You are cordially invited to attend the 2020 annual meeting of stockholders of CompX International Inc., which will be held on Wednesday, May 27, 2020, at 10:00 a.m., local time, at our corporate
offices at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2620. 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 cast your vote as instructed on your proxy card or voting instruction form as promptly as possible to ensure that your shares are represented and
voted in accordance with your wishes. Your vote, whether given by proxy or in person at the meeting, will be held in confidence by the inspector of election as provided in our bylaws.
Director Compensation
Compensation Policies and Practices as They Relate to Risk Management
Compensation Consultants
Related Party Transaction Policy
Relationships with Related Parties
Intercorporate Services Agreements
Risk Management Program
Tax Matters
Related Party Loans for Cash Management Purposes
Independent Registered Public Accounting Firm
Fees Paid to PricewaterhouseCoopers LLP
Preapproval Policies and Procedures
Background
Say-on-Pay Proposal
Effect of the Proposal
Vote Required
“Alliance Advisors” means Alliance Advisors, LLC, our proxy management advisor who will act as inspector of election for the annual
meeting of stockholders.
“401(k) Plan” means The Employee 401(k) Retirement Plan, a defined contribution plan.
“brokerage firm or other nominee” means a brokerage firm or other nominee such as a banking institution, custodian, trustee or
fiduciary (other than our transfer agent, Computershare) through which a stockholder holds its shares of our common stock.
“broker/nominee non-vote” means a non-vote by a brokerage firm or other nominee for shares held for a client’s account for which the
brokerage firm or other nominee does not have discretionary authority to vote on a particular matter and has not received instructions from the client.
“Code” means the Internal Revenue Code of 1986, as amended.
“Computershare” means Computershare Trust Company, N.A., our stock transfer agent and registrar.
“CompX,” “us,” “we” or “our”
means CompX International Inc.
“Contran” means Contran Corporation, the parent corporation of our consolidated tax group.
“Dixie Rice” means Dixie Rice Agricultural L.L.C., one of our parent companies.
“EWI” means EWI RE, Inc., a wholly owned subsidiary of NL that, prior to NL’s sale of EWI’s insurance and risk management business to a third
party in November 2019, was a reinsurance brokerage and risk management company.
“Family Trust” means the Harold C. Simmons Family Trust No. 2, which was established for the benefit of Serena Simmons Connelly and
Lisa K. Simmons and their children.
“independent directors” means the following directors: Thomas E. Barry, Terri L. Herrington, Ann Manix and Mary A. Tidlund.
“ISA” means an intercorporate services agreement between Contran and a related company pursuant to which employees of Contran provide certain
services, including executive officer services, to such related company on an annual fixed fee basis.
“Kronos Worldwide” means Kronos Worldwide, Inc., one of our publicly held sister corporations that is an international manufacturer of
titanium dioxide products.
“named executive officer” means any person named in the 2019 Summary Compensation Table in this proxy statement.
“NL” means NL Industries, Inc., one of our publicly held parent corporations that is a diversified holding company (i) of which we are a
subsidiary and (ii) that holds a significant investment in Kronos Worldwide.
“NLKW” means NLKW Holding, LLC, a wholly-owned subsidiary of NL, which holds a significant equity interest in Kronos Worldwide.
“NYSE American” means the NYSE American (formerly named NYSE MKT), the stock exchange on which our shares of class A common stock trade.
“PCAOB” means the Public Company Accounting Oversight Board, a private sector, non-profit corporation that oversees auditors of U.S.
public companies.
“PwC” means PricewaterhouseCoopers LLP, our independent registered public accounting firm.
“record date” means the close of business on March 31, 2020, the date our board of directors set for the determination of stockholders
entitled to notice of and to vote at the 2020 annual meeting of our stockholders.
“RPT Policy” means the Amended and Restated CompX International Inc. Policy Regarding Related Party Transactions dated August 3, 2016.
“Say-on-Pay” means the second proposal in this proxy statement for a nonbinding advisory vote for the consideration of our stockholders
to approve the compensation of our named executive officers as such proposal is described and as such compensation is disclosed in this proxy statement.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.
“stockholder of record” means a stockholder of our class A common stock who holds shares in its name in certificate form or
electronically with our transfer agent, Computershare.
“Tall Pines” means Tall Pines Insurance Company, an indirect wholly-owned captive insurance subsidiary of Valhi.
“Valhi” means Valhi, Inc., one of our publicly held parent corporations that is a diversified holding company of which NL and Kronos
Worldwide are subsidiaries.
CompX International Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240‑2620
We are providing this proxy statement in connection with the solicitation of proxies by and on behalf of our board of directors for use at our 2020 annual meeting of stockholders to
be held on Wednesday, May 27, 2020 and at any adjournment or postponement of the meeting. We will begin mailing our 2020 annual meeting materials on or about April 24, 2020 to the holders of our class A common stock as of the close of business on
March 31, 2020. Our mailed materials include:
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the accompanying notice of the 2020 annual meeting of stockholders;
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our 2019 Annual Report to Stockholders, which includes our Annual Report on Form 10-K for the fiscal year ended December 31, 2019; and
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the proxy card (or voting instruction form if you hold your shares through a brokerage firm or other nominee and not in your name in certificate form or electronically with our transfer agent, Computershare).
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We are not incorporating the 2019 annual report into this proxy statement and you should not consider the annual report as proxy solicitation material. The accompanying notice of annual meeting of
stockholders sets forth the time, place and purposes of the meeting. Our principal executive offices are located at Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2620.
Please refer to the Glossary of Terms on page ii for the definitions of certain terms used in this proxy statement.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Q:
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What is the purpose of the annual meeting?
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A:
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At the annual meeting, stockholders will vote on the following, as described in this proxy statement:
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Proposal 1 – the election of the seven director nominees named in this proxy statement; and
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Proposal 2 – the adoption of a nonbinding advisory resolution that approves the named executive officer compensation described in this proxy statement (Say-on-Pay).
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In addition, stockholders will vote on any other matter that may properly come before the meeting.
Q:
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How does the board recommend that I vote?
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A:
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The board of directors recommends that you vote FOR:
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the election of each of the nominees for director named in this proxy statement; and
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the approval and adoption of proposal 2 (Say-on-Pay).
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Q:
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Who is allowed to vote at the annual meeting?
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A:
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The board of directors has set the close of business on March 31, 2020 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting. Only holders of our class A common stock as of the close
of business on the record date are entitled to vote at the meeting. On the record date, 12,443,057 shares of our class A common stock were issued and outstanding. Each share of our class A common stock entitles its holder to one vote.
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Q:
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How do I vote if I am a stockholder of record?
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A:
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If you hold shares of our class A common stock in your name in certificate form or electronically with our transfer agent, Computershare, and not through a brokerage firm or other nominee, you are a stockholder of record. As a
stockholder of record, you may:
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vote over the internet at www.AALvote.com/CIX;
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vote by telephone using the voting procedures set forth on your proxy card;
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instruct the agents named on your proxy card how to vote your shares by completing, signing and mailing the enclosed proxy card in the envelope provided; or
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vote in person at the annual meeting.
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Q:
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What are the consequences if I am a stockholder of record and I execute my proxy card but do not indicate how I would like my shares voted for one or more of the director nominees named in this proxy
statement or proposal 2?
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A:
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If you are a stockholder of record, the agents named on your proxy card will vote your shares on such uninstructed nominee or proposal as recommended by the board of directors in this proxy statement.
