SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant: [ X ]
Filed by a Party other than the Registrant: [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[ X ] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Keystone Consolidated Industries, Inc.
------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth amount
on which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO GOES HERE]
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
August 27, 2003
To Our Stockholders:
You are cordially invited to attend the 2003 Annual Meeting of
Stockholders of Keystone Consolidated Industries, Inc. that will be held on
October 2, 2003, at 10:00 a.m., local time, at Keystone's corporate offices at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas, Texas. The matters
to be acted upon at the meeting are described in the attached Notice of Annual
Meeting of Stockholders and Proxy Statement.
Whether or not you plan to attend the meeting, please complete, date,
sign and return the enclosed proxy card or voting instruction form in the
accompanying envelope as promptly as possible to ensure that your shares are
represented and voted in accordance with your wishes. 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 Keystone's bylaws.
Sincerely,
/s/ Glenn R. Simmons
Glenn R. Simmons
Chairman of the Board
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on October 2, 2003
To the Stockholders of
Keystone Consolidated Industries, Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Keystone
Consolidated Industries, Inc., a Delaware corporation ("Keystone"), will be held
on Thursday, October 2, 2003, at 10:00 a.m., local time, at the offices of
Keystone at 5430 LBJ Freeway, Suite 1740, Dallas, Texas, for the following
purposes:
(1) To elect three directors each to serve until Keystone's 2006
annual meeting of stockholders (or the 2004 annual meeting of
stockholders if Proposal 2 to the Annual Meeting is approved)
and until their successors are duly elected and qualified;
(2) To approve a proposal to amend Keystone's Restated Certificate
of Incorporation to eliminate classification of Keystone's
board of directors (the "Board of Directors");
(3) To approve a proposal to amend Keystone's Restated Certificate
of Incorporation to increase the total number of authorized
shares of Keystone common stock, par value $1.00 per share,
from 12,000,000 shares to 27,000,000 shares; and
(4) To transact such other business as may properly come before
the meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on August 8,
2003, as the record date for determining the stockholders entitled to notice of
and to vote at the Annual Meeting. A complete list of the stockholders entitled
to vote at the Annual Meeting will be made available for inspection by any
stockholder of record at the offices of Keystone during ordinary business hours
from August 14, 2003, through the time of the Annual Meeting for any purpose
germane to the Annual Meeting.
In order to ensure that you are represented at the meeting, please
complete the enclosed proxy card or voting instruction form and return it
promptly in the accompanying postage-paid envelope. If you choose, you may still
vote in person at the Annual Meeting even though you previously signed your
proxy. You may revoke your proxy by following the procedures specified in the
accompanying proxy statement. The Inspector of Election for the Annual Meeting
in accordance with Keystone's bylaws, whether given by proxy or in person at the
Annual Meeting, will hold your vote in confidence.
By order of the Board of Directors,
Sandra K. Myers
Secretary
Dallas, Texas
August 27, 2003
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held on October 2, 2003
-------------
This proxy statement and the accompanying proxy card are being
furnished to the stockholders of Keystone Consolidated Industries, Inc., a
Delaware corporation ("Keystone"), in connection with the solicitation of
proxies by and on behalf of the board of directors of Keystone (the "Board of
Directors") for use at the 2003 Annual Meeting of Stockholders to be held at
10:00 a.m., local time, on Thursday, October 2, 2003, at Keystone's offices at
5430 LBJ Freeway, Suite 1740, Dallas, Texas and at any adjournment or
postponement thereof (the "Annual Meeting"). This proxy statement and the
accompanying proxy card are first being mailed to stockholders on or about
August 29, 2003. Keystone's annual report for the year ended December 31, 2002,
Current Report on Form 8-K dated August 14, 2003 and Quarterly Report on Form
10-Q for the quarter ended June 30, 2002 are enclosed herewith.
Only stockholders of record at the close of business on August 8, 2003,
(the "Record Date") will be entitled to vote at the Annual Meeting. As of the
Record Date, there were 10,068,450 shares of Keystone's common stock, $1.00 par
value per share ("Common Stock"), outstanding and entitled to vote. Each share
of Common Stock entitles the holder thereof to one vote. The presence, in person
or by proxy, of the holders of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting is necessary to constitute a quorum for the
conduct of business at the Annual Meeting. Shares of Common Stock that are voted
to abstain from any business coming before the Annual Meeting and broker/nominee
non-votes will be counted as being in attendance at the Annual Meeting for
purposes of determining whether a quorum is present.
If a quorum is present, nominees receiving a plurality of the
affirmative votes of the shares present in person or represented at the Annual
Meeting and entitled to vote will be elected until their successors are duly
elected and qualified (except in cases where no successor is elected due to a
reduction in the size of the Board of Directors), or their earlier resignation,
removal from office, death or incapacity. Neither shares as to which the
authority to vote on the election of directors has been withheld nor
broker/nominee non-votes will be counted as affirmative votes to elect director
nominees to the Board of Directors. However, since director nominees need only
receive the vote of a plurality of the shares represented at the Annual Meeting
and entitled to vote, a vote withheld from a particular nominee will not affect
the election of such nominee.
The approval of each of the two proposals to amend Keystone's Restated
Certificate of Incorporation requires the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting.
Shares of Common Stock that are voted to abstain and broker/nominee non-votes
will not be counted as votes for or against any of such proposals. However,
because approval of each proposal to amend Keystone's Restated Certificate of
Incorporation requires the affirmative vote of a majority of the outstanding
shares of Common Stock entitled to vote at the Annual Meeting (and not simply of
those shares voted, in person or by proxy, at the Annual Meeting), an abstention
or broker non-vote will have the same effect as a vote "against" the proposal.
Except as applicable laws may otherwise provide, the approval of any
other matter that may properly come before the Annual Meeting will require the
affirmative vote of a majority of the shares represented and entitled to vote at
the Annual Meeting. Shares of Common Stock that are voted to abstain from any
other business coming before the Annual Meeting and broker/nominee non-votes
will not be counted as votes for or against any such other matter.
Unless otherwise specified, the agents designated in the proxy card or
voting instruction form will vote the shares represented by a proxy at the
Annual Meeting "FOR" the election of each of the nominees for director, "FOR"
each of the two proposals to amend Keystone's Restated Certificate of
Incorporation and, to the extent allowed by the federal securities laws, in the
discretion of the agents on any other matter that may properly come before the
Annual Meeting.
Contran Corporation, a privately owned diversified holding company
("Contran"), and related entities hold approximately 49.6% of the outstanding
shares of Common Stock as of the Record Date and have indicated their intention
to vote such shares "FOR" the election of all of the nominees for director as
set forth in this proxy statement and "FOR" each of the two proposed amendments
to Keystone's Restated Certificate of Incorporation. If such shares are
represented and voted as indicated at the Annual Meeting and all other
outstanding shares of Common Stock are represented and voted at the Annual
Meeting, the additional affirmative vote of approximately 0.5% or more of the
outstanding shares of Common Stock will assure the election of each of the
nominees for director and the approval of each of the two proposed amendments to
Keystone's Restated Certificate of Incorporation. In addition, if a quorum is
present, all such nominees will be elected if no other person receives the
affirmative vote of more shares than the number of shares voted by Contran and
its related entities.
Mellon Investor Services LLC ("Mellon"), the transfer agent and
registrar for the Common Stock, has been appointed by the Board of Directors to
receive proxies, tabulate the vote and serve as Inspector of Election at the
Annual Meeting. Mellon shall keep all proxies and ballots delivered to it
confidential in accordance with Keystone's bylaws.
Any stockholder executing a proxy has the power to revoke it at any
time before it is voted. A proxy may be revoked by delivering to Mellon a
written revocation of the proxy or a duly executed proxy bearing a later date or
by voting in person at the Annual Meeting. Attendance at the Annual Meeting
alone, however, will not in itself constitute the revocation of a proxy.
Employees participating in the Keystone Consolidated Industries, Inc.
Deferred Incentive Plan, who are beneficial owners of Common Stock under such
plan, may use the enclosed voting instruction form to instruct the plan trustees
how to vote the shares held for such employees, and the trustees will, subject
to the terms of the plan, vote such shares in accordance with such instructions.
Keystone 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 of proxies by use of
the mail, officers, directors and employees of Keystone may solicit proxies by
written communication, telephone or personal calls for which such persons will
receive no special compensation. Upon request, Keystone will reimburse banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries
for their reasonable out-of-pocket expenses incurred in distributing proxy
materials and voting instructions to the beneficial owners of Common Stock held
by such entities.
