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 May 8, 1998
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" or the
"Company"), will be held on May 8, 1998, at 9:00 a.m. local time, at the offices
of the Company at 5430 LBJ Freeway, Suite 1740, Dallas, Texas, for the following
purposes:
(1) To elect two directors each for a term of three years, and until
their successors are duly elected and qualified; and
(2) To approve an amendment to the Keystone Consolidated Industries,
Inc. 1997 Long-Term Incentive Plan to increase the number of
shares of common stock available for issuance thereunder from
300,000 to 500,000; and
(3) 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 March 26, 1998,
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 April 7, 1998, 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 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. Your
vote, whether given by proxy or in person at the Annual Meeting, will be held in
confidence by the Inspector of Election for the Annual Meeting in accordance
with the Company's bylaws.
By order of the Board of Directors,
Sandra K. Myers
Secretary
Dallas, Texas
April 10, 1998
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 May 8, 1998
This Proxy Statement and the accompanying proxy card are being furnished to
the stockholders of Keystone Consolidated Industries, Inc., a Delaware
corporation ("Keystone" or the "Company"), in connection with the solicitation
of proxies by and on behalf of the Board of Directors of Keystone for use at the
1998 Annual Meeting of Stockholders to be held at 9:00 a.m. on Friday, May 8,
1998, at the Company's offices at 5430 LBJ Freeway, Suite 1740, Dallas, Texas
and at any adjournment or postponement thereof (the "Annual Meeting"). Any
stockholder executing a proxy has the power to revoke it at any time before it
is voted. A proxy may be revoked by either (i) filing with the Inspector of
Election a written revocation of the proxy; (ii) appearing at the Annual Meeting
and casting a vote contrary to that indicated on the proxy; or (iii) submitting
a duly executed proxy bearing a later date. Attendance at the Annual Meeting
alone, however, will not in itself constitute the revocation of a proxy. This
Proxy Statement and the accompanying proxy card are first being mailed to
stockholders on or about April 10, 1998. An annual report for the year ended
December 31, 1997 is enclosed herewith.
Only stockholders of record at the close of business on March 26, 1998,
(the "Record Date") will be entitled to vote at the Annual Meeting. As of the
Record Date, there were 9,358,393 shares of Keystone's common stock, $1.00 par
value per share ("Common Stock"), and 435,458 shares of Series A Preferred Stock
("Preferred Stock"), outstanding and entitled to vote. Each share of Common
Stock and each share of Preferred Stock entitles the holder thereof to one vote.
Shares of Common Stock and Preferred Stock vote together as one class on all
matters submitted to stockholders. (Shares of Preferred Stock may be entitled
to additional voting rights under applicable law with respect to certain
matters, but no such additional rights arise in connection with the matters to
be considered by stockholders at the Annual Meeting.) The presence, in person
or by proxy, of the holders of a majority of the shares of Common Stock and
Preferred Stock voting as one class entitled to vote at the Annual Meeting are
necessary to constitute a quorum for the conduct of business at the Annual
Meeting. Shares of 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.
Employees participating in the Keystone Consolidated Industries, Inc.
Deferred Incentive Plan or the DeSoto Stock Ownership Plus Plan, who are
beneficial owners of Common Stock under such plans, may use the enclosed voting
instruction card 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.
ChaseMellon Shareholder Services, L.L.C. ("Chase"), 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. All proxies and ballots delivered to Chase shall be kept
confidential by Chase in accordance with the Company's bylaws.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by Keystone. 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.
ELECTION OF DIRECTORS
Keystone's Restated Certificate of Incorporation provides for the Board of
Directors to be divided into three classes. The bylaws of the Company 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.
The number of directors is currently eight.
The nominees receiving a plurality of the votes of the shares present in
person or represented at the Annual Meeting and entitled to vote will be elected
to the classes designated and 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), or earlier resignation, removal from office, death or
incapacity. Neither shares as to which authority to vote on the election of
directors has been withheld nor broker/nominee non-votes will be counted as
affirmative votes to elect director nominees to the Board of Directors.
All of the nominees set forth below 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.
Harold C. Simmons and his affiliates hold approximately 48.5% 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
FOR THE BOARD OF DIRECTORS SET FORTH BELOW.
NOMINEES FOR BOARD OF DIRECTORS
The following biographical information has been provided by the nominees
for election to the Board of Directors of the Company for terms expiring at the
2001 annual meeting of stockholders:
PAUL M. BASS, JR. Director since 1989
Mr. Bass, age 63, is Vice Chairman of First Southwest Company, a privately
owned investment banking firm, and has served as a director since prior to 1993.
Mr. Bass is also a director of CompX International Inc. ("CompX"), a
manufacturer of ergonomic computer support systems, precision ball bearing
drawer slides, and medium-security mechanical locks, and Jayhawk Acceptance
Corporation; Chairman of Richman Gordman Half Price Stores, Inc.; Chairman of
MorAmerica Private Equities Company; director and Chairman of the Audit
Committee of California Federal Bank; and director and member of the Executive
Committee of Source Services, Inc. Mr. Bass is currently serving as a member of
the Executive Committee of Zale-Lipshy University Hospital and as Chairman of
the Board of Trustees of Southwestern Medical Foundation. Mr. Bass' term as a
director expires at the annual meeting in 1998.
DAVID E. CONNOR Director since 1992
Mr. Connor, age 72, is President of David E. Connor and Associates,
advisers to commerce and industry, in Peoria, Illinois and has served in such
capacity since prior to 1993. He is Chairman of the Board of First Midwest
Bankshares, Quincy, Illinois. He is also director of Heartland Community Health
Clinic, Peoria, Illinois and Museum Trustees of America, Washington, D.C. Mr.
Connor's term as a director expires at the annual meeting in 1998.
OTHER BOARD MEMBERS
The following biographical information has been provided by the directors
whose terms do not expire at the Annual Meeting:
THOMAS E. BARRY Director since 1989
Dr. Barry, age 54, 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 1993. Dr.
Barry's term as a director expires at the annual meeting in 2000.
WILLIAM P. LYONS Director since 1996
Mr. Lyons, age 56, is Chairman of the Board of JVL Corp., now an
investment firm, but formerly a generic pharmaceutical manufacturer, since prior
to 1993. Mr. Lyons is also President of William P. Lyons & Co., Inc. since
prior to 1993, and Managing Director of Madison Partners, LLC, both investment
firms. He is also a director of Lydall, Inc. Mr. Lyons was Chairman of Holmes
Protection Group, Inc., an electronic security systems and monitoring company,
from 1995 until February, 1998. Mr. Lyons' term as a director expires at the
annual meeting in 2000.
GLENN R. SIMMONS Director since 1986
Mr. Simmons, age 70, is Chairman of the Board of Directors of Keystone and
has served in such capacity since prior to 1993. Mr. Simmons was Chief
Executive Officer of Keystone from prior to 1993 to February 1997. Mr. Simmons
has served as Vice Chairman of the Board of Directors of Contran Corporation
("Contran"), a privately owned diversified holding company that may be deemed to
be the beneficial holder of approximately 45.4% of the outstanding Common Stock
as of the Record Date, since prior to 1993. Mr. Simmons has been a director of
Contran and an executive officer and/or director of various companies related to
Contran since prior to 1993. He is Vice Chairman of the Board of Valhi, Inc.