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Q:
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How do I vote if my shares are held through a brokerage firm or other nominee?
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A:
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If you hold your shares through a brokerage firm or other nominee, you must follow the instructions on your voting instruction form on how to vote your shares. In order to ensure your brokerage firm or other nominee votes your shares
in the manner you would like, you must provide voting instructions to your brokerage firm or other nominee by the deadline provided on your voting instruction form.
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Brokerage firms or other nominees may not vote your shares on the election of a
director nominee or proposal 2 in the absence of your specific instructions as to how to vote. We encourage you to provide instructions to your brokerage firm or other nominee regarding the voting of your shares. If you do not instruct your brokerage firm or other nominee how to vote with respect to the election of a director nominee or proposal 2,
your brokerage firm or other nominee may not vote with respect to the election of such director nominee or on proposal 2 and your vote will be counted as a “broker/nominee non-vote.” “Broker/nominee non-votes” are non-votes by a brokerage
firm or other nominee for shares held in a client’s account for which the brokerage firm or other nominee does not have discretionary authority to vote on a particular matter and has not received instructions from the client. How we treat
broker/nominee non-votes is separately described in each of the answers below regarding what constitutes a quorum and the requisite votes necessary to elect a director nominee or approve proposal 2.
Q:
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If I hold my shares through a brokerage firm or other nominee, how may I vote in person at the annual meeting?
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A:
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If you wish to vote in person at the annual meeting, you will need to follow the instructions on your voting instruction form on how to obtain the appropriate documents to vote in person at the meeting.
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Q:
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Who will count the votes?
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A:
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The board of directors has appointed Alliance Advisors to ascertain the number of shares represented, tabulate the vote and serve as inspector of election for the meeting.
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Q:
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Is my vote confidential?
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A:
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Yes. All proxy cards, ballots or voting instructions will be kept confidential in accordance with our bylaws.
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Q:
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How do I change or revoke my proxy instructions if I am a stockholder of record?
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A:
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If you are a stockholder of record, you may change or revoke your proxy instructions in any of the following ways:
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delivering to Alliance Advisors a written revocation;
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submitting another proxy card bearing a later date;
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changing your vote on www.AALvote.com/CIX;
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using the telephone voting procedures set forth on your proxy card; or
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voting in person at the annual meeting.
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Q:
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How do I change or revoke my voting instructions if my shares are held through a brokerage firm or other nominee?
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A:
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If your shares are held through a brokerage firm or other nominee, you must follow the instructions from your brokerage firm or other nominee on how to change or revoke your voting instructions or how to vote in person at the annual
meeting.
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Q:
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What constitutes a quorum?
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A:
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A quorum is the presence, in person or by proxy, of the holders of a majority of the votes from holders of the outstanding shares of our class A common stock entitled to vote at the meeting.
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Shares that are voted “abstain” or “withheld” are counted as present and entitled to vote and are, therefore, included for purposes of determining whether a quorum is present at the annual meeting.
As already discussed in the previous answer regarding how to vote shares held through a brokerage firm or other nominee, there are no proposals for the annual meeting that would allow a brokerage
firm or nominee to cast a vote on uninstructed shares. If a brokerage firm or other nominee receives no instruction for the election of any director nominee and receives no instruction for proposal 2, such uninstructed shares will be counted as not
entitled to cast a vote and are, therefore, not considered for purposes of determining whether a quorum is present at the annual meeting. If a brokerage firm or other nominee receives instructions on the election of at least one director nominee or
on proposal 2, such instructed shares will be counted as present and entitled to cast a vote and are, therefore, included for purposes of determining whether a quorum is present at the annual meeting.
NL directly held approximately 86.4% of the outstanding shares of our class A common stock as of the record date. NL has indicated its intention to have its shares of our common stock represented at
the meeting. If NL attends the meeting in person or by proxy, the meeting will have a quorum present.
Q:
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Assuming a quorum is present, what vote is required to elect a director nominee?
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A:
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A plurality of affirmative votes of the holders of our outstanding class A shares of common stock represented and entitled to vote at the meeting is necessary to elect each director nominee. You may indicate on your proxy card or in
your voting instructions that you desire to withhold authority to vote for any of the director nominees. Since director nominees need only receive a plurality of affirmative votes from the holders represented and entitled to vote at the
meeting to be elected, a vote withheld or a broker/nominee non-vote regarding a particular nominee will not affect the election of such director nominee.
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NL has indicated its intention to have its shares of our common stock represented at the meeting and to vote such shares FOR the election of each of the director nominees named in this proxy
statement. If NL attends the meeting in person or by proxy and votes as indicated, the stockholders will elect all of the nominees named in this proxy statement to the board of directors.
Q:
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Assuming a quorum is present, what vote is required to adopt and approve proposal 2 (Say-on-Pay)?
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A:
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The stockholder resolution contained in this proposal provides that the nonbinding affirmative vote of the holders of the majority of the outstanding shares of our class A common stock present in person or represented by proxy at the
meeting and entitled to vote on the subject matter will be the requisite vote to adopt the resolution and approve the compensation of our named executive officers as such compensation is disclosed in this proxy statement. Abstentions
will be counted as represented and entitled to vote and will therefore have the effect of a negative vote. Broker/nominee non-votes will not be counted as entitled to vote and will have no effect on this proposal.
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NL has indicated its intention to have its shares of our common stock represented at the meeting and to vote such shares FOR this nonbinding advisory proposal. If NL attends the meeting in person or
by proxy and votes as indicated, the stockholders will, by a nonbinding advisory vote, approve this proposal.
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Assuming a quorum is present, what vote is required to approve any other matter to come before the meeting?
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A:
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Except as applicable laws may otherwise provide, the approval of any other matter that may properly come before the meeting will require the affirmative vote of the holders of the majority of the class A common stock present in person
or represented by proxy at the annual meeting and entitled to vote on the subject matter. Abstentions will be counted as represented and entitled to vote and will therefore have the effect of a negative vote.
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Q:
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If I am a stockholder of record, how will the agents named on my proxy card vote on any other matter to come before the meeting?
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A:
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If you are a stockholder of record and to the extent allowed by applicable law, the agents named on your proxy card will vote in their discretion on any other matter that may properly come before the meeting.
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Q:
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Who will pay for the cost of soliciting the proxies?
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A:
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We 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, our directors, officers and
regular employees may solicit proxies by telephone or in person for which such persons will receive no additional compensation. Upon request, we will reimburse brokerage firms or other nominees for their reasonable out-of-pocket expenses
incurred in distributing proxy materials and voting instruction forms to the beneficial owners of our class A common stock that hold such stock in accounts with such entities.
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NL directly held approximately 86.4% of the outstanding shares of our class A common stock as of the record date. NL has indicated its intention to have its shares of our common stock represented at
the meeting and to vote such shares FOR the election of each of the director nominees named in this proxy statement and FOR proposal 2. If NL 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 of the nominees named in this proxy statement to the board of directors and approve proposal 2.
Ownership of CompX. The following table and footnotes set forth as of the record date the beneficial ownership, as defined by regulations
of the SEC, of our class A common stock held by each individual, entity or group known to us to own beneficially more than 5% of the outstanding shares of our class A common stock, each director, each named executive officer (which includes one
former executive officer) and all of our current directors and executive officers as a group. See footnote 3 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 our class A 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.