ELECTION OF DIRECTORS
(Proposal 1)
Keystone's Restated Certificate of Incorporation currently provides for
the Board of Directors to be divided into three classes. The bylaws of Keystone
provide that the Board of Directors shall consist of not less than five and not
more than nine persons, as determined by the Board of Directors from time to
time. Although there are currently only six directors serving, the Board of
Directors has set the number of directors at seven to accommodate the nomination
of Keith R. Coogan to the Board of Directors. Keystone's current Board of
Directors is composed of Dr. Thomas E. Barry and William Spier, whose current
terms are scheduled to expire in 2003; Paul M. Bass, Jr. and J. Walter Tucker,
Jr., whose current terms are scheduled to expire in 2004; and Glenn R. Simmons
and Steven L. Watson, whose current terms are scheduled to expire in 2005. Keith
R. Coogan is a first-time director nominee for a term expiring in 2006. If
Proposal 2 to the Annual Meeting is approved, this year's nominees, Dr. Barry
and Messrs. Coogan and Spier, if elected, will be elected for terms expiring in
2004 and all other Keystone directors will serve for terms expiring in 2004. If
Proposal 2 to the Annual Meeting is not approved, this year's nominees, if
elected, will be elected for terms expiring in 2006 and all other Keystone
directors will serve for their current terms.
NOMINEES FOR BOARD OF DIRECTORS
The nominees for election as Keystone directors for terms expiring at
the 2006 annual meeting of stockholders (or at the 2004 annual meeting of
stockholders if Proposal 2 to the Annual Meeting is approved) have provided the
following biographical information to the Board of Directors. All of the
nominees have consented to serve if elected to the Board of Directors. If any
individual nominated for a directorship is not available for election, which is
not anticipated, votes will be cast by the proxy holder for such substitute
nominee as shall be designated by the Board of Directors.
THOMAS E. BARRY Director since 1989
Dr. Barry, age 60, is vice president for executive affairs at Southern
Methodist University and has been a professor of marketing in the Edwin L. Cox
School of Business at Southern Methodist University since prior to 1998. Dr.
Barry is also a director of Valhi, Inc. ("Valhi"), a publicly held diversified
holding company affiliated with Keystone. Dr. Barry is a nominee for a term
expiring at the 2006 annual meeting of stockholders (or at the 2004 annual
meeting of stockholders if Proposal 2 to the Annual Meeting is approved).
KEITH R. COOGAN Nominee
Mr. Coogan, age 51, is being nominated to the Board of Directors for
the first time. He is chief executive officer of Software Spectrum, Inc., a
global business-to-business software services provider that is currently a
wholly owned subsidiary of Level 3 Communications, but from 1991 to June 2002
was a publicly traded corporation. Mr. Coogan is also a director of CompX
International Inc. ("CompX"), a manufacturer of ergonomic computer support
systems, precision ball bearing slides and security products that is affiliated
with Keystone. From 1990 to October 2002, he served in various other executive
officer positions of Software Spectrum, including vice president of finance and
operations and chief operating officer. Mr. Coogan is a nominee for a term
expiring at the 2006 annual meeting of stockholders (or at the 2004 annual
meeting of stockholders if Proposal 2 to the Annual Meeting is approved).
WILLIAM SPIER Director since 1996
Mr. Spier, age 68, is president and chairman of Sutton Holding Corp., a
private investment firm, and has served in such capacity since prior to 1998.
Mr. Spier is chairman of the board of Empire Resources, Inc. and has served in
such capacity since September 1999. Mr. Spier is a nominee for a term expiring
at the 2006 annual meeting of stockholders (or at the 2004 annual meeting of
stockholders if Proposal 2 to the Annual Meeting is approved).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES FOR
THE BOARD OF DIRECTORS SET FORTH ABOVE.
OTHER BOARD MEMBERS
PAUL M. BASS, JR. Director since 1989
Mr. Bass, age 68, is vice chairman of First Southwest Company, a
privately owned investment banking firm, and has served in such capacity since
prior to 1998. Mr. Bass is also a director of CompX and chairman of the board of
MACC Private Equities Inc. Mr. Bass is currently serving as chairman of the
board of trustees of Southwestern Medical Foundation. Mr. Bass' term as a
director expires at the 2004 annual meeting of stockholders.
GLENN R. SIMMONS Director since 1986
Mr. Simmons, age 75, is chairman of the board of Keystone and has
served in such capacity since prior to 1998. Since prior to 1998, Mr. Simmons
has served as vice chairman of the board of directors of Contran, the parent
corporation of Valhi and Keystone. Mr. Simmons has been a director of Contran
and an executive officer and/or director of various companies related to Contran
since prior to 1998. He is vice chairman of the board of Valhi, chairman of the
board of CompX, a director of NL Industries, Inc. ("NL"), a titanium dioxide
pigments company that is affiliated with Valhi; and a director of Titanium
Metals Corporation ("TIMET"), a company engaged in the titanium metals industry
that is affiliated with Valhi. Valhi, CompX, NL and TIMET may be deemed to be
affiliates of Keystone. Mr. Simmons' term as a director expires at the 2005
annual meeting of stockholders (or at the 2004 annual meeting of stockholders if
Proposal 2 to the Annual Meeting is approved).
J. WALTER TUCKER, JR. Director since 1971
Mr. Tucker, age 77, is vice chairman of the board of Keystone and has
served in such capacity since prior to 1998. Mr. Tucker has served as a
director, president and chief executive officer of Tucker & Branham, Inc., a
privately owned real estate, mortgage banking and insurance firm since prior to
1998. Mr. Tucker is also a director of Valhi. Since prior to 1998, he has also
been an executive officer and/or director of various companies related to Valhi
and Contran. Mr. Tucker's term as a director expires at the 2004 annual meeting
of stockholders.
STEVEN L. WATSON Director since 2000
Mr. Watson, age 52, has been president and a director of Valhi and
Contran since 1998 and chief executive officer of Valhi since 2002. Prior to
1998, he served as vice president and secretary of Valhi and Contran. He is also
a director of CompX, NL and TIMET. Mr. Watson has served as an executive officer
and/or director of various companies related to Valhi and Contran since 1980.
Mr. Watson's term as a director expires at the 2005 annual meeting of
stockholders (or at the 2004 annual meeting of stockholders if Proposal 2 to the
Annual Meeting is approved).
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 2002, the Board of Directors met four times. Each of the
directors of Keystone were present at more than 75% of the meetings of the Board
of Directors and the committees of the Board of Directors on which they served.
The Board of Directors has established and delegated authority to the
following four standing committees.
Executive Committee. The Executive Committee, which did not
meet during 2002, exercises all powers and authority of the Board of
Directors in the management of the business and affairs of Keystone, to
the extent permitted by Delaware law, when a meeting of the Board of
Directors is not possible. The members of the Executive Committee are
Messrs. Bass (chairman), Simmons, Spier and Tucker.
Master Trust Committee. The Master Trust Committee, which did
not meet during 2002, exercises the powers, rights and responsibilities
included under Articles 3 and 10 of the Keystone Consolidated
Industries, Inc. Master Retirement Trust. The members of the Master
Trust Committee are Messrs. Bass and Tucker.
Audit Committee. The Audit Committee, which met three times
during 2002, reviews and evaluates significant matters relating to the
audit and internal controls of Keystone, and reviews the scope and
results of audit and non-audit assignments of Keystone's independent
accountants. The principal responsibilities of the Audit Committee are
to serve as an independent and objective party to review Keystone's
auditing, accounting and financial reporting processes. For further
information on the role of the Audit Committee, see "Independent
Auditor Matters--Audit Committee Report." The members of the Audit
Committee are Messrs. Bass (chairman), Barry and Spier.
Compensation Committee. The Compensation Committee, which met
once during 2002, reviews and approves the amounts and forms of certain
compensation paid to executive officers. The members of the
Compensation Committee are Messrs. Barry (chairman) and Bass.
The Board of Directors does not have a Nominating Committee or any
committee performing a similar function. The full Board of Directors acts on all
matters that would be considered by such a committee. See "Stockholder
Proposals" for procedures for making nominations for directors of Keystone.
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 Meeting. The Board of Directors has previously established, and from time
to time may establish, other committees to assist it in the discharge of its
responsibilities.
COMPENSATION OF DIRECTORS
Directors of Keystone receive an annual retainer of $15,000, a fee of
$750 per day for each Board of Directors meeting and/or committee meeting
attended, and reimbursement for reasonable expenses incurred in attending Board
of Directors and/or committee meetings. Messrs. Glenn R. Simmons and Steven L.