("Valhi") and a director of NL Industries, Inc. ("NL"), Tremont Corporation
("Tremont"), and CompX, all of which companies may be deemed to be affiliates of
Keystone. Mr. Simmons' term as a director expires at the annual meeting in
1999.
WILLIAM SPIER Director since 1996
Mr. Spier, age 63, is President and Chairman of Sutton Holding Corp., a
private investment firm, and has served in such capacity since prior to 1993.
Mr. Spier is acting chief executive officer of Integrated Technology USA, Inc.
and has served in such capacity since November 1997. Mr. Spier was Chairman of
DeSoto from prior to 1993 to 1996, Chief Executive Officer of DeSoto from prior
to 1993 to 1994 and from 1995 to 1996. He is also a director of Geotek
Communications, Inc., Integrated Technology USA, Inc., and Trident Group, Inc.
Mr. Spier's term as a director expires at the annual meeting in 2000.
J. WALTER TUCKER, JR. Director since 1971
Mr. Tucker, age 72, is Vice Chairman of the Board of Directors of the
Company and has served in such capacity since prior to 1993. Mr. Tucker has
served as a Director, President, and Treasurer of Tucker & Branham, Inc., a
privately owned real estate, mortgage banking and insurance firm since prior to
1993. Mr. Tucker is also a director of Columbian Mutual Life Insurance Company
and Valhi. He has also been an executive officer and/or director of various
companies related to Valhi and Contran since prior to 1993. Mr. Tucker's term
as a director expires at the annual meeting in 1999.
RICHARD N. ULLMAN Director since 1992
Mr. Ullman, age 63, is President of Federal Companies, a privately held
commercial warehouse and transportation company in Peoria, Illinois, and has
served in such capacity since prior to 1993. He is a director of First of
America Bank - Illinois, N.A. and Cilcorp, Inc. and is also serving as director
of Children's Hospital of Illinois at St. Francis, director of St. Francis
Medical Center, and a trustee of Bradley University, all located in Peoria. Mr.
Ullman's term as a director expires at the annual meeting in 1999.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ending December 31, 1997, the Board of Directors met
five times. All directors of the Company 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 Executive Committee, which met two times during 1997, exercises all
powers and authority of the Board of Directors in the management of the business
and affairs of the Company, 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, Simmons, Spier and Tucker.
The Master Trust Committee, which did not meet during 1997, 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, Spier and Tucker.
The Audit Committee, which met once during 1997, reviews and evaluates
significant matters relating to the audit and internal controls of the Company,
and reviews the scope and results of audit and non-audit assignments of the
Company's independent accountants. The Audit Committee examines and recommends
for approval the audited financial statements of the Company, and annually
recommends to the Board of Directors the appointment of, and fees paid to, the
independent accountants. Recommendations and actions of the Audit Committee are
reported to the full Board of Directors. The members of the Audit Committee are
Messrs. Bass, Connor and Lyons.
The Compensation Committee, which met once during 1997, reviews and
approves the amounts and forms of compensation paid to executive officers. The
members of the Compensation Committee are Messrs. Barry, Bass and Ullman.
The Board of Directors does not have a Nominating Committee.
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:
HAROLD M. CURDY, age 50, is Vice President - Finance and Treasurer of the
Company since prior to 1993.
BERT E. DOWNING, JR., age 41, is Corporate Controller of the Company since
1993. Prior to 1993, Mr. Downing served as Senior Manager in the Dallas office
of Ernst & Young, a public accounting firm.
RALPH P. END, age 60, has served as Vice President and General Counsel of
the Company since prior to 1993.
THOMAS J. GLAISTER, age 48, has served as President, Keystone Steel & Wire,
a division of the Company since 1997. Mr. Glaister was General Manager,
Logistics of Lukens, Inc. prior to joining Keystone Steel & Wire. He held
various management positions at Lukens from prior to 1993 to 1997.
BILL J. JOHNSON, age 61, has served as President, Sherman Wire, a division
of the Company, since 1995. Mr. Johnson served as Vice President & General
Manager, Sherman Wire, since prior to 1993.
SANDRA K. MYERS, age 54, is Corporate Secretary of the Company and
Executive Secretary of Contran and has served in both capacities since prior to
1993.
ROBERT W. SINGER, age 61, is President and Chief Executive Officer of the
Company and has served in such capacities since 1997. Mr. Singer served as
President and Chief Operating Officer since prior to 1993. He has served as
Vice President of Valhi and Contran since prior to 1993 and is a director of
CompX.
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
As set forth under the caption "Security Ownership," Harold C. Simmons,
through Contran and other entities, may be deemed to beneficially own
approximately 48.5% of the outstanding Common Stock as of the Record Date and,
therefore, may be deemed to control the Company. The Company 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, 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. The Company 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 the Company might be a party to one or more of such transactions
in the future. In connection with these activities, the Company may consider
issuing additional equity securities or incurring additional indebtedness. The
Company'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 the Company to engage in transactions with related parties on terms,
in the opinion of the Company, no less favorable to the Company than could be
obtained from unrelated parties.
No specific procedures are in place that govern the treatment of
transactions among the Company 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 and officers 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 the Company. The Company has contracted with Contran, on
a fee basis payable in quarterly installments, to provide certain administrative
and other services to the Company 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 the Company, a copy
of which is included as Exhibit 10.1 in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997, filed on March 24, 1998 (the
"Intercorporate Services Agreement"). The fee incurred during 1997 was
$540,000. The Company 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 1997 were $62,000.
Certain of Keystone's property, liability and casualty insurance risks are
partially insured or reinsured by a captive insurance subsidiary of Valhi. The
premiums and claims paid in connection therewith were approximately $127,000 for
the year ended December 31, 1997.
Aircraft services were purchased from Valhi in the amount of $175,000 for
the year ended December 31, 1997.
In the opinion of management and the Board of Directors, the terms of the
transactions described above were no less favorable to the Company than those
that could have been obtained from an unrelated entity.
CERTAIN LITIGATION
Harold C. Simmons, Glenn R. Simmons and certain companies related to
Keystone are parties to the litigation described below.
In November 1991, a purported derivative complaint was filed in the Court
of Chancery of the State of Delaware, New Castle County, (Alan Russell Kahn v.
Tremont Corporation, et al., No. 12339), in connection with the purchase by
Tremont of 7.8 million shares of NL common stock from Valhi (the "NL Stock
Purchase"). In addition to Valhi, the complaint named as defendants Tremont and
the members of Tremont's board of directors, including Glenn R. Simmons and
Harold C. Simmons. The complaint alleged, among other things, that the NL Stock
Purchase constituted a waste of Tremont's assets and that Tremont's board of
directors had breached its fiduciary duties to Tremont's public stockholders. A
trial on this matter was held in June 1995 and in March 1996 the court issued
its opinion ruling in favor of the defendants and concluded that the NL Stock
Purchase did not constitute an overreaching by Valhi, that Tremont's purchase
price in the NL Stock Purchase was fair and that in all other respects the NL
Stock Purchase was fair to Tremont. In June 1996, the plaintiffs filed an
appeal with the Delaware Supreme Court. A hearing before a three-judge panel of
the Supreme Court was held in December 1996, and an en banc hearing before the
full Supreme Court was held in February 1997. In June 1997, the Delaware
Supreme Court en banc reversed the trial court ruling and remanded the matter to
the lower court for further proceedings. The Supreme Court held, in part, that
the trial court had erred in placing the burden of proof on the plaintiffs and
remanded the matter so that the trial court could determine whether the
defendants had demonstrated the fairness of the entire transaction. In October
1997, oral arguments upon remand were heard and the judge then requested
additional testimony. On February 4, 1998, Valhi reached an agreement in
principal to settle this matter. In March 1998, Valhi and Tremont executed and
filed with the court a proposed stipulation of settlement of the case. Under
the proposed settlement, which is subject to court approval, Valhi has agreed to
transfer to Tremont 1.2 million shares of NL Common Stock, subject to adjustment
depending on the average sales price of such shares during the fifteen trading
day period ending five trading days prior to the transfer, up to a maximum of
1.4 million shares and down to a minimum of 1.0 million shares. Valhi has the
option, in lieu of transferring such shares, to transfer cash or cash
equivalents equal to the product of such average sales price and the number of
shares that would otherwise have been transferred to Tremont. Valhi has not yet
decided whether it will transfer shares or cash pursuant to the terms of the
stipulation of settlement. If approved by the court, the transfer of shares
or cash is expected to occur in the second or third quarter of 1998.