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CompX Class A Common Stock (1)
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Amount and Nature of
Beneficial Ownership
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5% Stockholders
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Harold C. Simmons Family Trust No. 2
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10,764,004
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(3)(4)
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86.5%
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Lisa K. Simmons
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10,764,004
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(3)(4)
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86.5%
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Serena Simmons Connelly
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10,766,004
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(3)(4)
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86.5%
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Directors and Named Executive Officers
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Thomas E. Barry
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4,600
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(5)
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*
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David A. Bowers
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12,600
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(5)
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*
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Loretta J. Feehan
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6,600
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(5)
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*
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Robert D. Graham
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2,000
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(5)
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*
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Terri L. Herrington
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2,600
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(5)
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*
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Ann Manix
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4,775
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(5)
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*
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Mary A. Tidlund
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4,600
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(5)
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*
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James W. Brown
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-0-
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(5)
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-0-
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Scott C. James
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-0-
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(5)
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-0-
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Kelly D. Luttmer
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200
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(5)
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*
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Andrew B. Nace
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-0-
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(5)
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-0-
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Amy A. Samford
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-0-
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(5)
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-0-
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Current directors and executive officers as a group (15 persons)
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38,225
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(5)
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*
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* Less than 1%.
(1)
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Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 under the Securities Exchange Act, and is not necessarily indicative of beneficial ownership for any
other purpose. 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. Except as noted in footnote 4 to this table, the
business address for each listed person or entity is Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2620.
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(2)
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The percentages set forth above and in the following footnotes are based on 12,443,057 shares of our class A common stock outstanding as of the record date.
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(3)
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The shares reported in this table for the Family Trust and Ms. Simmons consist of 10,764,004 shares held directly by the entities below. The shares reported in this table for Ms. Connelly consist of such
10,764,004 shares held directly by such entities, plus 2,000 shares she holds directly. See footnote 4 to this table, below.
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CompX Class A Common Stock
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NL
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10,755,104
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86.4
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%
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Contran
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5,900
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*
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Kronos Worldwide.
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3,000
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*
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86.5
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%
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* Less than 1%.
(4)
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The following is a description of certain related entities or persons that may be deemed to beneficially own outstanding shares of our common stock.
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A majority of Contran’s outstanding voting stock is held directly by Ms. Simmons and Ms. Connelly and various family trusts established for the benefit of Ms. Simmons and Ms.
Connelly and their children and for which Ms. Simmons or Ms. Connelly, as applicable, serves as trustee (collectively, the “Other Trusts”). Ms. Simmons and Ms. Connelly are sisters. The remainder of Contran’s outstanding voting stock is held by the
Family Trust, for which Tolleson Private Bank, a third party financial institution, serves as trustee (the “Trustee”). Ms. Simmons and Ms. Connelly can appoint qualifying successor trustees of the Family Trust if the Trustee resigns or otherwise
decides not to serve as trustee. The business address of the Family Trust (and the Trustee) is 5550 Preston Road, Suite B, Dallas, Texas 75205.
Ms. Simmons and Ms. Connelly serve as co-chairs of the board of directors of Contran, and one other member of Contran management also serves on the board of directors of Contran.
Ms. Simmons and Ms. Connelly each has the power to vote and direct the disposition of shares of Contran voting stock they hold directly or which is held by the Other Trusts for which they serve as trustee. The Trustee of the Family Trust has the
power to vote and direct the disposition of the shares of Contran voting stock held by the Family Trust.
Contran is the sole owner of Valhi’s outstanding shares of non-voting preferred stock. Contran is also the holder of the sole membership interest of Dixie Rice and may be deemed
to control Dixie Rice.
Ms. Simmons, Ms. Connelly and the Family Trust directly hold, or are related to the following person or entities that directly hold, the following percentages of the outstanding
shares of NL common stock:
Valhi
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82.8%
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Kronos Worldwide
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Less than 1%
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Serena Simmons Connelly
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Less than 1%
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Ms. Simmons, Ms. Connelly and the Family Trust directly hold, or are related to the following entities that directly hold, the following percentages of the outstanding shares of
Kronos Worldwide common stock:
Valhi
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50.2%
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NLKW
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30.5%
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Contran
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Less than 1%
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Serena Simmons Connelly
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Less than 1%
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Ms. Simmons, Ms. Connelly and the Family Trust directly hold, or are related to the following person or entity that directly hold, the following percentages of the outstanding
shares of Valhi common stock (a):
Dixie Rice
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91.5%
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Serena Simmons Connelly
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Less than 1%
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(a)
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NL (including a wholly owned subsidiary of NL) and Kronos Worldwide own 14,372,970 shares and 1,724,916 shares, respectively, of Valhi common stock. Since NL and Kronos Worldwide are
majority owned subsidiaries of Valhi and pursuant to Delaware law, Valhi treats the shares of Valhi common stock that NL and Kronos Worldwide own as treasury stock for voting purposes. Pursuant to Section 13(d)(4) of the Securities
Exchange Act, such shares are not deemed outstanding for the purposes of calculating the percentage ownership of the outstanding shares of Valhi common stock as of the record date in this proxy statement.
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By virtue of the stock ownership of each of Kronos Worldwide, NL, Valhi, Dixie Rice and Contran, Ms. Simmons and Ms. Connelly being beneficiaries of the Family Trust, the direct
holdings of Contran voting stock by each of Ms. Simmons and Ms. Connelly and entities related to them, the positions as co-chairs of the Contran board by each of Ms. Simmons and Ms. Connelly, and the Family Trust’s ownership of Contran voting
stock, in each case as described above:
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Ms. Simmons, Ms. Connelly and the Family Trust (and the Trustee, in its capacity as trustee of the Family Trust) may be deemed to control each of Contran, Dixie Rice, Valhi, NL, Kronos Worldwide and us; and
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Ms. Simmons, Ms. Connelly, the Family Trust (and the Trustee, in its capacity as trustee of the Family Trust), Contran, Dixie Rice, Valhi, NL, Kronos Worldwide and we may be deemed to possess indirect
beneficial ownership of shares of common stock directly held by such entities, including any shares of our common stock.
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Except for the 2,000 shares of our class A common stock she holds directly, Ms. Connelly disclaims beneficial ownership of all shares of our class A common stock except to the extent of her pecuniary
interest in such shares, if any. Ms. Simmons disclaims beneficial ownership of all shares of our class A common stock, except to the extent of her pecuniary interest in such shares, if any. The Family Trust (and the Trustee) disclaims beneficial
ownership of all shares of our class A common stock except to the extent of its pecuniary interest in such shares, if any.
(5)
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Each of our directors or executive officers disclaims beneficial ownership of any shares of our common stock, except to the extent he or she has a pecuniary interest in such shares, if
any.
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We understand that Contran and related entities or persons may consider acquiring or disposing of shares of our 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 our common stock in the market, an assessment of our business and prospects, financial and stock market conditions and other
factors deemed relevant by such entities. We may similarly consider acquisitions of shares of our common stock and acquisitions or dispositions of securities issued by related entities.
Ownership of Related Companies. Some of our directors and executive officers own equity securities of certain companies related to us.
Ownership of NL and Valhi. 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 (which includes one former executive officer) and all of our current directors and executive officers as a group. All information is taken from or
based upon ownership filings made by such persons with the SEC or upon information provided by such persons.