Watson resumed receiving fees for serving as directors in April 2002. The
Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive Plan provides
for awards or grants of stock options, stock appreciation rights, restricted
stock, performance grants and other awards to key individuals, including
directors, performing services for Keystone or its subsidiaries. Under the 1997
Long-Term Incentive Plan, directors are annually granted stock options
exercisable for 1,000 shares of Common Stock. These options have an exercise
price equal to the closing sales price per share of Common Stock on the date of
grant, have a term of ten years and fully vest on the first anniversary of the
date of grant. The directors waived their rights to their 2002 annual grant of
stock options, and, accordingly, no annual grants were made in 2002. In addition
to serving as directors, Messrs. Simmons, Watson and Tucker provide consulting
services to Keystone. Keystone pays Contran for the consulting services provided
by Messrs. Simmons and Watson pursuant to Intercorporate Services Agreements
approved periodically between Contran and Keystone (each an "Intercorporate
Services Agreement"). Keystone pays Tucker & Branham, Inc. for the consulting
services provided by Mr. Tucker. See "Certain Business Relationships and Related
Transactions."
EXECUTIVE OFFICERS
In addition to Glenn R. Simmons as chairman of the board and J. Walter
Tucker, Jr. as vice chairman, the following are currently executive officers of
Keystone:
DAVID L. CHEEK, age 53, is president and chief executive officer of
Keystone and has served in such capacities since April 2003. He was president
and chief operating officer from October 2001 to April 2003. Mr. Cheek has
served as president, Keystone Steel & Wire, a division of Keystone, since March
2000 and was vice president of manufacturing, Keystone Steel & Wire, from March
1999 to March 2000. He was vice president of operations, Atlantic Steel,
Atlanta, Georgia from 1996 to 1999.
BERT E. DOWNING, JR., age 47, is vice president, chief financial
officer, corporate controller and treasurer of Keystone and has served in such
capacities since December 2002. He has served as vice president - corporate
controller and treasurer since May 2001, as vice president and corporate
controller since March 2000 and as corporate controller since prior to 1998.
SANDRA K. MYERS, age 60, has served as corporate secretary of Keystone
and as executive secretary of Contran since prior to 1998.
EXECUTIVE COMPENSATION
The Summary Compensation Table set forth below provides information
concerning annual and long-term compensation paid by Keystone for services
rendered in all capacities to Keystone and its subsidiaries during 2002, 2001
and 2000 by each of the most highly compensated individuals who were executive
officers of Keystone at December 31, 2002 (the "named executive officers"). For
amounts Keystone incurred that were attributable to the services Glenn R.
Simmons provided Keystone in 2002, 2001 and 2000 under Intercorporate Services
Agreements, see "Certain Business Relationships and Related Transactions."
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
-----------------
Awards
Annual Compensation -----------------
----------------------------------------------------- Shares
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation (1) Options (#) Compensation
- -------------------------- ------ ------------- -------------- ------------------ ------------------ --------------
David L. Cheek (2)....... 2002 $ 250,000 $ -0- $ -0- -0- $ 2,709 (3)
President and Chief 2001 203,388 -0- -0- -0- 1,534 (3)
Executive Officer 2000 173,269 -0- 235,280 (4) 27,000 3,400 (3)
Bert E. Downing, Jr....... 2002 200,000 -0- -0- -0- 35 (3)
Vice President, Chief 2001 170,000 -0- -0- -0- 1,918 (3)
Financial Officer, 2000 170,000 -0- -0- 15,000 4,758 (3)
Corporate Controller
and Treasurer
- --------------------
(1) An amount for other annual compensation is disclosed only if the amount
for other annual compensation exceeds the level required for reporting
pursuant to Securities and Exchange Commission (the "SEC") rules.
(2) Mr. Cheek became an executive officer of Keystone as of March 24, 2000.
(3) All other compensation for the last three years for each of the
following named executive officers consisted of (i) Keystone's matching
contributions pursuant to Keystone's 401(k) plan; and (ii) accruals to
unfunded reserve accounts attributable to certain limits under the
Internal Revenue Code of 1986, as amended (the "Code"), with respect to
the 401(k) plan and Keystone's pension plan, which amounts are payable
upon the named executive officer's retirement, the termination of his
employment with Keystone or to his beneficiaries upon his death; as
follows:
Unfunded Reserve Account Accruals
-----------------------------------
Account Accruals
Related to
Employer's 401(k) and Interest Accruals
401(k) Pension Plan Above 120% of the
Named Executive Officer Year Contributions (a) Limitations AFR Rate (b) Total
--------------------------- ------ ------------------ ------------- ------------------ -----------
David L. Cheek........... 2002 $ -0- $ 2,697 $ 12 $ 2,709
2001 -0- 1,534 -0- 1,534
2000 3,400 -0- -0- 3,400
Bert E. Downing, Jr...... 2002 -0- -0- 35 35
2001 -0- 1,845 73 1,918
2000 3,400 1,311 47 4,758
(a) Keystone did not make a matching contribution to the 401(k)
plan for 2002 or 2001. Keystone's matching contribution to the
401(k) plan for 2000 was made in cash.
(b) The agreements for these unfunded reserve accounts provide
that the balance of such accounts accrue credits in lieu of
interest compounded quarterly. Pursuant to SEC rules, the
amounts shown represent the portion of the credit accruals to
the unfunded reserve accounts that exceeds 120% of the
applicable federal long-term rate as prescribed by the Code
(the "AFR Rate"). The AFR Rate used for such computations was
the AFR Rate in effect on December 31, 2002, 2001 and 2000,
for the date that the credit accruals for 2002, 2001 and 2000,
respectively, were credited to the unfunded reserve account.
(4) Mr. Cheek's other annual compensation consists of certain relocation
expenses Keystone paid on his behalf, which include an amount to pay
his related income taxes on Keystone's payment of certain of his
relocation expenses.
No Grants of Stock Options or Stock Appreciation Rights. Keystone did
not grant any stock options or stock appreciation rights ("SARs") during 2002.
Stock Option Exercises and Holdings. The following table provides
information, with respect to the named executive officers, concerning the value
of unexercised stock options for Common Stock held as of December 31, 2002. In
2002, no named executive officer exercised any stock options. Keystone has not
granted any SARs.
DECEMBER 31, 2002 OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
December 31, 2002 (#) at December 31, 2002 (1)
--------------------------------- ----------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------- --------------- --------------- ----------------- --------------
David L. Cheek 33,000 9,000 $ -0- $ -0-
Bert E. Downing, Jr. 37,000 5,000 -0- -0-
- --------------------
(1) The values shown in the table are based on the $.53 per share closing
price of the Common Stock on December 31, 2002, as reported by the OTC
Bulletin Board, less the exercise price of the options.
Pension Plan. Keystone maintains a qualified, noncontributory defined
benefit plan which provides defined retirement benefits to various groups of
eligible employees including executive officers. Normal retirement age under
Keystone's pension plan is age 65. The defined benefit for salaried employees,
including officers, is based on a straight life annuity. An individual's monthly
benefit is the sum of the following: (a) for credited service prior to January
1, 1981, the amount determined by his or her average monthly cash compensation
for the five years of his or her highest earnings prior to January 1, 1981,
multiplied by 1.1%, multiplied by the years of credited service, plus (b) for
each year of service between 1980 and 1989, the amount determined by the sum of
1.2% multiplied by his or her average monthly cash compensation that year up to
the social security wage base and 1.75% multiplied by his or her average monthly
cash compensation that year in excess of the social security wage base, plus (c)
for each year subsequent to 1989, the amount determined by 1.2% multiplied by
his or her average monthly cash compensation that year, but not less than $14.00
per month.
The estimated annual benefits payable upon retirement at normal
retirement age for each of the named executive officers, assuming continued
employment with Keystone until normal retirement age at current salary levels,
are: David L. Cheek, $36,847; and Bert E. Downing, Jr., $59,921.
SECURITY OWNERSHIP OF MANAGEMENT
As of the Record Date, Keystone's directors, director nominee, the
named executive officers and the directors and executive officers as a group,
beneficially owned, as defined by the rules of the SEC, the shares of Common
Stock shown in the following table.
Common Stock
-----------------------------------------
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership (1) Class (1)(2)
- ------------------------ -------------------------- --------------
Thomas E. Barry......................................................... 9,000 (3)(4) *
Paul M. Bass, Jr........................................................ 14,000 (3)(4) *
David L. Cheek.......................................................... 42,000 (3)(4) *
Keith R. Coogan......................................................... -0- *
Bert E. Downing, Jr..................................................... 44,007 (3)(4) *
Glenn R. Simmons........................................................ 242,650 (3)(4)(5) 2.4%
William Spier........................................................... 386,262 (3) 3.8%
J. Walter Tucker, Jr.................................................... 160,450 (3)(4) 1.6%
Steven L. Watson........................................................ 3,250 (3)(4) *
All directors, nominees and executive officers as a group (10 persons). 925,219 (3)(4)(5) 9.0%
- --------------------
* Less than 1%.