In September 1996, a complaint was filed in the Superior Court of New
Jersey, Bergen County, Chancery Division (Seinfeld v. Simmons, et al., No. C-
336-96) against Valhi, NL and certain current and former members of NL's board
of directors, including Glenn R. Simmons and Harold C. Simmons. The complaint,
a derivative action on behalf of NL, alleged, among other things, that NL's
August 1991 "Dutch auction" tender offer was an unfair and wasteful expenditure
of NL's funds. The complaint sought, among other things, to rescind NL's
purchase of approximately 10.9 million shares of NL Common Stock from Valhi
pursuant to the Dutch auction, and the plaintiff has stated that damages sought
are $149 million. On February 4, 1998, Valhi reached an agreement in principal
to settle this matter. In February 1998, Valhi and NL executed and filed with
the court a proposed stipulation of settlement of the case. Under the proposed
settlement, which is subject to court approval, Valhi has agreed to transfer to
NL 750,000 shares of NL Common Stock, subject to adjustment depending on the
average sales price of such shares during the fifteen trading day period ending
five trading days prior to the transfer, up to a maximum of 825,000 shares and
down to a minimum of 675,000 shares. Valhi has the option, in lieu of
transferring such shares, to transfer cash or cash equivalents equal to the
product of such average sales price and the number of shares that would
otherwise have been transferred to NL . Valhi has not yet decided whether it
will transfer shares or cash pursuant to the terms of the stipulation of
settlement. If approved by the court, the transfer of shares or cash is
expected to occur in the second or third quarter of 1998.
SECURITY OWNERSHIP OF MANAGEMENT
As of March 26, 1998, the Company's nominees for directors, directors, the
executive officers named in the Summary Compensation Table below, and the direc-
tors and executive officers as a group, beneficially owned, as defined by the
rules of the Securities and Exchange Commission (the "Commission"), the shares
of Common Stock and Preferred Stock shown in the following table.
Amount and Nature of Beneficial Ownership(1)
Combined
Ownership of
Common and
Preferred
Percent Percent Stock
Name of Common of Preferred of Percent of
Beneficial Owner Stock (#) Class (2) Stock (#) Class (2) Class (2)
Thomas E. Barry (3) 4,200 - 0 - -
Paul M. Bass, Jr. (3)(4) 11,500 - 0 - -
David E. Connor (3) 6,500 - 0 - -
Harold M. Curdy (5) 28,952 - 0 - -
Bert E. Downing, Jr. (5) 8,444 - 0 - -
Thomas J. Glaister (5) 7,867 - 0 - -
William P. Lyons (3)(6) 37,127 - 0 - -
Glenn R. Simmons (5)(7) 110,267 1.2 0 - 1.1
Robert W. Singer (5) 46,287 - 0 - -
William Spier (3)(6)(8)(9) 227,412 2.4 193,537 44.4 4.3
J. Walter Tucker, Jr. 153,450 1.6 0 - 1.6
Richard N. Ullman (3) 5,500 - 0 - -
All directors and
executive officers as a
group (15 persons)
(3)(4)(5)(6)(7)(8)(9)(10) 679,987 7.1 193,537 44.4 8.8
<FN>
<F1>
(1) All beneficial ownership is sole and direct except as otherwise set forth
herein. Information as to the beneficial ownership of Common Stock and
Preferred Stock has either been furnished to the Company by or on behalf of
the indicated persons or is taken from reports on file with the
Securities and Exchange Commission.
<F2>
(2) Percentage omitted if less than 1%.
<F3>
(3) Includes shares that such person or group could acquire upon the
exercise of options exercisable within 60 days of the Record Date by
Messrs. Barry, Bass, Connor, Lyons, Spier and Ullman for the purchase of
4,000, 4,000, 4,000, 1,000, 1,000 and 4,000 shares, respectively,
pursuant to the Keystone Consolidated Industries, Inc. 1992
Non-Employee Director Stock Option Plan.
<F4>
(4) Includes 2,500 shares of Common Stock held in discretionary accounts by
First Southwest Company, a licensed broker-dealer, on behalf of certain
of its clients, as to which Mr. Bass has voting and dispositive
authority. Mr. Bass serves as Vice Chairman of First Southwest Company.
As a result of the foregoing, Mr. Bass may be deemed to be the
beneficial owner of such shares. However, Mr. Bass disclaims all such
beneficial ownership.
<F5>
(5) Includes shares that such person or group could acquire upon the
exercise of options exercisable within 60 days of the Record Date by
Messrs. Curdy, Downing, Glaister, Simmons, and Singer for the purchase
of 16,667, 7,000, 6,667, 69,167 and 23,333 shares, respectively,
pursuant to the Company's various stock option plans.
<F6>
(6) Includes shares that such person or group could acquire upon
the exercise of options exercisable within 60 days of the Record
Date by Messrs. Lyons and Spier for the purchase of 3,732 and 22,395
shares, respectively, pursuant to the Company's stock option plan.
These options represent options granted under the DeSoto, Inc. 1992
Stock Option Plan which were exchanged for Keystone options at the time
of the Company's acquisition of DeSoto on September 27, 1996.
<F7>
(7) Glenn R. Simmons is a brother of Harold C. Simmons. See footnote (1) to
the "Security Ownership of Certain Beneficial Owners" table.
<F8>
(8) Includes 184,017 shares of Common Stock owned by Coatings Group, a
private corporation controlled by William Spier.
<F9>
(9) Includes 193,537 shares of Preferred Stock owned by Coatings Group, a
private corporation controlled by William Spier.
<F10>
(10) In addition to the foregoing, the shares of Common Stock shown as
beneficially owned by the directors and executive officers of
Keystone as a group include 18,433 shares that the remaining executive
officers of Keystone have the right to acquire upon the
exercise within 60 days subsequent to the Record Date of stock options
granted pursuant to the Company's stock option plan.
</FN>
The following table sets forth the stockholders known to the Company to be
the beneficial owners of more than 5% of the Common Stock or Preferred
Stock outstanding as of the Record Date.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Combined
Ownership of
Common and
Preferred
Percent Percent Stock
Name and Address of Common of of Percent of
Beneficial Owner Stock Class Preferred Class Class (1)
(#) (1) Stock (#) (1)
Harold C. Simmons (2)(3) 4,542,673 48.5 - - 46.4
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240
Dimensional Fund Advisors Inc (4) 602,800 6.4 - - 6.2
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Coatings Group, Inc. (5) 184,017 2.0 193,537 44.4 3.9
444 Madison Avenue, 38th Floor
New York, New York 10022
Valhal Corp. - - 145,152 33.3 1.5
555 Fifth Avenue, 17th Floor
New York, New York 10033
Parkway M&A Capital Corp.
