<PAGE>
--SCHEDULE 14A--
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Keystone Automotive 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) and 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 the 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:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
700 East Bonita Avenue
Pomona, California 91767
[LOGO OF KEYSTONE AUTOMOTIVE INDUSTRIES]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Tuesday, August 24, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Keystone
Automotive Industries, Inc. (the "Company") will be held at the Sheraton Suites
Fairplex, 601 West McKinley Avenue, Pomona, California 91768 at 10:00 a.m.
(California Time) on August 24, 1999, for the following purposes:
(1) To elect the members of the Board of Directors to serve until the next
annual meeting of shareholders;
(2) To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the 2000 fiscal year; and
(3) To transact such other business as may properly come before the meeting
or any adjournments thereof.
These items are more fully described in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on July 16, 1999 as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the meeting. Only shareholders at the close of business on the record
date are entitled to vote at the meeting.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT BE
ABLE TO ATTEND THE MEETING TO VOTE IN PERSON, PLEASE COMPLETE, SIGN AND DATE
THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE. The Proxy may be revoked at any time prior to its exercise at the
meeting.
By Order of the Board of Directors,
/s/ Ronald G. Brown
Ronald G. Brown
Chairman of the Board
Pomona California
July 26, 1999
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
700 East Bonita Avenue
Pomona, California 91767
ANNUAL MEETING OF SHAREHOLDERS
August 24, 1999
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Keystone Automotive
Industries, Inc., a California corporation (the "Company"), in connection with
the solicitation of proxies by and on behalf of the Board of Directors of the
Company. The proxies solicited hereby are to be voted at the Annual Meeting of
Shareholders of the Company to be held on August 24, 1999, and at any and all
adjournments thereof (the "Annual Meeting").
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
executing the proxy. If no direction is made, the shares represented by each
properly executed unrevoked proxy will be voted "FOR" the election of the
nominees for the Board of Directors set forth herein and "FOR" the ratification
of the appointment of Ernst & Young LLP as independent accountants for the
Company for the 2000 fiscal year. With respect to any other item of business
that may come before the Annual Meeting, the proxy holders will vote the proxy
in accordance with their best judgement.
Any proxy given may be revoked at any time prior to its exercise by filing
with James C. Lockwood, Secretary of the Company, an instrument revoking such
proxy or by the filing of a duly executed proxy bearing a later date. Any
shareholder present at the meeting who has given a proxy may withdraw it and
vote his or her shares in person if such shareholder so desires.
It is contemplated that the solicitation of proxies will be made primarily
by mail. Should it, however, appear desirable to do so in order to ensure
adequate representation of shares at the Annual Meeting, officers, agents and
employees of the Company may communicate with shareholders, banks, brokerage
houses and others by telephone, telegraph, or in person to request that proxies
be furnished. All expenses incurred in connection with this solicitation will
be borne by the Company. In following up the original solicitation of proxies
by mail, the Company may make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares eligible to vote at the Annual Meeting and will
reimburse them for their expenses in so doing. The Company has no present plans
to hire special employees or paid solicitors to assist in obtaining proxies,
but reserves the option of doing so if it should appear that a quorum otherwise
might not be obtained. This Proxy Statement and the accompanying form of proxy
are first being mailed to shareholders on or about July 28, 1999.
VOTING SECURITIES
Only holders of record of the Company's Common Stock at the close of
business on July 16, 1999 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, the Company had issued and
outstanding 16,154,775 shares of Common Stock, the holders of which are
entitled to vote at the Annual Meeting. Each share of Common Stock that was
issued and outstanding as of the Record Date is entitled to one vote at the
Annual Meeting. The presence, in person or by proxy, of shareholders entitled
to cast at least a majority of the votes entitled to be cast by all
shareholders will constitute a quorum for the transaction of business at the
Annual Meeting.
<PAGE>
Abstentions and broker non-votes are each included in the determination of
the number of shares present at the meeting for purposes of determining whether
a quorum is present. Abstentions are counted in tabulations of votes cast on
proposals presented to shareholders, but broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 16, 1999, by each person
known by the Company to own beneficially more than 5% of the outstanding shares
of the Company's Common Stock and as to the number of shares beneficially owned
by (i) each director of the Company, (ii) the Chief Executive Officer and each
of the five other current or former executive officers of the Company named in
the Summary Compensation Table under the heading "Executive Compensation" (the
"Named Executive Officers") and (iii) all directors and executive officers as a
group. The Company believes that, unless otherwise noted, the persons listed
below have sole investment and voting power with respect to the Common Stock
they own.
<TABLE>
<CAPTION>
Number of Shares Percent of
Name and Address(1) of Common Stock(2) Class(3)
------------------- ----------------- ----------
<S> <C> <C>
Employee Stock Ownership Plan................. 832,903 5.2%
Ronald G. Brown............................... 944,878 5.9
Charles J. Hogarty(4)......................... 301,595 1.9
Al A. Ronco(5)................................ 117,360 *
Kim D. Wood(6)................................ 178,415 *
John M. Palumbo(7)............................ 30,273 *
Christopher Northup (8)....................... 21,949 *
Timothy C. McQuay(9).......................... 20,000 *
George E. Seebart(9).......................... 20,000 *
Keith M. Thompson (9)......................... 10,000 *
Dresdner Bank AG(10).......................... 2,026,070 12.5
Jurgen-Ponto-Platz 1
60301 Frankfurt, Germany
All directors and executive officers as a
group (10 persons)(11)....................... 1,664,470 10.2
</TABLE>
- --------
* Less than one percent.
