entities may be deemed to possess indirect beneficial ownership of any
shares directly held by certain of such other entities. Mr. Simmons
disclaims beneficial ownership of the any shares beneficially owned,
directly or indirectly, by any of such entities, except to the extent
otherwise expressly indicated in this note.
Harold C. Simmons may be deemed to share indirect beneficial ownership of
the 1,000,000 TIMET Trust Securities (which are convertible into 133,900
shares of TIMET Common Stock) that his spouse directly holds. Mr. Simmons
disclaims all such beneficial ownership.
The Annette Simmons Grandchildren's Trust (referred to herein as the "AS
Grandchildren's Trust") is the direct holder of 1,560 shares of TIMET
Common Stock. Harold C. Simmons and his spouse are co-trustees of the AS
Grandchildren's Trust. The AS Grandchildren's Trust benefits the
grandchildren of Mr. Simmons' spouse. Mr. Simmons, as co-trustee of the
Trust, has the power to vote and direct the disposition of the shares of
TIMET Common Stock the AS Grandchildren's Trust holds. Mr. Simmons
disclaims beneficial ownership of any shares of TIMET Common Stock that the
AS Grandchildren's Trust holds.
Glenn R. Simmons and Steven L. Watson are directors and/or officers of
Tremont LLC, NL, Valhi, VGI, National, NOA, Dixie Holding, Dixie Rice,
Southwest and Contran. J. Landis Martin and Gen. Thomas P. Stafford are
directors of NL. Each of such persons disclaims beneficial ownership of any
shares that any of such entities hold, whether directly or indirectly.
The business address of Tremont LLC, Valhi, VGI, National, NOA, Dixie
Holding, Contran, the CMRT and the Foundation is Three Lincoln Centre, 5430
LBJ Freeway, Suite 1700, Dallas, Texas
10
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.
(4) As reported in Amendment No. 3 to Statement on Schedule 13G filed with the
Commission dated February 3, 2003. The address of Dimensional Fund Advisors
Inc. is 1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(5) The shares of TIMET Common Stock shown as beneficially owned by Norman N.
Green include 500 shares that Mr. Green has the right to acquire by the
exercise of stock options within 60 days of the Record Date under the
Director Compensation Plan.
(6) The shares of TIMET Common Stock shown as beneficially owned by J. Landis
Martin include (i) 42,780 shares that Mr. Martin has the right to acquire
upon the exercise of stock options within 60 days of the Record Date under
the TIMET Stock Incentive Plan and (ii) 40 shares held by Mr. Martin's
daughters, beneficial ownership of which is disclaimed by Mr. Martin. Mr.
Martin is also the direct holder of 3,000 shares and an indirect holder of
10,000 shares of the TIMET Trust Securities. See "Ownership of TIMET Trust
Securities" below. Such TIMET Trust Securities are convertible into 401 and
1,339 shares, respectively, 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.
(7) The shares of TIMET Common Stock shown as beneficially owned by Albert W.
Niemi, Jr. include 1,000 shares that Dr. Niemi has the right to acquire
upon 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 Glenn R.
Simmons include 1,000 shares that Mr. Simmons has the right to acquire upon
the exercise of stock options within 60 days of the Record Date under the
Director Compensation Plan.
(9) The shares of TIMET Common Stock shown as beneficially owned by Thomas P.
Stafford include 1,150 shares that Gen. Stafford has the right to acquire
upon 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 1,500 shares that Mr. Watson has the right to acquire upon
the exercise of stock options within 60 days of the Record Date under the
Director Compensation Plan.
(11) The shares of TIMET Common Stock shown as beneficially owned by Christian
Leonhard include (i) 2,320 shares that Mr. Leonhard has the right to
acquire upon the exercise of stock options within 60 days of the Record
Date under the TIMET Stock Incentive Plan and (ii) 1,600 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.
(12) The shares of TIMET Common Stock shown as beneficially owned by Robert E.
Musgraves include (i) 6,120 shares that Mr. Musgraves has the right to
acquire upon the exercise of stock options within 60 days of the Record
Date under the TIMET Stock Incentive Plan, (ii) 20 shares held by members
of Mr. Musgraves' household, beneficial ownership of which is disclaimed by
Mr. Musgraves and (iii) 1,600 shares of TIMET Common Stock that represent
restricted shares
11
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,
1,440 shares are pledged to TIMET to secure repayment of loans from TIMET
in 1998 and 2001 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.
