SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Kronos Worldwide, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
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[LOGO GOES HERE] KRONOS WORLDWIDE, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
April 18, 2005
To our Stockholders:
You are cordially invited to attend the 2005 Annual Meeting of Stockholders
of Kronos Worldwide, Inc., which will be held on Thursday, May 19, 2005, at
10:00 a.m., local time, at Kronos Worldwide's corporate offices at Three Lincoln
Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas. The matters to be acted
upon at the meeting are described in the attached Notice of Annual Meeting of
Stockholders and Proxy Statement.
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 as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes.
Sincerely,
/s/ Harold C. Simmons
Harold C. Simmons
Chairman of the Board and
Chief Executive Officer
KRONOS WORLDWIDE, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 19, 2005
To the Stockholders of Kronos Worldwide, Inc.:
NOTICE IS HEREBY GIVEN that the 2005 Annual Meeting of Stockholders (the
"Meeting") of Kronos Worldwide, Inc., a Delaware corporation ("Kronos
Worldwide"), will be held on Thursday, May 19, 2005, at 10:00 a.m., local time,
at Kronos Worldwide's corporate offices at Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas for the following purposes:
(1) To elect seven directors to serve until the 2006 Annual Meeting of
Stockholders; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
The close of business on March 28, 2005 has been set as the record date
(the "Record Date") for the Meeting. Only holders of Kronos Worldwide's common
stock, par value $0.01 per share, at the close of business on the Record Date
are entitled to notice of, and to vote at, the Meeting. Kronos Worldwide's stock
transfer books will not be closed following the Record Date. A complete list of
stockholders entitled to vote at the Meeting will be available for examination
during normal business hours by any stockholder of Kronos Worldwide, for
purposes related to the Meeting, for a period of ten days prior to the Meeting
at the place where Kronos Worldwide will hold the Meeting.
You are cordially invited to attend the Meeting. Whether or not you plan to
attend the Meeting, please complete, date and sign the accompanying proxy card
or voting instruction form and return it promptly in the enclosed envelope. If
you choose, you may still vote in person at the Meeting even though you
previously submitted your proxy.
By Order of the Board of Directors,
/s/ Robert D. Graham
Robert D. Graham
Vice President, General Counsel and Secretary
Dallas, Texas
April 18, 2005
KRONOS WORLDWIDE, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
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PROXY STATEMENT
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GENERAL INFORMATION
This proxy statement and the accompanying proxy card or voting instruction
form are being furnished in connection with the solicitation of proxies by and
on behalf of the board of directors (the "Board of Directors") of Kronos
Worldwide, Inc., a Delaware corporation ("Kronos Worldwide"), for use at the
2005 Annual Meeting of Stockholders of Kronos Worldwide to be held on Thursday,
May 19, 2005 and at any adjournment or postponement thereof (the "Meeting"). The
accompanying Notice of Annual Meeting of Stockholders (the "Notice") sets forth
the time, place and purposes of the Meeting. The Notice, this proxy statement,
the accompanying proxy card or voting instruction form and Kronos Worldwide's
Annual Report to Stockholders, which includes Kronos Worldwide's Annual Report
on Form 10-K for the fiscal year ended December 31, 2004, are first being mailed
to the holders of Kronos Worldwide's common stock, par value $0.01 per share
("Common Stock"), on or about April 18, 2005. Kronos Worldwide's principal
executive offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite
1700, Dallas, Texas 75240-2697.
QUORUM, VOTING RIGHTS AND PROXY SOLICITATION
The record date set by the Board of Directors for the determination of
stockholders entitled to notice of and to vote at the Meeting was the close of
business on March 28, 2005 (the "Record Date"). Only holders of shares of Common
Stock as of the close of business on the Record Date are entitled to vote at the
Meeting. As of the Record Date, there were 48,946,049 shares of Common Stock
issued and outstanding. Each share of Common Stock entitles its holder to one
vote on all matters to be acted on at the Meeting. The presence, in person or by
proxy, of the holders of a majority of the shares of Common Stock entitled to
vote at the Meeting is necessary to constitute a quorum for the conduct of
business at the Meeting. Under applicable rules of the New York Stock Exchange
(the "NYSE") and Securities and Exchange Commission (the "SEC"), brokers or
other nominees holding shares of record on behalf of a client who is the actual
beneficial owner of such shares are authorized to vote on certain routine
matters without receiving instructions from the beneficial owner of the shares.
If a broker/nominee who is entitled to vote on a routine matter does not vote
such shares, such shares are referred to herein as "broker/nominee non-votes."
Shares of Common Stock that are voted to abstain from any business coming before
the Meeting and broker/nominee non-votes will be counted as being in attendance
at the Meeting for purposes of determining whether a quorum is present.
If a quorum is present, a plurality of the affirmative votes of the
outstanding shares of Common Stock represented and entitled to be voted at the
Meeting is necessary to elect each director of Kronos Worldwide. The
accompanying proxy card or voting instruction form provides space for a
stockholder to withhold authority to vote for any or all of the nominees to the
Board of Directors. Neither shares as to which the authority to vote on the
election of directors has been withheld nor broker/nominee non-votes will be
counted as affirmative votes to elect director nominees to the Board of
Directors. However, since director nominees need only receive the vote of a
plurality of the shares represented and entitled to vote at the Meeting, a vote
withheld from a particular nominee will not affect the election of such nominee.
Except as applicable laws may otherwise provide, if a quorum is present,
the approval of any other matter that may properly come before the Meeting will
require the affirmative vote of a majority of the shares represented and
entitled to vote at the Meeting. Shares of Common Stock that are voted to
abstain from any other business coming before the Meeting and broker/nominee
non-votes will not be counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Meeting "FOR" the election of the director nominees to the Board of Directors
and, to the extent allowed by applicable law, in the discretion of the agents on
any other matter that may properly come before the Meeting.
EquiServe Trust Company N.A. ("EquiServe"), the transfer agent and
registrar for the Common Stock as of the Record Date, has been appointed by the
Board of Directors to receive proxies and ballots, ascertain the number of
shares represented, tabulate the vote and serve as inspector of election for the
Meeting.
Each holder of record of Common Stock executing and delivering the proxy
card enclosed with this proxy statement may revoke it at any time prior to the
voting at the Meeting by delivering to EquiServe a written revocation of the
proxy, a duly executed proxy card bearing a later date or by voting in person at
the Meeting. Attendance by a stockholder at the Meeting will not in itself
constitute the revocation of such stockholder's proxy.
The Board of Directors is making this proxy solicitation. Kronos Worldwide
will pay all expenses related to the solicitation, including charges for
preparing, printing, assembling and distributing all materials delivered to
stockholders. In addition to the solicitation by mail, directors, officers and
regular employees of Kronos Worldwide may solicit proxies by telephone or in
person, for which such persons will receive no additional compensation. Kronos
Worldwide has retained The Altman Group, Inc. to aid in the distribution of this
proxy statement and related materials at an estimated cost of $1,000. Upon
request, Kronos Worldwide 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 Common Stock that such entities hold of
record.
CONTROLLED COMPANY
Valhi, Inc. ("Valhi") and NL Industries, Inc. ("NL") are the direct holders
of 56.4% and 36.4%, respectively, of the outstanding shares of Common Stock as
of the Record Date. Together, Valhi and NL own 92.8% of the outstanding shares
of Common Stock. Valhi is the direct holder of 83.1% of the outstanding shares
of NL common stock, par value $0.125 per share ("NL Common Stock"). Contran
Corporation ("Contran") holds, directly or through subsidiaries, 90.8% of the
outstanding shares of Valhi common stock, par value $0.01 per share ("Valhi
Common Stock").
Valhi and NL have each indicated their intention to have their shares of
Common Stock represented at the Meeting and voted "FOR" the election of each of
the director nominees to the Board of Directors. If Valhi alone attends the
Meeting in person or by proxy and votes as indicated, the Meeting will have a
quorum present and the stockholders will elect all the nominees to the Board of
Directors.
Because of the Common Stock ownership by Valhi and NL, Kronos Worldwide is
considered a controlled company under the listing standards of the NYSE.
Pursuant to the listing standards, a controlled company may choose not to have a
majority of independent directors, independent compensation, nominating or
corporate governance committees or charters for these committees. Kronos
Worldwide has chosen not to have an independent nominating or corporate
governance committee. The Board of Directors believes that the full Board of
Directors best represents the interests of all of Kronos Worldwide's
stockholders and that it is appropriate for all matters that would be considered
by a nominating or corporate governance committee to be considered and acted
upon by the full Board of Directors. Applying the NYSE director independence
standards, the Board of Directors has determined that four of its directors are
independent and have no material relationship with Kronos Worldwide. While the
members of Kronos Worldwide's management development and compensation committee
(the "MD&C Committee") currently satisfy the independence requirements of the
NYSE, Kronos Worldwide has chosen not to satisfy all of the NYSE listing
standards for a compensation committee. See "Meetings and Committees of the
Board of Directors" for more information on the committees of the Board of
Directors. See also "Stockholder Proposals and Director Nominations for the 2006
Annual Meeting" for a description of Kronos Worldwide's policies and procedures
for stockholder nominations of directors.
-2-
ELECTION OF DIRECTORS
The bylaws of Kronos Worldwide provide that the Board of Directors shall
consist of one or more members as determined by the Board of Directors or the
stockholders. The Board of Directors has currently set the number of directors
at seven. The directors elected at the Meeting will hold office until the 2006
Annual Meeting of Stockholders and until their successors are duly elected and
qualified or their earlier removal, resignation or death.
All of the nominees are currently directors of Kronos Worldwide whose terms
will expire at the Meeting. All of the nominees have agreed to serve if elected.
If any nominee is not available for election at the Meeting, all shares
represented by a 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 such nominee. The Board of Directors believes that all of
its nominees will be available for election at the Meeting and will serve if
elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. The respective nominees for election as directors of
Kronos Worldwide for terms expiring at the 2006 Annual Meeting of Stockholders
have provided the following information.
Keith R. Coogan, age 52, has served as a director of Kronos Worldwide since
2004. Mr. Coogan is chief executive officer of Software Spectrum, Inc., a global
business-to-business software services provider that is currently a wholly owned
subsidiary of Level 3 Communications, but from 1991 to 2002 was a publicly
traded corporation ("SSI"). From 1990 to 2002, he served in various other
executive officer positions of SSI, including vice president of finance and
operations and chief operating officer. He is also a director of CompX
International Inc., a manufacturer of precision slides, security products and
ergonomic computer support systems that is related to NL ("CompX"), and Keystone
Consolidated Industries, Inc., a steel fabricated wire products, industrial wire
and carbon steel rod company that is related to Contran ("Keystone"). Mr. Coogan
is a member of Kronos Worldwide's audit committee and chairman of each of
CompX's and Keystone's audit committees.
Cecil H. Moore, Jr., age 65, has been a director of Kronos Worldwide since
2003. Mr. Moore is currently a private investor and retired from KPMG LLP in
2000 after 37 years in which he served in various capacities with the firm.
Among other positions, he served as managing partner of the firm's Dallas, Texas
business unit from 1990 to 1999. Prior to 1990, Mr. Moore was partner-in-charge
of the audit and accounting practice of the firm's Dallas, Texas business unit
for 12 years. He is chairman of Kronos Worldwide's audit committee and on the
board of directors and audit committee of NL. Mr. Moore is also a director and
chairman of the audit committee of Perot Systems Corporation, a worldwide
provider of information technology services and business solutions.
George E. Poston, age 69, has been a director of Kronos Worldwide since
2003. From 2002 to 2003, he served as a director of NL. He has been president of
Poston Real Estate Co., a privately held commercial real estate investment
company, and president of Poston Capital Co., a privately held investment
company, since 1970. Mr. Poston is a member of Kronos Worldwide's audit
committee and management development and compensation committee (the "MD&C
Committee").