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Amount and Nature
of Beneficial
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Percent of
Class
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Amount and Nature
of Beneficial
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Percent of
Class
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Thomas E. Barry
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-0-
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(4)
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-0-
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68,400
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(4)
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*
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David A. Bowers
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-0-
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(4)
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-0-
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-0-
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(4)
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-0-
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Loretta J. Feehan
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14,250
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(4)
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*
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19,900
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(4)
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*
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Robert D. Graham
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6,500
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(4)
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*
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4,000
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(4)
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*
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Terri L. Herrington
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-0-
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(4)
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-0-
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12,900
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(4)
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*
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Ann Manix
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-0-
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(4)
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-0-
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-0-
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(4)
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-0-
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Mary A. Tidlund
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-0-
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(4)
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-0-
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16,900
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(4)
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*
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James W. Brown
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-0-
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(4)
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-0-
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-0-
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(4)
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-0-
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Scott C. James
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-0-
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(4)
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-0-
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-0-
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(4)
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-0-
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Kelly D. Luttmer
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-0-
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(4)
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-0-
|
-0-
|
(4)
|
-0-
|
Andrew B. Nace
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
Amy A. Samford
|
-0-
|
(4)
|
-0-
|
-0-
|
(4)
|
-0-
|
|
|
|
|
|
|
|
Current directors and executive
officers as a group (15 persons)
|
21,750
|
(4)
|
*
|
122,100
|
(4)
|
*
|
* Less than 1%.
(1)
|
Beneficial ownership as reported in the above table has been determined in accordance with Rule 13d-3 under the Securities Exchange Act, and is not necessarily indicative of beneficial ownership for any
other purpose. Except as otherwise noted, the individuals or group have sole investment power and sole voting power as to all shares set forth opposite their names.
|
(2)
|
The percentages are based on 48,755,734 shares of NL common stock outstanding as of the record date.
|
(3)
|
The percentages are based on 339,235,449 shares of Valhi common stock outstanding for voting purposes as of the record date. NL (including a wholly owned subsidiary of NL) and Kronos Worldwide own
14,372,970 shares and 1,724,916 shares, respectively, of Valhi common stock. Since NL and Kronos Worldwide are majority owned subsidiaries of Valhi and pursuant to Delaware law, Valhi treats the shares of Valhi common stock that NL and
Kronos Worldwide own as treasury stock for voting purposes. Pursuant to Section 13(d)(4) of the Securities Exchange Act, such shares are not deemed outstanding for the purposes of calculating the percentage ownership of the outstanding
shares of Valhi common stock as of the record date in this proxy statement.
|
(4)
|
Each of our directors or executive officers disclaims beneficial ownership of any shares of NL or Valhi common stock, except to the extent he or she has a pecuniary interest in such shares, if any.
|
ELECTION OF DIRECTORS
Our bylaws provide that the board of directors shall consist of one or more members as determined by our board of directors or stockholders. Our board of directors has currently set the number of
directors at seven and recommends the seven director nominees named in this proxy statement for election at our 2020 annual stockholder meeting. The directors elected at the meeting will hold office until our 2021 annual stockholder meeting and
until their successors are duly elected and qualified or their earlier removal or resignation.
All of the director nominees are currently members of our board of directors whose terms will expire at the 2020 annual meeting. All of the nominees have agreed to serve if elected. If any nominee
is not available for election at the meeting, your shares will be voted FOR an alternate nominee to be selected by the board of directors, unless you withhold authority to vote for such unavailable nominee. The board of directors believes that all
of its nominees will be available for election at the meeting and will serve if elected.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE FOLLOWING NOMINEES FOR DIRECTOR.
Nominees for Director. All of our nominees have extensive senior management and policy-making experience or significant accounting
experience. We believe all of our nominees are knowledgeable about our business. Each of our independent directors is financially literate. The board of directors considered each nominee’s specific business experiences described in the
biographical information provided below in determining whether to nominate him or her for election as a director.
Thomas E. Barry, age 76, has served on our board of directors since 2016. Dr. Barry has held the position of professor of marketing in the Edwin L. Cox School
of Business at Southern Methodist University since 1970, with emeritus status beginning in 2017. He also served the university as vice president for executive affairs from 1995 to 2015. Since prior to 2015, he has served as a director of Valhi and
a member of its audit and management development and compensation committees (including serving as chairman of Valhi’s audit and management development and compensation committees since 2016). He is the chairman of our audit committee and a member
of our management development and compensation committee.
Dr. Barry has four years of experience on our board of directors and over 19 years of experience on Valhi’s board of directors, audit committee and management development and compensation committee.
He also has senior executive, operating, corporate governance, finance and financial accounting oversight experience from a large, non-profit, private educational institution and from a former publicly held corporation affiliated with us, which was
publicly held at the time he served as one of its directors.
David A. Bowers, age 82, has served on our board of directors since 1993. Prior to his retirement in May 2018 as an officer and employee of CompX, Mr. Bowers
was employed by us or our predecessors since 1960 in various sales, marketing and executive positions, having been named president of our security products and related businesses in 1979. He served as our vice chairman of the board from 2000 to May
2018, as our chief executive officer from 2002 to 2017, and as our president from 2002 to 2014. Mr. Bowers is trustee emeritus and former chairman of the board of Monmouth College, Monmouth, Illinois.
Mr. Bowers has over 59 years of experience serving CompX, in which he developed general management, senior executive, corporate governance, finance and financial accounting oversight experience.
Loretta J. Feehan, age 64, has served as chair of the board (non-executive) of us, Kronos Worldwide, NL and Valhi since 2017, and as a director of each such
company since 2014. She is a certified public accountant who consults on financial and tax matters. She served as a tax partner with Deloitte and Touche LLP in the Denver office until 1992 primarily serving corporate clients. Ms. Feehan also
taught continuing education courses to tax practitioners around the country for many years. Ms. Feehan has been a financial advisor to Serena Simmons Connelly and Lisa K. Simmons since prior to 2015.
Ms. Feehan has six years of experience as a director of us, Kronos Worldwide, NL and Valhi. She also has over 42 years of financial and tax accounting and auditing experience, certain years of which
were as a partner of one the largest international accounting firms.
Robert D. Graham, age 64, has served as our vice chairman of the board since May 2018 and on our board of directors since 2016. He
previously served as our executive vice president from May 2017 to May 2018, and as our chairman of the board from January 2017 to May 2017. He currently serves as vice chairman of the board, president and chief executive officer of Kronos Worldwide
and Valhi, as vice chairman of the board and chief executive officer of NL, and as president and chief executive officer of Contran. He has served as a director of Contran, Valhi and Kronos Worldwide since 2016 and as a director of NL since 2014.
Mr. Graham has served with various companies related to us and Contran since 2002.
Mr. Graham has extensive experience with our businesses. He also has senior executive, operating, corporate governance, finance and financial accounting oversight experience from other publicly and
privately held entities related to us for which he currently serves or formerly served.
Terri L. Herrington, age 64, has served on our board of directors since 2018. Ms. Herrington is a private investor. She retired from International Paper
Company, a worldwide producer of fiber-based packaging, pulp and paper, at the end of 2016. Ms. Herrington worked for International Paper for nine years, including as their vice president finance beginning in 2011, and before that as their consumer
packaging vice president finance and strategy and as their vice president internal audit. Prior to joining International Paper, Ms. Herrington spent over 25 years with BP p.l.c. (and the former Amoco Corporation), a global producer of oil and gas,
where she held a variety of finance and commercial positions, lastly as their global Director of Audit for Finance and Financial Control. Since 2018, Ms. Herrington has served as a director and on the audit committee of Valhi. She is a member of
our audit committee.