(13) The shares of TIMET Common Stock shown as beneficially owned by Charles H.
Entrekin, Jr. include 2,800 shares that Dr. Entrekin has the right to
acquire upon the exercise of stock options within 60 days of the Record
Date under the terms of the TIMET Stock Incentive Plan and the TIMET
Executive Severance Policy.
(14) The shares of TIMET Common Stock shown as beneficially owned by Mark A.
Wallace include 4,800 shares that Mr. Wallace has the right to acquire upon
the exercise of stock options within 60 days of the Record Date under the
terms of the TIMET Stock Incentive Plan and the TIMET Executive Severance
Policy.
(15) The shares of TIMET Common Stock shown as beneficially owned by "All
Directors and Nominees and (Current and Former) Executive Officers as a
group" include 63,970 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, 1,740 shares that members of this group have the right to acquire
upon the conversion of TIMET Trust Securities and 3,200 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 LLC 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 LLC 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 (referred to herein as the "Exchange
Act") or ceasing to be traded on a national securities exchange.
Ownership of Valhi Common Stock
By virtue of the share ownership described above, for purposes of the
Commission's regulations, 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 Valhi Common Stock ($.01 par value per share) held by (i)
each director or nominee for director of TIMET, (ii) each current and former
executive officer identified in the table under the heading "Ownership of TIMET
Common Stock" and (iii) all current and former executive officers and all
directors and nominees for director 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 current or former
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.
12
Ownership of Valhi Common Stock
Valhi Common Stock
---------------------------------------------
Amount and Nature
of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (2)
------------------------
----------------------------- ---------------
Directors and Nominees
Norman N. Green -0- ---
J. Landis Martin 70,679 ---
Dr. Albert W. Niemi, Jr. -0- ---
Glenn R. Simmons (3) 161,247 ---
Gen. Thomas P. Stafford -0- ---
Steven L. Watson (4) 180,546 ---
Terry N. Worrell -0- ---
Paul J. Zucconi -0- ---
Current Executive Officers
Christian Leonhard -0- ---
Robert E. Musgraves -0- ---
Former Executive Officers
Dr. Charles H. Entrekin, Jr. -0- ---
Mark A. Wallace -0- ---
All Directors and Nominees and Executive Officers (Current and
Former) of the Company as a group (12 persons) (3)(4)(5) 412,472 ---
-------------
(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) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 148,000 shares that Mr. Simmons has the right to acquire
upon the exercise of stock options within 60 days of the Record Date under
stock option plans adopted by Valhi. In addition, such shares include 2,383
shares held in a personal individual retirement account for Mr. Simmons and
800 shares held in a retirement account for Mr. Simmons' wife, beneficial
ownership of which is disclaimed by Mr. Simmons.
(4) The shares of Valhi Common Stock shown as beneficially owned by Steven L.
Watson include 163,300 shares that Mr. Watson has the right to acquire upon
the exercise of stock options within
13
60 days of the Record Date under stock option plans adopted by Valhi and
2,035 shares held in a personal individual retirement account for Mr.
Watson.
(5) The shares of Valhi Common Stock shown as beneficially owned by "All
Directors and Nominees and (Current and Former) Executive Officers of the
Company as a group" include 311,300 shares that members of this group have
the right to acquire upon the exercise of stock options within 60 days of
the Record Date as described in notes (3) and (4) above.
Ownership of TIMET Trust Securities
The TIMET Capital Trust I (referred to herein as 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
(referred to herein as the "Debentures") of TIMET. The TIMET Trust Securities
are convertible, at the option of the holder thereof, into an aggregate of
approximately 540,000 shares of TIMET Common Stock at a conversion rate of
0.1339 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 (referred to herein as
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 LLC. See "Certain Relationships and
Transactions--Contractual Relationships--Registration Rights" below. Except as
set forth in notes (3) and (6) 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.
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 earned, paid or accrued 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 2000, 2001 and
2002 (regardless of the year in which actually paid).