Glenn R. Simmons, age 77, has been a director of Kronos Worldwide since
2003. Mr. Simmons has been vice chairman of the board of Valhi and Contran since
prior to 2000. Mr. Simmons is chairman of the board of Keystone and CompX. Mr.
Simmons is also a director of NL and Titanium Metals Corporation ("TIMET"), an
integrated producer of titanium metals products that is related to Valhi. In
February 2004, Keystone filed a voluntary petition for reorganization under
federal bankruptcy laws. Mr. Simmons has been an executive officer or director
of various companies related to Valhi and Contran since 1969. He is a brother of
Harold C. Simmons.
Harold C. Simmons, age 73, has served as chairman of the board and chief
executive officer of Kronos Worldwide since 2003. Mr. Simmons has served as
chief executive officer of NL since 2003 and chairman of the board of NL since
prior to 2000. He also has served as vice chairman of the board of TIMET since
August 2004. Mr. Simmons has been chairman of the board of Valhi and Contran
since prior to 2000 and was chief executive officer of Valhi from prior to 2000
to 2002. Mr. Simmons has been an executive officer or director of various
companies related to Valhi and Contran since 1961. Mr. Simmons is a brother of
Glenn R. Simmons.
-3-
Dr. R. Gerald Turner, age 59, has been a director of Kronos Worldwide since
2003. From May 2003 to December 2003, he was a director of NL. He has served
since 1995 as president of Southern Methodist University in Dallas, Texas. He
held previous executive and administrative positions at the University of
Mississippi, the University of Oklahoma and Pepperdine University. He serves on
the board of directors of J.C. Penney Corporation, Inc., American Beacon
Advisors Funds and First Broadcasting Investment Partners, LLC. Dr. Turner is a
member of Kronos Worldwide's audit committee and chairman of the MD&C Committee.
Steven L. Watson, age 54, has served as vice chairman of the board of
Kronos Worldwide since October 2004 and a director of Kronos Worldwide since
2003. Mr. Watson has been president and a director of Valhi and Contran since
1998 and chief executive officer of Valhi since 2002. Mr. Watson is also a
director of CompX, Keystone, NL and TIMET. Mr. Watson has served as an executive
officer or director of various companies related to Valhi and Contran since
1980.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held three meetings and took action by written
consent on five occasions in 2004. Each director participated in at least 75% of
such meetings and of the meetings of the committees on which he served at the
time. It is expected that each director will attend Kronos Worldwide's annual
meetings of stockholders, which are held immediately before the annual meetings
of the Board of Directors. All members of the Board of Directors at that time
attended Kronos Worldwide's 2004 annual stockholder meeting.
The Board of Directors has established and delegated authority to the
following two standing committees.
Audit Committee. The audit committee assists with the Board of
Directors' oversight responsibilities relating to the financial accounting
and reporting processes and auditing processes of Kronos Worldwide. The
responsibilities of the audit committee are more specifically set forth in
the audit committee charter, a copy of which is available under the
corporate governance section of Kronos Worldwide's website,
www.kronostio2.com. Applying the requirements of the NYSE listing standards
and SEC regulations, as applicable, the Board of Directors has determined
that
o each member of the audit committee is independent, financially
literate and has no material relationship with Kronos Worldwide;
and
o Mr. Cecil H. Moore, Jr. is an "audit committee financial expert."
No member of the audit committee serves on more than three public company
audit committees. For further information on the role of the audit
committee, see "Audit Committee Report." The current members of the audit
committee are Cecil H. Moore, Jr. (chairman), Keith R. Coogan, George E.
Poston and R. Gerald Turner. The audit committee held ten meetings and took
action by written consent on one occasion in 2004.
Management Development and Compensation Committee. The principal
responsibilities of the MD&C Committee are to review and approve certain
matters involving executive compensation; to recommend to the Board of
Directors whether or not to approve any proposed charge to Kronos Worldwide
or its subsidiaries pursuant to an intercorporate services agreement with a
related party; to take action or to review and approve certain matters
regarding Kronos Worldwide's employee benefit plans or programs; to
administer and grant awards under the Kronos Worldwide, Inc. 2003 Long-Term
Incentive Plan; to approve certain annual incentive compensation awards;
and to review and administer such other compensation matters as the Board
of Directors may direct from time to time. The Board of Directors has
determined that each member of the MD&C Committee is independent by
applying the NYSE director independence standards. For further information
on the role of the MD&C Committee, see "Executive Compensation Report." The
current members of the MD&C Committee are R. Gerald Turner (chairman) and
George E. Poston. The MD&C Committee held no meetings and took action by
written consent on two occasions in 2004.
The Board of Directors is expected to elect the members of the standing
committees at the Board of Directors annual meeting immediately following the
Meeting. The Board of Directors has previously established, and from time to
time may establish, other committees to assist it in the discharge of its
responsibilities.
-4-
EXECUTIVE OFFICERS
Set forth below is certain information relating to the executive officers
of Kronos Worldwide. Each executive officer serves at the pleasure of the Board
of Directors. Biographical information with respect to Harold C. Simmons and
Steven L. Watson is set forth under "Election of Directors--Nominees for
Director."
Name Age Position(s)
- ------------------------- ------ ---------------------------------------
Harold C. Simmons........ 73 Chairman of the Board and Chief Executive Officer
Steven L. Watson......... 54 Vice Chairman of the Board
Dr. Ulfert Fiand......... 56 President, Manufacturing and Technology
H. Joseph Maas.......... 53 President, Sales and Marketing
Douglas C. Weaver........ 63 Senior Vice President, Development
James W. Brown........... 48 Vice President and Controller
Robert D. Graham......... 49 Vice President, General Counsel and Secretary
Kelly D. Luttmer......... 41 Vice President and Tax Director
John A. St. Wrba......... 48 Vice President and Treasurer
Gregory M. Swalwell...... 48 Vice President, Finance and Chief Financial Officer
Dr. Ulfert Fiand has served as president, manufacturing and technology of
Kronos Worldwide since October 2004 and previously served as senior vice
president, manufacturing and technology since 2003. Since 2001, he has served as
president of manufacturing and technology of Kronos International, Inc. ("KII"),
a subsidiary of Kronos Worldwide. Dr. Fiand joined KII in 1988, and previously
served as group leader and director of chloride process technology, director of
process technology and vice president of production & process technology.
H. Joseph Maas has served as president, sales and marketing of Kronos
Worldwide since October 2004 and previously served as senior vice president,
sales and marketing since 2003. Mr. Maas served as vice president of marketing
for Kronos since 1997. Prior to that, he served as director of marketing for
Kronos from 1990 to 1996. Mr. Maas has also held several positions in commercial
development, marketing and planning for various divisions of NL since 1978.
Douglas C. Weaver has served as senior vice president, development of
Kronos Worldwide since 2003. Mr. Weaver served as vice president, development of
Kronos Worldwide since 1998. Prior to that, Mr. Weaver served in various
manufacturing, engineering and planning capacities with NL since 1973.
James W. Brown has served as vice president and controller of NL and Kronos
Worldwide since 2003. From 1998 to 2002, he served as vice president and chief
financial officer of SSI. From 1994 to 1998, Mr. Brown served as vice president,
corporate accounting of Affiliated Computer Services, Inc., a provider of
business process and information technology outsourcing solutions.
Robert D. Graham has served as vice president, general counsel and
secretary of Kronos Worldwide and NL since 2003 and vice president of Valhi and
Contran since 2002. From 1997 to 2002, Mr. Graham served as an executive
officer, and most recently as executive vice president and general counsel, of
SSI. From 1985 to 1997, Mr. Graham was a partner in the law firm of Locke
Purnell Rain Harrell (A Professional Corporation), a predecessor to Locke
Liddell & Sapp LLP.
Kelly D. Luttmer has served as vice president of Kronos Worldwide, CompX,
Contran, NL and Valhi since October 2004, tax director of Kronos Worldwide and
NL since 2003 and tax director of CompX, Valhi and Contran since 1998. Ms.
Luttmer has served in tax accounting positions with various companies related to
Valhi and Contran since 1989.
-5-
John A. St. Wrba has served as vice president of Kronos Worldwide since May
2004 and treasurer since 2003. He has also served as vice president and
treasurer of Valhi since February 2005, Contran since October 2004 and NL since
2003. He was NL's assistant treasurer from 2002 to 2003 and from prior to 1998
until 2000. From 2000 until 2002, he was assistant treasurer of Kaiser Aluminum
& Chemical Corporation, a leading producer of fabricated aluminum products.
Gregory M. Swalwell has served as chief financial officer of Kronos
Worldwide and NL since May 2004, vice president, finance of Kronos Worldwide and
NL since 2003 and vice president and controller of Valhi and Contran since prior
to 2000. Mr. Swalwell has served in accounting and financial positions with
various companies related to Valhi and Contran since 1988.
-6-
SECURITY OWNERSHIP
Ownership of Kronos Worldwide. The following table and footnotes set forth
as of the Record Date the beneficial ownership, as defined by regulations of the
SEC, of Common Stock held by each individual, entity or group known to Kronos
Worldwide to own beneficially more than 5% of the outstanding shares of Common
Stock, each director, each executive officer named in the summary compensation
table in this proxy statement (a "named executive officer") and all directors
and executive officers as a group. See footnote (4) below for information
concerning the relationships of certain individuals and entities that may be
deemed to own indirectly and beneficially more than 5% of the outstanding shares
of Common Stock. All information is taken from or based upon ownership filings
made by such individuals or entities with the SEC or upon information provided
by such individuals or entities.
Kronos Worldwide Common Stock
----------------------------------------------
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
- ---------------------------------------------------- ---------------------------- -----------------
Harold C. Simmons (3).............................. 4,255 (4)(5) *
Valhi, Inc. (3)................................ 27,840,953 (4)(5) 56.9%
NL Industries, Inc (3)......................... 17,550,532 (4)(5) 35.9%
TIMET Finance Management Company (3)........... 5,203 (4)(5) *
Annette C. Simmons (3)......................... 36,356 (4)(5) *
---------------
45,437,299 (4)(5) 92.8%
Keith R. Coogan.................................... -0- -0-
Cecil H. Moore, Jr................................. 512 (4) -0-
George E. Poston................................... 1,500 *
Glenn R. Simmons................................... 208 (4)(5) *
Dr. R. Gerald Turner............................... 1,036 (5) *
Steven L. Watson................................... 4,233 (4)(5) *
Dr. Ulfert Fiand................................... -0- -0-
H. Joseph Maas..................................... -0- -0-
Douglas C. Weaver.................................. -0- -0-
All directors and
executive officers
as a group (15 persons)........................... 45,444,788 (4)(5) 92.8%
- --------------------
* Less than 1%.
(1) Except as otherwise noted, the listed entities, individuals or group have
sole investment power and sole voting power as to all shares set forth
opposite their names. The number of shares and percentage of ownership for
each entity, individual or group assumes the receipt by such entity,
individual or group of shares that such entity, individual or group has the
right to receive within 60 days subsequent to the Record Date, if such
number of shares is determinable.
(2) The percentages are based on 48,946,049 shares of Common Stock outstanding
as of the Record Date.
(3) The business address of Valhi, NL and Harold C. and Annette C. Simmons is
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2697. The business address of TIMET Finance Management Company
("TFMC") is 300 Delaware Avenue, Suite 900, Wilmington, Delaware 19801.
(4) Valhi and TFMC are the direct holders of approximately 83.1% and 0.5% of
the outstanding shares of NL Common Stock, respectively. TIMET is the
direct holder of 100% of the outstanding shares of common stock of TFMC.