(1) The business address of each beneficial owner other than Dresdner Bank AG,
is 700 East Bonita Avenue, Pomona, California 91767.
(2) Each person has sole voting and investment power over the shares of Common
Stock shown as beneficially owned, subject to community property laws
where applicable.
(3) Shares of Common Stock which the person (or group) has the right to
acquire within 60 days after July 16, 1999 are deemed to be outstanding in
calculating the percentage ownership of the person (or group) but are not
deemed to be outstanding as to any other person (or group).
(4) Includes 56,796 shares held for the benefit of Mr. Hogarty by the
Company's Employee Stock Ownership Plan ("ESOP") and 30,000 shares
issuable upon exercise of currently exercisable stock options under the
Stock Incentive Plan (the "Plan"). Excludes options to acquire 110,000
shares of Common Stock under the Plan, which are not exercisable within 60
days of July 16, 1999.
(5) Includes 72,360 shares held by the Ronco Family Trust and 45,000 shares
issuable upon exercise of currently exercisable stock options.
(6) Includes 1,700 shares held by Mr. Wood as Trustee for Kristine and Kathryn
Wood pursuant to irrevocable trusts. Includes 26,250 shares subject to
currently exercisable stock options and excludes 63,750 shares subject to
options, which are not exercisable within 60 days of July 16, 1999.
2
<PAGE>
(7) Excludes options held by Mr. Palumbo to acquire 73,750 shares of Common
Stock, which are not exercisable within 60 days of July 16, 1999, and
includes 21,250 shares of Common Stock issuable upon exercise of currently
exercisable stock options and 23 shares held for the benefit of Mr.
Palumbo by the ESOP.
(8) Includes 8,649 shares held for the benefit of Mr. Northup by the ESOP and
12,500 shares subject to currently exercisable stock options and excludes
32,500 shares subject to options, which are not exercisable within 60 days
of July 16, 1999.
(9) Consists of shares issuable upon the exercise of currently exercisable
stock options granted under the Plan to the named individual.
(10) Based upon information set forth in a Form 13 G/A filed with the
Securities and Exchange Commission on February 16, 1999. The holder has
sole voting power with respect to 1,469,450 shares, sole dispositive power
with respect to 1,989,570 shares and shared dispositive power with respect
to 36,500 shares.
(11) Excludes 320,000 shares subject to options held by the directors and
executive officers which are not exercisable within 60 days of July 16,
1999 and includes 65,468 shares held for the benefit of directors and
executive officers by the ESOP and 205,000 shares subject to currently
exercisable stock options.
3
<PAGE>
ELECTION OF DIRECTORS
Nominees
A board of six directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's five nominees named below, all of whom are presently
directors of the Company. If any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for the nominee designated by the present Board of Directors to fill the
vacancy. It is not expected that any nominee will be unable or will decline to
serve as a director. The term of office of each person elected as a director
will continue until the next Annual Meeting or until a successor has been
elected and qualified.
Vote Required; Recommendation of Board of Directors
Shareholders are not entitled to cumulative voting in connection with the
election of directors. The six nominees receiving the highest number of
affirmative votes of the shares present in person or represented by a proxy, a
quorum being present, shall be elected as directors. For this purpose, the
votes cast are defined under California law to be the shares of the Company's
Common Stock represented and voting at the Annual Meeting. Votes that are
withheld from any nominee will be counted for purposes of determining the
presence or absence of a quorum, but have no legal effect under California law.
Only votes cast for a nominee will be counted, except that the accompanying
proxy will be voted for all nominees in the absence of an instruction to the
contrary. Abstentions, broker non-votes and instructions on the accompanying
proxy to withhold authority to vote for one or more nominees will result in the
respective nominees receiving fewer votes. However, the number of votes
otherwise received by the nominee will not be reduced by such action.
The Board of Directors unanimously recommends that the shareholders vote "FOR"
the nominees listed below:
Information Concerning Nominees
Set forth below is certain information with respect to the nominees standing
for election to the Board of Directors.
<TABLE>
<CAPTION>
Director
Name Age Position with the Company Since
---- --- ------------------------- --------
<S> <C> <C> <C>
Ronald G. Brown......... 62 Chairman of the Board 1997
Charles J. Hogarty...... 58 President, Chief Executive Officer and a Director 1987
Timothy C. McQuay
(1)(2)................. 47 Director 1996
Al A. Ronco (1)......... 63 Director 1987
George E. Seebart
(1)(2)................. 70 Director 1996
Keith M. Thompson (2)... 58 Director 1999
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
RONALD G. BROWN was elected a director of the Company upon completion of the
combination of the Company and North Star Plating Company ("North Star") in
March 1997 (the "North Star Merger"), pursuant to the terms of the Merger
Agreement as described below, and was elected as Chairman of the Board of
Directors in May 1997. Mr. Brown served as President of North Star from its
founding in 1968 until the North Star Merger, and he is currently the Vice
President--Manufacturing of North Star.