14
Summary Compensation Table (1)(2)
Annual Compensation Long Term Compensation Awards
Other
Annual
Compen- Restricted Securities All Other
sation) Stock Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) (3 Awards ($)(4) Options (#) ($) (5)
--------------------------- ---- ----------- ------ ------- ------------- ----------- -------
($)(3)
Current Executive Officers
J. Landis Martin 2002 500,000 -0- 131 -0- -0- 19,491
Chairman of the Board and
Chief Executive Officer
2001 500,000 1,000,000 -0- -0- -0- 20,493
2000 500,000 -0- -0- -0- 25,000 20,493
Christian Leonhard (6) 2002 250,000 30,000 -0- -0- -0- 42,948
Chief Operating
Officer-Europe
2001 250,000 135,000 -0- -0- -0- 47,745
2000 244,121 30,000 -0- 185,000 -0- 108,295
Robert E. Musgraves 2002 250,000 110,000 -0- -0- -0- 15,521
Chief Operating Officer-
North America
2001 250,000 330,000 -0- -0- -0- 14,941
2000 247,917 30,000 -0- 185,000 -0- 14,873
Former Executive Officers
Dr. Charles H. Entrekin, Jr. 2002 250,000 30,000 -0- -0- -0- 19,764
(7)
Executive Vice President-
Commercial
2001 250,000 135,000 -0- -0- -0- 15,997
2000 245,833 30,000 -0- 185,000 -0- 16,002
Mark A. Wallace (8) 2002 250,000 30,000 -0- -0- -0- 13,452
Executive Vice President,
Chief Financial Officer and
Treasurer
2001 250,000 130,000 -0- -0- -0- 51,041
2000 245,833 40,000 -0- 185,000 -0- 12,932
---------------
(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 served as
executive officers of Tremont Corporation during 2002. 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 Corporation during 2002, 2001 and 2000.
Pursuant to an intercorporate services agreement, in each of 2002, 2001 and
2000, Tremont Corporation is obligated to reimburse TIMET for approximately
10% of the TIMET salary and regular bonus of each of Mr. Martin, Mr.
Musgraves, and 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
2002 $60,000 $33,600 $33,600
2001 $60,000 $45,600 $45,600
2000 $60,000 $33,360 $31,570
15
(3) Under TIMET's variable incentive compensation plan (referred to herein as
the "Employee Cash Incentive Plan") applicable to Dr. Entrekin, Mr.
Leonhard, Mr. Musgraves and Mr. Wallace, the largest portion of the
variable compensation payable to such individuals is based upon TIMET's
financial performance, while a substantially smaller portion is based on
the assessed performance of the individual executive officer. The amount
shown in the "Bonus" column for 2000 for each such individual represents
the amount paid to such individual under the individual performance portion
of the Employee Cash Incentive Plan for service in 2000. The amount shown
in the "Bonus" column for 2002 for Dr. Entrekin and Mr. Wallace represents
the amount paid under the individual performance portion of the Employee
Cash Incentive Plan to such individual for service in 2002 in accordance
with TIMET's Executive Severance Policy. For 2002, Mr. Leonhard and Mr.
Musgraves were each awarded $30,000 under the individual performance
portion of the Employee Cash Incentive Plan, but each has chosen to defer
payment of such award indefinitely (without interest). Under Commission
rules, these earned amounts are required to be shown in the "Bonus" column
for 2002 even though not actually paid.
The amounts shown in the "Bonus" column for 2001 for Dr. Entrekin, Mr.
Leonhard and Mr. Wallace and $130,000 of the amount shown in the "Bonus"
column for Mr. Musgraves for 2001 were paid pursuant to a special
discretionary bonus program approved by the TIMET Board of Directors. This
program was applicable to all U.S. and certain European salaried employees.
In lieu of participating in the Employee Cash Incentive Program, Mr. Martin
participates in TIMET's Senior Executive Cash Incentive Plan (referred to
herein as the "Senior Executive Cash Incentive Plan") which provides for
payments based solely upon TIMET's financial performance. No payments were
made under this plan to Mr. Martin during 2000, 2001 or 2002.
In 2001, the TIMET Board of Directors made one-time bonus awards to a small
number of employees (including Mr. Martin and Mr. Musgraves) in recognition
of their special efforts in achieving a favorable settlement of certain
litigation on behalf of the Company. Of Mr. Martin's award of $1,000,000
(shown in the "Bonus" column for 2001), $550,000 was paid in 2001 and the
remainder was paid in 2002 with accrued interest at 7% per annum (the
above-market portion of such interest of $131 is reflected in the "All
Other Compensation" column for Mr. Martin in 2002). Tremont Corporation
also awarded Mr. Martin a $1,000,000 bonus in respect of the same
litigation settlement. The Tremont Corporation bonus was paid $200,000 in
2002 and $800,000 on February 7, 2003 prior to the Tremont Merger, with
interest on the unpaid portion at 7% per annum ($71,541 in 2002 and $37,146
in 2003).