Tremont LLC ("Tremont"), Annette C. Simmons, The Combined Master Retirement
Trust (the "CMRT") and Valhi are the holders of approximately 39.5%, 14.3%,
12.0% and 2.4% of the outstanding shares of TIMET common stock, par value
$0.01 per share ("TIMET Common Stock"). Valhi is the sole member of
Tremont. The ownership of Ms. Simmons is based on the 1,600,000 shares of
TIMET's 6 3/4% Series A Convertible Preferred Stock, par value $0.01 per
share (the "TIMET Series A Preferred Stock"), that she directly owns, which
are convertible into 2,666,666 shares of TIMET Common Stock. The ownership
of Valhi includes 24,500 shares of TIMET Common Stock that Valhi has the
right to acquire upon conversion of 14,700 shares of TIMET Series A
Preferred Stock that Valhi directly holds. The percentage ownership of
TIMET Common Stock held by each of Ms. Simmons and Valhi assumes the full
conversion of only the shares of TIMET Series A Preferred Stock she or
Valhi owns, respectively.
-7-
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"), Contran,
the Harold Simmons Foundation, Inc. (the "Foundation"), the Contran
Deferred Compensation Trust No. 2 (the "CDCT No. 2") and the CMRT are the
direct holders of approximately 77.6%, 9.1%, 3.7%, 0.9%, 0.4% and 0.1%,
respectively, of the outstanding shares of Valhi Common Stock. National,
NOA, Inc. ("NOA") and Dixie Holding Company ("Dixie Holding") are the
direct holders of approximately 73.3%, 11.4% and 15.3%, respectively, of
the outstanding common stock of VGI. Contran and NOA are the direct holders
of approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the direct holder of 100%
of the outstanding common stock of Dixie Holding. Contran is the holder of
100% of the outstanding common stock of Dixie Rice and approximately 88.9%
of the outstanding common stock of Southwest.
Substantially all of Contran's outstanding voting stock is held by trusts
established for the benefit of certain children and grandchildren of Harold
C. Simmons (the "Trusts"), of which Mr. Simmons is the sole trustee, or
held by Mr. Simmons or persons or other entities related to Mr. Simmons. As
sole trustee of the Trusts, Mr. Simmons has the power to vote and direct
the disposition of the shares of Contran stock held by the Trusts. Mr.
Simmons, however, disclaims beneficial ownership of any Contran shares the
Trusts hold.
The Foundation directly holds approximately 0.9% 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.
The CDCT No. 2 directly holds approximately 0.4% of the outstanding shares
of Valhi Common Stock. U.S. Bank National Association serves as the trustee
of the CDCT No. 2. Contran established the CDCT No. 2 as an irrevocable
"rabbi trust" to assist Contran in meeting certain deferred compensation
obligations that it owes to Harold C. Simmons. If the CDCT No. 2 assets are
insufficient to satisfy such obligations, Contran must satisfy the balance
of such obligations. Pursuant to the terms of the CDCT No. 2, Contran
retains the power to vote the shares held by the CDCT No. 2, retains
dispositive power over such shares and may be deemed the indirect
beneficial owner of such shares.
The CMRT directly holds approximately 12.0% of the outstanding shares of
TIMET Common Stock and 0.1% of the outstanding shares of Valhi Common
Stock. Valhi established the CMRT to permit the collective investment by
master trusts that maintain 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, Steven L.
Watson, H. Joseph Maas, Douglas C. Weaver and certain other executive
officers of Kronos Worldwide are participants in one or more of the
employee benefit plans that invest through the CMRT. Each of such persons
disclaims beneficial ownership of any of the shares the CMRT holds, except
to the extent of his or her individual vested beneficial interest, if any,
in the assets the CMRT holds.
Harold C. Simmons is the chairman of the board and chief executive officer
of each of Kronos Worldwide and NL, vice chairman of the board of TIMET and
the chairman of the board of each of Tremont, Valhi, VGI, National, NOA,
Dixie Holding, Dixie Rice, Southwest and Contran.
-8-
By virtue of the holding of the offices, the stock ownership and his
services as trustee, all as described above, (a) Harold C. Simmons may be
deemed to control certain of such entities and (b) Mr. Simmons and certain
of such entities may be deemed to possess indirect beneficial ownership of
shares directly held by certain of such other entities. However, Mr.
Simmons disclaims beneficial ownership of the shares beneficially owned,
directly or indirectly, by any of such entities, except to the extent of
his vested beneficial interest, if any, in shares held by the CMRT and his
interest as a beneficiary of the CDCT No. 2. Mr. Harold Simmons disclaims
beneficial ownership of all shares of Common Stock that NL, Valhi or TFMC
directly holds.
All directors or executive officers of Kronos Worldwide who are also
directors or executive officers of NL, Valhi, TFMC or their parent
companies disclaim beneficial ownership of the shares of Common Stock that
NL, Valhi or TFMC directly hold.
Annette C. Simmons is the wife of Harold C. Simmons. She is the direct
owner of 35,976 shares of Common Stock. Mr. Simmons may be deemed to share
indirect beneficial ownership of such shares. Mr. Simmons disclaims all
such beneficial ownership.
The Annette C. Simmons Grandchildren's Trust, a trust of which Harold C.
Simmons and Annette C. Simmons are co-trustees and the beneficiaries of
which are the grandchildren of Annette C. Simmons, is the direct holder of
40,000 shares of Valhi Common Stock (the "Grandchildren's Trust"). Mr.
Simmons, as co-trustee of the Grandchildren's Trust, has the power to vote
and direct the disposition of the shares Valhi Common Stock the
Grandchildren's Trust directly holds. Mr. Simmons disclaims beneficial
ownership of any shares of Valhi Common Stock that the Grandchildren's
Trust holds.
NL and a subsidiary of NL directly hold 3,522,967 and 1,186,200 shares of
Valhi Common Stock, respectively. NL is a majority owned subsidiary of
Valhi. Pursuant to Delaware law, Valhi treats the shares of Valhi Common
Stock that NL and NL's subsidiary directly hold as treasury stock for
voting purposes, and for purposes of calculating the percentage ownership
of the outstanding shares of Valhi Common Stock as of the Record Date in
this proxy statement such shares are not deemed outstanding.
The business address of Tremont, VGI, National, NOA, Dixie Holding, the
Foundation, the CMRT and Contran is Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240-2697. The business address of Dixie Rice is
600 Pasquiere Street, Gueydan, Louisiana 70542. The business address of
Southwest is 402 Canal Street, Houma, Louisiana 70360. The business address
of TIMET is 1999 Broadway, Suite 4300, Denver, Colorado 80202.
(5) Includes (excludes) the following shares of Common Stock that such entity
or individual received or distributed, as applicable, on March 29, 2005 in
a dividend NL declared that was paid in the form of shares of Kronos
Worldwide Common Stock, reported without duplication:
Number of Shares of Common
Stock Received (Distributed)
in NL Stock Dividend Paid on
Name of Beneficial Owner March 29, 2005
---------------------------------------- -----------------------------
Harold C. Simmons....................... 145
Valhi, Inc.............................. 221,319
NL Industries, Inc...................... (266,229)
TIMET Finance Management Company........ 1,218
Annette C. Simmons...................... 380
Glenn R. Simmons........................ 32
R. Gerald Turner........................ 5
Steven L. Watson........................ 42
-9-
Kronos Worldwide understands that Contran and related entities may consider
acquiring or disposing of shares of Common Stock through open-market or
privately negotiated transactions, depending upon future developments,
including, but not limited to, the availability and alternative uses of funds,
the performance of Common Stock in the market, an assessment of the business of
and prospects for Kronos Worldwide, financial and stock market conditions and
other factors deemed relevant by such entities. Kronos Worldwide may similarly
consider acquisitions of shares of Common Stock and acquisitions or dispositions
of securities issued by related entities.
Ownership of Related Companies. Certain Kronos Worldwide directors and
executive officers own equity securities of certain Kronos Worldwide related
companies. The following table and footnotes set forth the beneficial ownership,
as of the Record Date, of the shares of NL and Valhi Common Stock held by each
director, each named executive officer and all directors and executive officers
as a group. All information is taken from or based upon ownership filings made
by such individuals or entities with the SEC or upon information provided by
such individuals or entities.
NL Valhi
Common Stock Common Stock
-------------------------------------- ------------------------------------
Amount and Amount and
Nature of Beneficial Percent of Nature of Beneficial Percent of
Name of Beneficial Owner Ownership (1) Class (1)(2) Ownership (1) Class (1)(3)
- ------------------------ --------------------- --------------- ------------------ -----------
Harold C. Simmons........... 30,800 (4)(5) * 3,383 (4) *
Valhi, Inc................ 40,350,931 (4) 83.1% n/a n/a
TIMET Finance Management
Company................. 222,100 (4) * -0- -0-
Valhi Group, Inc.......... -0- (4) -0- 92,739,554 (4) 77.6%
National City Lines, Inc.. -0- (4) -0- 10,891,009 (4) 9.1%
Contran Corporation....... -0- (4) -0- 4,864,300 (4)(6) 4.1%
Harold Simmons Foundation,
Inc..................... -0- (4) -0- 1,044,200 (4) *
The Combined Master
Retirement Trust........ -0- (4) -0- 115,000 (4) *
Annette C. Simmons........ 69,475 (4) * 43,400 (4) *
Annette C. Simmons
Grandchildren's Trust... -0- (4) -0- 40,000 (4) *
------------ -------------
40,673,306 83.8% 109,740,846 91.8%
Keith R. Coogan............. -0- -0- -0- -0-
Cecil H. Moore, Jr.......... -0- -0- -0- -0-
George E. Poston............ -0- -0- -0- -0-
Glenn R. Simmons............ 8,000 (4)(5) * 18,247 (4)(7) *
Dr. R. Gerald Turner........ 1,000 (5) * -0- -0-
Steven L. Watson............ 12,000 (4)(5) * 117,246 (4)(5) *
Dr. Ulfert Fiand............ -0- -0- -0- -0-
H. Joseph Maas.............. 1,000 (5) * -0- -0-
Douglas C. Weaver........... 6,800 (5) * -0- -0-
All directors and executive
officers of Kronos
Worldwide as a group (15
persons).................. 40,702,106 (4)(5) 83.8% 110,044,105 (4)(5)(6)(7) 91.9%
- --------------------
* Less than 1%.
-10-
(1) Except as otherwise noted, the listed entities, individuals or group have
sole investment power and sole voting power as to all shares set forth
opposite their names. The number of shares and percentage of ownership for
each individual, entity or group assumes the exercise by such individual,
entity or group (exclusive of others) of stock options that such
individual, entity or group may exercise within 60 days subsequent to the
Record Date.
(2) The percentages are based on 48,547,134 shares of NL Common Stock
outstanding as of the Record Date.
(3) The percentages are based on 119,535,878 shares of Valhi Common Stock
outstanding as of the Record Date. For purposes of calculating the
outstanding shares of Valhi Common Stock as of the Record Date, 3,522,967
and 1,186,200 shares of Valhi Common Stock held by NL and a subsidiary of
NL, respectively, are treated as treasury stock for voting purposes and
excluded from the amount of Valhi Common Stock outstanding.
(4) See footnote (4) to the "Ownership of Kronos Worldwide" table for a
description of certain relationships among the individuals, entities or
groups appearing in this table. All directors or executive officers of
Kronos Worldwide who are also directors or executive officers of Valhi,
TFMC, VGI, National, Contran, the Foundation or their parent companies
disclaim beneficial ownership of the shares of NL or Valhi Common Stock
that such entities directly hold. Based on the relationships described in
footnote (4) to the "Ownership of Kronos Worldwide" table, these share
amounts exclude certain shares that such individual, entity or group may be
deemed to indirectly and beneficially own and as to which each such
individual, entity or group disclaims beneficial ownership.
Harold C. Simmons disclaims beneficial ownership of any and all securities
that his wife, Annette C. Simmons, directly holds.