(1) All beneficial ownership is sole and direct except as otherwise set
forth herein. Information as to the beneficial ownership of Common
Stock has either been furnished to Keystone by or on behalf of the
indicated persons or is taken from reports on file with the SEC. The
number of shares and percentage of ownership of Common Stock for each
person or group assumes the exercise by such person or group (exclusive
of the exercise by others) of stock options that such person or group
may exercise within 60 days subsequent to the Record Date.
(2) The percentages are based on 10,068,450 shares of Common Stock
outstanding as of the Record Date.
(3) The shares of Common Stock shown as beneficially owned by such person
or group include the following number of shares such person or group
has the right to acquire upon the exercise of stock options granted
pursuant to Keystone's various stock option plans that such person or
group may exercise within 60 days subsequent to the Record Date:
Shares of Common Stock
Issuable Upon the Exercise
of Stock Options On or Before
Name of Beneficial Owner October 7, 2003
-------------------------------------------------------------------------- ------------------------------
Thomas E. Barry........................................................... 7,000
Paul M. Bass, Jr.......................................................... 7,000
David L. Cheek............................................................ 42,000
Bert E. Downing, Jr....................................................... 42,000
Glenn R. Simmons.......................................................... 127,000
William Spier............................................................. 7,000
J. Walter Tucker, Jr...................................................... 7,000
Steven L. Watson.......................................................... 1,000
All other executive officers of Keystone as a group (1 person)............ 20,000
(4) Excludes certain shares that such individual may be deemed to
indirectly and beneficially own as to which such individual disclaims
beneficial ownership. See footnote (2) to the "Security Ownership of
Certain Beneficial Owners" table for a description of such excluded
shares.
(5) Glenn R. Simmons is a brother of Harold C. Simmons. See footnote (2) to
the "Security Ownership of Certain Beneficial Owners" table.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and footnotes set forth the stockholders known to
Keystone to be beneficial owners, as defined by regulations of the SEC, of more
than 5% of the outstanding shares of Common Stock as of the Record Date. The
table and footnotes also set forth the shares of Keystone's Series A 10%
Cumulative Convertible Pay-In-Kind Preferred Stock, stated value $1,000 and no
par value per share (the "Series A Preferred Stock"), Contran and its
subsidiaries beneficially own as of the Record Date. See footnote (2) below for
information concerning individuals and entities that may be deemed to own
indirectly and beneficially those shares of Common Stock that Contran, Valhi and
NL directly and indirectly hold.
Common and
Series A
Common Stock Series A Preferred Stock Preferred
------------------------------ ---------------------------- Stock
Amount and Amount and Combined
Nature of Nature of Percent
Beneficial Percent of Beneficial Percent of of
Name of Beneficial Owner Ownership (1) Class (1) Ownership (1) Class (1) Class (1)
- ------------------------ ---------------- ------------ --------------- ------------ -----------
Contran Corporation and subsidiaries:
Contran Corporation (2)....... 4,109,159 (3) 40.8% 54,956 (3) 92.5% 75.0%
Valhi, Inc. (2)............... 326,364 (3) 3.2% -0- (3) -0-% 1.4%
NL Industries, Inc. (2)....... 326,050 (3) 3.2% -0- (3) -0-% 1.4%
----------- ----------
4,761,573 (3) 47.3% 54,956 (3) 92.5% 77.7%
- --------------------
(1) The percentages are based on 10,068,450 shares of Common Stock and
59,399 shares of Series A Preferred Stock outstanding as of the Record
Date, respectively. Subject to Keystone's Restated Certificate of
Incorporation, each share of Series A Preferred Stock entitles its
holder to convert such share into 250 shares of Common Stock (a
conversion price equivalent to $4.00 per share of the stated value).
Currently, however, Keystone's Restated Certificate of Incorporation
only allows for the issuance of 12,000,000 shares of Common Stock, of
which 10,068,450 are currently issued and outstanding and Contran alone
has the right to convert all of its shares of Series A Preferred Stock
into an aggregate of 13,739,000 shares of Common Stock. As a result,
Keystone is seeking in Proposal 3 to the Annual Meeting stockholder
approval of an increase in Keystone's authorized Common Stock to allow
for the full conversion of the currently outstanding Series A Preferred
Stock. See Proposal 3 to the Annual Meeting in this proxy statement.
Except as otherwise provided by law, a share of Series A Preferred
Stock does not entitle its holder to voting rights. The combined
percent of class assumes the approval of Proposal 3 and the full
conversion of only Contran's shares of Series A Preferred Stock. The
terms of the Series A Preferred Stock are set forth in Exhibit 3.2 to
Keystone's Annual Report on Form 10-K for the year ended December 31,
2002. All information is taken from or based upon ownership filings
made by such persons with the SEC or upon information provided by such
persons.
(2) The business address of Contran, Valhi and NL is Three Lincoln Centre,
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697.
Contran, Valhi, NL, the Harold Simmons Foundation, Inc. (the
"Foundation"), The Combined Master Retirement Trust (the "Master
Trust") and the spouse of Harold C. Simmons are the direct holders of
approximately 40.8%, 3.2%, 3.2%, 1.9%, 0.3% and 0.1%, respectively, of
the outstanding Common Stock. Contran is also the direct holder of
approximately 92.5% of the outstanding Series A Preferred Stock, which
is convertible into approximately 57.7% of the outstanding Common Stock
assuming only Contran's conversion of all of its Series A Preferred
Stock and the approval of Proposal 3 to the Annual Meeting.
Valhi, Tremont LLC ("Tremont") and the spouse of Harold C. Simmons are
the direct holders of approximately 63.2%, 21.4% and 0.1%,
respectively, of the outstanding common stock of NL. Valhi is the sole
member of Tremont.
Valhi Group, Inc. ("VGI"), National City Lines, Inc. ("National"),
Contran, the Foundation, the Contran Deferred Compensation Trust No. 2
(the "CDCT No. 2") and the Master Trust are the direct holders of
77.6%, 9.1%, 3.0%, 1.3%, 0.4% and 0.1%, respectively, of the
outstanding common stock of Valhi. National, NOA, Inc. ("NOA") and
Dixie Holding Company ("Dixie Holding") are the direct holders of
approximately 73.3%, 11.4% and 15.3%, respectively, of the outstanding
common stock of VGI. Contran and NOA are the direct holders of
approximately 85.7% and 14.3%, respectively, of the outstanding common
stock of National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA. Dixie Rice
Agricultural Corporation, Inc. ("Dixie Rice") is the direct holder of
100% of the outstanding common stock of Dixie Holding. Contran is the
holder of 100% of the outstanding common stock of Dixie Rice and
approximately 88.9% of the outstanding common stock of Southwest.
Substantially all of Contran's outstanding voting stock is held by
trusts established for the benefit of certain children and
grandchildren of Harold C. Simmons (the "Trusts"), of which Mr. Simmons
is the sole trustee. As sole trustee of the Trusts, Mr. Simmons has the
power to vote and direct the disposition of the shares of Contran stock
held by the Trusts. Mr. Simmons, however, disclaims beneficial
ownership of any Contran shares that the Trusts hold.
The Foundation directly holds approximately 1.9% of the outstanding
shares of Common Stock and 1.3% of the outstanding shares of Valhi
common stock. The Foundation is a tax-exempt foundation organized for
charitable purposes.
The Master Trust directly holds approximately 0.3% of the outstanding
shares of Common Stock and 0.1% of the outstanding shares of Valhi
common stock. Valhi established the Master Trust as a trust to permit
the collective investment by master trusts that maintain the assets of
certain employee benefit plans Valhi and related companies adopt.
Harold C. Simmons is the sole trustee of the Master Trust and a member
of the trust investment committee for the Master Trust. Mr. Simmons is
a participant in one or more of the employee benefit plans that invest
through the Master Trust.
Harold C. Simmons is the chairman of the board of Tremont, Valhi, VGI,
National, NOA, Dixie Holding, Dixie Rice, Southwest, Contran and the
Foundation. He is chairman of the board and chief executive officer of
NL.