A similar award of $360,000 was made in 2001 to Mr. Musgraves, TIMET's
General Counsel at the time. Of this amount, $200,000 was paid in 2001 at
the time of the award (reflected in the "Bonus" column for 2001). The
balance was payable in two equal installments of $80,000 each in 2002 and
2003, subject to Mr. Musgraves' continued employment with TIMET. One such
installment of $80,000 was earned and paid in May 2002 (reflected in the
"Bonus" column for 2002). Mr. Musgraves has chosen to defer payment of the
remaining installment of $80,000 otherwise due in 2003 under such award
indefinitely (without interest).
(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 4,000 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 ($46.25 per share). As of December 31, 2002, each such person
held 2,400 shares of restricted TIMET Common Stock (valued at $45,840 at
the $19.10 per share closing
16
price of TIMET Common Stock on such date). The restrictions lapse as to 20%
of such shares on each of the first five anniversaries of such grant date.
Any shares as to which restrictions have not lapsed are subject to
forfeiture in the event of the termination of the individual's employment
with TIMET (for reasons other than death, disability or retirement). Upon
the resignations of Dr. Entrekin and Mr. Wallace effective December 31,
2002, the 2,400 shares of restricted TIMET Common Stock held by each with
respect to which restrictions had not then lapsed were cancelled. Holders
of restricted stock are entitled to vote and receive dividends with respect
to such shares prior to the date restrictions lapse thereon.
(5) Except as otherwise indicated in notes (6) and (8) below, "All Other
Compensation" amounts represent (i) matching contributions made or accrued
by TIMET pursuant to the savings feature of TIMET's Retirement Savings
Plan, (ii) retirement contributions made or accrued by TIMET pursuant to
the Retirement Savings Plan, (iii) life insurance premiums paid by TIMET
and (iv) long-term disability insurance premiums paid by TIMET, as follows:
Year Martin Leonhard Musgraves Entrekin Wallace
Savings Match ($) 2002 2,468 -0- 2,000 6,594 2,000
2001 5,000 -0- 2,530 6,877 2,500
2000 5,000 -0- 2,509 4,920 2,456
Retirement 2002 10,200 -0- 7,400 11,550 6,000
Contribution ($)
2001 8,670 -0- 6,290 7,500 5,100
2000 8,670 -0- 6,290 7,350 5,100
Life Insurance ($) 2002 -0- 1,620 1,599 1,620 1,444
2001 -0- 1,620 1,599 1,620 1,444
2000 -0- 563 1,552 490 1,368
Long-Term 2002 6,823 -0- 4,522 -0- 4,008
Disability
Insurance ($)
2001 6,823 -0- 4,522 -0- 4,008
2000 6,823 -0- 4,522 -0- 4,008
(6) The amounts shown as "All Other Compensation" for Mr. Leonhard for 2000
include amounts paid or accrued by TIMET, TIMET's wholly owned subsidiary,
TIMET UK, Ltd. (referred to herein as "TIMET UK"), or TIMET UK's 70%-owned
subsidiary, TIMET Savoie, S.A. (referred to herein as "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 = $1.52 for 2000. The
portion of Mr. Leonhard's compensation paid by TIMET Savoie was paid in
French francs. The exchange rate used was FF1 = $.15 for 2000. The amounts
shown as "All Other Compensation" for Mr. Leonhard include $41,328 in 2002,
$46,125 in 2001, and $107,732 in 2000 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).
(7) Mr. Entrekin resigned his position with TIMET effective December 31, 2002.
17
(8) Mr. Wallace resigned his position with TIMET effective December 31, 2002.
"All Other Compensation" for Mr. Wallace for 2001 included a country club
initiation fee of $38,000.
Stock Option/SAR Grants in Last Fiscal Year
No stock options or stock appreciation rights (referred to herein as "SARs")
were granted under the TIMET Stock Incentive Plan in 2002.