444 Madison Avenue, 38th Fl.
New York, New York 10022 35,023 - 96,769 22.2 1.4
<FN>
<F1>
(1) Percentage omitted if less than 1%.
<F2>
(2) The shares of Common Stock shown as beneficially owned by Harold C. Simmons
includes 3,599,759, 326,364, 326,050, 250,000, and 30,000 shares of Common
Stock held by Contran, Valhi, NL, The Harold Simmons Foundation, Inc.
(the "Foundation"), and The Combined Master Retirement Trust (the "Master
Trust"), respectively.
Contran and NL directly hold approximately 38.5% and 3.5%, respectively, of
the outstanding Common Stock. Valhi and Tremont are the holders of
approximately 58.2% and 17.7%, respectively, of the outstanding common
stock of NL. Contran holds, directly or indirectly through related
entities, approximately 92.1% and 46.1% of the outstanding common stock
of Valhi and Tremont, respectively. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit
of certain of Harold C. Simmons' children and grandchildren (together, the
"Trusts"), of which Mr. Simmons is the sole trustee. As sole trustee of
each of the Trusts, Mr. Simmons has the power to vote and direct the
disposition of the shares of Contran stock held by each of the Trusts;
however, Mr. Simmons disclaims beneficial ownership thereof.
Harold C. Simmons is Chairman of the Board, President and Chief
Executive Officer of Valhi and Contran and Chairman of the Board and
Chief Executive Officer of certain related entities through which
Contran may be deemed to control Valhi. Additionally, he is Chairman of
the Board of NL and is a director of Tremont.
The Foundation holds approximately 2.7% of the outstanding shares of
Common Stock. The Foundation is a tax-exempt foundation organized and
existing exclusively for charitable purposes. Harold C. Simmons is
Chairman of the Board and Chief Executive Officer of the Foundation.
By virtue of the holding of the offices, the stock ownership and his
service as trustee as described above, Harold C. Simmons may be deemed
to control certain of such entities and Mr. Simmons and certain of such
entities may be deemed to possess indirect beneficial ownership of
certain shares of Common Stock directly held by certain of such other
entities. However, Mr. Simmons disclaims such beneficial ownership of
the shares of Common Stock beneficially owned, directly or indirectly,
by any of such entities.
The Master Trust holds approximately 0.3% of the outstanding shares of
Common Stock. The Master Trust is a trust formed by Valhi to permit the
collective investment by trusts that maintain the assets of certain
employee benefit plans adopted by Valhi and related companies, including
Keystone. Harold C. Simmons is sole trustee of the Master Trust and
sole member of the Trust Investment Committee for the Master Trust.
The trustee and members of the Trust Investment Committee for the
Master Trust are selected by Valhi's board of directors. Harold C.
Simmons and Glenn R. Simmons are members of Valhi's board of directors
and are both participants in one or more of the employee benefit plans
that invest through the Master Trust; however, both such persons
disclaim beneficial ownership of the shares of Common Stock held by the
Master Trust, except to the extent of their respective vested beneficial
interests therein.
The information contained in this footnote is based on information
provided to the Company by Valhi, Contran and certain of their
affiliates as of the Record Date.
<F3>
(3) The shares of Common Stock shown as beneficially owned by Harold C.
Simmons also includes 10,500 shares of Common Stock held by Mr.
Simmons' wife, with respect to all of which Mr. Simmons disclaims
beneficial ownership.
<F4>
(4) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 602,800 shares of
Common Stock as of December 31, 1997, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered
open-end investment company, or in series of The DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and the DFA
Participating Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all
such shares.
<F5>
(5) Coatings Group, Inc. is a private corporation controlled by William Spier.
</FN>
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 Commission, the New York Stock Exchange and Keystone. Based solely on
the review of the copies of such reports filed with the Commission, Keystone
believes that for 1997 its executive officers, directors and 10% stockholders
complied with all applicable filing requirements under Section 16(a).
DIRECTOR'S COMPENSATION
Directors of Keystone receive an annual retainer of $12,000. Such
directors also receive a fee of $450 per day for each Board of Directors meeting
and/or committee meeting. Directors are also reimbursed for reasonable expenses
incurred in attending Board of Directors and/or committee meetings. Under the
Keystone Consolidated Industries, Inc. 1992 Non-Employee Director Stock Option
Plan ("Director Plan"), which terminated May 1, 1997, non-employee directors
were granted an option to purchase 1,000 shares of Common Stock on the third
business day after the Company issues its press release summarizing the
Company's annual financial results for the prior fiscal year. The exercise
price of the options is equal to the last reported sale price of Common Stock on
the New York Stock Exchange Composite Tape on the date of grant. Options
granted pursuant to the Director Plan become exercisable one year after the date
of grant and expire on the fifth anniversary following the date of grant. 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 the Company or its subsidiaries. Mr. Glenn
R. Simmons' services are made available to the Company pursuant to the
Intercorporate Services Agreement. In addition to being a director, Mr. Tucker
provides certain consulting services to the Company for which the Company pays a
company related to Mr. Tucker. See "Certain Business Relationships and Related
Transactions."
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's chief
executive officer and to each of the Company's four most highly compensated
executive officers or directors other than the chief executive officer (each a
"named executive officer") for services rendered in all capacities to the
Company for the years ended December 31, 1997, 1996, and 1995.
Summary Compensation Table
Long-Term
Compensation
Awards
Securities All Other
Name and Annual Compensation Underlying Compensation
Principal Position Year Salary($) Bonus ($) Options (#) ($)(1)
Glenn R. Simmons (2) 1997 126,923 200,000 - -
Chairman of the Board 1996 126,923 250,000 125,000 -
1995 123,077 - - -
Harold M. Curdy 1997 150,000 85,000 10,000 11,882
Vice President-Finance 1996 140,000 175,000 25,000 7,260
& Treasurer 1995 132,000 60,000 - 7,425
Bert E. Downing, Jr. 1997 84,000 80,000 - 5,451
Corporate Controller 1996 80,000 37,000 15,000 4,840
1995 76,000 20,000 - 4,655
Thomas J. Glaister (3) 1997 171,636 112,500 20,000 -
President
Keystone Steel & Wire
Robert W. Singer (4) 1997 185,000 350,000 40,000 62,943
President and 1996 170,000 200,000 - 7,260
Chief Executive Officer 1995 170,000 62,500 - 7,425
<FN>
<F1>
(1) For 1997 represents (i) a contribution of $5,451 to the accounts of
Messrs. Curdy, Downing, and Singer to the Company's 401(k) Plan for the
benefit of such executive officer and (ii) $6,431 and $57,492 accrued by
the Company in an unfunded account for the benefit of Mr. Curdy and Mr.
Singer, respectively, under a deferred compensation agreement payable
upon the named executive officer's retirement, the termination of his
employment with the Company or to his beneficiaries upon his death. For
1996 represents a contribution of $7,260, $4,840, and $7,260 to the
accounts of Messrs. Curdy, Downing, and Singer, respectively, to
the Company's 401(k) Plan, and for 1995 represents a contribution of
$7,425, $4,655 and $7,425 to the accounts of Messrs. Curdy, Downing, and
Singer, respectively, to the Company's 401(k) Plan.