By virtue of the holding of the offices, the stock ownership and his
services as trustee, all as described above, Mr. Simmons may be deemed
to control such entities, and Mr. Simmons and certain of such entities
may be deemed to possess indirect beneficial ownership of the shares of
Common Stock or Series A Preferred Stock directly held by certain of
such other entities. Mr. Simmons, however, disclaims beneficial
ownership of the shares of Common Stock or Series A Preferred Stock
beneficially owned, directly or indirectly, by any of such entities,
except to the extent of his vested beneficial interest, if any, in any
shares of Common Stock the Master Trust directly holds.
Harold C. Simmons' spouse is the direct owner of 10,645 shares of
Common Stock and 69,475 shares of NL common stock. Mr. Simmons may be
deemed to share indirect beneficial ownership of such shares. Mr.
Simmons disclaims all such beneficial ownership.
Messrs. Barry and Tucker are directors of Valhi. Messrs. Glenn Simmons
and Steven Watson are directors and executive officers of Valhi and
Contran and directors of NL. Messrs. Bass and Tucker are members of the
trust investment committee of the Master Trust. Messrs. David L. Cheek,
Bert E. Downing, Jr., Glenn Simmons, Harold Simmons and Watson are
participants in one or more of the employee benefit plans that invest
through the Master Trust. Each of such persons disclaims beneficial
ownership of any shares of Common Stock directly or indirectly owned by
any of such entities, except to the extent of such person's vested
beneficial interest, if any, in any shares of Common Stock the Master
Trust directly holds.
The CDCT No. 2 directly holds approximately 0.4% of the outstanding
Valhi common stock. U.S. Bank National Association serves as the
trustee of the CDCT No. 2. Contran established the CDCT No. 2 as an
irrevocable "rabbi trust" to assist Contran in meeting certain deferred
compensation obligations that it owes to Harold C. Simmons. If the CDCT
No. 2 assets are insufficient to satisfy such obligations, Contran is
obligated to satisfy the balance of such obligations as they come due.
Pursuant to the terms of the CDCT No. 2, Contran (i) retains the power
to vote the shares of Valhi common stock held directly by the CDCT No.
2, (ii) retains dispositive power over such shares and (iii) may be
deemed the indirect beneficial owner of such shares.
For purposes of calculating the outstanding shares of Valhi common
stock as of the Record Date, 1,000,000, 3,522,967 and 1,186,200 shares
of Valhi common stock held by Valmont Insurance Company, a wholly owned
subsidiary of Valhi ("Valmont"), NL and a subsidiary of NL,
respectively, are excluded from the amount of Valhi common stock
outstanding. Pursuant to Delaware corporate law, Valhi treats these
excluded shares held by these majority owned subsidiaries as treasury
stock for voting purposes.
The business address of Tremont, VGI, National, NOA, Dixie Holding, the
Master Trust and the Foundation is Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240-2697. The business address of
Dixie Rice is 600 Pasquiere Street, Gueydan, Louisiana 70542. The
business address of Southwest is 402 Canal Street, Houma, Louisiana
70360.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides summary information required by SEC rules
as of December 31, 2002 with respect to Keystone's equity compensation plans
under which Keystone's equity securities may be issued to employees or
nonemployees (such as directors, consultants, advisers, vendors, customers,
suppliers and lenders) in exchange for consideration in the form of goods or
services. The Keystone Consolidated Industries, Inc. 1992 Incentive Compensation
Plan and the Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive
Plan, both of which have been approved by Keystone's stockholders, are the only
such Keystone equity compensation plans.
Column (A) Column (B) Column (C)
--------------------------- -------------------------- --------------------------
Number of Securities
Remaining Available for
Future Issuance Under
Number of Securities to be Weighted-Average Exercise Equity Compensation Plans
Issued Upon Exercise of Price of Outstanding (Excluding Securities
Outstanding Options, Options, Reflected in
Plan Category Warrants and Rights Warrants and Rights Column (A))
- --------------------------- ---------------------------- ---------------------------- --------------------------
Equity compensation plans
approved by security
holders.................... 487,300 $8.18 208,000
Equity compensation plans
not approved by security
holders.................... -0- -0- -0-
Total...................... 487,300 $8.18 208,000
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Keystone's executive officers, directors and persons who own more than
10% of a registered class of Keystone's equity securities to file reports of
ownership with the SEC and Keystone. Based solely on the review of the copies of
such reports filed with the SEC, Keystone believes that for 2002 its executive
officers, directors and 10% stockholders complied with all applicable filing
requirements under Section 16(a).
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
As set forth under the caption "Security Ownership of Certain
Beneficial Owners," Harold C. Simmons, through Contran and other entities, may
be deemed to beneficially own approximately 49.6% of the outstanding Common
Stock as of the Record Date (78.7% assuming the approval of Proposal 3 to the
Annual Meeting and the full conversion of only Contran's shares of Series A
Preferred Stock) and, therefore, may be deemed to control Keystone. Keystone and
other entities that may be deemed to be controlled by or affiliated with Mr.
Simmons sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, tax
sharing agreements, joint ventures, partnerships, loans, options, advances of
funds on open account, and sales, leases and exchanges of assets, including
securities issued by both related and unrelated parties, and (b) common
investment and acquisition strategies, business combinations, reorganizations,
recapitalizations, securities repurchases and purchases and sales (and other
acquisitions and dispositions) of subsidiaries, divisions or other business
units, which transactions have involved both related and unrelated parties and
have included transactions that resulted in the acquisition by one related party
of a publicly-held minority equity interest in another related party. Keystone
continuously considers, reviews and evaluates and understands that Contran and
related entities consider, review and evaluate transactions of the type
described above. Depending on the business, tax and other objectives then
relevant, it is possible that Keystone might be a party to one or more of such
transactions in the future. In connection with these activities, Keystone may
consider issuing additional equity securities or incurring additional
indebtedness. Keystone's acquisition activities have in the past and may in the
future include participation in the acquisition or restructuring activities
conducted by other companies that may be deemed to be controlled by Harold C.
Simmons. It is the policy of Keystone to engage in transactions with related
parties on terms, in the opinion of Keystone, no less favorable to Keystone than
could be obtained from unrelated parties.
No specific procedures are in place that govern the treatment of
transactions among Keystone and its related entities, although such entities may
implement specific procedures as appropriate for particular transactions. In
addition, under applicable principles of law, in the absence of stockholder
ratification or approval by directors who may be deemed disinterested,
transactions involving contracts among companies under common control must be
fair to all companies involved. Furthermore, directors owe fiduciary duties of
good faith and fair dealing to all stockholders of the companies for which they
serve.
Glenn R. Simmons, J. Walter Tucker, Jr. and Sandra K. Myers are not
salaried employees of Keystone. Keystone has contracted with Contran, on a fee
basis payable in quarterly installments, to provide certain administrative and
other services to Keystone in addition to the services of Mr. Simmons and Ms.
Myers, including consulting services of Contran executive officers pursuant to
the Intercorporate Services Agreement between Contran and Keystone, a copy of
which is included as Exhibit 10.1 in Keystone's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, filed on April 11, 2003. The fee
incurred during 2002 was $1,025,000. During each of 2002, 2001 and 2000, the
portion of the amounts Keystone incurred pursuant to the Intercorporate Services
Agreements attributable to the services Mr. Glenn R. Simmons provided Keystone
was $219,000. Keystone compensates Tucker & Branham, Inc. for certain consulting
services of Mr. Tucker on an hourly basis as his services are requested. The
fees paid Tucker & Branham, Inc. during 2002 were $5,100.
Tall Pines Insurance Company ("Tall Pines"), Valmont and EWI RE, Inc.
("EWI") provide for or broker certain of Keystone's insurance policies. Tall
Pines and Valmont are direct or indirect, wholly owned captive insurance
companies of Valhi. Parties related to Harold C. Simmons own all of the
outstanding common stock of EWI. Through December 31, 2000, a son-in-law of
Harold C. Simmons managed the operations of EWI. Subsequent to December 31,
2000, and pursuant to an amended agreement that may be terminated with 90 days
written notice by either party, this son-in-law provides advisory services to
EWI as requested by EWI, for which such son-in-law is paid $11,875 per month and
receives certain other benefits under EWI's benefit plans. Such son-in-law is
also currently chairman of the board of EWI. Keystone generally does not
compensate Tall Pines, Valmont or EWI directly for insurance, but understands
that, consistent with insurance industry practice, Tall Pines, Valmont and EWI
receive commissions for their services from the insurance and reinsurance
underwriters. During 2002, Keystone and its subsidiaries paid approximately $2.2
million for policies provided or brokered by Tall Pines, Valmont and/or EWI.