Stock Option Exercises and Holdings
Prior to the commencement of public trading of TIMET Common Stock in 1996,
executive officers of TIMET were from time to time granted stock options
pursuant to the Tremont Stock Incentive Plan with respect to their TIMET
service. Since 1996, such executive officers have been granted stock options
only pursuant to the TIMET Stock Incentive Plan. The following table and
accompanying notes provide information, with respect to the current and former
executive officers of TIMET listed in the "Summary Compensation Table" above,
concerning the exercise of TIMET and Tremont Corporation stock options during
the last fiscal year and the value of unexercised TIMET and Tremont Corporation
stock options held as of December 31, 2002. No Tremont Corporation stock options
were held by any such executive officers as of December 31, 2002. No SARs have
been granted under the TIMET Stock Incentive Plan or the Tremont Stock Incentive
Plan. See also "Certain Relationships and Transactions--Contractual
Relationships--Option Reimbursement Agreement" below.
Aggregated Option Exercises in 2002 and 12/31/02 Option Values
Value of
Number of Securities Unexercised
Underlying In-the-Money
Unexercised Options Options at
Shares at 12/31/02 (#) 12/31/02 ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
---- ------------ ------------ ------------- -------------
TIMET
-----
J. Landis Martin -0- -0- 34,060/20,940 -0-/-0-
Christian J. M. Leonhard -0- -0- 1,780/900 -0-/-0-
Robert E. Musgraves -0- -0- 5,280/1,380 -0-/-0-
Dr. Charles H. Entrekin, Jr. -0- -0- 2,800/-0- -0-/-0-
Mark A. Wallace -0- -0- 4,800/-0- -0-/-0-
Tremont Corporation
----------------------
Robert E. Musgraves (1) -0- 200,864 -0-/-0- -0-/-0-
---------------
(1) Pursuant to an agreement with Tremont Corporation in 2002, Mr. Musgraves'
remaining vested Tremont Corporation stock options exercisable for 9,500
shares of the common stock of Tremont Corporation were cancelled for a cash
payment of $200,864, equal to the difference between the market price of
the common stock of Tremont Corporation on the date of cancellation and the
respective exercise prices of the options cancelled, multiplied by the
number of such options cancelled.
18
Severance Arrangements
In 1999, the Company adopted a policy applicable to certain executive officers
of the Company, including Mr. Martin, Mr. Musgraves, Mr. Leonhard, Dr. Entrekin
and Mr. Wallace, providing that the following payments will be made to each such
individual in the event his employment is terminated by TIMET without cause (as
defined in the policy) or such individual terminates his 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. For Mr.
Martin, Mr. Musgraves and Mr. Leonhard, the base salary for purposes of the
executive severance policy will be no less than those salaries in effect for
each prior to voluntary reductions in the base salary of each executive made in
2003.
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
be eligible to receive, at his option and in lieu of any benefits under the
foregoing executive severance policy, 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.
Dr. Entrekin and Mr. Wallace resigned from TIMET effective December 31, 2002.
Each received severance benefits consistent with the terms of the
above-described policy.
Equity Compensation Plan Information
The following table provides information as of December 31, 2002 with respect to
compensation plans and arrangements under which equity securities of TIMET are
authorized for issuance.
Column (A) Column (B) Column (C)
Number of securities
remaining available for
Number of Securities to Weighted-average future issuance under
be issued upon exercise exercise price of equity compensation plans
of outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants, and rights reflected in Column (A))
-------------------- -------------------- -------------------------
Equity compensation plans 190,420 $165.11 148,330
approved by security
holders
Equity compensation plans - - - - - - - - -
not approved by security
holders
Total 190,420 $165.11 148,330
19
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 (referred to herein as 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 2002, 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
regarding base salaries are generally 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, as well as
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 2002. However, based upon
the current condition of the business and the outlook over the next few years,
Mr. Leonhard and Mr. Musgraves, the Company's two Chief Operating Officers, have
voluntarily reduced their salaries from $250,000 to $225,000 beginning in 2003.
20
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 54% of base salary for 2002, 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 2002.
Potential awards under the Employee Cash Incentive Plan attributable solely to
the performance of TIMET in 2002 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 2002, 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.
An individual performance award may be made to an executive of TIMET under the
Employee Cash Incentive Plan if such executive's performance objectives were met
during the prior fiscal year. Payments made to executive officers identified in
the Summary Compensation Table under this portion of the Employee Cash Incentive
Plan for services rendered in 2002 are included under the "Bonus" column of the
Summary Compensation Table. Mr. Leonhard and Mr. Musgraves each earned a bonus
of $30,000 for 2002 service but have chosen to defer payment of that bonus until
2004 indefinitely (without interest).