CHARLES J. HOGARTY served as the President, Chief Operating Officer and a
director of the Company since 1987 and was appointed the Chief Executive
Officer of the Company in May 1997. From his joining the Company in 1960 until
1987, Mr. Hogarty held various positions, including salesman, sales manager,
general manager and regional manager. Mr. Hogarty served as a director of the
Aftermarket Body Parts Association from 1984 to 1993, President in 1989 and
Chairman in 1990.
4
<PAGE>
TIMOTHY C. MCQUAY was appointed a director of the Company upon the
completion of its initial public offering in June 1996. Mr. McQuay joined A. G.
Edwards & Sons, Inc. as a senior member of its Investment Banking Department in
July 1997, where he is currently a Managing Director. From October 1994 to July
1997, Mr. McQuay was Managing Director--Corporate Finance with Crowell, Weedon
& Co. From May 1993 to October 1994, Mr. McQuay was Vice President, Corporate
Development with Kerr Group, Inc., a NYSE-listed plastics manufacturing
company. From May 1990 to May 1993, Mr. McQuay was Managing Director--Merchant
Banking with Union Bank. Mr. McQuay is a director of Meade Instruments Corp., a
publicly held company.
AL A. RONCO served as the Executive Vice President of the Company from 1987
until he retired in August 1998 and as Secretary from 1987 until he resigned
that office in May 1997. From his joining the Company in 1959 until 1987, Mr.
Ronco held various positions, including salesman, production manager, general
manager and regional manager.
GEORGE E. SEEBART was appointed a director of the Company upon the
completion of its initial public offering in June 1996. From 1964 until his
retirement in 1993, Mr. Seebart was employed in various executive positions
with Farmers Group, Inc., including as Senior Vice President, Field Operations
and Vice President, Sales and Marketing. Additionally, from 1987 to 1993, Mr.
Seebart was President of Mid-Century Insurance Company, a subsidiary of Farmers
Group, Inc.
KEITH M. THOMPSON was the President and Chief Executive Officer of Republic
Automotive Parts, Inc. ("Republic") from 1986 until he resigned on November 30,
1998. Republic was acquired by the Company in June 1998. Mr. Thompson was
elected a director of the Company in March 1999.
In connection with the North Star Merger, the Company agreed to use its best
efforts to maintain Ronald G. Brown as a member of the Board of Directors and
each of Messrs. Hogarty, Ronco and Palumbo (Vice President, Treasurer and Chief
Financial Officer) have agreed to vote all shares of the Company's Common Stock
as to which they have sole or shared voting power in favor of the election of
Mr. Brown as a member of the Board of Directors. Other than as described above,
there are no arrangements or understandings between any director, or any
nominee, or any other person pursuant to which such director or nominee is or
was nominated to serve as a director. There is no family relationship among any
directors or executive officers of the Company.
Board Meetings and Committees
The Board of Directors held a total of seven meetings during the fiscal year
ended March 26, 1999 (the "Fiscal Year"). The Board of Directors has an Audit
Committee and a Compensation Committee, which met three and four times,
respectively, during the Fiscal Year. During the Fiscal Year, each director
attended at least 75% of the meetings of the Board of Directors held while he
was a director and of the Committees of the Board of Directors on which he
served.
The Audit Committee's functions include recommending to the Board of
Directors the engagement of the Company's independent auditors, reviewing and
approving the services performed by the independent auditors and reviewing and
evaluating the Company's accounting policies and internal accounting controls.
The Compensation Committee reviews and approves the compensation of officers
and key employees, including the granting of options under the Company's Stock
Incentive Plan. See "Report of Compensation Committee" attached hereto as Annex
"A."
Director Compensation
The Company compensates each director, who is not also an employee, at the
rate of $15,000 per year for all meetings of the Board of Directors and
committees thereof; and reimburses such person for all reasonable and
documented expenses incurred as a director. In addition, each non-employee
director, upon joining the
5
<PAGE>
Board of Directors, receives an option to purchase 10,000 shares of the Common
Stock of the Company pursuant to the Stock Incentive Plan. Each non-employee
director also receives an option to purchase 5,000 shares of Common Stock for
each year they are reelected as Directors. Such options have an exercise price
equal to the market price of such shares on the date of grant, are immediately
exercisable and have a term of five years. The Board of Directors may modify
such compensation in the future.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended March 26, 1999, Messrs. Seebart and McQuay
served on the Compensation Committee. Mr. McQuay was a Managing Director--
Corporate Finance with Crowell, Weedon & Co. ("Crowell Weedon") until he
resigned in July 1997 to join the investment banking department of A.G. Edwards
& Sons, Inc. ("A.G. Edwards"). Crowell Weedon was one of the representatives of
the underwriters of the Company's initial public offering in June 1996 and the
Company's public offering in June 1997. In addition, Crowell Weedon provided
certain financial advisory services to the Company in connection with the North
Star Merger, for which it received a fee. A. G. Edwards was one of the
representatives of the Underwiters of the Company's public offering in June
1997 and rendered a fairness opinion in connection with the Company's
acquisition of Republic in June 1998, for which it received a fee.
Report of Compensation Committee
The Report of the Compensation Committee of the Board of Directors of the
Company, describing the compensation policies and rationale applicable to the
Company's executive officers with respect to compensation paid to such
executive officers for the fiscal year ended March 26, 1999, is attached to
this Proxy Statement as Annex "A."