These amounts principally include payments for reinsurance and insurance
premiums paid to unrelated third parties, but also include commissions paid to
Tall Pines, Valmont and EWI. In Keystone's opinion, the amounts that Keystone
and its subsidiaries paid for these insurance policies are reasonable and
similar to those they could have obtained through unrelated insurance companies
and/or brokers. Keystone expects that these relationships with Tall Pines,
Valmont and EWI will continue in 2003.
Dallas Compressor Company, a subsidiary of Contran, sells compressors
and related services to Keystone. During 2002, Keystone purchased products and
services from Dallas Compressor Company in the amount of $267.
Aircraft services were purchased from Valhi in the amount of $74,000
for the year ended December 31, 2002.
During 2002, Garden Zone, a 51% owned subsidiary of Keystone, paid
approximately $60,000 to one of its other owners for accounting and financial
services.
EWP Financial LLC, a wholly owned subsidiary of Contran, has agreed to
loan Keystone up to an aggregate of $6 million through September 30, 2003.
Borrowings bear interest at the prime rate plus 3%, and are collateralized by
the stock of Engineered Wire Products, Inc., a wholly owned subsidiary of
Keystone. In addition, Keystone pays a commitment fee of .375% on the unutilized
portion of the facility. At August 27, 2003, no amounts were outstanding under
the facility, and $6 million was available for borrowing by Keystone. The
independent directors of Keystone approved the terms of this loan. During 2002,
Keystone paid Contran unused line fees of $23,000 related to this facility.
In the opinion of management and the Board of Directors, the terms of
the transactions described above were no less favorable to Keystone than those
that could have been obtained from an unrelated entity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is or has been an officer or
employee of Keystone or any of its subsidiaries.
REPORT ON EXECUTIVE COMPENSATION
Compensation Committee Report. During 2002, Keystone's chairman of the
board (the "COB") and/or the Compensation Committee (the "Committee")
administered matters regarding compensation of executive officers. The Committee
is comprised of directors who are neither officers nor employees of Keystone or
its subsidiaries.
It is Keystone's policy that employee compensation, including
compensation to executives, be at a level which allows Keystone to attract,
retain, motivate and reward individuals of training, experience and ability who
can lead Keystone in accomplishing its goals. It is also the Committee's policy
that compensation programs maintain a strong risk/reward ratio, with a
significant component of cash compensation being tied to Keystone's financial
results, creating a performance-oriented environment that rewards employees for
achieving pre-set financial performance levels. It is Keystone's policy to
structure compensation arrangements to be deductible for federal income tax
purposes under applicable provisions of the Code.
During 2002, Keystone's compensation program with respect to its
executive officers consisted of three components: base salary, incentive bonus,
including deferred compensation, and stock option awards.
Base Salary. The COB and/or the Committee reviews base salaries for
executives at least annually. Base salaries for all salaried employees,
including executive officers of Keystone, have been established on a
position-by-position basis. Keystone's management conducts annual internal
reviews of salary levels in an attempt to rank base salary and job value of each
position. The ranges of salaries for comparable positions considered by
management were based upon management's general business knowledge and no
specific survey, study or other analytical process was utilized to determine
such ranges. Additionally, no specific companies' or groups of companies'
compensation were compared with that of Keystone, nor was an attempt made to
identify or otherwise quantify the compensation paid by the companies that
served as a basis for such individuals' general business knowledge. Base salary
levels are generally not increased except in instances of (i) promotions, (ii)
increases in responsibility or (iii) unwarranted discrepancies between job value
and the corresponding base salary. Keystone considers general base salary
increases from time to time when competitive factors so warrant. Over a period
of years, base salaries are designed to be below the median annual cash
compensation for comparable executives, but when combined with the other
components of compensation create a competitive or above median total
compensation package.
Incentive Bonus Program. Awards under Keystone's incentive bonus
program can represent a significant portion of an executive's potential annual
cash compensation and are awarded at the discretion of the COB and/or the
Committee. Annual performance reviews are an important factor in determining
management's recommendation, which is primarily based on each individual's
performance and Keystone's overall performance. No specific financial or budget
tests were applied in the measurement of individual performance. The executive
officer's performance is typically measured by the ability the executive officer
demonstrates in performing, in a timely and cost efficient manner, the functions
of the executive officer's position. Keystone's overall performance is typically
measured by Keystone's historical financial results. No specific overall
performance measures were used and there is no specific relationship between
overall Keystone performance and an executive officer's incentive bonus.
Stock Options/Restricted Stock. A part of Keystone's total compensation
program is the consideration of non-cash incentive awards in the form of stock
options, stock appreciation rights and restricted stock granted to executives.
The Compensation Committee determines whether or not to grant stock options,
stock appreciation rights or restricted stock and the terms of the grant,
including the exercise price of stock options and the length of period during
which the options may be exercised. The Compensation Committee also considers
the number of stock options already outstanding in granting new stock options.
The Compensation Committee did not grant any stock options, stock appreciation
rights or restricted stock in 2002.
The following individuals in the capacities indicated submit the
foregoing report:
Glenn R. Simmons Dr. Thomas E. Barry Paul M. Bass, Jr.
Chairman of the Board Chairman of the Member of the
Compensation Committee Compensation Committee
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return on Common Stock against the cumulative total
return of the S&P 500 Stock Index and the S&P Steel Index from December 31, 1997
to December 31, 2002. The graph shows the value at December 31 of each year
assuming an original investment of $100 and the reinvestment of dividends to
stockholders.
Comparison of Five Year Cumulative Total Stockholder Return Among
Keystone Consolidated Industries, Inc. Common Stock, the S&P 500 Index and the
S&P Steel Index
[PERFORMANCE GRAPH GOES HERE]
December 31,
------------------------------------------------------------------------------------
1997 1998 1999 2000 2001 2002
------------- ------------- ------------ ------------- ------------ -----------
Keystone................... $100 $ 68 $ 49 $ 11 $ 5 $ 4
S&P 500 Index.............. 100 129 156 141 125 97
S&P 500 Steel Index........ 100 87 95 60 77 59
APPROVAL OF AMENDMENT
TO KEYSTONE'S RESTATED CERTIFICATE OF INCORPORATION
ELIMINATING CLASSIFICATION OF THE BOARD OF DIRECTORS
(Proposal 2)
General. On March 14, 2003, the Board of Directors approved a proposal
to amend Keystone's Restated Certificate of Incorporation to provide for the
elimination of the classification of the Board of Directors. If this proposed
amendment to the Restated Certificate of Incorporation is approved, then, upon
the filing of the amendment with the Secretary of State of the State of
Delaware, the terms of all directors will end at the 2004 annual meeting of
stockholders, and all directors will thereafter be elected to one-year terms. If
this proposed amendment to the Restated Certificate of Incorporation is not
approved, the Board of Directors will remain classified and each director
nominee elected at the Annual Meeting will serve for a term expiring at the 2006
annual meeting of stockholders.
Proposed Amendment. If this proposed amendment is approved, the text of
Article Eighth of Keystone's Restated Certificate of Incorporation reflecting
the proposed amendment would read in its entirety as follows:
EIGHTH. The number of directors of the corporation shall be
fixed by the by-laws, subject to the provisions of this certificate of
incorporation and to the provisions of the laws of the State of
Delaware.
Any director or the entire board of directors may be removed,
with or without cause, by holders of a majority of the shares then
entitled to vote at an election of directors.
In furtherance and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized:
To make, alter, amend or repeal the by-laws of the
corporation.
To authorize and cause to be executed mortgages and
liens upon the real and personal property of the corporation.
To set apart out of any of the funds of the
corporation available for dividends a reserve or reserves for
any proper purpose and to abolish any such reserve in the
manner in which it was created.
By resolution passed by the majority of the whole
board, to designate one or more committees, each committee to
consist of two or more of the directors of the corporation,
which, to the extent provided in the resolution or in the
by-laws of the corporation, shall have and may exercise the
powers of the board of directors in the management of the
business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may
require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution
adopted by the board of directors.
Required Vote and Effectiveness. If the stockholders approve the
proposed amendment to the Restated Certificate of Incorporation to eliminate the
classification of the Board of Directors, the amendment would become effective
upon its filing with the Secretary of State of the State of Delaware. This
proposed amendment requires the affirmative vote of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND DEEMS
THIS PROPOSAL TO BE IN THE BEST INTEREST OF KEYSTONE AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE AMENDMENT TO KEYSTONE'S RESTATED CERTIFICATE OF
INCORPORATION TO ELIMINATE KEYSTONE'S CLASSIFIED BOARD OF DIRECTORS.