In 1996, the Board established the Senior Executive Cash Incentive Plan, which
was approved by the Company's stockholders in 1997 and remains effective. This
plan was applicable only to Mr. Martin in 2002. The Senior Executive Cash
Incentive 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 2002 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 to a
small number of employees (including Mr. Martin and Mr. Musgraves) in
recognition of their special efforts in achieving a favorable settlement of
certain litigation on behalf of the Company. The Board awarded $1,000,000 to Mr.
Martin ($550,000 of which was paid in 2001 and $450,000 of which was paid in
2002, together with interest on the unpaid balance) and $360,000 for Mr.
Musgraves. For Mr. Musgraves, $200,000 of his award was paid in 2001 at the time
of the award, and the balance of the award was payable in two equal installments
in 2002 and 2003, subject to Mr. Musgraves' continued employment with the
Company. One such installment of $80,000 was earned and paid in May 2002. Mr.
Musgraves has voluntarily agreed to defer payment of the remaining installment
of $80,000 otherwise due in 2003 indefinitely (without interest). These amounts
are reflected in the Summary Compensation Table.
21
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 2002. 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 previously approved both the TIMET
Stock Incentive Plan and the Senior Executive Cash Incentive Plan in 1997. The
limitation on deductibility requires re-approval of only the Senior Executive
Cash Incentive Plan every five years. Consequently, the Compensation Committee
believes that payments made pursuant to the TIMET Stock Incentive Plan qualify
for exemption from the deductibility limit as "performance-based compensation,"
but payments made under the Senior Executive Cash Incentive Plan would not. The
Company anticipates, however, that it would seek stockholder re-approval of the
Senior Executive Cash Incentive Plan prior to making any non-deductible payments
under that plan. 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 periodically to 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 2002. However, based upon the current condition of the business and
the outlook over the next few years, Mr. Martin has voluntarily reduced his
salary from $500,000 to $250,000 beginning in 2003.
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
General Thomas P. Stafford (Chair)
Norman N. Green
Dr. Albert W. Niemi, Jr.
22
INDEPENDENT AUDITOR MATTERS
Independent Auditors
The firm of PricewaterhouseCoopers LLP served as TIMET's independent auditors
for the year ended December 31, 2002, 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 2003 and is
expected to be considered for appointment to audit TIMET's annual consolidated
financial statements for the year ending December 31, 2003. Representatives of
PricewaterhouseCoopers LLP are 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.
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, 2002 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 ("SAS")
No. 61 (Communication with Audit Committees) and SAS No. 90 (Audit Committee
Communications). 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, 2002
be included in TIMET's Annual Report on Form 10-K for the year ended December
31, 2002, which has been filed with the Commission.
Audit Committee
Dr. Albert W. Niemi, Jr. (Chair)
General Thomas P. Stafford
Paul J. Zucconi
23
Fees Paid to PricewaterhouseCoopers LLP
The Commission recently adopted new disclosure rules applicable to the
independent auditor fee information effective May 6, 2003 pursuant to the
Sarbanes-Oxley Act of 2002. TIMET has decided to provide disclosure in
accordance with certain of these rules in advance of the effective date. The
following table shows the aggregate fees PricewaterhouseCoopers LLP has billed
or is expected to bill to TIMET and its subsidiaries for services rendered for
2001 and 2002.
Type of Fees 2001 2002
------------------------------------- ---- ----
Audit Fees (1)....................... $502,500 $397,000
Audit-Related Fees (2)............... 21,000 5,000
Tax Fees (3)......................... 66,750 64,500
All Other Fees (4)................... 25,000 -0-
------ ---
Total................................ $615,250 $466,500
======= =======
--------------------
(1) Represents fees for the following services:
(a) audits of TIMET's consolidated year-end financial statements for each
year;
(b) reviews of the unaudited quarterly financial statements appearing in
TIMET's Forms 10-Q for each of the first three quarters of each year;
(c) consents filed with the SEC;
(d) normally provided statutory or regulatory filings or engagements for
each year; and
(e) the estimated out-of-pocket costs PricewaterhouseCoopers LLP incurred
in providing all of such services for which TIMET reimburses
PricewaterhouseCoopers LLP.