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company for services rendered in all capacities during each of the three fiscal
years ended March 26, 1999 to the Company's Chief Executive Officer, the
Company's four other most highly compensated executive officers who were
holding office at the end of fiscal 1999 and a highly compensated executive
officer who resigned during fiscal 1999 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
-------------------------------------- ------------
Other Annual Securities All Other
Name and Principal Compensation Underlying Compensation
Position Year Salary ($) Bonus ($) ($) (1) Options (#) ($)(2)
------------------ ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Hogarty...... 1999 265,000 183,380 10,728 40,000 3,058
1998 250,000 129,917 11,486 40,000 2,284
1997 250,000 122,010 11,616 -- 2,099
Al A. Ronco (3)......... 1999 127,501 -- 3,552 30,000 7,319
1998 195,000 101,462 11,268 40,000 8,208
1997 185,000 101,675 11,640 -- 3,725
Ronald D. Brown (4)..... 1999 300,000 -- -- -- --
1998 325,000 -- -- -- --
Kim D. Wood (4)......... 1999 190,000 121,100 9,149 25,000 2,328
1998 175,000 90,979 6,180 40,000 5,390
John M. Palumbo......... 1999 148,096 103,800 9,104 25,000 2,318
1998 100,000 52,042 6,000 15,000 2,722
1997 97,500 -- 6,000 5,000 783
Christopher Northup..... 1999 99,829 34,600 1,800 10,000 3,475
1998 97,500 -- 1,800 -- 3,509
1997 86,400 -- 1,800 20,000 --
</TABLE>
- --------
(1) Consists of automobile lease and related expenses.
(2) Consists of reimbursement of medical and dental expenses not covered by
insurance plans provided to employees generally.
(3) Mr. Ronco resigned as Executive Vice President of the Company in August
1998.
(4) Mr. Brown was elected Chairman of the Board of Directors and Mr. Wood was
elected a Vice President of the Company in May 1997. Mr. Brown is also Vice
President--Manufacturing of North Star and Mr. Wood is the President and
Chief Operating Officer of North Star.
In June 1996, the Company entered into a three year employment agreement
with Mr. Hogarty, pursuant to which he is entitled to (i) receive an annual
base salary of $250,000, (ii) receive such performance-based bonus, if any, as
may be determined by the Board of Directors, (iii) participate in all plans
sponsored for executive officers in general and (iv) receive the use of an
automobile leased and maintained by the Company. Pursuant to the terms of the
employment agreement, the term was automatically extended in June 1999 for an
additional two-year term. In the event the Company terminates employment before
the end of the term without cause or the individual terminates his employment
for specified causes, the Company is obligated to pay the base salary through
the term of the agreement. In the event the Company terminates employment
before the end of the term with cause or the individual resigns, the Company is
obligated to pay the base salary only through the date of termination. For
Fiscal 2000, Mr. Hogarty's base salary has been increased to $275,000.
Upon consummation of the acquisition of North Star, North Star entered into
employment agreements with Ronald G. Brown (Chairman of the Board of the
Company) and Kim D. Wood (Vice President of the Company
7
<PAGE>
and President and Chief Operating Officer of North Star). Under a five-year
employment agreement, Mr. Brown is employed as the Vice President-Manufacturing
of North Star and is entitled to (i) receive an annual base salary for the 12
months commencing March 1, 1997, 1998, 1999, 2000 and 2001 of $325,000,
$300,000, $275,000, $225,000 and $150,000, respectively, and (ii) participate
in any group health, medical reimbursement or dental plan sponsored by the
Company or North Star for executive officers in general. In the event North
Star terminates his employment before the end of the stated term with cause, or
Mr. Brown terminates his employment for specified causes, North Star is
obligated to pay the compensation described in clauses (i) and (ii) only
through the date of termination. In the event North Star terminates his
employment before the end of the stated term other than with cause, North Star
is obligated to pay such compensation through the stated term of the agreement.
The agreement further provides that Mr. Brown will not engage in any
"competitive activity" (as defined in the agreement) during the period
commencing on the date of the employment agreement and ending on the later to
occur of the seventh anniversary of such date or two years after the
termination of his employment.
Under the employment agreement, which is terminable by either party at the
end of three years by giving written notice, Mr. Wood is employed as the
President and Chief Operating Officer of North Star and is entitled to
(i) receive an annual base salary of $175,000, (ii) receive such performance-
based bonus, if any, as may be determined by the Board of Directors, (iii)
participate in all plans sponsored by North Star for employees in general and
(iv) receive the use of an automobile leased and maintained by North Star. In
the event North Star terminates his employment before the end of the stated
term with cause or Mr. Wood terminates his employment for specified causes,
North Star is obligated to pay such compensation only through the date of
termination. In the event North Star terminates Mr. Wood's employment before
the end of the stated term other than with cause, North Star is obligated to
pay such compensation through the stated term of the agreement, but in no event
for less than 12 months. The agreement further provides that Mr. Wood will not
engage in any "competitive activity" (as defined in the agreement) during the
12-month period commencing on the termination of his employment. For Fiscal
2000, Mr. Wood's base salary has been increased to $200,000.