<F2>
(2) Mr. Simmons is not a salaried employee of the Company. The reported
salary represents an allocation of his time devoted to Keystone business
under the Intercorporate Services Agreement. See "Certain Business
Relationships and Related Transactions" above. Keystone, however, paid
Mr. Simmons' reported bonuses in 1997 and 1996.
<F3>
(3) Mr. Glaister was first appointed an executive officer of the Company in
January 1997.
<F4>
(4) The amounts shown in the table as compensation for Mr. Singer exclude
the amount Contran credited to Keystone for Mr. Singer's services
rendered to Valhi pursuant to intercorporate services agreements with
Contran, which amounts were $65,000, $55,000, and $117,500 for 1997,
1996 and 1995, respectively.
</FN>
The following table sets forth certain information for the fiscal year
ended December 31, 1997, with respect to stock options granted to the named
executive officers. No stock appreciation rights were granted and no options
have been granted at an option price below fair market value on the date of
grant.
Option Grants in 1997
% of
Total Potential Realizable
Number Options Value at Assumed
of Granted Annual
Securities to Exercise Rates of Stock Price
Underlying Employees or Base Appreciation for
Options in Fiscal Price Expiration Option Term ($)
Name Granted* Year ($/Share) Date 5% 10%
Harold M. Curdy 10,000 8 8.125 3/03/07 51,098 129,492
Thomas J. Glaister 20,000 17 9.25 1/13/07 116,346 294,842
Robert W. Singer 40,000 33 8.125 3/03/07 204,391 517,966
* Options vest 33-1/3%, 66-2/3%, and 100% on the first, second, and third
anniversary of the date of grant, respectively.
The following table provides information, with respect to the named
executive officers, concerning the value of unexercised stock options held as of
December 31, 1997. In 1997, no named executive officer exercised any stock
options.
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/SARs at
December 31, 1997(#) December 31, 1997 ($)(1)
Name Exercisable Unexercisable Exercisable Unexercisable
Glenn R. Simmons 69,167 83,333 202,083 322,917
Harold M. Curdy 13,333 26,667 48,542 103,333
Bert E. Downing, Jr. 6,200 10,800 21,475 40,150
Thomas J. Glaister 0 20,000 0 55,000
Robert W. Singer 10,000 40,000 32,500 155,000
<FN>
<F1>
(1) The values shown in the table are based on the $12.00 per share closing
price of the Common Stock on December 31, 1997, as reported by the New
York Stock Exchange Composite Tape, less the exercise price of the
options.
</FN>
REPORT ON EXECUTIVE COMPENSATION
Compensation Committee Report
During 1997, matters regarding compensation of executives were administered
by the Compensation Committee (the "Committee"). The Committee is comprised of
directors who are neither officers nor employees of the Company or its
subsidiaries and who are not eligible to participate in any of the employee
benefit plans administered by it except the 1997 Long-Term Incentive Plan. The
Committee adopts compensation policies and is responsible for approving all
compensation of executives paid by the Company.
It is the Company's policy that employee compensation, including
compensation to executives, be at a level which allows the Company to attract,
retain, motivate and reward individuals of training, experience, and ability who
can lead the Company 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 the Company's financial
results, creating a performance-oriented environment that rewards employees for
achieving pre-set financial performance levels. It is the Company's policy to
structure all compensation arrangements to be deductible for federal income tax
purposes under applicable provisions of the Internal Revenue Code.
During 1997, the Company's compensation program with respect to its
executives consisted of three components: base salary, incentive bonus, and
stock option awards.
Base Salary
The Committee reviews, in consultation with the Chief Executive Officer
("CEO"), base salaries for executives at least annually. The Committee
approves, with any modifications it deems appropriate, the CEO's recommendations
for base salary levels. Base salaries for all salaried employees, including
executive officers of the Company, have been established on a position-by-
position basis. Annual internal reviews of salary levels are conducted by the
Company's management 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 the Company, 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. The Company 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 the Company's incentive bonus program represent a significant
portion of an executive's potential annual cash compensation and are awarded at
the discretion of the Committee on recommendation of the CEO. Annual
performance reviews are an important factor in determining management's
recommendation which is primarily based on each individual's performance and,
to a lesser extent, on the Company's overall performance. No specific financial
or budget tests were applied in the measurement of individual performance. The
executive's performance is typically measured by the ability the executive
demonstrates in performing, in a timely and cost efficient manner, the functions
of the executive's position. The Company's overall performance is typically
measured by the Company's historical financial results. No specific overall
performance measures were used and there is no specific relationship between
overall Company performance and an executive's incentive bonus.
Stock Options/Restricted Stock
An integral part of the Company's total compensation program is non-cash
incentive awards in the form of stock options, stock appreciation rights
("SARs") and restricted stock granted to executives. Stock option grants, in
particular, are considered an essential element of the Company's total
compensation package for the executives. The Committee believes that stock
options, SARs and restrictive stock awards provide an earnings opportunity based
on the Company's success measured by Common Stock performance. Additionally,
awards establish an ownership perspective and encourage the retention of
executives. Incentive stock options are granted at a price not less than 100%
of the fair market value of such stock on the date of grant. The exercise price
of all options and the length of period during which the options may be
exercised are determined by the Compensation Committee. The Compensation
Committee also considered the number of stock options already outstanding in
granting new stock options.
The foregoing report is submitted by the members of the Compensation
Committee of the Board of Directors.
Dr. Thomas E. Barry, Chairman
Paul E. Bass
Richard N. Ullman
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is or has been an officer or
employee of the Company or any of its subsidiaries. In 1997, no executive
officer of the Company served on the compensation committee or as a director of
another entity, one of whose executive officers served on the Company's
Compensation Committee or Board of Directors.
Pursuant to Commission regulations, this report is not "soliciting
material," is not deemed filed with the Commission and is not to be incorporated
by reference in any filing of the Company under the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange Act").
Performance Graph
The following graph reflects a comparison of the cumulative total return of
the Common Stock from December 31, 1992 through December 31, 1997, with the
Standard & Poor's 500 Composite Index and the Standard & Poor's Iron & Steel
Index. The comparison for each of the periods assumes that the value of the
investment in the Common Stock and each index was $100 on December 31, 1992 and
that all dividends were reinvested.
Comparison of Five Year Cumulative Total Shareholder Return Among
Keystone Consolidated Industries, Inc., S&P 500, and S&P Iron & Steel Index
[Performance graph goes here.]
1992 1993 1994 1995 1996 1997
Keystone $100 $103 $136 $115 $83 $120
S&P 500 $100 $110 $112 $153 $189 $252
S&P Iron & Steel $100 $132 $128 $119 $106 $108
Pursuant to Commission regulations, this performance graph is not
"soliciting material," is not deemed filed with the Commission and is not to be
incorporated by reference in any filing of the Company under the Securities Act
or the Exchange Act.
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 the Company'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 salaried employees named in the Summary Compensation Table,
assuming continued employment with the Company until normal retirement age at
current salary levels are: Harold M. Curdy, $50,649; Bert E. Downing, Jr.,
$35,494; Thomas J. Glaister, $33,920; and Robert W. Singer, $28,056. Glenn R.
Simmons does not participate in the Keystone Pension Plan.
PROPOSED AMENDMENT OF THE KEYSTONE CONSOLIDATED INDUSTRIES, INC.