(5) The shares of NL Common Stock or Valhi Common Stock shown as beneficially
owned by such person or group include the following number of shares such
person or group has the right to acquire upon the exercise of stock options
granted pursuant to NL or Valhi stock option plans that such person or
group may exercise within 60 days subsequent to the Record Date:
Shares of NL Common Stock Shares of Valhi Common Stock
Issuable Upon the Exercise Issuable Upon the Exercise
of Stock Options of Stock Options
Name of Beneficial Owner On or Before May 27, 2005 On or Before May 27, 2005
------------------------------------------ ----------------------------- -----------------------------
Harold C. Simmons........................ 4,000 -0-
Glenn R. Simmons......................... 2,000 -0-
Steven L. Watson......................... 4,000 100,000
H. Joseph Maas........................... 1,000 -0-
Douglas C. Weaver........................ 6,800 -0-
All directors and executive officers as a
group (15 persons)..................... 17,800 266,600
(6) Includes 439,400 shares of Valhi Common Stock the CDCT No. 2 directly holds.
(7) The shares of Valhi Common Stock shown as beneficially owned by Glenn R.
Simmons include 800 shares his wife holds in her retirement account, with
respect to which shares he disclaims beneficial ownership.
-11-
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND OTHER INFORMATION
Compensation of Directors. In 2004, directors received an annual retainer
of $20,000, paid in quarterly installments, plus a fee of $1,000 per day for
attendance at meetings and at a daily rate ($125 per hour) for other services
rendered on behalf of the Board of Directors or its committees. For the first
two quarters of 2004, directors also received an annual retainer of $2,000, paid
in quarterly installments, for each committee on which they served. Starting
with the third quarter of 2004, the Board of Directors increased the director
fees paid to members of the audit committee. The increase resulted in the
chairman of the audit committee and any member of the committee who Kronos
Worldwide identified as an "audit committee financial expert" for purposes of
the annual proxy statement receiving an annual retainer of $10,000, paid in
quarterly installments (provided that if one person served in both capacities
only one such retainer was paid), and other members of the audit committee
receiving an annual retainer of $5,000, paid in quarterly installments. If any
director dies while serving on the Board of Directors, his or her designated
beneficiary or estate will be entitled to receive a death benefit equal to the
annual retainer then in effect. Kronos Worldwide reimburses its directors for
reasonable expenses incurred in attending meetings and in the performance of
other services rendered on behalf of the Board of Directors or its committees.
On the day of each annual stockholder meeting, each director receives a
grant of shares of Common Stock as determined by the following formula based on
the closing price of a share of Common Stock on the date of such meeting.
Range of Closing Price Per Shares of Common
Share on the Date of Grant Stock to Be Granted
-------------------------- -------------------
Under $5.00 2,000
$5.00 to $9.99 1,500
$10.00 to $20.00 1,000
Over $20.00 500
As a result of the $30.01 per share closing price of Common Stock on May 20,
2004, the date of the 2004 annual stockholder meeting, each director elected on
that date received a grant of 500 shares of Common Stock.
Intercorporate Services Agreements. Contran and certain of its
subsidiaries, including Kronos Worldwide, have entered into intercorporate
services agreements (collectively, the "ISAs") pursuant to which Contran, among
other things, provides the services of certain of the named executive officers
to certain of Contran's subsidiaries, including Kronos Worldwide and its
subsidiaries. For a discussion of these ISAs, see "Certain Relationships and
Transactions--Intercorporate Services Agreement."
-12-
Summary of Cash and Certain Other Compensation of Executive Officers. The
summary compensation table below provides information concerning annual and
long-term compensation paid or accrued by Kronos Worldwide and its subsidiaries
for services rendered to Kronos Worldwide and its subsidiaries during 2004, 2003
and 2002 by Kronos Worldwide's chief executive officer and four other executive
officers with the highest total salary and bonus, or charge to Kronos Worldwide
or its subsidiaries pursuant to an ISA between Kronos Worldwide and Contran (the
"Contran ISA"), in 2004.
SUMMARY COMPENSATION TABLE (1)
Annual Compensation (2)
Name and ------------------------------------- All Other
Principal Position Year Salary Bonus Compensation
- ----------------------------------------------- ------ ----------------- ----------------- -----------------
Harold C. Simmons (3).......................... 2004 $ 988,005 (3) $ -0- (3) $ -0-
Chairman of the Board and Chief Executive 2003 190,000 (3) -0- (3) -0-
Officer
Steven L. Watson (3)........................... 2004 363,905 (3) -0- (3) -0-
Vice Chairman of the Board
Dr. Ulfert Fiand............................... 2004 209,664 (4) 153,044 (4)(5) -0-
President, Manufacturing and Technology 2003 173,786 (4) 121,650 (4)(5) -0-
2002 128,827 (4) 89,388 (4)(5) -0-
H. Joseph Maas................................. 2004 223,000 162,800 (5) 20,531 (6)
President, Sales and Marketing
Douglas C. Weaver.............................. 2004 166,750 78,400 (5) 27,555 (6)
Senior Vice President, Development
- ----------------------
(1) For the periods presented for each named executive officer, no stock
options or shares of restricted stock were granted nor payouts made
pursuant to long-term incentive plans. Therefore, the columns for such
compensation have been omitted.
(2) Other than Dr. Fiand, no named executive officer received "other annual
compensation," as defined by SEC rules, from Kronos Worldwide or its
subsidiaries. For each of the three years presented, Dr. Fiand received an
annual automobile allowance that is less than the amount required to be
reported pursuant to SEC rules. Therefore, the column for other annual
compensation has been omitted.
(3) Messrs. Simmons and Watson are employees of Contran. The amounts shown in
the summary compensation table as salary for them represent the portion of
the fees Kronos Worldwide and subsidiaries paid pursuant to certain ISAs
with respect to the services they rendered to Kronos Worldwide and its
subsidiaries. During 2003, Mr. Simmons provided his services to Kronos
Worldwide pursuant to a Services Agreement between NL, Kronos Worldwide and
KII dated as of January 1, 1995 and amended as of April 1, 2002 (the "NL
ISA"). Other than Mr. Simmons, the charges for executive officers' services
under the NL ISA for 2003 to Kronos Worldwide were not specifically
identifiable to a particular executive officer or did not exceed $100,000
and were not allocable between Kronos Worldwide and KII. During 2004,
Messrs. Simmons and Watson provided their services to Kronos Worldwide
pursuant to the Contran ISA.
-13-
The components of salary shown in the summary compensation table for
Messrs. Simmons and Watson are provided below. The Contran ISA fee for 2004
included amounts allocated to KII under the Contran ISA. The amount shown
in the table as salary for each of Messrs. Simmons and Watson also includes
director compensation paid to each of them by Kronos Worldwide.
2003 2004
----------------------- -----------------------
Harold C. Simmons
Contran ISA Fee.............................. $ 190,000 (a) $ 950,000 (a)
Kronos Worldwide Cash Director Fees.......... -0- 23,000
Kronos Worldwide Director Stock.............. -0- 15,005
----------------- -----------------
$ 190,000 $ 988,005
================= =================
Steven L. Watson
Contran ISA Fee.............................. $ 325,900 (a)
Kronos Worldwide Cash Director Fees.......... 23,000
Kronos Worldwide Director Stock.............. 15,005
-----------------
$ 363,905
=================
(a) Mr. Simmons became an executive officer of Kronos Worldwide as of
August 6, 2003. Mr. Watson became an executive officer of Kronos
Worldwide as of October 8, 2004.
(4) Dr. Fiand receives his cash compensation in euros. Kronos Worldwide reports
these amounts in the summary compensation table above in U.S. dollars based
on an average exchange rate for each of 2004, 2003 and 2002 of $1.2347,
$1.1212 and $0.9360 per (euro)1.00, respectively.
(5) Represents amounts Kronos Worldwide paid pursuant to Kronos Worldwide's
share-in-performance plan. For a description of this plan, see "Executive
Compensation Report."
(6) As shown below, all other compensation for 2004 for Messrs Maas and Weaver
consisted of (i) matching contributions Kronos Worldwide made or accrued
pursuant to the savings feature of the NL savings plan, (ii) retirement
contributions Kronos Worldwide made or accrued pursuant to the NL savings
plan and (iii) life insurance premiums Kronos Worldwide paid.
NL Savings
NL Savings Plan Life
Plan Retirement Insurance
Named Executive Officer Year Match Contributions Premiums Total
------------------------------ ------ ---------- ------------- --------- ---------
H. Joseph Maas................ 2004 $ 7,432 $ 11,275 $ 1,824 $ 20,531
Douglas C. Weaver............. 2004 8,200 16,400 2,955 27,555
-14-
No Grants of Stock Options or Stock Appreciation Rights. Neither Kronos
Worldwide nor any of its parent or subsidiary corporations granted any stock
options or stock appreciation rights ("SARs") to the named executive officers
during 2004.
Stock Option Exercises and Holdings. The following table provides
information with respect to each of the named executive officers concerning the
aggregate amount the named executive officer realized in 2004 upon the exercise
of stock options for NL Common Stock and the value of unexercised stock options
for Valhi and NL Common Stock such officer held as of December 31, 2004. Neither
Kronos Worldwide nor any of its parent or subsidiary companies has granted any
SARs nor has Kronos Worldwide granted any stock options.
AGGREGATE STOCK OPTION EXERCISES IN 2004 AND
DECEMBER 31, 2004 OPTION VALUES
Number of Shares
Shares Underlying Value of Unexercised
Acquired Unexercised Options at In-the-Money Options
on December 31, 2004 (#) at December 31, 2004 (1)
Exercise Value --------------------------- ---------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------ -------- --------- ------------ -------------- ------------ --------------
Harold C. Simmons
NL Stock Options.... -0- $ -0- 6,000 -0- $ 86,829 $ -0-
Steven L. Watson
Valhi Stock Options. -0- -0- 100,000 -0- 815,000 -0-
NL Stock Options.... -0- -0- 4,000 -0- 54,254 -0-
------- -------- ---------- ---------- --------- ---------
-0- -0- 104,000 -0- 869,254 -0-
Dr. Ulfert Fiand
NL Stock Options.... 7,000 62,533 (2) 3,600 3,400 38,214 41,951
H. Joseph Maas
NL Stock Options.... 11,800 93,525 (2) 3,600 3,400 38,214 41,951
Douglas C. Weaver
NL Stock Options.... 14,400 127,852 (2) 5,400 2,200 76,682 26,869
- --------------------
(1) Each aggregate value is based on the difference between the exercise price
of the individual stock options and the closing sales price per share of
such underlying common stock on December 31, 2004. Such closing sales
prices were $16.09 per share for Valhi Common Stock and $22.10 per share
for NL Common Stock.
(2) The amount realized for each exercise is based on the difference between
the same-day sales price per share of the underlying NL Common Stock issued
upon exercise and the exercise price per share.
Pension Plans. The Retirement Program of NL Industries, Inc. for its U.S.
employees (the "Pension Plan") provides lifetime retirement benefits to eligible
employees. In 1996, NL approved the suspension of all future accruals under the
salaried component of the Pension Plan. The estimated accrued annual benefit
payable under the Pension Plan upon retirement at normal retirement age for
Messrs. Maas and Weaver is $26,778 and $32,527, respectively.