The following table sets forth certain information with respect to options
granted under the Stock Incentive Plan during fiscal 1999 to the Named
Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rate of Stock
Percentage of Total Price Appreciation
Shares of Options Granted for Option Term
Common Stock to Employees in Exercise ---------------------
Name Underlying Options Fiscal Year Price Expiration Date 5% 10%
---- ------------------ ------------------- -------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Hogarty...... 40,000(1) 27.6% $24.13 April 8, 2008 607,014 1,538,400
Kim D. Wood............. 25,000(1) 17.2 24.13 April 8, 2008 379,384 961,500
John M. Palumbo......... 25,000(1) 17.2 24.13 April 8, 2008 379,384 961,500
Al A. Ronco............. 25,000(2) 17.2 24.13 April 8, 2008 379,834 961,500
5,000(3) 3.5 15.13 August 30, 2003 20,901 46,185
Christopher Northup..... 10,000(1) 6.9 24.13 April 8, 2008 151,174 384,600
</TABLE>
- --------
(1) The options vest in four equal annual installments, with the first
installment having vested on April 18, 1999.
(2) These options expired upon Mr. Ronco's retirement in August 1998.
(3) These options were granted to Mr. Ronco in his capacity as a director after
his retirement and are fully vested.
8
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
Aggregated Option Exercises in Last Fiscal Year
and Year-End Option Values
<TABLE>
<CAPTION>
Number of Shares of
Shares Common Stock Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
on Value Options at Year-End at Year-End
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Charles J. Hogarty...... 0 0 10,000/70,000 0/0
Kim D. Wood............. 0 0 10,000/55,000 0/0
John M. Palumbo......... 0 0 12,500/32,500 0/0
Al A. Ronco............. 0 0 45,000/0 0/0
Christopher Northup..... 0 0 5,000/20,000 $32,500/$65,000
</TABLE>
Employee Defined Benefit Pension Plan
General. The Board of Directors adopted the Employee Defined Benefit Pension
Plan (the "Pension Plan"), originally effective as of April 1, 1978, for the
benefit of the eligible employees of the Company. Since the implementation of
the Pension Plan, the Company has amended the Pension Plan from time to time.
The primary purpose of the Pension Plan was to provide a retirement benefit for
participating employees who continue in the employ of the Company until their
retirement. Effective April 30, 1997, the Pension Plan was suspended with no
further benefits to accrue on behalf of any participant or beneficiary and no
further contributions, except as may be required for fiscal 1997 or by law, to
be made. It is anticipated that the Pension Plan will be terminated within the
next two years and that the termination will not have a material adverse impact
on the financial condition of the Company upon that event. The Pension Plan has
been replaced with the 401(k) Savings Plan described below.
Estimated Monthly Benefits. The following table sets forth the estimated
monthly benefit under the Pension Plan based on the current benefit structure.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Remuneration Years of Service
------------ ----------------------------------
15 20 25 30 35
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
$125,000 $1,172 $1,563 $1,953 $2,344 $2,734
150,000 1,407 1,875 2,344 2,813 3,281
175,000 1,407 1,875 2,344 2,813 3,281
200,000 1,407 1,875 2,344 2,813 3,281
225,000 1,407 1,875 2,344 2,813 3,281
250,000 1,407 1,875 2,344 2,813 3,281
300,000 1,407 1,875 2,344 2,813 3,281
400,000 1,407 1,875 2,344 2,813 3,281
450,000 1,407 1,875 2,344 2,813 3,281
500,000 1,407 1,875 2,344 2,813 3,281
</TABLE>
The compensation covered by the Pension Plan includes basic salary or wages,
overtime payments, bonuses, commissions and all other direct current
compensation, but does not include contributions by the Company to Social
Security, benefits from stock options (whether qualified or not), contributions
to this or any other retirement plans or programs, or the value of any other
fringe benefits provided at the expense of the Company. For benefit calculation
purposes, a "highest-five-year" average of compensation is used. Benefits are
paid as straight-life annuities with no subsidies or offsets. The compensation
covered by the Pension Plan for all of the Named Executive Officers was limited
to $150,000 in accordance with Section 401(a)(17) of the Internal Revenue Code
of 1986, as amended.
9
<PAGE>
The years of credited service for each Named Executive who participates in
the Pension Plan are as follows:
<TABLE>
<CAPTION>
Name Years
---- -----
<S> <C>
Charles J. Hogarty................................................. 38
Al A. Ronco........................................................ 39
John M. Palumbo.................................................... 2
Christopher Northup................................................ 15
</TABLE>
401(k) Savings Plan
Effective April 1, 1997, the Section 401(k) Savings Plan (the "Plan") in
effect at North Star was amended to make the Plan available to employees of the
Company. Pursuant to the amendment, the Company became the Plan sponsor and
North Star became an adopting employer. All employees of the Company as of
April 1, 1997, became participants in the Plan and the amendment had no affect
upon those persons who were employed at North Star on April 1, 1997. Persons
becoming employees of the Company subsequent to April 1, 1997 are not eligible
to participate until they complete one year of service and are at least 21
years of age.
Under the terms of the Plan, participants can contribute, by way of payroll
deductions, from 1% to 15% of their pre-tax compensation annually, subject to
certain legal limitations. The Plan also provides for a matching contribution
by the Company equal to 50% of the first 6% of a participant's contribution.