1997 LONG-TERM INCENTIVE PLAN
(Proposal 2)
The Board of Directors (the "Board") is submitting to the stockholders for
their approval an amendment, adopted by the Board of Directors on February 25,
1998, to the Keystone Consolidated Industries, Inc. 1997 Long-Term Incentive
Plan (the "Plan"). Subject to stockholder approval, the amendment would
increase the number of shares of Common Stock subject to the Plan from 300,000
to 500,000. The increase in the number of shares covered by the Plan will
provide additional shares available for future undetermined grants of stock
options, stock appreciation rights ("SARs"), restricted stock, performance
grants and other awards as deemed by the Incentive Compensation Committee. As
of March 26, 1998, awards of stock options covering 249,000 shares of Common
Stock were outstanding under the Plan, leaving 51,000 shares available for
future grants.
Description of the Plan
General
Purpose. The purpose of the Plan is to advance the interests of Keystone
and its stockholders by providing incentives to certain eligible persons who
contribute significantly to the strategic and long-term performance objectives
and growth of the Company.
Types of Awards. The Plan provides for awards or grants of stock options,
stock appreciation rights ("SARs"), restricted stock, performance grants and
other awards deemed by the Incentive Compensation Committee to be consistent
with the purposes of the Plan (collectively, "Awards").
Eligible Persons. Key individuals employed by, or performing services for,
Keystone or its subsidiaries are eligible to receive Awards. A person who is
eligible to receive an Award may be a nonemployee director or some other person
who is not employed by Keystone.
Administration. Generally, a committee of the Board consisting of two or
more individuals administers the Plan (the "Committee"). The Plan provides
that the Incentive Compensation Committee is the initial committee to administer
the Plan. In certain other instances, the Board or other persons may administer
the Plan. The Plan requires that the membership of the Committee consist of
"nonemployee directors" as defined in Rule 16b-3 promulgated by the Commission
under the Exchange Act and "outside directors" as defined under regulations
promulgated by the Department of Treasury under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Members of the Committee must
also meet any applicable requirements of the New York Stock Exchange. Eligible
persons entitled to receive Awards include members of the Committee.
The Committee determines the eligible persons to whom it grants Awards and
the type, size and terms of such Awards. The Committee may also amend the terms
of any Award in any manner the Committee deems appropriate if the Committee
could grant such amended Award at the time of the amendment. In addition, the
Committee can construe and interpret the Plan and any Award granted thereunder
and make all other determinations deemed necessary or advisable for the
administration of the Plan.
Number of Shares Subject to the Plan. The Plan, when amended, reserves a
maximum of 500,000 shares of Keystone Common Stock for Awards to be granted
under the Plan, subject to certain adjustments. If the proposed amendment to
the Plan is approved, the Plan will reserve 500,000 shares of Keystone Common
Stock for Awards granted and to be granted under the Plan, subject to certain
adjustments. Keystone Common Stock issued under the Plan may be either newly
issued shares, treasury shares, reacquired shares or any combination of the
three. If any shares of Keystone Common Stock issued as restricted stock under
the Plan are reacquired by the Company pursuant to such rights, or if any Award
is canceled, terminates or expires unexercised, Keystone Common Stock that would
otherwise have been issuable pursuant to such Award will be available for
issuance under new Awards.
Annual Limit on Awards to an Individual. The underlying shares of Keystone
Common Stock issuable in any single fiscal year under Awards to an individual
shall not exceed 300,000 shares.
Limitations on Transfers of Awards. Generally, an Award is nontransferable
except by approval of the Committee or by will or the laws of descent and
distribution. Incentive stock options, however, are transferable only by will
or the laws of descent and distribution.
Description of Awards under the Plan
Stock Options. An Award of a stock option ("Stock Option") is the right to
purchase a specified number of shares of Keystone Common Stock at a specified
exercise price, both of which the Committee determines. The Committee can
choose whether or not the grant of a Stock Option requires the recipient to pay
a purchase price at the time of grant. The Committee also determines when and
how a Stock Option becomes exercisable. The term of a Stock Option, however,
cannot exceed ten years. A Stock Option may be either a nonqualified or an
incentive stock option.
The Committee may grant nonqualified Stock Options to any eligible person
under the Plan. The exercise price for nonqualified Stock Options may be at any
price the Committee determines that is above the par value for the underlying
shares of Keystone Common Stock.
The Committee may only grant incentive Stock Options to employees of
Keystone or its subsidiaries. The exercise price of an incentive Stock Option
may not be less than the fair market value of the underlying shares of Keystone
Common Stock on the date of grant. The maximum aggregate fair market value of
Keystone Common Stock (determined as of the respective dates of grant) with
respect to which incentive stock options are first exercisable by any one
employee of Keystone or its subsidiaries in any calendar year cannot exceed
$100,000. If the Committee grants an incentive Stock Option to an employee
holding more than ten percent of the voting power of all classes of stock of any
of Keystone or its subsidiaries, the option cannot have an exercise price lower
than 110% of fair market value on the date of the grant or a term longer than
five years. In addition, the recipient of an incentive Stock Option cannot
exercise the option beyond the time an incentive Stock Option may be exercised
in order to qualify as such under the Code.
Payment of the exercise price of a Stock Option must be made in such form
as the Committee determines in its discretion. If the Committee allows payment
to be made with shares of Keystone Common Stock, such shares are valued at their
fair market value on the day of exercise and shall have been held by the option
holder for a period of at least six months.
The Committee may grant Stock Options in conjunction with any other Award,
except that an incentive Stock Option cannot have an associated award that is a
nonqualified Stock Option. When the Committee awards a Stock Option in
conjunction with an associated Award, the number of Keystone Common Shares
subject to the Stock Option may be reduced on an appropriate basis to the extent
that the associated Award is exercised, paid to or otherwise received by the
recipient, as determined by the Committee.
Stock Appreciation Rights. SARs are rights to receive (without payment to
the Company) cash, Keystone Common Stock, other property or any combination of
the three based on the increase in the value of Keystone Common Stock from the
date of grant to the date of exercise. An SAR awarded under the Plan that is
related to another Award is exercisable, subject to applicable laws, rules and
regulations, only to the extent that the other Award is exercisable and then
only during such period or periods as the Committee determines. In addition, an
SAR that is associated with a Stock Option is exercisable only when the fair
market value of a share of Keystone Common Stock exceeds the exercise price per
share of the associated Stock Option. If an SAR's Associated Award is an
incentive Stock Option, the exercise of the SAR is limited to those instances
where its exercise would not disqualify the associated stock option's status as
an incentive stock option under the Code. When the Committee awards an SAR in
conjunction with an associated Award, the number of shares of Keystone Common
Stock subject to the SAR may be reduced on an appropriate basis to the extent
that the associated Award is exercised, paid to or otherwise received by the
recipient, as determined by the Committee.
Upon the exercise of an SAR, the holder receives, at the election of the
Committee, cash, shares of Keystone Common Stock, other consideration or any
combination of the three equal in value (or in the discretion of the Committee,
less than) to the excess of the fair market value of the shares of Keystone
Common Stock subject to such exercise over the exercise price for such shares as
specified in the SAR.