Dr. Fiand is eligible to receive a pension through KII's German operations
("Kronos Germany") through the Bayer Pensionskasse and the Supplemental Pension
Promise. All of KII's employees in Germany (including wage earners) who have
contributed for five years and are less than 55 years of age are covered by the
Bayer Pensionskasse. Each employee contributes 2% of eligible earnings excluding
bonus, up to the social security contribution ceiling (currently (euro)62,400)
and the Bayer Pensionskasse provides a benefit of 44% of such employee's
accumulated contributions (with a minimum benefit of approximately (euro)13 per
month). The Supplemental Pension Promise also covers all employees of Kronos
Germany who have completed ten years of service. Kronos Germany accrues 11.25%
of participants' eligible annual earnings excluding bonus in excess of the
social security contribution ceiling, up to a maximum of (euro)109,200. The
Supplemental Pension Promise provides an annual retirement benefit of 20% of all
accruals made by Kronos Germany. Benefits for both plans are payable upon
retirement and the attainment of ages specified in the plans. No amounts were
paid or distributed under these plans to Dr. Fiand in 2004. As of December 31,
2004, the estimated accrued annual benefit payable upon normal retirement at
normal retirement age for Dr. Fiand is (euro)27,588.
-15-
Chief Operations Management Consultant. Following his resignation as chief
executive officer of Kronos Worldwide in July 2003, Dr. Lawrence A. Wigdor
entered into a consultancy arrangement with Kronos Worldwide pursuant to which
Dr. Wigdor provides ongoing management services to Kronos Worldwide's titanium
dioxide operations. Dr. Wigdor received $461,000 on August 1, 2003 and monthly
payments of $84,000 beginning on August 1, 2003. On February 1, 2004, Dr. Wigdor
received a payment under the arrangement of $461,000 based on Kronos Worldwide
having achieved 2003 segment profit (as Kronos Worldwide defines that term
internally) of in excess of $130 million. For 2004, Dr. Wigdor received an
annual discretionary bonus of $1.0 million. For the term of the arrangement, Dr.
Wigdor will receive annual discretionary bonuses as determined by the chief
executive officer. Under the consultancy arrangement, as amended in February
2004, if Kronos Worldwide terminates the consultancy arrangement prior to
December 31, 2006, Dr. Wigdor will receive twelve months compensation and
medical and dental coverage through December 31, 2006 and a pro-rata portion of
any bonus for the year in which the termination occurs. The arrangement provides
Dr. Wigdor various other benefits, including, medical and dental benefits and
office and secretarial support at Kronos Worldwide's New Jersey office.
In January 2004, NL paid Dr. Wigdor approximately $408,500 to repurchase
and cancel previously granted stock options he held that were exercisable at
varying exercise prices for an aggregate of 63,800 shares of NL Common Stock.
The purchase price was determined based on a value of the underlying shares of
NL Common Stock of $12.70 per share.
In addition, during 2004, Dr. Wigdor exercised previously granted stock
options for 148,500 shares of NL Common Stock and realized an aggregate value
from the sale of such shares of $721,732. The amount he realized upon the
exercise of stock options is based on the difference between his sales prices
per share of NL Common Stock on the day of each exercise and the exercise price
per share. At December 31, 2004, Dr. Wigdor held exercisable stock options to
purchase 41,300 shares of NL Common Stock and unexercisable stock options to
purchase 60,000 shares of NL Common Stock. Based on the difference between the
exercise price of his individual stock options and the $22.10 per share closing
sales price of NL Common Stock on December 31, 2004, the value of his
exercisable and unexercisable stock options to purchase NL common stock was
$382,636 and $754,100, respectively.
Following his resignation in July 2003, Dr. Wigdor elected to receive his
retirement benefits under the Pension Plan at an early retirement age. He began
receiving a monthly payment amount of $2,428 in August 2003, which will continue
for the remainder of his life.
During 2004, Dr. Wigdor's sister-in-law was employed by Kronos Worldwide
and was paid $43,300 and received customary employee benefits, including medical
insurance. She continues to be employed by Kronos Worldwide. Additionally,
during 2004, Kronos Worldwide employed Dr. Wigdor's son and paid him $74,550.
-16-
EQUITY COMPENSATION PLAN INFORMATION
The following table provides summary information as of December 31, 2004
with respect to equity compensation plans under which Kronos Worldwide's equity
securities may be issued to employees or nonemployees (such as directors,
consultants, advisers, vendors, customers, suppliers and lenders) in exchange
for goods or services.
Column (A) Column (B) Column (C)
-------------------------- ------------------------- -------------------------
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to be Weighted-Average Exercise Equity Compensation Plans
Issued Upon Exercise of Price of Outstanding (Excluding Securities
Outstanding Options, Options, Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (A))
- --------------------------- -------------------------- ------------------------- -------------------------
Equity compensation plans
approved by security
holders.................... -0- $ -0- 147,000
Equity compensation plans
not approved by security
holders.................... -0- -0- -0-
Total...................... -0- -0- 147,000
CORPORATE GOVERNANCE DOCUMENTS
Code of Business Conduct and Ethics. Kronos Worldwide has adopted a code of
business conduct and ethics that applies to all of Kronos Worldwide's directors,
officers and employees, including Kronos Worldwide's principal executive
officer, principal financial officer, principal accounting officer and
controller. Only the Board of Directors may amend the code. Only Kronos
Worldwide's audit committee or other committee of the Board of Directors with
specific delegated authority may grant a waiver of the code. Kronos Worldwide
will disclose amendments to, or waivers of, the code as required by law and the
applicable rules of the NYSE.
Corporate Governance Guidelines. Kronos Worldwide has adopted corporate
governance guidelines to assist the Board of Directors in exercising its
responsibilities. Among other things, the corporate governance guidelines
provide for director qualifications, independence standards and
responsibilities, approval procedures for ISAs and that the audit committee
chairman preside at all meetings of the independent directors.
Audit Committee Charter. Kronos Worldwide has adopted an audit committee
charter under which the audit committee operates. Among other things, the audit
committee charter provides the purpose, authority, resources and
responsibilities of the committee.
A copy of each of these three documents, among others, is available on
Kronos Worldwide's website at www.kronostio2.com under the corporate governance
section. In addition, any person may obtain a copy of these three documents
without charge, by sending a written request to the attention of Kronos
Worldwide's corporate secretary at Kronos Worldwide, Inc., Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Kronos Worldwide's executive officers, directors and
persons who own more than 10% of a registered class of Kronos Worldwide's equity
securities to file reports of ownership with the SEC, the NYSE and Kronos
Worldwide. Based solely on the review of the copies of such forms and
representations by certain reporting persons, Kronos Worldwide believes that for
2004 its executive officers, directors and 10% stockholders complied with all
applicable filing requirements under section 16(a), except that Harold C.
Simmons filed a Form 4 on December 21, 2004 that reported two transactions by
his wife on March 2, 2004.
-17-
EXECUTIVE COMPENSATION REPORT
During 2004, Kronos Worldwide's independent directors and the MD&C
Committee administered matters regarding the compensation of Kronos Worldwide's
executive officers.
Contran ISA
During 2004, Kronos Worldwide paid certain fees to Contran for services
provided pursuant to the Contran ISA, including the services of the following
executive officers of Kronos Worldwide:
Name Positions with Kronos Worldwide
- ----------------------- -----------------------------------------------------
Harold C. Simmons Chairman of the Board and Chief Executive Officer
Steven L. Watson Vice Chairman of the Board
James W. Brown Vice President and Controller
Robert D. Graham Vice President, General Counsel and Secretary
Kelly D. Luttmer Vice President and Tax Director
John A. St. Wrba Vice President and Treasurer
Gregory M. Swalwell Vice President, Finance and Chief Financial Officer
Contran annually determines the aggregate fee to charge Kronos Worldwide
and its subsidiaries based on (i) an estimate of the amount of time each Contran
employee that performs services for Kronos Worldwide and its subsidiaries will
spend on such services over the year and (ii) Contran's cost related to such
employee, which includes the employee's base salary, incentive compensation and
an overhead component that takes into account other employment costs, including
medical benefits, unemployment and disability insurance and pension costs and
other costs of providing an office, equipment and supplies related to the
provision of such services. The portion of the annual charge Kronos Worldwide
pays under the Contran ISA for the services of any particular individual is
capped at $1.0 million to enhance Kronos Worldwide's ability to deduct such
charge for federal income tax purposes. The amount of the fee Kronos Worldwide
paid in 2004 under the Contran ISA for a person who provided services to Kronos
Worldwide or its subsidiaries represents, in management's view, the reasonable
equivalent of "compensation" for such services. It is also management's view
that the proposed aggregate charge to Kronos Worldwide under the Contran ISA is
fair to Kronos Worldwide and its stockholders. See "Certain Relationships and
Transactions--Intercorporate Services Agreement" for the aggregate amount Kronos
Worldwide paid to Contran in 2004 under the Contran ISA. For each named
executive officer that was a Contran employee in 2004, the portion of the annual
charge Kronos Worldwide paid in 2004 to Contran under the Contran ISA
attributable to the services of such executive officer is set forth under
footnote (3) to the summary compensation table in this proxy statement. The
amount charged under the Contran ISA is not dependent upon Kronos Worldwide's
financial performance.
Based upon the independent directors' review of Contran's ISA allocation
process and documentation as to how Contran determines the necessary personnel,
the estimated number of full time employees that are required to provide
services and the cost of such services under the Contran ISA and their related
discussions with management, the independent directors agreed that such
aggregate 2004 charge from Contran under the Contran ISA was fair and reasonable
to Kronos Worldwide and its stockholders. In making such determination, the
independent directors relied on their collective business experience and
judgment.
Other Executive Officers
In 2004, the MD&C Committee administered certain matters regarding the
compensation of Ulfert Fiand, H. Joseph Maas and Douglas C. Weaver, executive
officers and employees of Kronos Worldwide or one of its subsidiaries. For 2004,
Kronos Worldwide's cash compensation for executive officers generally consisted
of two primary components: base salary and annual operating earnings bonus
awards provided by Kronos Worldwide's Share-in-Performance Program.
-18-
Base Salaries. Kronos Worldwide's management establishes base salaries for
executive officers employed by Kronos Worldwide or its subsidiaries on a
position-by-position basis by conducting annual internal reviews of salary
levels in an attempt to rank salary and job value to each position. The MD&C
Committee reviews changes in salaries, including those for Messrs. Fiand, Maas
and Weaver. In 2004, the MD&C Committee reviewed an increase in base salaries
for Kronos Worldwide's employees, including Messrs. Fiand, Maas and Weaver, by
the expected inflation rate in the applicable country for the employee. The
aggregate average percentage increase for 2004 in base salary was 2.0%.
Bonuses. Operating earnings bonus awards under Kronos Worldwide's
Share-in-Performance Plan constitute a significant portion of the potential
annual cash compensation for Messrs. Fiand, Maas and Weaver. Based on the
business plan for the year and management's recommendation, in February 2004,
the MD&C Committee sets Kronos Worldwide's year-end operating earnings goals at
three levels: a threshold level, which is the minimum operating earnings level
for any award to be made under the Share-in-Performance Plan (the "Minimum
Level"), a target level (the "Target Level"), and a maximum level (the "Maximum
Level"). The chief executive officer, with the assistance of the Company's chief
operating management consultant and chief financial officer, selected the
participants in the Share-in Performance Plan and determined the bonus awards
for each participant that would be paid upon Kronos Worldwide's achievement of
the operating earnings target at each level. An executive officer's cash
compensation is designed to result in below competitive compensation levels if
the Minimum Level is not achieved.
Pursuant to the Share-in-Performance Plan, if operating earnings fall below
the Minimum Level, no operating earnings bonus award is paid. For 2004, if
Kronos Worldwide achieved operating earnings at 85% or higher of the Target
Level but did not achieve the Target Level, a participant would receive a
reduced Target Level annual operating earnings bonus award, reduced by the pro
rata amount by which the achieved operating earnings was less than the Target
Level. As a result of Kronos Worldwide achieving 2004 operating earnings at the
Target Level, Messrs. Fiand, Maas and Weaver received the operating earnings
bonus awards set forth next to their name for 2004 in the bonus column of the
summary compensation table in this proxy statement.