Ms. Herrington has two years of experience on the boards of directors and audit committees of CompX and Valhi. She also has senior executive, operating, corporate governance, finance, and financial
accounting oversight experience from two publicly-traded companies for which she formerly served.
Ann Manix, age 67, has served on our board of directors since 1998. Since 2014, Ms. Manix has served as a director of Blue Canyon Partners, Inc., a global
management consulting firm. She served on the global market intelligence, consulting and financial advisory team for Ducker Worldwide, LLC, a privately held industrial research firm, since prior to 2014, and as a managing partner for the firm from
1994 until 2006. Additionally, she has served as a principal of Summus, Ltd., a strategic consulting firm, since 2008. She is chair of our management development and compensation committee and a member of our audit committee.
Ms. Manix has over 21 years of experience on our board of directors and audit committee and 19 years of experience on our management development and compensation committee. She has senior executive,
operating, corporate governance, finance and financial accounting oversight experience from other publicly and privately held entities for which she formerly served.
Mary A. Tidlund, age 63, has served on our board of directors since 2016. Ms. Tidlund is a private investor. From
1998 to 2017, she served as the president of The Mary A. Tidlund Charitable Foundation, a charitable organization that designed and funded sustainable development projects around the world. From 1989 to 1995, she served as president and chief
executive officer of Williston Wildcatters Oil Corporation, a former publicly traded oil exploration and service company. Ms. Tidlund has served as a director and on the audit committee of Valhi since 2016, and also served as a director of
Valhi from 2014 to 2015. She is a member of our audit committee.
Ms. Tidlund has four years of experience on our board of directors and audit committee, and five years of experience on the board of directors and audit committee of Valhi. She also has senior executive, operating, corporate governance, finance and financial accounting oversight experience from a publicly traded oil exploration and service company for which she formerly served.
Current Executive Officers. Set forth below is certain information relating to our executive officers. Each executive officer serves at
the pleasure of the board of directors. Biographical information with respect to Robert D. Graham is set forth under the Nominees for Director subsection above.
|
|
|
Robert D. Graham
|
64
|
Vice Chairman of the Board
|
Scott C. James
|
54
|
President and Chief Executive Officer
|
Kelly D. Luttmer
|
56
|
Executive Vice President and Chief Tax Officer
|
Andrew B. Nace
|
55
|
Executive Vice President
|
Steven S. Eaton
|
61
|
Vice President, Internal Control over Financial Reporting
|
Jane R. Grimm
|
49
|
Vice President and Secretary
|
Bryan A. Hanley
|
39
|
Vice President and Treasurer
|
Amy E. Ruf
|
42
|
Vice President and Controller
|
Amy Allbach Samford
|
46
|
Vice President and Chief Financial Officer
|
Scott C. James has served as our chief executive officer since 2017, as our president since 2014, and as president of both of our divisions,
CompX Security Products and CompX Marine, since 2002 and 2005, respectively. He served as our chief operating officer from 2014 to 2017 and as our vice president from 2002 to 2014. Since 1992, Mr. James has served in various sales, marketing and
executive positions with our security products operations.
Kelly D. Luttmer has served as our chief tax officer since 2016 and as our executive vice president since 2015. She previously served as our global tax
director from 2012 to 2015, as our vice president from 2004 to 2015, and as our tax director from 2004 to 2012. She currently serves as executive vice president and chief tax officer of Kronos Worldwide, NL, Valhi and Contran. Ms. Luttmer has
served in tax accounting positions (including officer positions) with various companies related to us and Contran since 1989. As discussed below in the Upcoming Executive Officer Changes section, Ms. Luttmer has provided notice to us, Valhi, Kronos
Worldwide and NL that she will retire as an officer of us and those companies effective June 1, 2020.
Andrew B. Nace has served as our executive vice president since 2017, and previously served as our vice president from 2013 to 2017. He currently serves as
executive vice president of Kronos Worldwide and NL, as executive vice president and general counsel of Valhi, and as executive vice president, general counsel and secretary of Contran. Mr. Nace has served in legal positions (including officer
positions) with various companies related to us and Contran since 2003.
Steven S. Eaton has served as our vice president, internal control over financial reporting since 2015. He currently serves as vice president, internal
control over financial reporting for Kronos Worldwide, NL and Valhi. Mr. Eaton has served in internal audit positions (including officer positions) with various companies related to us and Contran since 2006.
Jane R. Grimm has served as our vice president and secretary since 2017. She currently serves as vice president and secretary of Valhi. Ms. Grimm has served
in legal positions (including officer positions) with various companies related to us and Contran since 2010.
Bryan A. Hanley has served as our vice president and treasurer since 2017. He currently serves as vice president and treasurer of Contran, Valhi, Kronos
Worldwide and NL. From 2013 to 2017, Mr. Hanley served as assistant treasurer and director, investor relations of Pier 1 Imports, Inc., a publicly traded retailer specializing in home furnishings and decor, and also served as its assistant treasurer
from 2010 to 2013.
Amy E. Ruf has served as our vice president and controller since June 2019. She has served in various accounting and financial positions in various companies
related to us and Contran since 2004.
Amy Allbach Samford has served as our vice president and chief financial officer since June 2019. She currently serves as vice president and chief financial
officer of NL, and as vice president and controller of Valhi and Contran. Ms. Samford has served in various accounting and financial positions (including officer positions) in various companies related to us and Contran since 2006.
Upcoming Executive Officer Changes. On March 13, 2020, Kelly D. Luttmer, our executive vice president and chief tax officer, provided notice to us that,
effective as of June 1, 2020, she will retire as one of our officers. In connection with her retirement from us, Ms. Luttmer has also provided notice to Valhi, Kronos Worldwide and NL that she will also retire as an officer of those companies as of
such date. Following such retirements, Ms. Luttmer will continue to be employed by Contran and will continue to serve as executive vice president and chief tax officer of Contran.
Following such retirement notice of Ms. Luttmer, our board of directors took action, also effective as of June 1, 2020, to:
•
|
elect Darci B. Scott as our vice president, tax; and
|
•
|
designate Ms. Scott as an executive officer of CompX.
|
Ms. Scott, age 45, has served in various tax accounting positions with various companies related to us and Contran since 2006 and currently serves as vice president, tax of Valhi. Beginning June 1, 2020, she will also
serve as an executive officer of NL as its vice president, tax and of Valhi as its vice president, tax – financial reporting.
Controlled Company Status, Director Independence and Committees. Because of NL’s ownership of 86.4% of the outstanding shares of our class
A common stock, we are considered a controlled company under the corporate governance standards of the NYSE American. Pursuant to the corporate governance standards, a controlled company may choose not to have a majority of independent directors,
independent compensation or nominations committees or charters for these committees. We have decided not to have an independent nominations or nominations committee or charters for these committees. Our board of directors believes that the full
board of directors best represents the interests of all of our stockholders and that it is appropriate for all matters that would otherwise be considered by a nominations or risk oversight committee to be considered and acted upon by the full board
of directors. Applying the NYSE American director independence standards without any additional categorical standards, the board of directors has determined that Thomas E. Barry, Terri L. Herrington, Ann Manix and Mary A. Tidlund are independent and
have no material relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. While the members of our management development and compensation committee currently satisfy the
independence requirements of the NYSE American, we have chosen not to satisfy all of the NYSE American corporate governance standards for a compensation committee and not to have a charter for our management development and compensation committee.