Restricted Stock. An Award of restricted stock is an award of a number of
shares of Keystone Common Stock that are subject to certain restrictions (e.g.,
such stock shall be issued but not delivered to the recipient and, generally,
shall be forfeited if the recipient's employment or performance of services for
Keystone terminates). Such restrictions exist for a certain restricted period
and in accordance with such terms as the Committee specifies. Prior to the
expiration of the restricted period and the satisfaction of any applicable
terms, a recipient who has received an Award of restricted stock has the rights
of ownership of the shares of Keystone Common Stock subject to such award,
including the right to vote and to receive dividends.
Performance Grants. At the time an Award of a performance grant is made,
the Committee establishes performance objectives during a specified award
period. The final value, if any, of a performance grant is determined by the
degree to which the performance objectives have been achieved during the award
period, subject to adjustments that the Committee may approve based on relevant
factors. Performance objectives may be based on the performance of the
recipient, Keystone, one or more of its subsidiaries or one or more of their
divisions or units, or any combination of thereof, as the Committee determines.
The Committee may, in its discretion, make adjustments in the computation of any
performance measure. The maximum value of an Award of a performance grant as
established by the Committee may be a fixed amount, an amount that varies from
time to time based on the value of Keystone Common Stock, or an amount that is
determinable from other criteria the Committee specifies. Performance grants
may have different classes or series, having different names, terms and
conditions.
The Committee may grant Awards of performance grants in conjunction with
other Awards. If awarded in conjunction with an associated Award, the number of
performance grants may be reduced on an appropriate basis to the extent that the
associated Award is exercised by, paid to, or otherwise received by, the
recipient, as determined by the Committee.
The Committee will generally determine the value of an Award of a
performance grant as promptly as practicable after the end of the award period
or upon the earlier termination of the recipient's employment or performance of
services. The Committee may, however, determine the value of the performance
grant and pay it out at any time during the award period. If the performance
grant does not have an associated Award, the holder of the performance grant
will be paid the final value. If the performance grant has value and has an
associated Award, however, the Committee will determine whether to cancel the
performance grant and permit the recipient to retain the associated Award, to
cancel the associated Award and pay out the value of the performance grant or to
pay out the value of only a portion of the performance grant and to cancel the
associated Award as to an appropriate portion thereof.
Payments pursuant to an Award of a performance grant may be made in cash,
shares of Keystone Common Stock or other consideration (for example, other
Keystone securities or property) or a combination of the three, and in
accordance with terms the Committee sets. The Committee may also permit any
payments under an Award be deferred until a later date upon such terms as
determined by the Committee.
Additional Information
Adjustments in Shares of Keystone Common Stock. Under the Plan, if any
change in the outstanding shares of Keystone Common Stock occurs by reason of an
extraordinary or unusual event (e.g. stock split, stock dividend,
recapitalization or merger), the Committee may direct appropriate changes in the
terms of any Award or the number of shares of Keystone Common Stock available
for Awards. Such changes may include the number or kind of securities that may
be subject to, the exercise price under, any measure of performance for, or the
number or value of, an Award.
Amendments to Awards. The Committee may amend or modify any outstanding
Award in any manner (including, but not limited to, acceleration of the date of
exercise of or payments under any Award) if the Committee could grant the
amended or modified Award under the terms of the Plan at the time of such
amendment or modification. Only in certain circumstances, however, may the
Committee amend or modify an outstanding Award in a material manner that
adversely affects the holder of the affected Award without the holder's written
consent.
Substitution of Awards. The Committee may permit holders of Awards to
surrender outstanding Awards in order to exercise or realize the rights under
other Awards. In addition, the Committee may allow or require holders of Awards
to exchange such outstanding Awards for the grant of new Awards.
Significant Corporate Events. In the event of dissolution or liquidation
of Keystone, all outstanding Awards terminate immediately prior to the
consummation of such dissolution or liquidation action, unless otherwise
provided by the Committee. In the event of a proposed sale of all or
substantially all of the assets of Keystone or the merger of Keystone with or
into another corporation, all restrictions on any outstanding Awards lapse and
recipients of Awards become entitled to the full benefit of their Awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Committee.
Rights to Continue as Employee or Service Provider. Neither the Plan nor
any Award confers on any individual any right to continue in the employ of, or
provide services to, Keystone or its subsidiaries.
Effectiveness of Rights as Stockholders. A recipient of an Award has no
rights as a stockholder with respect to the shares of Keystone Common Stock
issuable pursuant to the Award until the date of issuance of the stock
certificate for such shares.
Financing. If the Committee deems it advisable, Keystone may assist
recipients of Awards with financing from Keystone or a third party so as to
permit the payment of taxes with respect to an Award or to enable the recipient
to acquire, exercise or realize the rights of an Award. Such assistance may
take any form as the Committee considers appropriate.
Deferrals. The Committee may grant an Award in conjunction with the
deferral of a recipient's compensation. The Committee may provide that any such
deferred compensation be forfeited to the Company under certain circumstances,
subject to an increase or decrease in value based upon specified performance
measures or credited with income equivalents until the date or dates of payment
of the Award.
Alternative Payments for Tax Withholding. The Committee may permit a
recipient of an Award to elect to pay taxes required to be withheld with respect
to an Award in any appropriate manner (including, without limitation, by the
surrender to the Company of shares of Keystone Common Stock owned by such person
or that would otherwise be distributed, or have been distributed, as the case
may be, pursuant to such Award).
Termination. The Plan terminates on May 9, 2007 or such time as the Board
adopts a resolution terminating the Plan. The Board may extend the Plan for
up to an additional five years for the grant of Awards other than incentive
Stock Options.
Amendments to the Plan. The Board may amend the Plan at any time. Except
in certain circumstances, no amendment shall adversely affect in a material
manner any right of any recipient of an Award without such recipient's written
consent.
Registration of Keystone Common Stock under Plan. The Company has
registered the issuance of the initial 300,000 shares of Keystone Common Stock
reserved under the Plan with the Commission and intends to register the issuance
of an additional 200,000 shares of Keystone Common Stock if the proposed
amendment to the Plan is approved.
Federal Income Tax Consequences
The following is a summary of the principal current federal income tax
consequences of transactions under the Plan. It does not describe all federal
tax consequences under the Plan, nor does it describe state, local or foreign
tax consequences.
Incentive Stock Options. No taxable income is realized by the recipient
upon the grant or exercise of an incentive stock option. However, the exercise
of an incentive stock option may result in alternative minimum tax liability for
the recipient. If no disposition of shares issued to a recipient pursuant to
the exercise of an incentive stock option is made by the recipient within two
years from the date of grant or within one year after the transfer of such
shares to the recipient, then upon sale of such shares, any amount realized in
excess of the exercise price will be taxed to the recipient short-term or long-
term capital gain or loss, depending on how long the shares have been held, and
no deduction will be allowed to the Company for federal income tax purposes.
If the shares of Keystone Common Stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of the two-year
and one-year holding periods described above, generally the recipient will
realize ordinary income in the year of disposition in an amount equal to the
excess (if any) of the fair market value of the shares at exercise (or, if less,
the amount realized on an arms-length sale of such shares) over the exercise
price, and the Company will be entitled to deduct such amount. Any further gain
realized will be taxed as short-term or long-term capital gain and will not
result in any deduction by the Company. Special rules may apply where all or a
portion of the exercise price of the incentive stock option is paid by tendering
shares of Keystone Common Stock.