(2) Represents fees for assurance and related services reasonably related to
the audit or review of TIMET's financial statements for each year. These
services may include accounting consultations, attest services concerning
financial accounting, and reporting standards and advice concerning
internal controls.
(3) Represents fees for tax compliance, tax advice and tax planning services.
(4) Represents fees for all services not described in the other categories. The
fees in 2001 were for compensation studies.
24
PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the period December 31, 1997
through December 31, 2002, 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.
25
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. 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 LLC 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. 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,
Vice Chairman of Tremont LLC and a director of NL. General Thomas P. Stafford, a
director of TIMET, is also a director of NL. Steven L. Watson, a director of
TIMET, is also an executive officer of Contran, Valhi and Tremont LLC, and a
director of Contran, CompX, Keystone, Valhi, and NL. Robert D. Hardy is an
Assistant Treasurer of TIMET and is also Vice President, Chief Financial
Officer, Controller, Treasurer and Assistant Secretary of NL. A. Andrew R. Louis
is Assistant Secretary of TIMET and Secretary and Associate General Counsel of
Contran, Valhi and Tremont LLC. Robert D. Graham is Assistant Secretary of TIMET
and Vice President of Contran, Valhi and Tremont LLC. Joan H. Prusse is Vice
President, General Counsel and Secretary of TIMET and Vice President of Tremont
LLC. TIMET understands that all such persons are expected to continue to serve
in such capacities in 2003. 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. Prior to
the Tremont Merger in 2003, certain directors and officers of TIMET served as
directors and officers of Tremont Corporation.
Although no specific procedures are in place that govern the treatment of
transactions among TIMET, Contran, Valhi, Tremont LLC 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.
26
Contractual Relationships
Tremont Corporation Intercorporate Services Agreement
During 2002, TIMET and Tremont Corporation were parties to an intercorporate
services agreement (the "Tremont Corporation ISA") that provided that TIMET
would render certain management, financial, tax and administrative services to
Tremont Corporation, including provision for the reimbursement by Tremont
Corporation to TIMET of a portion of the salary, regular bonus and overhead
expense for the executive officers of Tremont Corporation. The Tremont
Corporation ISA was subject to automatic renewal and contained a provision
whereby the Tremont Corporation ISA could be terminated by either party pursuant
to written notice delivered at least 30 days prior to a quarter-end. During
2002, fees for services provided by TIMET to Tremont Corporation were
approximately $0.4 million. TIMET expects to enter into an ISA for 2003 with
Tremont LLC and an ISA for 2003 with Contran to replace the former Tremont
Corporation ISA as a result of the Tremont Merger.
NL Intercorporate Services Agreement
TIMET and NL are parties to an intercorporate services agreement (referred to
herein as 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 2002. 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 2003 at a reduced amount 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 (referred to collectively herein as "BMI") pursuant to various
agreements. A wholly owned subsidiary of Tremont LLC owns approximately 32% of
the outstanding equity securities of BMI (representing 26% of the voting
securities of BMI). During 2002, fees for such utility services provided by BMI
to TIMET were approximately $2.8 million.
Shareholders' Agreement
Prior to TIMET's initial public offering in 1996, TIMET, Tremont Corporation and
other stockholders of TIMET at that time entered into a shareholders' agreement
(referred to herein as the "Shareholders' Agreement") that provides, among other
things, that so long as Tremont LLC (as the successor to Tremont Corporation 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 LLC, 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 certain periodic information about TIMET and its
subsidiaries to Tremont LLC, which right is subject to confidentiality
restrictions.
Registration Rights
Under the Shareholders' Agreement, Tremont LLC (as successor to Tremont
Corporation) is entitled to certain rights with respect to the registration
under the Securities Act of the shares of TIMET Common Stock that Tremont LLC
holds. The Shareholders' Agreement generally provides, subject to certain
limitations, that (i) Tremont LLC 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 for sale for its own account, Tremont LLC has the right to
28
require TIMET to include in such registration the registrable securities held by
Tremont LLC or its permitted transferees so long as Tremont LLC 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 Corporation
with respect to their TIMET service. With respect to such Tremont Corporation
stock options, TIMET has previously agreed to reimburse Tremont Corporation for
the difference between the market price of the shares of common stock of Tremont
Corporation on the date of exercise of such Tremont Corporation stock options
(up to $16.625 per share) and the exercise price of such options. TIMET is
obligated to reimburse Tremont LLC (as successor to Tremont Corporation) $66,528
with respect to exercise or cancellation of Tremont Corporation stock options
that occurred from August of 2001 until the Tremont Merger in 2003.
