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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>
[LOGO]
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
700 East Bonita Avenue
Pomona, California 91767
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on Wednesday, August 23, 2000
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 23, 2000, 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 approve an amendment to the Company's 1996 Employee Stock Incentive
Plan, as amended, to increase from 1,100,000 to 2,200,000 the number
of shares issuable under the Plan;
(3) To ratify the appointment of Ernst & Young LLP as independent
accountants for the Company for the 2001 fiscal year; and
(4) 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 7, 2000 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 21, 2000
<PAGE>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To be held on August 23, 2000
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 23, 2000,
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" (i) the election of the
nominees for the Board of Directors set forth herein; (ii) the amendment to
the Company's 1996 Employee Stock Incentive Plan, as amended (the "Plan") to
increase from 1,100,000 to 2,200,000 the number of shares issuable under the
Plan; and (iii) the ratification of the appointment of Ernst & Young LLP as
independent accountants for the Company for the 2001 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 21, 2000.
VOTING SECURITIES
Only holders of record of the Company's Common Stock at the close of
business on July 7, 2000 (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 14,489,345 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.
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.
1
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of July 7, 2000, 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, and nominee for director, of the
Company, (ii) the Chief Executive Officer and each of the four 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
Name and Address (1) of Common Stock (2) of Class (3)
-------------------- ------------------- -------------
<S> <C> <C>
Merrill Lynch & Co., Inc. (4)............... 1,539,306 10.6%
Dimension Fund Advisors, Inc................ 1,008,880 7.0
Ronald G. Brown............................. 916,878 6.3
Charles J. Hogarty (5)...................... 339,192 2.3
Kim D. Wood (6)............................. 195,915 1.4
John M. Palumbo (7)......................... 32,773 *
Christopher Northup (8)..................... 40,399 *
Al A. Ronco (9)............................. 122,360 *
Timothy C. McQuay (10)...................... 25,000 *
George E. Seebart (10)...................... 25,000 *
Keith M. Thompson (10)...................... 15,000 *
A. Jayson Adair............................. 0 *
Ronald G. Foster............................ 0 *
All directors and executive officers as a
group (10 persons) (11).................... 1,736,267 11.8
</TABLE>
--------
* Less than one percent.
(1) The business address of each beneficial owner, other than Merrill Lynch &
Co., Inc. and Dimension Fund Advisors, Inc., is 700 East Bonita Avenue,
Pomona, California 91767. Merrill Lynch & Co., Inc.'s address is World
Financial Center, North Tower, 250 Vesey Street, New York, New York
10381. Dimension Fund Advisors, Inc.'s address is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(2) Other than as to the shares held by Merrill Lynch & Co., Inc., to the
best knowledge of the Company, 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 7, 2000 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) Merrill Lynch & Co., Inc. has shared voting and dispositive power with
respect to the shares and has filed a Schedule 13G on behalf of Merrill
Lynch Investment Managers, a division.
(5) Includes 37,500 shares issuable upon exercise of currently exercisable
stock options under the Plan. Excludes options to acquire 32,500 shares
of Common Stock under the Plan, which are not exercisable within 60 days
of July 7, 2000.
(6) Includes 1,700 shares held by Mr. Wood as Trustee for Kristine and
Kathryn Wood pursuant to irrevocable trusts. Includes 33,750 shares
subject to currently exercisable stock options and excludes 21,250 shares
subject to options which are not exercisable within 60 days of July 7,
2000.
(7) Excludes options held by Mr. Palumbo to acquire 21,250 shares of Common
Stock under the Plan, which are not exercisable within 60 days of July 7,
2000, and includes 23,750 shares of Common Stock issuable upon exercise
of currently exercisable stock options.
(8) Includes 23,750 shares subject to currently exercisable stock options and
excludes 11,250 shares subject to options which are not exercisable
within 60 days of July 7, 2000.
(9) Includes 72,360 shares held by the Ronco Family Trust and 50,000 shares
issuable upon exercise of currently exercisable stock options.
(10) Consists of shares issuable upon the exercise of currently exercisable
stock options granted under the Plan to the named individual.
(11) Excludes 97,500 shares subject to options held by the directors and
executive officers which are not exercisable within 60 days of July 7,
2000 and includes 257,500 shares subject to currently exercisable stock
options.
2
<PAGE>
ELECTION OF DIRECTORS
Nominees
A board of eight 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 eight nominees named below, all of whom except for Messrs.