If an incentive stock option is exercised at a time when it no longer
qualifies for the tax treatment described above, the option is treated as a
nonqualified stock option. Generally, an incentive stock option will not be
eligible for the tax treatment described above if it is exercised more than
three months following termination of employment (one year following termination
of employment by reason of permanent and total disability), except in certain
cases where the incentive stock option is exercised after the death of a
recipient.
Nonqualified Stock Options. With respect to nonqualified stock options
granted under the Plan, no income is realized by the recipient at the time the
options are granted. Generally, at exercise, ordinary income is realized by the
recipient in an amount equal to the difference between the exercise price and
the fair market value of the shares on the date of exercise, and the Company
receives a tax deduction for the same amount, and at disposition, appreciation
or depreciation after the date of exercise is treated as either short-term or
long-term capital gain or loss, depending on how long the shares have been held.
SARs. The grant of an SAR does not result in income for the grantee or in
a deduction for the Company. Upon the exercise of an SAR, the grantee generally
recognizes ordinary income and the Company is entitled to a deduction equal to
the positive difference between the fair market values of the shares subject to
the SAR on the dates of grant and exercise.
Restricted Stock. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the fair market value of the stock at
the time the stock is either transferable or is no longer subject to forfeiture,
less any amount paid for such stock. The Company is entitled to a corresponding
tax deduction for the amount of ordinary income recognized by the recipient.
However, a recipient who so elects under Section 83(b) of the Internal Revenue
Code within 30 days of the date of issuance of the restricted stock will realize
ordinary income on the date of issuance equal to the fair market value of the
shares of restricted stock at that time (measured as if the shares were
unrestricted and could be sold immediately), less any amount paid for such
stock. If the shares subject to such election are forfeited, the recipient will
not be entitled to any deduction, refund or loss for tax purposes with respect
to the ordinary income previously recognized. Upon sale of the shares after the
forfeiture period has expired, the appreciation or depreciation since the shares
became transferable or free from risk of forfeiture (or, if a Section 83(b)
election was made, since the shares were issued, taking into account the
ordinary income previously recognized) will be treated as long-term or short-
term capital gain or loss. The holding period to determine whether the
recipient has long-term or short-term capital gain or loss begins when the
restriction period expires (or upon earlier issuance of the shares, if the
recipient elected immediate recognition of income under Section 83(b)).
Performance Awards. The recipient of a performance award will generally be
subject to tax at ordinary income rates on any cash received and the fair market
value of any Keystone Common Stock issued under the award, and the Company will
generally be entitled to a deduction equal to the amount of ordinary income
realized by the recipient. Any cash received under a performance award will be
included in income at the time of receipt. The fair market value of any
Keystone Common Stock received will also generally be included in income (and a
corresponding deduction will generally be available to the Company) at the time
of receipt. The capital gain or loss holding period for any Keystone Common
Stock distributed under a performance award will begin when the recipient
recognizes ordinary income in respect of that distribution.
Plan Benefits
Since the Committee grants Awards in its discretion, the benefits that
recipients of Awards shall receive from the Plan are presently indeterminable.
Proposed Amendment
The following is the text of Section 5 (b) of the Plan in its entirety
reflecting the proposed amendment (additions are underlined; deletions are in
brackets):
(b) Maximum Number of Shares that May be Issued. There may be
issued under this Plan (as Restricted Stock, in payment of Performance
Grants, pursuant to the exercise of Stock Options or Stock
Appreciation Rights or in payment of or pursuant to the exercise of
such other Awards as the Committee, in its discretion, may determine)
an aggregate of not more than 500,000 [300,000] Common Shares, subject
to adjustment as provided in Section 15. Common Shares issued
pursuant to this Plan may be either authorized but unissued shares,
treasury shares, reacquired shares or any combination thereof. If any
Common Shares issued as Restricted Stock or otherwise subject to
repurchase or forfeiture rights are reacquired by the Company pursuant
to such rights or, if any Award is canceled, terminates or expires
unexercised, any Common shares that would otherwise have been issuable
pursuant thereto will be available for issuance under new Awards.
Approval
The affirmative vote of a majority of the outstanding shares represented
and entitled to be voted at the Annual Meeting is required to amend the Plan.
Broker/nominee non-votes will not be counted as represented and entitled to vote
with regard to adoption of the Plan and, therefore, will have no effect on its
adoption. Abstentions will be counted and will have the same effect as a vote
against the amendment of the Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE PLAN .
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand, L.L.P., independent public accountants, have audited the
Company's financial statements and are currently expected to be retained to
audit the financial statements for 1998. Representatives of Coopers & Lybrand,
L.L.P. will be present at the Annual Meeting. They will have an opportunity to
make a statement if they desire to do so and will be available to respond to
appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for stockholder
action at the Company's annual meetings, subject to regulations adopted by the
Commission. The Company presently intends to call the next annual meeting
during May 1999. For such proposals to be considered for inclusion in the Proxy
Statement and form of proxy relating to the 1999 annual meeting, they must be
received by the Company not later than December 11, 1998. 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 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.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
April 10, 1998
A copy of Keystone's 1997 Form 10-K Annual Report, as filed with the
Commission, is included in Keystone's 1997 Annual Report to Stockholders
distributed to stockholders with this Proxy Statement. Additional copies are
available without charge by writing to: Secretary, Keystone Consolidated
Industries, Inc., 5430 LBJ Freeway, Suite 1740, Dallas, Texas 75240.
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
Friday, May 8, 1998
The undersigned, being participants in the Keystone Consolidated
Industries, Inc. Deferred Incentive Plan or the DeSoto Stock Ownership Plus
Plan, having received the Notice of Annual Meeting and Proxy Statement dated
April 10, 1998, 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 (the "Company"), held of
record by the trustee for the account of the undersigned and entitled to vote on
the record date, March 26, 1998, at the Annual Meeting of Stockholders to be
held on May 8, 1998, 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 or the DeSoto Stock Ownership Plus
Plan, as applicable, as follows:
1. Election of DirectorsNOMINEES: Paul M. Bass and David E. Connor each for a
term of three years.
(Instruction: To withhold authority for any single
nominee, write that nominee's name in the space
provided below)
FOR all nominees WITHHOLD AUTHORITY
listed to the right to vote for all nominees
(except as marked to listed to the right
the contrary)
[ ] [ ]
2. Amendment of Long-Term
Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Signature
Date: , 1998
PLEASE SIGN, DATE, AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
PROXY
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ Freeway, Suite 1740
Dallas, Texas 75240
SOLICITED BY THE BOARD OF DIRECTORS
for Annual Meeting of Stockholders
Friday, May 8, 1998
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement dated April 10, 1998, and Annual Report to Stockholders, hereby
appoints Ralph P. End 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
(the "Company"), held of record by the undersigned and entitled to vote on the
record date, March 26, 1998, at the Annual Meeting of Stockholders to be held at
5430 LBJ Freeway, Suite 1740, Dallas, TX 75240 at 9:00 a.m. local time on May
8, 1998, 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" proposals 1 and 2.
1. Election of DirectorsNOMINEES: Paul M. Bass and David E. Connor each for a
term of three years.
(Instruction: To withhold authority for any single
nominee, write that nominee's name in the space
provided below)
FOR all nominees WITHHOLD AUTHORITY
listed to the right to vote for all nominees
(except as marked to listed to the right
the contrary)
[ ] [ ]
2. Amendment of Long-Term
Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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: , 1998
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE KEYSTONE CONSOLIDATED
INDUSTRIES, INC. PROXY STATEMENT THAT ACCOMPANIED THIS PROXY.