2019 Meetings and Standing Committees of the Board of Directors. The board of directors held four meetings and took action by written
consent on one occasion in 2019. Each of our incumbent directors attended all of the board meetings and meetings of the committees on which he or she served that were held while he or she was in office during 2019. It is expected that each director
nominee will attend our annual meeting of stockholders, which is held immediately before the annual meeting of the board of directors. All of our directors who were elected at our 2019 annual stockholder meeting attended such meeting.
The board of directors has established and delegated authority to two standing committees, which are described below. The board of directors is expected to elect the members of the standing
committees at the board of directors annual meeting immediately following the annual stockholder meeting. The board of directors from time to time may establish other committees to assist it in the discharge of its responsibilities.
Audit Committee. Our audit committee assists with the board of directors’ oversight responsibilities relating to our financial accounting
and reporting processes and auditing processes. The purpose, authority, resources and responsibilities of our audit committee are more specifically set forth in its charter. Applying the requirements of the NYSE American corporate governance
standards (without additional categorical standards) and SEC regulations, as applicable, the board of directors has previously determined that:
•
|
each member of our audit committee is independent, financially literate and has no material relationship with us other than serving as our director; and
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•
|
Ms. Terri L. Herrington is an “audit committee financial expert.”
|
No member of our audit committee serves on more than three public company audit committees. For further information on the role of our audit committee, see the Audit Committee Report in this proxy
statement. The current members of our audit committee are Thomas E. Barry (chairman), Terri L. Herrington, Ann Manix and Mary A. Tidlund. Our audit committee held five meetings in 2019.
Management Development and Compensation Committee. The principal responsibilities of our management development and compensation committee
are:
•
|
to recommend to the board of directors whether or not to approve any proposed charge to us or any of our privately held subsidiaries pursuant to our ISA with Contran;
|
•
|
to review, approve and administer certain matters regarding our employee benefit plans or programs, including annual incentive compensation awards;
|
•
|
to review, approve, administer and grant awards under our equity compensation plan; and
|
•
|
to review and administer such other compensation matters as the board of directors may direct from time to time.
|
As discussed above, the board of directors has determined that each member of our management development and compensation committee is independent by applying the NYSE American director independence
standards (without additional categorical standards). The management development and compensation committee may delegate to its members or our officers any or all of its authority as it may choose subject to certain limitations of Delaware law on
what duties directors may delegate. The committee has not exercised this right of delegation. With respect to the role of our executive officers in determining or recommending the amount or form of executive compensation, see the Compensation
Discussion and Analysis section of this proxy statement. With respect to director cash compensation, our executive officers make recommendations on such compensation directly to our board of directors for its consideration without involving the
management development and compensation committee. The current members of our management development and compensation committee are Ann Manix (chair) and Thomas E. Barry. Our management development and compensation committee held one meeting in
2019.
Risk Oversight. Our board of directors oversees the actions we take in managing our material risks. Our management is responsible for our
day-to-day management of risk. The board’s oversight of our material risks is undertaken through, among other things, various reports and assessments that management presents to the board and the related board discussions. The board has delegated
some of its primary risk oversight to our audit committee and management development and compensation committee. Our audit committee annually receives management’s reports and assessments on, among other things, the risk of fraud, certain material
business risks and a ranking of such material business risks and our insurance program. The audit committee also receives reports from our independent registered public accounting firm regarding, among other things, financial risks and the risk of
fraud. Our management development and compensation committee receives management’s assessments on the likelihood that our compensation policies and practices could have a material adverse effect on us, as more fully described in the Compensation
Policies and Practices as They Relate to Risk Management section of this proxy statement. The audit committee and management development and compensation committee report to the board of directors about their meetings. We believe the leadership
structure of the board of directors is appropriate for our risk oversight.
Identifying and Evaluating Director Nominees. Historically, our management has recommended director nominees to the board of directors.
As stated in our corporate governance guidelines:
•
|
our board of directors has no specific minimum qualifications for director nominees;
|
•
|
each nominee should possess the necessary business background, skills and expertise at the policy-making level and a willingness to devote the required time to the duties and responsibilities of membership on
the board of directors; and
|
•
|
the board of directors believes that experience as our director is a valuable asset and that directors who have served on the board for an extended period of time are able to provide important insight into
our current and future operations.
|
In identifying, evaluating and determining our director nominees, the board of directors follows such corporate governance guidelines. The board also considers the nominee’s ability to satisfy the need, if any, for
required expertise on the board of directors or one of its committees. While we do not have any policy regarding the diversity of our nominees, the board does consider diversity in the background, skills and expertise at the policy making level of
our director nominees, and as a result our board believes our director nominees do possess a diverse range of senior management experience that aids the board in fulfilling its responsibilities. The board of directors believes its procedures for
identifying and evaluating director nominees are appropriate for a controlled company under the NYSE American corporate governance standards.
Leadership Structure of the Board of Directors and Independent Director Meetings. Loretta J. Feehan serves as our chair of the board
(non-executive), and our chief executive officer does not serve on our board. The board of directors believes our current leadership structure is appropriate for a controlled company under the NYSE American corporate governance standards. While
there is no single organizational structure that is ideal in all circumstances, the board of directors believes that having different individuals serve as our chair of the board (non-executive) and as our chief executive officer reflects the
established working relationship for these positions regarding our business and provides an appropriate breadth of experience and perspective that effectively facilitates the formulation of our long-term strategic direction and business plans. In
addition, the board of directors believes that since Ms. Feehan is a representative of Contran, her service as our chair of the board (non-executive) is beneficial in providing strategic leadership for us since there is a commonality of interest that
is closely aligned in building long-term stockholder value for all of our stockholders. We have in the past, and may in the future, have a leadership structure in which the same individual serves as our chairman of the board and as our chief
executive officer. In those instances, the individual has been, or would be expected to be, an employee or representative of Contran (or one of Contran’s subsidiaries, including us).
Pursuant to our corporate governance guidelines, our independent directors are entitled to meet on a regular basis throughout the year, and will meet at least once annually, without the participation
of our other directors who are not independent. While we do not have a lead independent director, the chairman of our audit committee presides at all of the meetings of our independent directors. Our non-management directors (who are not executive
officers of CompX) also meet at regularly scheduled meetings without management participation, with the chairman of our audit committee also presiding at such meetings. In 2019, we complied with the NYSE American requirements for meetings of our
non-management and independent directors.
Stockholder Proposals and Director Nominations for the 2021 Annual Meeting of Stockholders. Stockholders may submit proposals on matters
appropriate for stockholder action at our annual stockholder meetings, consistent with rules adopted by the SEC. We must receive such proposals not later than December 26, 2020 to be considered for inclusion in the proxy statement and form of proxy
card relating to our annual meeting of stockholders in 2021. Our 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 in our records, the number of
shares of our 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 our stockholders in accordance with the process discussed above. Our 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 director if elected.
For proposals or director nominations to be brought at the 2021 annual meeting of stockholders but not included in the proxy statement for such meeting, our bylaws require that the proposal or
nomination must be delivered or mailed to our principal executive offices in most cases no later than March 2, 2021. Proposals and nominations should be addressed to our corporate secretary at CompX International Inc., Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2620.
Communications with Directors. Stockholders and other interested parties who wish to communicate with the board of directors or its
non-management or independent directors may do so through the following procedures. Such communications not involving complaints or concerns regarding accounting, internal accounting controls and auditing matters related to us may be sent to the
attention of our corporate secretary at CompX International Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2620. Provided that any such communication relates to our business or affairs and is within the function of
our board of directors or its committees, and does not relate to insignificant or inappropriate matters, such communication, or a summary of such communication, will be forwarded to the chairman of our audit committee, who also serves as the
presiding director of our non-management and independent director meetings.