For purposes of determining the amount of contributions and matching
contributions to be allocated to a participant's account, compensation is
defined as the annual income amount reportable by the Company for federal
income tax purposes, including overtime, commissions and bonuses.
A participant is always 100% vested in his own Plan contributions. A
participant becomes 100% vested in the matching contributions allocated to his
account upon his attainment of early retirement age (age 55 and four years of
service), normal retirement age (age 65), disability while employed by the
Company, his death while employed by the Company or the termination or complete
discontinuance of contributions to the Plan.
If a participant terminates employment with the Company for any other
reason, a participant vests 25% in his benefits after one year of service, and
25% each year thereafter, with 100% vesting after four or more years of
service.
Employee Stock Ownership Plan
General. The Board of Directors adopted the Employee Stock Ownership Plan
(the "ESOP"), originally effective as of April 1, 1975, for the benefit of the
eligible employees of the Company. Since the implementation of the ESOP, the
Company has amended the ESOP from time to time. In September 1997, the Board of
Directors amended the ESOP to freeze eligibility, service and benefit accruals
and in March 1997, the Board of Directors amended the ESOP to terminate the
ESOP as of March 31, 1998. Currently, subject to the direction of each
participant, shares of Common Stock of the Company held in the ESOP are either
being distributed to the participant or are being sold and the cash proceeds
are being distributed to the participant. It is anticipated that all shares of
Common Stock held by the ESOP will have been distributed to the participants or
sold on or before September 1, 1999.
10
<PAGE>
CERTAIN TRANSACTIONS
The Company has entered into three lease agreements with two partnerships
whose partners include certain of the Company's directors and officers and two
lease agreements with a corporation which is owned by a family member of a
former officer and director of the Company. In addition, as a result of the
North Star Merger, the Company is a party to four leases with partnerships
whose partners include persons, or their spouses, who are currently officers or
directors of the Company. The Company believes that the terms and conditions of
such leases with affiliated parties are no less favorable to the Company than
could have been obtained from unaffiliated parties in arm's length transactions
at the time such leases were entered into.
The Company entered into a lease dated January 5, 1995, with V-JAC
Properties, Ltd. for an 8,000 square feet warehouse facility in Ontario,
California, with a lease term of three years (with an option to renew the lease
for an additional three years on the same terms and conditions), for a monthly
rent of $3,494. This lease was extended for an additional five years on the
same terms by unanimous vote of the disinterested directors in February 1998.
V-JAC Properties, Ltd. is a partnership whose interests are held equally by
Virgil K. Benton, Sr., and John G. Jordan, each of whom is a co-founder of the
Company, and Al A. Ronco and Charles J. Hogarty, who are currently directors
and executive officers of the Company.
The Company has also entered into a lease dated January 5, 1995, with V-JAC
Properties, Ltd. for a 10,000 square feet warehouse facility in Palmyra, New
Jersey, with a lease term of three years (with an option to renew the lease for
an additional three years on the same terms and conditions), for a monthly rent
of $2,985. This lease was extended for an additional five years with a 5%
increase in the monthly rent by the unanimous vote of the disinterested
directors in February 1998.
On January 1, 1995, North Star entered into a ten-year lease agreement with
a partnership owned by the spouses of Ronald G. Brown and Kim D. Wood to lease
property occupied by North Star's East Peoria, Illinois service center. The
initial base rent under the lease was $6,975 per month, which is subject to
increase on each anniversary of the lease term by the percentage increase in
the Consumer Price Index during the preceding year. In addition to the base
rent, North Star pays real estate taxes, maintenance, utilities and insurance
costs associated with the property.
On January 1, 1995, North Star entered a ten-year lease agreement with a
partnership owned by the spouse of Raymond Wood, a former shareholder, officer
and director of North Star, and the spouse of Ronald G. Brown to lease the
property occupied by North Star's Brainerd, Minnesota chrome bumper plating
center. The initial base rent under the lease was $21,300 per month, which is
subject to increase on each anniversary of the lease term by the percentage
increase in the Consumer Price Index during the preceding year. In addition to
the base rent, North Star pays real estate taxes, maintenance, utilities and
insurance costs associated with the property. Pursuant to the lease agreement,
North Star is responsible for certain occurrences on the premises, including
any environmental contamination.
On January 1, 1995, North Star entered into a ten-year lease agreement with
a partnership owned by Kim D. Wood and Richard Monson, the general manager of
North Star's Brainerd, Minnesota chrome bumper manufacturing and recycling
center to lease the property occupied by North Star's St. Cloud, Minnesota
service center. The initial base rent under the lease was $5,000 per month,
which is subject to increase on each anniversary of the lease term by the
percentage increase in the Consumer Price Index during the preceding year. In
addition to the base rent, North Star pays real estate taxes, maintenance,
utilities and insurance costs associated with the property.
On May 20, 1996, North Star entered into a ten-year lease agreement with a
partnership owned by the spouses of Ronald G. Brown and Kim D. Wood and the
Brown Family Limited Partnership to lease property occupied by North Star's
headquarters and Minneapolis, Minnesota service center hub. The initial base
rent under the lease was $12,000 per month, which is subject to increase on the
anniversary of the lease term by the percentage increase in the Consumer Price
Index during the preceding year. In addition to the base rent, North
11
<PAGE>
Star pays real estate taxes, maintenance utilities and insurance costs
associated with the property. In an amendment to the lease dated September 23,
1996, the partnership agreed to construct a 37,260 square foot addition to the
existing building. North Star began occupying the addition in January 1997 and,
accordingly, the base rent increased to $25,627 per month.