APPROVAL OF AMENDMENT TO
KEYSTONE'S RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE ITS AUTHORIZED COMMON STOCK
(Proposal 3)
General. During March 2002, Keystone completed an exchange offer with
respect to its 9-5/8% Senior Secured Notes due 2007 for various forms of
consideration, one of which included an exchange for shares of Series A
Preferred Stock. As of the Record Date, there were 59,399 shares of Series A
Preferred Stock outstanding. Subject to Keystone's Restated Certificate of
Incorporation, each share of Series A Preferred Stock entitles its holder to
convert such share into 250 shares of Common Stock (a conversion price
equivalent to $4.00 per share of the stated value). As a result, a conversion of
all of the outstanding shares of Series A Preferred Stock would require Keystone
to issue 14,849,750 shares of Common Stock. As of the Record Date, however,
Keystone's Restated Certificate of Incorporation only authorized the issuance of
12,000,000 shares of Common Stock, of which 10,068,450 were issued and
outstanding and 695,300 shares were reserved for issuance in connection with
Keystone's stock option plans. As a result, Keystone does not have sufficient
shares of Common Stock authorized for a full conversion of the outstanding
shares of Series A Preferred Stock.
On March 14, 2003, the Board of Directors approved a proposal to amend
Keystone's Restated Certificate of Incorporation to increase the total number of
shares of Common Stock authorized for issuance from 12,000,000 shares to
27,000,000 shares. Keystone would reserve substantially all of the 15,000,000
proposed additional authorized shares of Common Stock for issuance from time to
time, if and when a holder of shares of Series A Preferred Stock duly exercises
the option to convert such Series A Preferred Shares to Common Stock. If the
proposed amendment becomes effective, 14,849,750 shares would be reserved for
issuance upon the conversion of the Series A Preferred Shares and 1,386,500
shares would be available for issuance from time to time for such purposes and
such consideration as the Board of Directors may approve, without the further
approval of holders of Common Stock (except as may be required by law or the
rules of any national securities exchange on which such shares are at the time
listed). The Board of Directors currently has no agreements or plans for the
issuance of such 1,386,500 shares.
The future issuance of shares of Common Stock would have a dilutive
effect on the voting rights of existing holders of Common Stock. There are no
preemptive rights with respect to shares of Common Stock. The additional
authorized shares of Common Stock would have identical powers, preferences and
rights as the shares now authorized, including the right to cast one vote per
share and to receive dividends, if any. Under Delaware law, stockholders will
not have any dissenters' or appraisal rights in connection with this proposed
amendment.
Proposed Amendment. If this proposed amendment is approved, the text of
Article Fourth of Keystone's Restated Certificate of Incorporation reflecting
the proposed amendment would read in its entirety as follows:
FOURTH. The total number of shares of all classes of stock
which the corporation shall have authority to issue is twenty-seven
million five hundred thousand (27,500,000), of which twenty-seven
million (27,000,000) shares are Common Stock of the par value of One
Dollar ($1.00) each and five hundred thousand (500,000) shares are
Preferred Stock without par value (including 250,000 shares of Series A
Cumulative Convertible Pay-In-Kind Preferred Stock by prior
designation, as amended).
The Preferred Stock shall be issued in one or more series. The
Board of Directors is hereby expressly authorized to issue the shares
of Preferred Stock in such series and to fix from time to time before
issuance the number of shares to be included in any series and the
designation, relative rights, preferences and limitations of all shares
of such series. The authority of the Board of Directors with respect to
each series shall include, without limitation thereto, the
determination of any or all of the following and the shares of each
series may vary from the shares of any other series in the following
respects:
(a) The number of shares constituting such series and the
designation thereof to distinguish the shares of such series
from the shares of all other series;
(b) The annual dividend rate on the shares of that series and
whether such dividends shall be cumulative and, if cumulative,
the date from which dividends shall accumulate;
(c) The redemption price or prices for the particular series, if
redeemable, and the terms and conditions of such redemption;
(d) The preference, if any, of shares of such series in the event
of any voluntary or involuntary liquidation, dissolution or
winding up of the corporation;
(e) The voting rights, if any, in addition to the voting rights
prescribed by law and the terms of exercise of such voting
rights;
(f) The right, if any, of shares of such series to be converted
into shares of any other series or class and the terms and
conditions of such conversion; and
(g) Any other relative rights, preferences and limitations of that
series.
No holder of stock of the corporation shall have any
preemptive or other right whatever, as such holder, to subscribe for or
purchase or to have offered to him for subscription or purchase any
additional shares of stock of any class, character or description which
may be issued or sold by the corporation, or obligations of any kind
which may be issued or sold by the corporation and which shall be
convertible into stock of any class of the corporation, or to which
there shall be attached or appertain any warrant or warrants or other
instrument or instruments that shall confer upon the holder of such
obligation the right to subscribe for, or to purchase or receive from
the corporation any shares of capital stock of any class of the
corporation, whether now or hereafter authorized.
Required Vote and Effectiveness. If the stockholders approve the
proposed amendment to the Restated Certificate of Incorporation to increase the
authorized shares of Common Stock, the amendment would become effective upon its
filing with the Secretary of State of the State of Delaware. This proposed
amendment requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND DEEMS
THIS PROPOSAL TO BE IN THE BEST INTEREST OF KEYSTONE AND ITS STOCKHOLDERS AND
RECOMMENDS A VOTE "FOR" THE AMENDMENT TO KEYSTONE'S RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE ITS AUTHORIZED SHARES OF COMMON STOCK.
INDEPENDENT AUDITOR MATTERS
Independent Auditors. The firm of PricewaterhouseCoopers LLP ("PwC")
served as Keystone's independent auditors for the year ended December 31, 2002.
Keystone's audit committee has appointed PwC to review Keystone's quarterly
unaudited consolidated financial statements to be included in its Quarterly
Reports on Form 10-Q for the first three quarters of 2003. Keystone expects PwC
will be considered for appointment to audit Keystone's annual consolidated
financial statements for the year ending December 31, 2003. Representatives of
PwC are not expected to attend the Annual Meeting.
Audit Committee Report. The audit committee of the Board of Directors
is composed of three directors, all of whom are independent. The audit committee
operates under a written charter the Board of Directors adopted, a copy of which
was attached as Exhibit A to Keystone's proxy statement for its 2001 annual
meeting of stockholders. Keystone's management is responsible for preparing
Keystone's consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America. Keystone's
independent auditors are responsible for auditing Keystone's consolidated
financial statements in accordance with auditing standards generally accepted in
the United States of America. The audit committee serves as an independent and
objective party to review Keystone's auditing, accounting and financial
reporting processes.
The audit committee has reviewed and discussed Keystone's audited
consolidated financial statements for the year ended December 31, 2002 with
Keystone's management and independent auditors. The audit committee discussed
with the independent auditors the matters required by Statement on Auditing
Standards No. 61 (Communication with Audit Committees) and SAS No. 90 (Audit
Committee Communications), received written disclosures from the independent
auditors required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and discussed with the independent auditors
their independence. The audit committee also considered whether the independent
auditors' provision of non-audit services to Keystone and its subsidiaries is
compatible with such auditors' independence. Additionally, the audit committee
discussed with Keystone's management and the independent auditors such other
matters as the committee deemed appropriate. Based on the audit committee's
review of Keystone's audited consolidated financial statements and the audit
committee's discussions with Keystone's management and independent auditors, the
audit committee recommended to the Board of Directors that Keystone's audited
consolidated financial statements for the year ended December 31, 2002 be
included in Keystone's Annual Report on Form 10-K for the year ended December
31, 2002, which has been filed with the Securities and Exchange Commission.
Paul M. Bass, Jr. Dr. Thomas E. Barry William Spier
Chairman of the Audit Member of the Audit Member of the Audit
Committee Committee Committee
Pre-approval Policies and Procedures. Effective May 6, 2003, Keystone's
audit committee implemented pre-approval policies and procedures that require
the audit committee to pre-approve any services Keystone's independent public
accountants provide to Keystone or its subsidiaries. Prior to May 6, 2003,
Keystone's audit committee pre-approved all audit and audit related services PwC
rendered to Keystone and its subsidiaries. The audit committee did not
pre-approve tax and other PwC services provided to Keystone or its subsidiaries
prior to May 6, 2003.
Fees Paid to PwC. The following table shows the aggregate fees PwC has
billed or is expected to bill to Keystone and its subsidiaries for services
rendered for 2001 and 2002.