Adair and Foster 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 eight 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 nonvotes 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
---- --- ------------------------- --------
<C> <C> <S> <C>
Ronald G. Brown........... 63 Chairman of the Board 1997
Charles J. Hogarty........ 59 President, Chief Executive Officer
and a Director 1987
Timothy C. McQuay (1)(2).. 48 Director 1996
Al A. Ronco (1)........... 64 Director 1987
George E. Seebart (1)(2).. 71 Director 1996
Keith M. Thompson (2)..... 60 Director 1999
A. Jayson Adair........... 30 Nominee
Ronald G. Foster.......... 58 Nominee
</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 North Star Plating Company ("North Star") merger in March 1997 (the "North
Star merger") 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. Mr. Brown has served as a member of the Board of
Directors and a Vice President of the Bumper Recycling Association of North
America.
3
<PAGE>
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.
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. He also served as Secretary of the Company
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.
A. JAYSON ADAIR has been the President of Copart, Inc., a publicly-held
company ("Copart"), since November 1996 and has served as a director of that
corporation since September 1992. From April 1995 until October 1996, Mr.
Adair served as Copart's Executive Vice President and from August 1990 until
April 1995, he served as its Vice President of Sales and Operations. From June
1988 to August 1990, Mr. Adair served as Copart's Manager of Operations.
RONALD G. FOSTER has been a consultant since he left the automotive
division of Tenneco, Inc. in October 1993, specializing in acquisitions, joint
ventures, turnaround situations and quality systems such as QS9000. For the
prior 25 years, he had held various positions within the automotive division,
most recently as the Senior Vice President of Tenneco Automotive and General
Manager of Monroe Auto Equipment Company, the world's largest manufacturer of
ride control systems.
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 31, 2000 (the "Fiscal Year"). The Board of Directors has an
Audit Committee and a Compensation Committee, which met
4
<PAGE>
two and six 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 Plan. See
"Report of the Compensation Committee on Executive Compensation" 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 Board of Directors, receives an option to purchase
10,000 shares of the Common Stock of the Company pursuant to the 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 will
have an exercise price equal to the market price of such shares on the date of
grant, will be immediately exercisable and will have a term of five years. The
Board of Directors may modify such compensation in the future.
Compensation Committee Interlocks and Insider Participation
No interlocking relationship exists between the Company's executive
officers, Board of Directors or Compensation Committee and any executive
officer or member of the Board of Directors or Compensation Committee of any
other company nor did any such interlocking relationship exist during the last
fiscal year.
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 31, 2000, is attached to
this Proxy Statement as Annex "A."
5
<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 31, 2000 to the Company's Chief Executive Officer and
the Company's four other most highly compensated executive officers who were
holding office at the end of fiscal 2000 (the "Named Executives"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation ------------
--------------------------------- Securities
Other Annual Underlying All Other
Name and Principal Compensation Options Compensation
Position Year Salary ($) Bonus ($) ($)(1) (#)(2) ($)(3)
------------------ ---- ---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Charles J. Hogarty..... 2000 275,000 96,250 10,092 60,000 7,499
President and Chief
Executive 1999 265,000 183,380 10,728 40,000 7,858
Officer 1998 250,000 129,917 11,486 40,000 7,034
Ronald G. Brown (4).... 2000 275,000 -- -- -- 3,914
Chairman of the Board 1999 300,000 -- -- -- 2,808
1998 325,000 -- -- -- 2,808
Kim D. Wood (4)........ 2000 200,000 70,000 9,089 25,000 13,653
Vice President 1999 190,000 121,100 9,149 25,000 7,128
1998 175,000 90,979 6,180 40,000 9,954
John M. Palumbo........ 2000 175,000 61,250 10,044 50,000 8,356
Vice President and
Chief 1999 148,096 103,800 9,104 25,000 7,118
Financial Officer 1998 100,000 52,042 6,000 15,000 5,722
Christopher Northup.... 2000 125,000 21,875 1,800 20,000 8,008
Vice President 1999 99,829 34,600 1,800 10,000 6,402
1998 97,500 -- 1,800 -- 6,247
</TABLE>
--------
(1) Consists of automobile lease and related expenses.
(2) On February 2, 2000, the Company purchased certain options held by the
above-named persons at a price of $0.05 per option, as follows: Mr.