Common Stock Based Compensation. In 2004, the MD&C Committee administered
matters regarding the Common Stock based compensation of Kronos Worldwide's
executive officers. In 2004, however, management did not recommend any Common
Stock based compensation and the MD&C Committee did not grant any such
compensation to any executive officers other than annual stock grants to Kronos
Worldwide's directors, including the chief executive officer and the vice
chairman of the board, for their services as directors. The MD&C Committee does
not currently anticipate granting Common Stock based compensation to anyone in
2005 other than these annual grants of stock to directors. See "Compensation of
Directors and Executive Officers and Other Information--Compensation of
Directors."
Deductibility of Compensation
Section 162(m) of the Code generally disallows a tax deduction to public
companies for non-performance based compensation over $1.0 million paid to the
company's chief executive officer and four other most highly compensated
executive officers. It is Kronos Worldwide's general policy to structure the
performance-based portion of the compensation of its executive officers in a
manner that enhances Kronos Worldwide's ability to deduct fully such
compensation.
The following individuals, in the capacities indicated, hereby submit the
foregoing report.
R. Gerald Turner George E. Poston
Chairman of the MD&C Committee and Member of the MD&C Committee and
Independent Director Independent Director
Cecil H. Moore, Jr.
Independent Director
-19-
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Relationships with Related Parties. As set forth under "Security
Ownership," Harold C. Simmons, through Contran, may be deemed to control Kronos
Worldwide. Kronos Worldwide and other entities that may be deemed to be
controlled by or affiliated with Mr. Simmons sometimes engage in (a)
intercorporate transactions such as guarantees, management and expense sharing
arrangements, shared fee arrangements, tax sharing agreements, joint ventures,
partnerships, loans, options, advances of funds on open account and sales,
leases and exchanges of assets, including securities issued by both related and
unrelated parties and (b) common investment and acquisition strategies, business
combinations, reorganizations, recapitalizations, securities repurchases and
purchases and sales (and other acquisitions and dispositions) of subsidiaries,
divisions or other business units, which transactions have involved both related
and unrelated parties and have included transactions that resulted in the
acquisition by one related party of an equity interest in another related party.
Kronos Worldwide periodically considers, reviews and evaluates and understands
that Contran and related entities periodically consider, review and evaluate
such transactions. Depending upon the business, tax and other objectives then
relevant and restrictions under indentures and other agreements, it is possible
that Kronos Worldwide might be a party to one or more of such transactions in
the future. In connection with these activities Kronos Worldwide may consider
issuing additional equity securities or incurring additional indebtedness.
Kronos Worldwide's acquisition activities have in the past and may in the future
include participation in acquisition or restructuring activities conducted by
other companies that may be deemed to be controlled by Mr. Simmons. It is the
policy of Kronos Worldwide to engage in transactions with related parties on
terms, in the opinion of Kronos Worldwide, no less favorable to Kronos Worldwide
than could be obtained from unrelated parties.
Certain directors or executive officers of Contran, CompX, Keystone, NL,
TIMET or Valhi also serve as directors or executive officers of Kronos
Worldwide. Such 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 adverse interests. No specific
procedures are in place that govern the treatment of transactions among Kronos
Worldwide and its related entities, although such entities may implement
specific procedures as appropriate for particular transactions. In addition,
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 owe fiduciary duties of good faith and fair
dealing to all stockholders of the companies for which they serve.
Intercorporate Services Agreements. Under the ISAs, employees of one
company will provide certain services, including executive officer services, to
the other company on a fee basis. The services rendered under the ISAs may
include executive, management, financial, internal audit, accounting, tax,
legal, insurance, risk management, treasury, aviation, human resources,
technical, consulting, administrative, office, occupancy and other services as
required from time to time in the ordinary course of the recipient's business.
The fees paid pursuant to the ISAs are generally based upon an estimate of the
time devoted by employees of the provider of the services to the affairs of the
recipient and the employer's cost related to such employees, which includes the
employees' cash compensation and an overhead component that takes into account
other employment costs of the employees. Each of the ISAs in their current form
extends on a quarter-to-quarter basis, generally subject to the termination by
either party pursuant to a written notice delivered 30 days prior to the start
of the next quarter. Because of the large number of companies affiliated with
Contran and Kronos Worldwide, Kronos Worldwide believes it benefits from cost
savings and economies of scale gained by not having certain management,
financial and administrative staffs duplicated at each entity, thus allowing
certain individuals to provide services to multiple companies but only be
compensated by one entity. With respect to a publicly held company that is a
party to an ISA, the ISA and the related aggregate annual charge is reviewed and
approved by the independent directors of the company.
Effective January 1, 2004, Kronos Worldwide entered into the Contran ISA.
Under the Contran ISA, Kronos Worldwide paid fees of approximately $4.4 million
for services provided in 2004. In 2005, Kronos Worldwide anticipates paying
Contran approximately $5.7 million for services to be provided under the Contran
ISA. Kronos Worldwide also pays director fees and expenses directly to Messrs.
Glenn and Harold Simmons and Watson for their services as Kronos Worldwide
directors.
-20-
Loans between Related Parties. On the December 8, 2003, immediately prior
to NL's distribution of 48.8% of the outstanding Common Stock, Kronos Worldwide
distributed a $200 million dividend to NL in the form of a long-term note
payable. The $200 million long-term note payable to NL was unsecured and bore
interest at 9% per annum, with interest payable quarterly and all principal due
in 2010. On September 24, 2004, NL completed the acquisition of 68.4% of the
outstanding shares of CompX class A and B common stock previously held by Valhi
and Valcor, Inc., a wholly owned subsidiary of Valhi ("Valcor"). NL paid the
purchase price for these shares by transferring to Valhi and Valcor an aggregate
$168.6 million of the $200 million long-term note receivable from Kronos
Worldwide. In October 2004, Valcor distributed its note receivable from Kronos
Worldwide to Valhi, and subsequently, Kronos Worldwide prepaid $100.0 million of
the consolidated note payable to Valhi principally using available cash on hand.
In December 2004, Kronos Worldwide prepaid the remaining balances on the notes
due Valhi and NL that were originally represented by the $200 million long-term
note and the related notes were cancelled.
From time to time, other loans and advances are made between Kronos
Worldwide and various related parties pursuant to term and demand notes. These
loans and advances are entered into principally for cash management purposes.
When Kronos Worldwide loans funds to related parties, the lender is generally
able to earn a higher rate of return on the loan than the lender would earn if
the funds were invested in other instruments. While certain of such loans may be
of a lesser credit quality than cash equivalent instruments otherwise available
to Kronos Worldwide, Kronos Worldwide believes that it has evaluated the credit
risks involved, and that those risks are reasonable and reflected in the terms
of the applicable loans. When Kronos Worldwide borrows from related parties, it
is generally able to pay a lower rate of interest than it would pay if it
borrowed from other parties.
Interest income on all loans to unconsolidated related parties was nil in
2004. Interest expense on all loans from unconsolidated related parties was
$15.2 million in 2004.
Short-Swing Trading Profits. From December 2004 through January 2005, NL
sold certain shares of Common Stock in the open-market. In the six months prior
to such sales, Valhi had purchased shares of Common Stock in the open-market.
Pursuant to section 16(b) of the Exchange Act, certain of such sales and
purchases might be deemed to be matched for purposes of computing short-swing
profits. As a result, Valhi made several voluntary payments to Kronos Worldwide
concurrently with NL's sales transactions aggregating approximately $600,000,
which amount represents the maximum amount of any possible short-swing profits
resulting from these transactions.
Insurance Matters. Contran and Kronos Worldwide participate in a combined
risk management program. Pursuant to the program, Contran and certain of its
subsidiaries and affiliates, including Kronos Worldwide and certain of its
subsidiaries and affiliates, purchase certain of their insurance policies as a
group, with the costs of the jointly owned policies being apportioned among the
participating companies. Tall Pines Insurance Company, including Valmont
Insurance Company that merged into Tall Pines in December 2004 ("Tall Pines"),
and EWI RE, Inc. ("EWI") provide for or broker these insurance policies. Tall
Pines is a captive insurance company wholly owned by Valhi, and EWI is a
reinsurance brokerage and risk management firm wholly owned by NL. A son-in-law
of Harold C. Simmons serves as EWI's chairman of the board and chief executive
officer and is compensated as an employee of EWI. Consistent with insurance
industry practices, Tall Pines and EWI receive commissions from insurance and
reinsurance underwriters for the policies that they provide or broker.
With respect to certain of such jointly owned insurance policies, it is
possible that unusually large losses incurred by one or more insureds during a
given policy period could leave the other participating companies without
adequate coverage under that policy for the balance of the policy period. As a
result, Contran and certain of its subsidiaries or affiliates, including Kronos
Worldwide, have entered into a loss sharing agreement under which any uninsured
loss is shared by those entities who have submitted claims under the relevant
policy. Kronos Worldwide believes the benefits in the form of reduced premiums
and broader coverage associated with the group coverage for such policies
justify the risks associated with the potential for any uninsured loss.
During 2004, Contran and its related parties paid premiums of approximately
$15.1 million for policies Tall Pines provided or EWI brokered, including
approximately $8.1 million paid by Kronos Worldwide and Louisiana Pigment
Company, L.P., a partnership of which subsidiaries of Kronos Worldwide and
Huntsman LLC each own 50% ("LPC"). These amounts principally included payments
for reinsurance and insurance premiums paid to unrelated third parties, but also
included commissions paid to Tall Pines and EWI. In Kronos Worldwide's opinion,
the amounts that Kronos Worldwide and LPC paid for these insurance policies and
the allocation among Kronos Worldwide and its affiliates of relative insurance
premiums are reasonable and at least as favorable to those they could have
obtained through unrelated insurance companies or brokers. Kronos Worldwide
expects that these relationships with Tall Pines and EWI will continue in 2005.
-21-
Tax Matters. Prior to December 8, 2003, Kronos Worldwide and its qualifying
subsidiaries were members of NL's consolidated U.S. federal income tax group
(the "NL Tax Group"). As a member of the NL Tax Group, Kronos Worldwide was a
party to a tax sharing agreement (the "NL Tax Agreement"). The NL Tax Group,
including Kronos Worldwide, was included in the consolidated U.S. federal tax
return of Contran (the "Contran Tax Group"). As a member of the Contran Tax
Group, NL is a party to a separate tax sharing agreement (the "Contran Tax
Agreement"). The Contran Tax Agreement provides that NL and its qualifying
subsidiaries, including Kronos Worldwide, compute provisions for U.S. income
taxes on a separate-company basis using tax elections made by Contran. Pursuant
to the NL Tax Agreement and using tax elections made by Contran, Kronos
Worldwide makes payments or receives payments in amounts it would have paid to
or received from the U.S. Internal Revenue Service had it not been a member of
the NL Tax Group but instead had been a separate taxpayer. Refunds are generally
limited to amounts previously paid under the NL Tax Agreement.
Effective December 8, 2003, Kronos Worldwide and its qualifying
subsidiaries ceased being members of the NL Tax Group, but Kronos Worldwide and
its qualifying subsidiaries remained as members of the Contran Tax Group. Kronos
Worldwide entered into a new tax sharing agreement with Valhi and Contran, which
contains similar terms as the NL Tax Agreement (the "Valhi Tax Agreement").
Kronos Worldwide is also a part of consolidated tax returns filed by
Contran in certain United States state jurisdictions. For such consolidated
state tax returns, intercompany allocations of state tax provisions are computed
on a separate company basis using tax elections made by Contran. As a result,
Kronos Worldwide makes payments or receives payments in the amounts that would
have been paid to or received from the respective state tax authority had Kronos
Worldwide not been a part of the consolidated state tax return.
Under certain circumstances, tax regulations could require Contran to treat
items differently than Kronos Worldwide would have treated them on a stand alone
basis. Pursuant to the NL Tax Agreement and consolidated state tax returns,
Kronos Worldwide received approximately $1.2 million from NL in 2004. Pursuant
to the Valhi Tax Agreement, Kronos Worldwide paid approximately $0.3 million to
Valhi in 2004.