On June 17, 1999, pursuant to its share repurchase program, the Company
purchased 50,000 shares of its Common Stock from The Ronco Family Trust at a
price equal to $17.81 per share. The high, low and closing prices for the
Company's Common Stock, as reported by the Nasdaq National Market on June 17,
1999, were $19.00, $17.50 and $17.69, respectively. On July 9 and 12, 1999, in
connection with the termination of the Company's ESOP, the ESOP sold an
aggregate of 389,276 shares of the Company's Common Stock in the over-the-
counter market at an average price of $17.47 per share on behalf of certain
participants. Of these shares, 375,776 shares were purchased by the Company, at
a price of $17.50 per share, as part of its share repurchase program. Included
in the shares sold by the ESOP were 51,984 shares held by the ESOP for the
benefit of Al A. Ronco.
12
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the shareholders of the Company's Common Stock with
the cumulative return of the NASDAQ Stock Market (US Companies) Index and the
following group of peer companies (the "Peer Group"): Autozone, Inc., Discount
Auto Parts, Inc., Finishmaster, Inc., Genuine Parts Co., O'Reilly Automotive,
Inc., Pep Boys--Manny, Moe & Jack and Trak Auto Corp. for the period commencing
with June 21, 1996, the date the Company's Common Stock began trading on the
NASDAQ National Market and ending March 26, 1999. The information contained in
the performance graph shall not be deemed "soliciting material" or to be
"filed" with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act or
Exchange Act, except to the extent that the Company specifically incorporates
it by reference into such filing. The stock price performance on the following
graph is not necessarily indicative of future stock price performance. The
graph assumes that the value of the investment in the Company's Common Stock,
the NASDAQ Market Index and the peer group of companies was each $100 on June
21, 1996 and that all dividends were reinvested.
COMPARISON OF 33 MONTH CUMULATIVE TOTAL RETURN
AMONG KEYSTONE AUTOMOTIVE INDUSTRIES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
<TABLE>
<CAPTION>
KEYSTONE NASDAQ
AUTOMOTIVE STOCK
Measurement Period INDUSTRIES, PEER MARKET
(Fiscal Year Covered) INC. GROUP (U.S.)
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt-June 21, 1996 $100 $100 $100
FYE March 28, 1997 $168 $ 86 $106
FYE March 27, 1998 $253 $105 $156
FYE March 26, 1999 $168 $ 89 $208
</TABLE>
13
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Executive officers, directors, and greater-than-ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it and written representations from certain reporting
persons that they have complied with the relevant filing requirements, the
Company believes that, during the fiscal year ended March 26, 1999, all
relevant Section 16(a) filing requirements were complied with.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP, independent
accountants, to audit the financial statements of the Company for the 2000
fiscal year. This selection is being presented to the shareholders for
ratification at the Annual Meeting. Ernst & Young LLP has audited the Company's
financial statements since the fiscal year ended in March 1977. A
representative of Ernst & Young LLP is expected to be present at the meeting,
will have the opportunity to make a statement and is expected to be available
to respond to appropriate questions.
Vote Required, Recommendation of Board of Directors
The affirmative vote of a majority of the votes cast on the proposal at the
Annual Meeting is required to ratify the Board's selection. If the shareholders
reject the nomination, the Board will reconsider its selection.
The Company's Board of Directors unanimously recommends voting "FOR" the
ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for the 2000 fiscal year.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders are advised that any shareholder proposal, including
nominations to the Board of Directors, intended for inclusion in the Company's
proxy materials for the 2000 Annual Meeting of Shareholders, must be received
by the Company on or before April 3, 2000. In addition, if a shareholder
intends to present a proposal for action at the 2000 Annual Meeting of
Shareholders, the shareholder must provide the Company with notice thereof on
or before June 12, 2000. It is recommended that shareholders submitting
proposals direct them to the Company, c/o James C. Lockwood, Secretary of the
Company, and utilize certified mail, return-receipt requested in order to
ensure timely delivery.
14
<PAGE>
OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual Meeting
other than as specified herein. If other business should, however, be properly
brought before such meeting, the persons voting the proxies will vote them in
accordance with their best judgment.
THE SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, AND RETURN PROMPTLY THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE.
/s/ James C. Lockwood
James C. Lockwood
Secretary
July 26, 1999
15
<PAGE>
ANNEX "A"
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The following report of the Compensation Committee to the Board of Directors
shall not be deemed to be incorporated by reference into any filing by the
Company under either the Securities Act of 1933, as amended ("Securities Act")
or the Securities Exchange Act of 1934, as amended ("Exchange Act") that
incorporates future Securities Act or Exchange Act filings in whole or in part
by reference.
General
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for establishing and administering the policies that govern
executive compensation and benefit practices. All decisions of the Committee
are subject to the approval of the Company's Board of Directors. The
compensation committee of the Board of Directors is currently comprised of
Messrs. McQuay, Seebart and Thompson.