Hogarty sold the Company options to purchase 40,000 shares with an
exercise price of $24.13 per share and 30,000 shares with an exercise
price of $14.13 per share. Mr. Wood sold the Company otions to purchase
25,000 shares with an exercise price of $24.13 per share and 10,000 shares
with an exercise price of $14.13 per share. Mr. Palumbo sold the Company
options to purchase 25,000 shares with an exercise price of $24.13 per
share and 25,000 shares with an exercise price of $24.13 per share. Mr.
Northup sold the Company options to purchase 10,000 shares with an
exercise price of $24.13 per share and 5,000 shares with an exercise price
of $14.13 per share. The purchases were approved by the Board of Directors
and were made to align the options granted under the Plan with the shares
reserved for issuance under the Plan. No option grants have been made to
the above named individuals since the purchases and the Company has no
commitment to issue options to said individuals in replacement or
otherwise in the future.
(3) Consists of reimbursement of medical and dental expenses not covered by
insurance plans provided to employees generally and contributions made
under the Company's 401(k) Savings Plan.
(4) Mr. Brown is also Vice President--Manufacturing of North Star and Mr.
Wood is the President and Chief Operating Officer of North Star.
Mr. Hogarty has an employment agreement with the Company, which terminates
on June 19, 2001, subject to automatic renewal for additional two year terms
unless written notice of termination is given by either party
6
<PAGE>
90 days prior to the end of the term. Pursuant to the employment agreement, he
is entitled to (i) receive an annual base salary, initially set at $250,000 in
1996, (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. In the event the Company terminates his
employment before the end of the term without cause or Mr. Hogarty terminates
his employment for specified causes, the Company is obligated to pay the base
salary through the term of the agreement. For fiscal 2001, Mr. Hogarty's base
salary has been increased to $285,000.
Upon consummation of the acquisition of North Star in March 1997, 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 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, 2000 and 2001 of $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, 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, or Mr.
Brown terminates his employment for specified causes, 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.
Mr. Wood has an employment agreement which terminates on March 27, 2002,
subject to automatic renewal for additional two year terms unless written
notice is given by either party 90 days prior to the end of the term. Mr. Wood
is employed as the President and Chief Operating Officer of North Star and is
entitled to (i) receive an annual base salary, initially set at $175,000 in
1997, (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, North Star is
obligated to pay such compensation 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, or Mr. Wood terminates his employment for
specified causes, 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 2001, Mr. Wood's base salary
has been increased to $205,000.
In December 1999, Mr. Palumbo, a Vice President and the Chief Financial
Officer of the Company, entered into a three-year employment agreement with
the Company, as approved by the Board of Directors. The employment agreement
provides for an annual base salary, initially set at $175,000, a bonus as
determined by the Board of Directors, participation in benefit plans for
executive officers and the use of an automobile maintained by the Company. In
the event that the Company terminates his employment before the end of the
term without cause or Mr. Palumbo terminates his employment for specified
causes, the Company is obligated to pay the base salary through the term of
the agreement. For fiscal 2001, Mr. Palumbo's base salary has been increased
to $210,000.
7
<PAGE>
The following table sets forth certain information with respect to options
granted under the Plan during fiscal 2000 to the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rate of
Percentage of Stock Price
Total Options Appreciation
Shares of Granted to for Option Term
Common Stock Employees in Exercise Expiration -----------------
Name Underlying Options Fiscal Year Price Date 5% 10%
---- ------------------ ------------- -------- ------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald G. Brown......... 0 -- -- -- -- --
Charles J. Hogarty...... 60,000 (1)(2) 19.1% $14.13 April 8, 2009 532,000 1,351,200
Kim D. Wood............. 25,000 (1)(2) 7.9 14.13 April 8, 2009 221,875 563,000
John M. Palumbo......... 50,000 (1)(2) 15.9 14.13 April 8, 2009 443,750 1,126,000
Christopher Northup..... 20,000 (1)(2) 6.4 14.13 April 8, 2009 177,500 450,400
</TABLE>
--------
(1) The options vest in four equal annual installments, with the first
installment having vested on April 9, 2000.
(2) With respect to these grants in April 1999, Messrs. Hogarty, Wood,
Palumbo and Northup sold options to purchase 30,000, 10,000, 25,000 and
5,000 shares of Common Stock, respectively, to the Company in February
2000 at a price of $0.05 per option.