Insurance Matters
Tall Pines Insurance Company (referred to herein as "Tall Pines"), Valmont, and
EWI RE, Inc. (referred to herein as "EWI, Inc.") provide for or broker certain
of TIMET's insurance policies. Tall Pines is a wholly owned captive insurance
company of Tremont LLC. Valmont is a wholly owned captive insurance company of
Valhi. At January 1, 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. (referred
to herein collectively with EWI, Inc., as "EWI"). Through December 31, 2000, a
son-in-law of Harold C. Simmons managed the operations of EWI. Subsequent to
December 31, 2002, pursuant to an agreement that may be terminated upon 90 days
written notice by either party, this 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. Since March 2003,
such son-in-law serves as the chairman of the board of EWI, Inc. 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 2002, TIMET paid approximately $3.4 million
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 EWI, 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 expects
that these relationships with Tall Pines, Valmont, and EWI will continue in
2003.
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.
28
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 were entitled to borrow funds to purchase TIMET Common Stock or to pay
taxes payable with respect to vesting shares of restricted stock. Each executive
could 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 2002 was 4.025% (3.4425% for 2003). 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. TIMET terminated this program effective July 30, 2002, subject to
continuing only those loans outstanding at that time in accordance with their
then-current terms. The following table identifies the executive officers of
TIMET who were indebted to TIMET under this program during 2002 and as of the
Record Date:
Maximum Principal Amount Principal Outstanding as of
Name Outstanding during 2002 ($) March 24, 2003($)
---- -------------------------- -----------------
Robert E. Musgraves 113,708 113,708
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, 2002, except for an inadvertent late report on Form 4 by Christian
Leonhard and two inadvertent late reports on Form 4 by Mr. Harold C. Simmons.
STOCKHOLDER PROPOSALS FOR 2004 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 November 29,
2003 to be considered for inclusion in the proxy statement and form of proxy
relating to the 2004 Annual Meeting of Stockholders. Any such proposals should
be addressed to: Corporate Secretary, Titanium Metals Corporation, 1999
Broadway, Suite 4300, Denver, Colorado 80202.
OTHER MATTERS
The Board of Directors knows of no other business 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.
29
2002 ANNUAL REPORT ON FORM 10-K; HOUSEHOLDING
TIMET's 2002 Annual Report on Form 10-K, as filed with the Commission, is
included as a part of TIMET's 2002 Annual Report which accompanies this Proxy
Statement. 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.
The Commission has adopted rules that permit companies and intermediaries
such as brokers to satisfy the delivery requirements for proxy statements with
respect to two or more security holders sharing the same address by delivering a
single proxy statement addressed to those security holders. This process, which
is commonly referred to as "householding," potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are TIMET
stockholders will be "householding" our proxy materials. A single Proxy
Statement will be delivered to multiple stockholders sharing an address unless
contrary instructions have been received from the affected stockholders. Once
you have received notice from your broker or us that either will be
"householding" communications to your address, "householding" will continue
until you are notified otherwise or until you revoke your consent. If at any
time, you no longer wish to participate in "householding" and would prefer to
receive a separate Proxy Statement, or if you currently receive multiple copies
of the Proxy Statement at your address and would like to request "householding"
of Company communications, please notify your broker if your shares are not held
directly in your name. If you own your shares directly rather than through a
brokerage account, you should direct your written request to the corporate
secretary, Titanium Metals Corporation, 1999 Broadway, Suite 4300, Denver,
Colorado 80202 or contact the corporate secretary by phone at 303-296-5600 or by
fax at 303-291-2990.
TITANIUM METALS CORPORATION
Denver, Colorado
April 4, 2003
30
[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 20, 2003
The undersigned hereby appoints Joan H. Prusse and Matthew O'Leary, 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 2003 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 20, 2003, at 1:00 p.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 Seven 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,
Steven L. Watson, Terry N. Worrell,
Paul J. Zucconi
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
stockholders, 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.
--------------------------------
2003
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SIGNATURE(S) DATE