During the fiscal year ended March 26, 1999, all of the executive officers
of the Company with the exception of Mr. Palumbo and two other executive
officers (who are not Named Executives) had written employment agreements. The
employment agreements with respect to Messrs. Hogarty and Ronco were adopted
before the Company's initial public offering in June 1996 and the employment
agreements with respect to Messrs. Brown and Wood were adopted at the time of
the acquisition of North Star in March 1997. Bonuses for the current fiscal
year will be determined by the Board of Directors upon recommendation from the
Committee as described below. Increases in salaries for fiscal 1999, for
executive officers with employment agreements, were fixed by the Committee
after considering the performance of the Company and its increase in size as
well as the contribution of the executive officer. Salaries for the executive
officers who did not have employment agreements were recommended by management
and approved by the Committee.
Compensation Philosophy
The Company's executive compensation program is designed to (1) provide
levels of compensation that integrate pay and incentive plans with the
Company's strategic goals, so as to align the interest of executive management
with the long-term interests of the Company's shareholders, (2) attract,
motivate and retain executive talent capable of achieving the strategic
business goals of the Company and (3) recognize outstanding individual
contributions. The Company's executive compensation program consists of three
main elements: base salary, annual cash bonus and long-term incentives.
Base Salary
Base salaries for executive officers (including raises for those persons
with employment agreements) are determined on an annual basis by evaluating
each executive officer's position, duties, responsibilities, tenure,
performance and potential contributions to the Company. The Company also
provides its chief executive officer and other executive officers with medical,
dental, and other customary employee benefits.
Annual Cash Bonuses
Certain key executive officers of the Company, including the Chief Executive
Officer, participate in an annual bonus pool, the aggregate amount of which is
limited to 80% of the base compensation of all of the participants. Each
participant's bonus is determined with reference to the Company's pre-tax
profit margin for the fiscal year as well as each participant's base
compensation as a percentage of all of the participants' base compensation.
Individual bonuses are limited in amount to 80% of base compensation. The other
executive officers are eligible for an incentive bonus at the discretion of the
Committee and the Board of Directors, the amount of which will be determined
subjectively, taking into account factors such as the financial performance of
the Company, achievement of corporate goals and individual performance.
16
<PAGE>
Long-Term Incentives
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Stock
Incentive Plan. The Committee is responsible for selecting the executive
officers to whom grants should be made, the time of grants, the determination
of the per share exercise price and the number of shares subject to each option
awarded. The Committee believes that stock options provide the Company's
executive officers with the opportunity to purchase and maintain an equity
interest in the Company and to share in the appreciation of the value of the
Common Stock. The Committee believes that stock options directly motivate an
executive to maximize long-term shareholder value. The options incorporate
vesting periods in order to encourage key employees to continue in the employ
of the Company. All options granted in fiscal 1999 were granted at the fair
market value of the Company's Common Stock on the date of the grant.
Summary
The Compensation Committee believes that its executive compensation
philosophy of paying its executive officers by means of base salaries, annual
cash bonuses and long-term incentives, as described in this Report, is in the
best interests of the Company and its shareholders.
Compensation Committee:
Timothy C. McQuay
George E. Seebart
Keith M. Thompson
17
<PAGE>
PROXY KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
700 East Bonita Avenue
Pomona, California 91767
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles J. Hogarty, John M. Palumbo and James
C. Lockwood, and each of them, the attorneys and proxies of the undersigned
with full powers of substitution to vote as indicated herein, all of the common
stock ("Keystone Common Stock"), no par value, of Keystone Automotive
Industries, Inc. ("Keystone") held of record by the undersigned at the close of
business on July 16, 1999, at the Annual Meeting of Keystone Stockholders to be
held on August 24, 1999, at 10:00 a.m., Pacific Daylight Savings Time at the
Sheraton Fairplex, 601 West McKinley Avenue, Pomona, California 91768, or at
any postponements or adjournments thereof, with all the powers the undersigned
would possess if then and there personally present.
THIS PROXY WILL BE VOTED AS DIRECTED BELOW. WHEN NO CHOICE IS INDICATED, THIS
PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR THE APPROVAL
OF PROPOSAL 2. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly come before the Meeting or any
adjournments or postponements thereof.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE
PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLACK OR BLUE INK.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR ALL NOMINEES LISTING IN PROPOSAL 1 AND FOR PROPOSAL 2.
1. ELECTION OF [_] FOR all [_] WITHHOLD
DIRECTORS nominees listed AUTHORITY to
below (except as vote for all
marked to the nominees listed
contrary) below.
Vote withheld from the following nominees:
[_] Ronald G. Brown [_] Timothy C. McQuay
[_] Charles J. Hogarty [_] George E. Seebart
[_] Al A. Ronco [_] Keith M. Thompson
2. RATIFICATION OF APPOINTMENT OF ERNST & YOUNG [_] FOR [_] AGAINST [_] ABSTAIN
LLP AS INDEPENDENT ACCOUNTANTS
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT OF KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
(Signature should be exactly
as name or names appear on
this proxy. If stock is held
jointly each holder should
sign. If signature is by
attorney, executor,
administrator, trustee or
guardian, please give full
title.)
Dated: _________________ , 1999
-------------------------------
Signature
----------------------
Signature if held jointly
I plan to attend the meeting:
Yes [_] No [_]