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 at
on Value Options at Year-End Year-End
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ronald G. Brown......... 0 0 0/0 0/0
Charles J. Hogarty...... 0 0 37,500/32,500 0/0
Kim D. Wood............. 0 0 33,750/21,250 0/0
John M. Palumbo......... 0 0 23,750/21,250 0/0
Christopher Northup..... 0 0 23,750/11,250 0/0
</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 by law,
to be made. It is anticipated that the Pension Plan will be terminated 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.
8
<PAGE>
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.
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.......................... 39
John M. Palumbo............................. 3
Christopher Northup......................... 16
</TABLE>
401(k) Savings Plan
Effective April 1, 1997, the Section 401(k) Savings Plan (the "Savings
Plan") in effect at North Star was amended to make the Savings Plan available
to employees of the Company. Pursuant to the amendment, the Company became the
Savings Plan sponsor and North Star became an adopting employer. All employees
of the Company as of April 1, 1997, became participants in the Savings 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 Savings 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 Savings 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.
9
<PAGE>
A participant is always 100% vested in his or her own Savings 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, death while employed by the Company or the
termination or complete discontinuance of contributions to the Savings 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.
CERTAIN TRANSACTIONS
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 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 $23,600 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
10
<PAGE>
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 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.
The Company believes that the terms and conditions of the above 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.
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.
11
<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. and Pep Boys--Manny, Moe & Jack, 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 31, 2000. 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 CUMULATIVE TOTAL RETURN*
AMONG KEYSTONE AUTOMOTIVE INDUSTRIES, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND A PEER GROUP
KEYSTONE AUTOMOTIVE INDS INC
<TABLE>
<CAPTION>
6/21/96 3/28/97 3/27/98 3/26/99 3/31/00
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
KEYSTONE AUTOMOTIVE INDUSTRIES, INC. 100.00 167.57 253.38 167.57 63.51
PEER GROUP 100.00 86.13 105.77 89.40 75.01
NASDAQ STOCK MARKET (U.S.) 100.00 103.73 157.28 212.47 394.91
</TABLE>
12
<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
31, 2000, all relevant Section 16(a) filing requirements were complied with,
except that Messrs. Hogarty, Wood, Palumbo and Northup and James C. Lockwood
(Vice President-General Counsel and Secretary of the Company), each reported
on a Form 5 for fiscal 2000, the repurchase by the Company on February 2, 2000
of certain stock options. Because the repurchases were nonexempt transactions,
they should have been reported on a Form 4 for the month of February 2000.
Keith M. Thompson filed a late report on Form 5 for fiscal 2000 reflecting
that he no longer had a beneficial interest in certain shares of the Company's
Common Stock owned by his former spouse. A Form 4 should have been filed by
him for the month of July 1999. In addition, Ronald G. Brown filed a late
report on Form 5 for fiscal 2000 reflecting a gift of shares of the Company's
Common Stock in September 1999, which should have been reported on a timely
filed Form 5 for fiscal 2000.
APPROVAL OF AMENDMENT TO 1996 EMPLOYEE STOCK INCENTIVE PLAN
The Company's Board of Directors and shareholders have previously adopted
and approved the Company's 1996 Employee Stock Incentive Plan, as amended (the
"Plan"). A total of 1,100,000 shares of Common Stock have been reserved for
issuance under the Plan. In May 2000, the Board of Directors approved an
amendment to the Plan, subject to shareholder approval, to increase the shares
issuable under the Plan to 2,200,000.
At the Annual Meeting, the shareholders are being requested to consider and
approve the proposed amendment to the Plan to increase the number of shares of
Common Stock issuable under the Plan from 1,100,000 shares to 2,200,000. The
Board believes that the amendment is essential to enable the Company to
attract and maintain key employees, to motivate high levels of performance and
to recognize key employee accomplishments.
As of July 7, 2000, options to purchase a total of 855,500 shares held by
110 optionees were outstanding under the Plan at a weighted average exercise
price of $15.75 per share and 17,325 shares remained available for future
grant.
Description of Stock Incentive Plan
General. The Board of Directors of the Company adopted the Plan pursuant to
which officers, directors, employees and independent contractors are eligible
to receive shares of the Common Stock of the Company or other securities or
benefits with a value derived from the value of the Common Stock of the
Company. The purpose of the Plan is to enable the Company to attract, retain
and motivate officers, directors, employees and independent contractors by
providing for or increasing their proprietary interests in the Company and, in
the case of non-employee directors, to attract such directors and further
align their interests with those of the Company's shareholders by providing
for or increasing their proprietary interests in the Company.