-22-
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on Common Stock against the cumulative total
return of the S&P 500 Index and the S&P 500 Diversified Chemicals Index for the
period commencing December 8, 2003 (the initial date the Common Stock traded
publicly) and ending December 31, 2004. The graph shows the value at December 31
of each year assuming an original investment of $100 and the reinvestment of
dividends.
Comparison of Cumulative Return among Kronos Worldwide, Inc. Common Stock,
the S&P 500 Index and the S&P 500 Diversified Chemicals Index
[PERFORMANCE GRAPH GOES HERE]
December 8, December 31, December 31,
2003 2003 2004
----------- ----------- -----------
Kronos Worldwide, Inc......................... $100 $129 $243
S&P 500 Index................................. 100 104 115
S&P 500 Diversified Chemicals Index........... 100 105 122
-23-
AUDIT COMMITTEE REPORT
The audit committee of the Board of Directors is comprised of four
directors and operates under a written charter adopted by the Board of
Directors. All members of the audit committee meet the independence standards
established by the Board of Directors and the NYSE and promulgated by the SEC
under the Sarbanes-Oxley Act of 2002. The audit committee charter is available
on Kronos Worldwide's website at www.kronostio2.com under the corporate
governance section.
Kronos Worldwide's management is responsible for, among other things,
preparing its consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America ("GAAP"),
establishing and maintaining internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f)) and evaluating the effectiveness of such
internal control over financial reporting. The independent auditor is
responsible for auditing Kronos Worldwide's consolidated financial statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States) and for expressing an opinion on the conformity of the financial
statements with GAAP. The independent auditor is also responsible for auditing
Kronos Worldwide's internal control over financial reporting in accordance with
such standards and for expressing an opinion on (i) management's assessment of
the effectiveness of its internal control over financial reporting and (ii) the
effectiveness of its internal control over financial reporting. The audit
committee assists the Board of Directors in fulfilling its responsibility to
oversee management's implementation of Kronos Worldwide's financial reporting
process. In its oversight role, the audit committee reviewed and discussed the
audited financial statements with management and with PricewaterhouseCoopers LLP
("PwC"), Kronos Worldwide's independent auditor for 2004. The audit committee
also reviewed and discussed internal control over financial reporting with
management and with PwC.
The audit committee met with PwC and discussed any issues deemed
significant by the independent auditor, including the required matters to be
discussed by Statement of Auditing Standards No. 61, Communication with Audit
Committee, as amended. PwC has provided to the audit committee written
disclosures and the letter required by Independence Standards Board No. 1,
Independence Discussions with Audit Committees, and the audit committee
discussed with PwC that firm's independence. The audit committee also concluded
that PwC's provision of non-audit services to Kronos Worldwide and its
affiliates is compatible with PwC's independence.
Based upon the foregoing considerations, the audit committee recommended to
the Board of Directors that Kronos Worldwide's audited financial statements be
included in its Annual Report on Form 10-K for 2004.
Members of the audit committee of the Board of Directors respectfully
submit the foregoing report.
Cecil H. Moore, Jr. George E. Poston
Chairman of the Audit Committee Member of the Audit Committee
Keith R. Coogan Dr. R. Gerald Turner
Member of the Audit Committee Member of the Audit Committee
-24-
INDEPENDENT AUDITOR MATTERS
Independent Auditor. PwC served as Kronos Worldwide's independent auditor
for the year ended December 31, 2004. Kronos Worldwide's audit committee has
appointed PwC to review Kronos Worldwide's quarterly unaudited consolidated
financial statements to be included in its Quarterly Reports on Form 10-Q for
the first three quarters of 2005. Kronos Worldwide expects PwC will be
considered for appointment to audit Kronos Worldwide's annual consolidated
financial statements and internal control over financial reporting for the year
ending December 31, 2005. Representatives of PwC are not expected to attend the
Meeting.
Fees Paid to PwC. The following table shows the aggregate fees PwC has
billed or is expected to bill to Kronos Worldwide and its subsidiaries for
services rendered for 2003 and 2004.
Type of Fees 2003 2004
------------------------------------- ------------ ------------
Audit Fees (1)....................... $ 891,709 $ 2,571,259
Audit-Related Fees (2)............... 73,773 20,236
Tax Fees (3)......................... 124,873 51,735
All Other Fees....................... -0- -0-
------------ ------------
Total................................ $ 1,090,355 $ 2,643,230
============ ============
- --------------------
(1) Fees for the following services:
(a) audits of consolidated year-end financial statements for each year and
audit of internal control over financial reporting for 2004;
(b) reviews of the unaudited quarterly financial statements appearing in
Forms 10-Q for each of the first three quarters of each year;
(c) consents and assistance with registration statements filed with the
SEC; (d) normally provided statutory or regulatory filings or
engagements for each year; and
(e) the estimated out-of-pocket costs PwC incurred in providing all of
such services for which Kronos Worldwide reimburses PwC.
(2) Fees for assurance and related services reasonably related to the audit or
review of Kronos Worldwide's financial statements for each year. These
services included employee benefit plan audits, accounting consultations
and attest services concerning financial accounting and reporting standards
and advice concerning internal controls.
(3) Permitted fees for tax compliance, tax advice and tax planning services.
Preapproval Policies and Procedures. On February 17, 2005, the audit
committee adopted an amended and restated preapproval policy, a copy of which is
attached as Appendix A to this proxy statement, with respect to preapproving
engagements of PwC to perform audit or nonaudit services on behalf of Kronos
Worldwide or any of its subsidiaries. As of May 6, 2003, the NL audit committee
became responsible for preapproving every engagement of PwC to perform audit or
nonaudit services on behalf of Kronos Worldwide or any of its subsidiaries. For
2004, the Kronos Worldwide audit committee became responsible for approving such
services. From May 6, 2003 to December 31, 2003, the NL audit committee
preapproved the engagement of PwC for all such services. For 2004, the Kronos
Worldwide audit committee preapproved the engagement of PwC for all such
services.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Meeting. If any other matters properly come before the
Meeting, the persons designated as agents in the enclosed proxy card or voting
instruction form will vote on such matters in accordance with their reasonable
judgment.
-25-
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2006 ANNUAL MEETING
Stockholders may submit proposals on matters appropriate for stockholder
action at Kronos Worldwide's annual stockholder meetings, consistent with rules
adopted by the SEC. Kronos Worldwide must receive such proposals not later than
December 19, 2005 to be considered for inclusion in the proxy statement and form
of proxy card relating to the Annual Meeting of Stockholders in 2006. Kronos
Worldwide's bylaws require that the proposal must set forth a brief description
of the proposal, the name and address of the proposing stockholder as they
appear on Kronos Worldwide's books, the number of shares of Common Stock the
stockholder holds and any material interest the stockholder has in the proposal.
The Board of Directors will consider the director nominee recommendations
of Kronos Worldwide stockholders. Kronos Worldwide's bylaws require that a
nomination set forth the name and address of the nominating stockholder, a
representation that the stockholder will be a stockholder of record entitled to
vote at the annual stockholder meeting and intends to appear in person or by
proxy at the meeting to nominate the nominee, a description of all arrangements
or understandings between the stockholder and the nominee (or other persons
pursuant to which the nomination is to be made), such other information
regarding the nominee as would be required to be included in a proxy statement
filed pursuant to the proxy rules of the SEC and the consent of the nominee to
serve as a Kronos Worldwide director if elected.
The Board of Directors has no specific minimum qualifications for director
candidates. The Board of Directors will consider a potential director nominee's
ability to satisfy the need, if any, for any required expertise on the Board of
Directors or one of its committees. Historically, Kronos Worldwide's management
has recommended director nominees to the Board of Directors. Because under the
NYSE listing standards Kronos Worldwide may be deemed to be a controlled
company, the Board of Directors believes that additional policies or procedures
with regard to the consideration of director candidates recommended by its
stockholders are not appropriate.
For proposals or director nominations to be brought at the 2006 Annual
Meeting of Stockholders but not included in the proxy statement for such
meeting, Kronos Worldwide's bylaws require that the proposal or nomination must
be delivered or mailed to the principal executive offices of Kronos Worldwide in
most cases no later than March 4, 2006. Proposals and nominations should be
addressed to: Corporate Secretary, Kronos Worldwide, Inc., Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders who wish to communicate with the Board of Directors may do so
through the following procedures. Stockholder communications not involving
complaints or concerns regarding accounting, internal accounting controls and
auditing matters related to Kronos Worldwide ("Accounting Complaints or
Concerns") may be sent to the attention of Kronos Worldwide's corporate
secretary at Kronos Worldwide, Inc., Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240-2697. Stockholder communications that relate to
matters that are within the scope of the responsibilities of the Board of
Directors and its committees, or summaries of such communications, will be
forwarded to the chairman of the audit committee.
Accounting Complaints or Concerns, which may be made anonymously, should be
sent to the attention of Kronos Worldwide's general counsel with a copy to
Kronos Worldwide's chief financial officer at the same address as the corporate
secretary. Accounting Complaints or Concerns will be forwarded to the chairman
of the audit committee. Kronos Worldwide will keep Accounting Complaints or
Concerns confidential and anonymous, to the extent feasible, subject to
applicable law. Information contained in an Accounting Complaint or Concern may
be summarized, abstracted and aggregated for purposes of analysis and
investigation.
2004 ANNUAL REPORT ON FORM 10-K
A copy of Kronos Worldwide's Annual Report on Form 10-K for the fiscal year
ended December 31, 2004, as filed with the SEC, is included as part of the
annual report mailed to Kronos Worldwide's stockholders with this proxy
statement. This Annual Report on Form 10-K may also be accessed on Kronos
Worldwide's website at www.kronostio2.com.
-26-
ADDITIONAL COPIES
Pursuant to an SEC rule concerning the delivery of annual reports and proxy
statements, a single set of these documents may be sent to any household at
which two or more stockholders reside if they appear to be members of the same
family. Each stockholder continues to receive a separate proxy card. This
procedure, referred to as householding, reduces the volume of duplicate
information stockholders receive and reduces mailing and printing expenses. A
number of brokerage firms have instituted householding. Certain beneficial
stockholders who share a single address may have received a notice that only one
annual report and proxy statement would be sent to that address unless a
stockholder at that address gave contrary instructions. If, at any time, a
stockholder who holds shares through a broker no longer wishes to participate in
householding and would prefer to receive a separate proxy statement and related
materials, or if such stockholder currently receives multiple copies of the
proxy statement and related materials at his or her address and would like to
request householding of Kronos Worldwide communications, the stockholder should
notify his or her broker. Additionally, Kronos Worldwide will promptly deliver a
separate copy of Kronos Worldwide's 2004 annual report or this proxy statement
to any stockholder at a shared address to which a single copy of such documents
was delivered, upon the written or oral request of the stockholder.
To obtain copies of Kronos Worldwide's 2004 annual report or this proxy
statement without charge, please mail your request to the attention of
Robert D.
Graham, Corporate Secretary, at Kronos Worldwide, Inc., Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697, or call him at
972.233.1700.
KRONOS WORLDWIDE, INC.
Dallas, Texas
April 18, 2005
-27-
Appendix A
Kronos Worldwide, Inc.
AUDIT COMMITTEE PREAPPROVAL POLICY
AMENDED AND RESTATED AS OF FEBRUARY 17, 2005
----------------
Section 1. -- Statement of Principles
The Audit Committee is required, subject to any de-minimus exceptions
permitted by applicable law or regulation, to preapprove the audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such services do not impair the auditors' independence.
This Policy applies to services provided by the accounting firm that serves
Kronos Worldwide, Inc. and its subsidiaries (the "Company") as its primary
independent auditor, and any international affiliates thereof.