Complaints or concerns regarding accounting, internal accounting controls and auditing matters, which may be made anonymously, should be sent to the attention of our general counsel with a copy to
our chief financial officer at the same address as our corporate secretary. These complaints or concerns will be forwarded to the chairman of our audit committee. We will investigate and keep these complaints or concerns confidential and anonymous,
to the extent feasible, subject to applicable law. Information contained in such a complaint or concern may be summarized, abstracted and aggregated for purposes of analysis and investigation.
Compensation Committee Interlocks and Insider Participation. During 2019, Ann Manix and Thomas E. Barry served on the management
development and compensation committee. No member of the committee:
•
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was an officer or employee of ours during 2019 or any prior year;
|
•
|
had any related party relationships with us that requires disclosure under applicable SEC rules; or
|
•
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had any interlock relationships under applicable SEC rules.
|
For 2019, no executive officer of ours had any interlock relationships within the scope of the intent of applicable SEC rules. However, during 2019 Robert D. Graham was an executive officer of ours and on the board of
directors of Contran when concurrently also serving as one of our directors.
Code of Business Conduct and Ethics. We have adopted a code of business conduct and ethics. The code applies to all of our directors,
officers and employees, including our principal executive officer, principal financial officer, principal accounting officer and controller. Only the board of directors may amend the code. Only our audit committee or other committee of the board of
directors with specifically delegated authority may grant a waiver of this code. We will disclose amendments to or waivers of the code as required by law and the applicable rules of the NYSE American.
Corporate Governance Guidelines. We have 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, for independence standards and responsibilities, for approval procedures for ISAs and that our audit committee chairman preside at all
meetings of the independent directors.
Availability of Corporate Governance Documents. A copy of each of our audit committee charter, code of business conduct and ethics and corporate governance
guidelines is available on our website at www.compx.com under the corporate section.
Employee, Officer and Director Hedging. We have not adopted any policies or practices regarding hedging of our equity securities by our employees (including
officers) or directors. However, our employees (including officers) and directors must comply with our insider trading policy, which applies to hedging transactions involving our securities as it does to transactions in our securities generally.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
AND OTHER INFORMATION
Compensation Discussion and Analysis. This compensation discussion and analysis describes the key principles and factors underlying our
executive compensation policies for our named executive officers. In 2019, we employed one of our named executive officers. Contran employed and directly compensated our five other named executive officers who provided their services to us in 2019
under our ISA with Contran.
As defined in the Glossary of Terms at the beginning of this proxy statement, the phrase “named executive officers” refers to the six persons whose compensation is summarized in the 2019 Summary
Compensation Table in this proxy statement. Such phrase is not intended to refer, and does not refer, to all of our executive officers.
Nonbinding Advisory Stockholder Vote on Executive Officer Compensation. For the 2019 annual meeting of stockholders, we submitted a nonbinding advisory
proposal recommending the stockholders adopt a resolution approving the compensation of our named executive officers as disclosed in the 2019 proxy statement. At the annual meeting, the resolution received the affirmative vote of 94.1% of the
eligible votes. We considered the favorable result and determined not to make any material changes to our compensation practices.
Compensation of our Named Executive Officer Employed by Us. We have one named executive officer employed by us. Scott C. James is our president and chief
executive officer. Mr. James was an executive officer and employed by us for all of the last three years, and became our chief executive officer in May 2017.
Overview. Prior to 2017, we decided to forgo long-term compensation (other than defined contribution plans that are generally available on a non-discriminatory basis to all employees) and implemented a compensation program that is primarily cash-based, with minimal perquisites, if any. Our objectives for the primarily cash-based compensation
program as it relates to our senior officers, including Mr. James, are to:
•
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have a total individual compensation package that is easy to understand;
|
•
|
encourage them to maximize long-term stockholder value; and
|
•
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achieve a balanced compensation package that would attract and retain highly qualified senior officers and appropriately reflect each such officer’s individual performance, contributions and general market
value.
|
In furtherance of our objectives and in an effort to separate annual operating planning from annual incentive compensation, we implemented discretionary incentive bonuses for our senior officers. As a result, annual
compensation for Mr. James primarily consists of a base salary and a discretionary incentive bonus.
We do not base Mr. James’ compensation on any specific measure of, or formula based upon, our financial performance, although we do consider our financial performance as one factor in determining his
compensation. We determine the amount of each component of such compensation solely in our collective business judgment and experience, without performing any independent market research. We have not entered into any written employment agreements
with Mr. James.
Base Salary. We have established Mr. James’ annual base salary based on his responsibility and experience. We pay this portion of his compensation to provide
Mr. James with a reliable amount of compensation for the year, subject to his continued at-will employment and satisfactory performance for his services at the level of his responsibilities. Robert D. Graham, who is our vice chairman of the board,
conducts an annual internal review of Mr. James’ salary level and makes a recommendation on the salary to our management development and compensation committee. The committee reviews the recommendation and may take such action, including
modifications to the recommendation, as it deems appropriate. The recommendation of Mr. Graham and the determinations of our management development and compensation committee are based on our evaluations of the past year annual base-salary amounts
with adjustments made as a result of our past and expected future financial performance, inflation, past and potential future individual performance and contributions or alternative career opportunities that might be available to Mr. James, without
performing any independent market research.
In determining increases in Mr. James’ base salary for each of the last three years, we did not use any specific measure of, or formula based upon, our financial performance, although we did consider
our financial performance as one factor in determining such increases. There is no specific weighting of factors in determining the increases. Mr. James’ base salary is disclosed in his salary column in the 2019 Summary Compensation Table in this
proxy statement for each of the last three years.
Annual Incentive Bonus. We pay a discretionary incentive bonus annually in cash to Mr. James to motivate him to
achieve higher levels of performance in attaining our corporate goals and reward him for such performance. We determine the amount of any such incentive bonus on a year-end discretionary evaluation of Mr. James’ responsibility, performance, attitude
and potential. The amount of the incentive bonus is also influenced by the amount of his base salary and prior year incentive bonus, as well as our financial performance. We based our award of incentive bonuses for Mr. James primarily upon the
recommendation of Mr. Graham and upon the determinations of our management development and compensation committee, which may take such action, including modifications to the recommendation, as it deems appropriate.
In determining Mr. James’ bonus for each of the last three years, we did not use any specific overall performance measures or any specific measure of, or formula based upon, our financial
performance, although we did consider our financial performance as one factor in determining such bonuses. Additionally, there is no specific weighting of factors considered in the determination of the annual incentive bonus. We approved
discretionary incentive bonuses for Mr. James in the last three years as a percentage of his base salary as follows.
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Discretionary Incentive Bonuses as a
Percentage of Base Salary
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Scott C. James
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128%
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129%
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116%
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(1)
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These bonuses were approved by our management development and compensation committee in the first quarter of the following year, and such bonuses were paid in such following year for performance in the
reported year.
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The 2019 discretionary incentive bonus for Mr. James recognized, among other things, the continuation of our higher sales in 2019 in both of our segments as compared to 2018 and our continued strong operating
performance. The 2018 discretionary incentive bonus for Mr. James recognized, among other things, our higher sales and operating income in 2018 in both of our segments as compared to 2017, and Mr. James’ greater level of experience as chief executive
officer. The 2017 discretionary incentive bonus for Mr. James recognized, among other things, the promotion of Mr. James in 2017 to our chief executive officer, improved revenues in 2017 in both of our segments as compared to 2016, and continued
strong operating income. These discretionary incentive bonuses are disclosed in the bonus column in the 2019 Summary Compensation Table in this proxy statement.