Administration. The Plan is administered by the Compensation Committee (the
"Committee"), except that grants to non-employee directors are made by the
Board of Directors pursuant to a predetermined formula. The Committee has full
and final authority to select the recipients of awards and to grant such
awards. Subject to the provisions of the Plan, the Committee has a wide degree
of flexibility in determining the terms and conditions of awards and the
number of shares to be issued pursuant thereto, including conditioning the
receipt of vesting of awards upon the achievement by the Company of specified
performance criteria. The expenses of administering the Plan are borne by the
Company.
13
<PAGE>
Terms of Awards. The Plan authorizes the Committee to enter into any type
of arrangement with an eligible recipient that, by its terms, involves or
might involve the issuance of Common Stock or any other security or benefit
with a value derived from the value of Common Stock. Awards are not restricted
to any specified form, or structure and may include, without limitation, sales
or bonuses of stock, restricted stock, stock options, reload stock options,
stock purchase warrants, other rights to acquire stock, securities convertible
into or redeemable for stock, stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares. An award may
consist of one such security or benefit or two or more of them in tandem or in
the alternative.
An award granted under the Plan may include a provision accelerating the
receipt of benefits upon the occurrence of specified events, such as a change
of control of the Company or a dissolution, liquidation, merger,
reclassification, sale of substantially all of the property and assets of the
Company or other significant corporate transactions. The Committee may grant
options that either are intended to be "incentive stock options" as defined
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") or are not intended to be incentive stock options ("non-qualified
stock options"). Awards to non-employee directors may only be non-qualified
stock options.
An award may permit the recipient to pay all or part of the purchase price
of the shares or other property issuable pursuant thereto, or to pay all or
part of such recipient's tax withholding obligation with respect to such
issuance, by (i) delivering previously owned shares of capital stock of the
Company or other property, (ii) reducing the amount of shares or other
property otherwise issuable pursuant to the award or (iii) delivering a
promissory note, the terms and conditions of which will be determined by the
Committee. If an option permits the recipient to pay for the shares issuable
pursuant thereto with previously owned shares, the recipient would be able to
exercise the option in successive transactions, starting with a relatively
small number of shares and, by a series of book-entry exercises using shares
acquired from each such transaction to pay the purchase price of the shares
acquired in the following transaction, to exercise an option for a large
number of shares with no more investment than the original share or shares
delivered. The exercise price and any withholding taxes are payable in cash by
non-employee directors, although the Board of Directions at its discretion may
permit such payment by delivery of shares of Common Stock, or by delivery of
broker instructions authorizing a loan secured by the shares acquired upon
exercise or payment of proceeds from the sale of such shares.
Amendment and Termination. Subject to limitations imposed by law, the Board
of Directors may amend or terminate the Plan at any time and in any manner.
However, no such amendment or termination may deprive the recipient of an
award previously granted under the Plan of any rights thereunder without his
consent.
Federal Tax Information. The grant of a non-qualified stock option under
the Plan will not result in any federal income tax consequences to the
optionee or to the Company. Upon exercise of a non-qualified stock option, the
optionee is subject to income taxes at the rate applicable to ordinary
compensation income on the difference between the option exercise price and
the fair market value of the shares on the date of exercise. This income is
subject to withholding for federal income and employment tax purposes. The
Company is entitled to an income tax deduction in the amount of the income
recognized by the optionee subject to possible limitations imposed by Section
162(m) of the Code. Any gain or loss on the optionee's subsequent disposition
of the shares of Common Stock will receive long or short-term capital gain or
loss treatment, depending on whether the shares are held for more than one
year following exercise. The Company does not receive a tax deduction for any
such gain.
The grant of an incentive stock option ("ISO") under the Plan will not
result in any federal income tax consequences to the optionee or to the
Company. An optionee recognizes no federal taxable income upon exercising an
ISO (subject to the alternative minimum tax rules discussed below), and the
Company receives no deduction at the time of exercise. In the event of a
disposition of stock acquired upon exercise of an ISO, the tax consequences
depend upon how long the optionee has held the shares of Common Stock. If the
optionee does not dispose of the shares within two years after ISO was
granted, nor within one year after the ISO was exercised, the optionee will
recognize a long-term capital gain (or loss) equal to the difference between
the sale price of the shares and the exercise price. The Company is not
entitled to any deduction under these circumstances.