Type of Fees 2001 2002
- ------------------------------------- ----------- ----------
Audit Fees (1)....................... $185,878 $214,057
Audit-Related Fees (2)............... 88,628 148,495
Tax Fees (3)......................... -0- -0-
All Other Fees (4)................... 39,696 130,480
-------- --------
Total................................ $314,202 $493,032
======= =======
- --------------------
(1) Fees for the following services:
(a) audits of Keystone's consolidated year-end financials
statements for each year;
(b) reviews of the unaudited quarterly financial statements
appearing in Keystone's Forms 10-Q for each of the first three
quarters of each year;
(c) normally provided statutory or regulatory filings or
engagements for each year; and
(d) the estimated out-of-pocket costs PwC incurred in providing
all of such services for which Keystone reimburses PwC.
(2) Fees for employee benefit plan audits ($79,128 and $83,495 in 2001 and
2002, respectively) and accounting consultations and attest services
concerning financial accounting and reporting standards ($9,500 and
$65,000 in 2001 and 2002, respectively).
(3) Fees for tax compliance, tax advice and tax planning services.
(4) Fees for actuarial valuation services related to Keystone's post
retirement benefit plans.
STOCKHOLDER DIRECTOR NOMINATIONS OR PROPOSALS
Stockholders may submit director nominations or proposals on matters
appropriate for stockholder action at Keystone's annual meetings, subject to
regulations adopted by the SEC. Keystone presently intends to call the next
annual meeting during May 2004. For such nominations or proposals to be
considered for inclusion in the proxy statement and form of proxy relating to
the 2004 annual meeting, they must be received by Keystone not later than
December 31, 2003. Such proposals should be addressed to: Secretary, Keystone
Consolidated Industries, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite
1740, Dallas, Texas 75240.
OTHER MATTERS
Management does not intend to present, and has no information as of the
date of preparation of this proxy statement that others will present, any
business at the Annual Meeting other than business pertaining to matters set
forth in the Notice of Annual Meeting of Stockholders and this proxy statement.
However, if other matters requiring the vote of the stockholders properly come
before the Annual Meeting, it is the intention of the persons named in the
enclosed form of proxy to vote the proxies held by them in accordance with their
best judgment on such matters.
CERTAIN INFORMATION INCORPORATED BY REFERENCE
This proxy statement incorporates by reference the consolidated
financial statements, supplementary financial information, management's
discussion and analysis of financial condition and results of operations,
changes in and disagreements with accountants on accounting and financial
disclosure and quantitative and qualitative disclosures about market risk, as
applicable, included in the following documents:
(1) Keystone's Annual Report on Form 10-K for the fiscal year
ended December 31, 2002, which is included as part of the 2002
annual report to stockholders Keystone mailed with this proxy
statement;
(2) Keystone's Current Report on Form 8-K dated August 14, 2003,
which Keystone mailed with this proxy statement; and
(3) Keystone's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2003, which Keystone mailed with this proxy
statement.
Any statement contained in a document incorporated by reference in this
proxy statement will be deemed to be modified or superseded for purposes of this
proxy statement to the extent that a statement contained in this proxy statement
or in any other subsequently filed document that is also incorporated by
reference in this proxy statement modifies or supersedes such statement. Any
statements so modified or superseded will not be deemed, except as modified or
superseded, to constitute a part of this proxy statement.
ADDITIONAL COPIES
Pursuant to an SEC rule concerning the delivery of annual reports and
proxy statements, a single set of these reports may be sent to any household at
which two or more stockholders reside if they appear to be members of the same
family. Each stockholder continues to receive a separate proxy card. This
procedure, referred to as householding, reduces the volume of duplicate
information stockholders receive and reduces mailing and printing expenses. A
number of brokerage firms have instituted householding. Certain beneficial
stockholders who share a single address may have received a notice that only one
annual report and proxy statement would be sent to that address unless a
stockholder at that address gave contrary instructions. If, at any time, a
stockholder who holds shares through a broker no longer wishes to participate in
householding and would prefer to receive a separate proxy statement and related
materials, or if such stockholder currently receives multiple copies of the
proxy statement and related materials at his or her address and would like to
request householding of Keystone communications, the stockholder should notify
his or her broker. Additionally, Keystone will promptly deliver a separate copy
of Keystone's 2002 annual report, Current Report on Form 8-K dated August 14,
2003, Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 or this
proxy statement to any stockholder at a shared address to which a single copy of
such documents was delivered, upon the written or oral request of the
stockholder.
To obtain copies of Keystone's 2002 annual report, Current Report on
Form 8-K dated August 14, 2003, Quarterly Report on Form 10-Q for the quarter
ended June 30, 2003 or this proxy statement without charge, please mail your
request to Sandra K. Myers, Corporate Secretary, at Keystone Consolidated
Industries, Inc., Three Lincoln Centre, 5430 LBJ Freeway, Suite 1740, Dallas,
Texas 75240-2697, or call her at (972) 458-0028.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
Dallas, Texas
August 27, 2003
PROXY
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
October 2, 2003
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated August 27, 2003 and Annual Report to Stockholders, hereby
appoints Bert E. Downing, Jr. and Sandra K. Myers, or either of them, proxies,
with full power of substitution to vote, as specified in this proxy, all the
shares of capital stock of KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware
corporation, held of record by the undersigned and entitled to vote on the
record date, August 8, 2003, at the Annual Meeting of Stockholders to be held at
5430 LBJ Freeway, Suite 1740, Dallas, TX 75240 at 10:00 a.m. local time on
October 2, 2003, and all adjournments or postponements thereof, as directed and,
in their discretion, on all other matters which may properly come before the
Annual Meeting or any adjournments or postponements thereof. The undersigned
directs said proxies to vote as specified upon the items shown on the reverse
side, which are referred to in the Notice of Annual Meeting and set forth in the
Proxy Statement. The undersigned hereby acknowledges receipt of the accompanying
Proxy Statement and Annual Report to Stockholders, and hereby revokes any proxy
or proxies heretofore given by the undersigned relating to the Annual Meeting.
(Continued, and to be marked, dated and signed, on the other side)
(Back Side)
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted "For" all items.
Election of Directors for a NOMINEES: Dr. Thomas E. Barry, Keith R.
Three-Year Term Coogan and William Spier
Instruction: To withhold authority
for any single nominee, write that
For Withhold nominee's name in the space provided
[ ] [ ] below)
----------------------------------------
Proposal to Amend Restated
Certificate of Incorporation to
Eliminate Classification of
Board of Directors
For Withhold
[ ] [ ]
Proposal to Amend Restated
Certificate of Incorporation to
Increase Authorized Number
of Shares
For Withhold
[ ] [ ]
Please mark, date and sign exactly as your name appears on this proxy
card. When shares are held jointly, both holders should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If the holder is a corporation or partnership, the full corporate or
partnership name should be signed by a duly authorized officer.
-----------------------------------
Signature
-----------------------------------
Signature, if shares held jointly
Date: _______________________, 2003
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE KEYSTONE CONSOLIDATED INDUSTRIES,
INC. PROXY STATEMENT THAT ACCOMPANIED THIS PROXY.
VOTING INSTRUCTIONS
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
October 2, 2003
The undersigned, being participants in the Keystone Consolidated
Industries, Inc. Deferred Incentive Plan, having received the Notice of Annual
Meeting and Proxy Statement dated August 27, 2003 and Annual Report to
Stockholders, hereby instructs the trustee, to vote, as specified below, all the
shares of common stock of KEYSTONE CONSOLIDATED INDUSTRIES, INC., a Delaware
corporation, held of record by the trustee for the account of the undersigned
and entitled to vote on the record date, August 8, 2003, at the Annual Meeting
of Stockholders to be held on October 2, 2003, and all adjournments or
postponements thereof, as directed and, in their discretion, on all other
matters which may properly come before the Annual Meeting or any adjournments or
postponements thereof.
(Continued, and to be marked, dated and signed, on the other side)
************
(Back Side)
Please vote all shares allocated to my account in the Keystone Consolidated
Industries, Inc. Deferred Incentive Plan, as applicable. If no direction is
made, the trustee will vote "For" all items.
Election of Directors for a NOMINEES: Dr. Thomas E. Barry, Keith R.
Three-Year Term Coogan and William Spier
Instruction: To withhold authority
for any single nominee, write that
For Withhold nominee's name in the space provided
[ ] [ ] below)
----------------------------------------
Proposal to Amend Restated
Certificate of Incorporation to
Eliminate Classification of
Board of Directors
For Withhold
[ ] [ ]
Proposal to Amend Restated
Certificate of Incorporation to
Increase Authorized Number
of Shares
For Withhold
[ ] [ ]
-----------------------------------
Signature
Date: _______________________, 2003
PLEASE SIGN, DATE AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.