Unless a type of service to be provided by the independent auditor is
subject to preapproval under Sections 3 or 4 of this Policy, it will require
specific preapproval by the Audit Committee under Section 2 of this Policy. In
addition, any proposed services subject to preapproval under Section 3 of this
Policy that exceeds the applicable preapproved fee level will also require
preapproval under either Section 2 or Section 4 of this Policy. Notwithstanding
the foregoing, the preapproval requirements under this Policy are waived with
respect to the provision of permitted non-Audit Services to the extent allowed
by applicable law or regulation.
Section 2. -- Specific Preapproval
Subject to Sections 4 and 5 of this Policy, the following describes the
Audit and Audit-related services to be provided by the independent auditor that
must have the specific preapproval of the Audit Committee before the independent
auditor can be engaged:
o Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
o Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q;
o Services associated with registration statements filed by the Company
with the Securities and Exchange Commission ("SEC"), including
responding to SEC comment letters and providing comfort letters;
o Statutory audits or annual audits of the annual financial statements
of subsidiaries of the Company;
o Quarterly review procedures of the interim financial statements of
subsidiaries of the Company;
o Services associated with potential business acquisitions/dispositions
involving the Company;
o Any other services provided to the Company not specifically described
above or in Section 3 of this Policy; and
o Any material changes in terms, conditions or fees with respect to the
foregoing resulting from changes in audit scope, Company structure or
other applicable matters.
Section 3. -- Other Categories of Preapproval
Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements and that are traditionally performed by the independent
auditor. The Audit Committee believes that the provision of all of the services
described below does not impair the independence of the auditor and is
consistent with the SEC's rules on auditor independence.
A-1
Subject to Section 5 of this Policy, the following Audit, Audit-related,
Tax and All Other services to be provided by the independent auditor will have
the preapproval of the Audit Committee, subject to the limitation that the
aggregate fees for such services provided by the independent auditor in any
calendar year may not exceed the limits established by the Audit Committee. The
Audit Committee will periodically revise the list of pre-approved services and
the fee limitation based on subsequent determinations as it deems appropriate.
o Audit Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies; and
o Assistance with responding to SEC comment letters received by the
Company other than in connection with a registration statement
filed with the SEC.
o Audit-related Services:
o Consultations with the Company's management as to the accounting
and/or disclosure treatment of transactions or events and/or the
actual or potential impact of final or proposed rules, standards
or interpretations of the SEC, the Financial Accounting Standards
Board, the Public Company Accounting Oversight Board or other
applicable domestic or international regulatory or
standard-setting bodies (note, under SEC rules, some
consultations may be "audit" rather than "audit-related").
o Financial statement audits of employee benefit plans of the
Company;
o Agreed-upon or expanded audit procedures related to the Company's
accounting records required to respond to or comply with
financial, accounting, legal, regulatory or contractual reporting
requirements; and
o Internal control reviews and assistance with internal control
reporting requirements of the Company (to the extent permitted by
applicable rule or regulation).
o Tax Services:
o Consultations with the Company's management as to the tax
treatment of transactions or events and/or the actual or
potential tax impact of final or proposed laws, rules and
regulations in U.S. federal, state and local and international
jurisdictions;
o Consultations with the Company's management related to compliance
with existing or proposed tax laws, rules and regulations in U.S.
federal, state and local and international jurisdictions; o
Assistance in the preparation of and review of the Company's U.S.
federal, state and local and international income, franchise and
other tax returns;
o Assistance with tax inquiries, audits and appeals of the Company
before the U.S. Internal Revenue Service and similar state, local
and international agencies;
o Consultations with the Company's management regarding domestic
and international statutory, regulatory or administrative tax
developments;
o Transfer pricing and cost segregation studies of the Company; and
o Expatriate tax assistance and compliance for the Company and
its employees.
o Other Services:
o Assistance with corporate governance matters (including
preparation of board minutes and resolutions) and assistance with
the preparation and filing of documents (such as paperwork to
register new companies or to de-register existing companies)
involving the Company with non-U.S. governmental and regulatory
agencies, provided, however, that the non-U.S. jurisdiction in
which such services are provided does not require that the
individual providing such service be licensed, admitted or
otherwise qualified to practice law.
Any services provided by the independent auditor under this Section of the
Policy shall be reported to the full Audit Committee by an officer of the
Company at the first meeting of the Audit Committee held subsequent to the
engagement of the independent auditor to provide such services. Such report
shall include detailed back-up documentation provided by the independent auditor
regarding the services provided.
A-2
Section 4. -- Delegation
Subject to Section 5 of this Policy, the Audit Committee has delegated
preapproval authority to the Audit Committee Chairman or his/her designee for
(i) any proposed services described in Section 3 of this Policy to the extent
that the aggregate fees for such services provided by the independent auditor
during the then-current calendar year has exceeded the limits established by the
Audit Committee or (ii) any other proposed services that are not described in
Section 3 of this Policy that the Audit Committee Chairman or his/her designee
determines to be appropriate or necessary. The Chairman or his/her designee
shall report any pre-approval decisions under this Section 4 of the Policy to
the full Audit Committee at the first meeting of the Audit Committee held
subsequent to such pre-approval decision. The Audit Committee does not delegate
its responsibilities to pre-approve services performed by the independent
auditor to management.
Section 5. -- Prohibited Non-Audit Services
The following is a list of non-audit services for which the independent
auditor is prohibited from providing to the Company under the terms of the SEC's
rules on auditor independence, or otherwise:
o Bookkeeping or other services related to the accounting records or
financial statements of the Company;
o Financial information systems design and implementation;
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports;
o Actuarial services; o Internal audit outsourcing services;
o Management functions;
o Human resources;
o Broker, dealer, investment adviser or investment banking services;
o Any service for which no fee would be charged unless a specified
finding or result is obtained, or in which the amount of the fee is
otherwise dependent upon the finding or result of such service (other
than any such fee which is fixed by a court of competent authority or
other public authorities and not dependent on a finding or result);
o Any tax service involving (i) a listed transaction within the meaning
of 26 C.F.R. ss. 1.6011.1-4(b)(2) or (ii) a confidential transaction
within the meaning of 26 C.F.R. ss. 1.6011.1-4(b)(3), or that would be
a confidential transaction within the meaning of 26 C.F.R. ss.
1.6011.1-4(b)(3) if the fee for the transaction were equal to or more
than the minimum fee described in 26 C.F.R. ss. 1.6011.1-4(b)(3);
o Legal services to the extent that the jurisdiction in which such
services are provided requires that the individual providing such
service be licensed, admitted or otherwise qualified to practice law;
and
o Expert services unrelated to the audit.
Section 6. -- Procedures
Applications to provide services that require preapproval by the Audit
Committee under Section 2 of this Policy, or that require preapproval of the
Chairman of the Audit Committee or his/her designee under Section 4 of this
Policy, must be made by an auditor in writing. Such an application, which shall
include detailed back-up documentation provided by the independent auditor
regarding the services provided, shall be submitted to the Audit Committee or
the Chairman of the Audit Committee, as applicable, for final resolution.
Section 7. -- Engagement Letters
Engagement of the independent auditor under this Policy to provide the
following services must be evidenced pursuant to a written engagement letter
with the independent auditor that must at least be signed by the Chairman of the
Audit Committee or his/her designee before the engagement can commence:
A-3
o Annual audits of the consolidated financial statements of the Company,
attestation services associated with the Company's system of internal
control over financial reporting and other services associated with
the Company's Annual Report on Form 10-K;
o Quarterly review procedures associated with the Company's unaudited
interim consolidated financial statements and other services
associated with the Company's Quarterly Reports on Form 10-Q; and
o Any engagement for which applicable professional standards of the
independent auditor require an engagement letter.
Any other engagement of the independent auditor under this Policy may be
evidenced pursuant to a written engagement letter with the independent auditor,
as may be required by the Audit Committee, the Chairman of the Audit Committee
or his/her designee, the independent auditor or an officer of the Company,
before the engagement can commence. Any such engagement letter may, but is not
required to, be signed by the Chairman of the Audit Committee or his/her
designee.
A-4
KRONOS WORLDWIDE, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240-2697
Dear Stockholder:
Kronos Worldwide, Inc. encourages you to take advantage of new and convenient
ways by which you can vote your shares. You can vote your shares electronically
through the internet or by telephone. This eliminates the need to return this
proxy card.
1. To vote over the internet:
o Log on to the internet and go to the web site
http://www.eproxyvote.com/kro. Internet voting will be available until
12:01 A.M. on May 19, 2005.
2. To vote over the telephone:
o On a touch-tone telephone call 1-877-PRX-VOTE (1-877-779-8683) 24
hours a day, seven days a week. Telephone voting will be available
until 12:01 A.M. on May 19, 2005.
o Non-U.S. stockholders should call 1-201-536-8073.
Your electronic vote authorizes the named proxies to vote in the same manner as
if you marked, dated and returned this proxy card. If you vote your shares
electronically, do not mail back this proxy card.
Your vote is important. Thank you for voting.
DETACH HERE
- -------------------------------------------------------------------------------
Proxy
KRONOS WORLDWIDE, INC.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF KRONOS WORLDWIDE,
INC. FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 19, 2005
The undersigned hereby appoints Gregory M. Swalwell, Robert D. Graham and A.
Andrew R. Louis, 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 2005 Annual Meeting of Stockholders (the "Meeting") of Kronos
Worldwide, Inc., a Delaware corporation ("Kronos Worldwide"), to be held at
Kronos Worldwide's corporate offices at Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas on Thursday, May 19, 2005, at 10:00 a.m. (local time),
and at any adjournment or postponement of the Meeting, all of the shares of
common stock, par value $0.01 per share, of Kronos Worldwide standing in the
name of the undersigned or that the undersigned may be entitled to vote on the
proposals set forth, and in the manner directed, on this proxy card.
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE KRONOS WORLDWIDE PROXY
STATEMENT THAT ACCOMPANIED THIS PROXY CARD.
The proxies, if this card is properly executed, will vote in the manner directed
on this card. If no direction is made, the proxies will vote "FOR" all nominees
named on the reverse side of this card for election as directors and, to the
extent allowed by applicable law, in the discretion of the proxies as to all
other matters that may properly come before the Meeting and any adjournment or
postponement thereof.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
Kronos Worldwide, Inc.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8003
EDISON, NJ 08818-8003
Your vote is important. Please vote immediately.
Vote-by-Internet Vote-by-Telephone
Log on to the internet and go to Call toll-free
http://www.eproxyvote.com/kro. 1-877-PRX-VOTE (1-877-779-8683)
Follow the easy steps outlined Follow the easy recorded instructions.
on the secured website.
If you vote over the internet or by telephone, please do not mail your card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
- -------------------------------------------------------------------------------
[ X ] Please mark votes as in this example.
This proxy, if properly executed, will be voted as specified below by you. If no
direction is given, this proxy will be voted "FOR" all nominees for directors
listed below and "FOR" proposal 2.
- -------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" all nominees for director listed
below and "FOR" proposal 2.
- -------------------------------------------------------------------------------
1. Election of Directors. (Please see reverse)
FOR WITHHOLD
FOR WITHHOLD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
----------------------------------------------
For all nominees except as written above.
Director Nominees:
01 Keith R. Coogan,
02 Cecil H. Moore, Jr.,
03 George E. Poston,
04 Glenn R. Simmons,
05 Harold C. Simmons,
06 R. Gerald Turner, and
07 Steven L. Watson.
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting and any adjournment or
postponement thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as the name that appears on this card. Joint owners should
each sign. When signing other than in an individual capacity, please fully
describe such capacity. Each signatory hereby revokes all proxies heretofore
given to vote at said Meeting and any adjournment or postponement thereof.
Signature: Date: Signature: Date:
------------ ------- ------------- --------