14
<PAGE>
If the optionee fails to satisfy either of the foregoing ISO holding
periods, he or she must recognize ordinary income in the year of the
disposition (referred to as a "disqualifying disposition"). The amount of such
ordinary income generally is the lesser of (i) the difference between the
amount realized on the disposition and the exercise price, or (ii) the
difference between the fair market value of the stock on the exercise date and
the exercise price. Any gain in excess of the amount taxed as ordinary income
will be treated as a long or short-term capital gain, depending on whether the
stock was held for more than one year. The Company, in the year of the
disqualifying disposition, is entitled to a deduction equal to the amount of
ordinary income recognized by the optionee.
The "spread" under an ISO--i.e., the difference between the fair market
value of the shares at exercise and the exercise price--is classified as an
item of adjustment in the year of exercise for purposes of the alternative
minimum tax.
The foregoing is only a summary of the current effect of federal income
taxation upon the optionholder and the Company with respect to the shares
purchased under the Plan. Reference should be made to the applicable
provisions of the Code. In addition, the summary does not discuss the tax
consequences of a optionholder's death or the income tax laws of any
municipality, state or foreign country to which the grantee may be subject.
Amended Plan Benefits. As of the date of this proxy statement, no executive
officer or director and no associates of any executive officer or director,
has been granted any options subject to shareholder approval of the proposed
amendment. The benefits which may be received pursuant to the proposed Plan
amendment by our executive officers, directors and employees are not
determinable at this time.
Vote Required, Recommendation of Board of Directors. The approval of the
amendment to the Plan requires the affirmative vote of a majority of the votes
cast on the proposal at the Annual Meeting, provided the affirmatively voted
shares are at least equal to a majority of the number of shares constituting a
quorum.
The Company's Board of Directors unanimously recommends voting "FOR" the
Amendment of the Plan to increase the number of shares issuable under the
Plan.
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 nomination 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.
We are submitting this proposal to you because the Board believes that such
action follows sound corporate practice. If you do not ratify the selection of
independent public accountants, the Board will consider it a direction to
consider selecting other public accountants. However, even if you ratify the
selection, the Board may still appoint new independent public accountants at
any time during the year if it believes that such a change would be in the
best interest of the Company and our shareholders.
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, provided the affirmatively voted
shares are at least equal to a majority of the number of shares constituting a
quorum.
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 2001 fiscal year.
15
<PAGE>
SUBMISSION OF STOCKHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal, including
nominations to the Board of Directors, intended for inclusion in the Company's
proxy materials for the 2001 Annual Meeting of Shareholders, must be received
by the Company on or before April 3, 2001. In addition, if a shareholder
intends to present a proposal for action at the 2001 Annual Meeting of
Shareholders, the shareholder must provide the Company with notice thereof on
or before June 12, 2001. 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.
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.
If you would like an additional copy of our Annual Report on Form 10-K for
the year ended March 31, 2000, that we filed with the SEC, we will send you
one without charge. Please address your request to:
Keystone Automotive Industries, Inc.
700 E. Bonita Avenue
Pomona, California 91767
Attn: James C. Lockwood, Secretary
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 21, 2000
16
<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 31, 2000, all but two of the executive
officers of the Company had written employment agreements. The employment
agreement with respect to Mr. Hogarty was adopted before the Company's initial
public offering in June 1996 and the employment agreement with respect to
Messrs. Brown and Wood were adopted at the time of the acquisition of North
Star in March 1997. Mr. Palumbo's employment agreement was approved by the
Board of Directors in November 1999. 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 2000, for executive
officers with employment agreements, were fixed by the Committee after
considering the performance of the Company 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 interests 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 salaries, annual cash bonuses 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 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.
17
<PAGE>
Long-Term Incentives
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the 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 any appreciation in 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.
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
18
<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 7, 2000, at the Annual Meeting of Keystone Stockholders to be
held on August 23, 2000, 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 PROPOSALS 2 AND 3. 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 LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
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
[_] A. Jayson Adair [_] Ronald G. Foster
2. APPROVE AMENDMENT TO THE 1996 EMPLOYEE STOCK [_] FOR [_] AGAINST [_] ABSTAIN
INCENTIVE PLAN
3. 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: _________________ , 2000
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Signature
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Signature if held jointly
I plan to attend the meeting:
Yes [_] No [_]