Defined Contribution Plans. We pay discretionary annual contributions to the CompX Capital Accumulation Plan, a profit sharing defined contribution plan, and
The Employee 401(k) Retirement Plan, a 401(k) defined contribution plan. Participants of these plans are employees of certain of our operations. In March of each year, upon the recommendation of our chief executive officer and the approval of our
management development and compensation committee, we contributed for the plan year that ended on December 31 of the prior year, subject to certain limitations under the respective plans and the U.S. Internal Revenue Code of 1986, as amended:
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to the CompX Capital Accumulation Plan for each of the last three plan years, 7.25% of that year’s earnings before taxes of our combined CompX security products division and Livorsi marine components unit for
each of the last three years (with certain adjustments); and
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•
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to our 401(k) plan for each of the last three plan years, a matching contribution from a pool of 5% of the earnings before taxes of the business unit up to 100% of the participant’s eligible earnings.
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Mr. James received such contributions for each of the last three years. These contributions are included in his all other compensation column in the 2019 Summary Compensation Table in this proxy
statement.
Compensation of our Named Executive Officers Employed by Contran. For each of the last three years, certain of our named executive officers were employed by
Contran and provided their services to us pursuant to our ISA with Contran. Our named executive officers who provided services to us pursuant to our ISA with Contran are as follows:
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Robert D. Graham
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Vice Chairman of the Board
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Kelly D. Luttmer
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Executive Vice President and Chief Tax Officer
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Andrew B. Nace
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Executive Vice President
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Amy A. Samford
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Vice President and Chief Financial Officer
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James W. Brown
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Former Vice President, Chief Financial Officer and Controller
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The nature of the duties of each of our named executive officers who are employees of Contran is consistent with the duties normally associated with the officer titles and positions such officer holds
with us.
Intercorporate Services Agreement with Contran. We pay Contran a fee for services provided pursuant to our ISA with Contran, which fee was
approved by our independent directors after receiving the recommendation of our management development and compensation committee and the concurrence of our chief financial officer. Such services provided under this ISA included the services of our
named executive officers employed by Contran, and as a result a portion of the aggregate ISA fee we pay to Contran is paid with respect to services provided to us by such named executive officers. The nature of the duties of each of our executive
officers who are employees of Contran is consistent with the duties normally associated with the officer titles and positions such officer holds with us.
The charge under this ISA reimburses Contran for its cost of employing the personnel who provide the services by allocating such cost to us based on the estimated percentage of time
such personnel were expected to devote to us over the year. The amount of the fee we paid for each year under this ISA for a person who provided services to us represents, in management’s view, the reasonable equivalent of “compensation” for such
services. See the Intercorporate Services Agreements part of the Certain Relationships and Transactions section of this proxy statement for the aggregate amount we paid to Contran in 2019 under this ISA. Under the various ISAs among Contran and its
subsidiaries and affiliates, we shared the cost of the employment of our executive officers employed by Contran with Contran and certain of its other publicly and privately held subsidiaries. For our named executive officers employed by Contran, the
portion of the annual charge we paid for each of the last three years to Contran under this ISA attributable to each of their services, as applicable, is set forth in the 2019 Summary Compensation Table in this proxy statement. As discussed further
below, the amount charged under the ISA is based upon Contran’s cost of employing or engaging the personnel who provide the services to us (including the services of our named executive officers employed by Contran) by allocating such cost to us
based on the estimated percentage of time such personnel were expected to devote to us over the year. The amount charged under the ISA is not dependent upon our financial performance.
We believe the cost of the services received under our ISA with Contran, after considering the quality of the services received, is fair to us and is no less favorable to us than we could otherwise
obtain from an unrelated third party for comparable services, based solely on our collective business judgment and experience without performing any independent market research.
In the early part of each year, Contran’s management, including certain of our executive officers, estimates the percentage of time that each Contran employee, including certain of our named
executive officers, is expected to devote in the upcoming year to Contran and its subsidiaries and affiliates, including us. Contran’s management then allocates Contran’s cost of employing each of its employees among Contran and its various
subsidiaries based on such estimated percentages. Contran’s aggregate cost of employing each of its employees comprises:
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the annualized base salary of such employee at the beginning of the year;
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an estimate of the bonus Contran will pay or accrue for such employee (other than bonuses, if any, for specific matters) for the year, using as a reasonable approximation for such bonus the actual bonus that
Contran paid or accrued for such employee in the prior year; and
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Contran’s portion of the social security and medicare taxes on such base salary and an estimated overhead factor (25% for each of 2019, 2018 and 2017) applied to the base salary for the cost of medical and
life insurance benefits, unemployment taxes, disability insurance, defined benefit and defined contribution plan benefits, professional education and licensing and costs of providing an office, equipment and supplies related to providing
such services.
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Contran’s senior management subsequently made such adjustments to the details of the proposed ISA charge as they deemed necessary for accuracy, overall reasonableness and fairness to us.
In the first quarter of each year, the proposed charge for that year under our ISA with Contran was presented to our management development and compensation committee, and the committee considered
whether to recommend that our board of directors approve the ISA charge. Among other things during such presentation, the committee was informed of:
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the quality of the services Contran provides to us, including the quality of the services certain of our executive officers provide to us;
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the comparison of the ISA charge and number of full-time equivalent employees reflected in the charge by department for the prior year and proposed for the current year;
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the comparison of the prior year and proposed current year charges by department and in total and such amounts as a percentage of Contran’s similarly calculated costs for its departments and in total for
those years;
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the comparison of the prior year and proposed current year average hourly rate; and
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the concurrence of our chief financial officer as to the reasonableness of the proposed charge.
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In determining whether to recommend that the board of directors approve the proposed ISA fee to be charged to us, the management development and compensation committee considers the three elements of
Contran’s cost of employing the personnel who provide services to us, as discussed above, including the cost of employing certain of our named executive officers, in the aggregate and not individually. After considering the information contained in
such presentations, and following further discussion and review, our management development and compensation committee recommended that our board of directors approve the proposed ISA fee after concluding, based on their collective business judgment
and experience without performing any independent market research, that:
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the cost to employ the additional personnel necessary to provide the quality of the services provided by Contran would exceed the proposed aggregate fee to be charged by Contran to us under our ISA with
Contran; and
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the cost for such services would be no less favorable than could otherwise be obtained from an unrelated third party for comparable services.
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In reaching its recommendation, our management development and compensation committee did not review:
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any ISA charge from Contran to any other publicly held parent or sister company, although such charge was separately reviewed by the management development and compensation committee of the applicable
company; and
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the compensation policies of Contran or the amount of time our named executive officers employed by Contran are expected to devote to us because:
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o
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each of our named executive officers employed by Contran provides services to many companies related to Contran, including Contran itself, and the percentage of time devoted to each company by such named
executive officers varies;
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the fee we pay to Contran under our ISA with Contran each year does not represent all of Contran’s cost of employing each of such named executive officers;
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Contran and these other companies related to Contran absorb the remaining amount of Contran’s cost of employing each of such named executive officers; and
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the members of our management development and compensation committee consider the factors discussed above, applying their collective business judgment and experience, in determining whether to recommend
that the proposed ISA fee for each year be approved by the full board of directors.
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