KEYSTONE CONSOLIDATED INDUSTRIES, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
TO THE STOCKHOLDERS OF
KEYSTONE CONSOLIDATED INDUSTRIES, INC.:
THE ANNUAL MEETING OF STOCKHOLDERS (THE "ANNUAL MEETING") OF KEYSTONE
CONSOLIDATED INDUSTRIES, INC., A DELAWARE CORPORATION ("KEYSTONE" OR THE
"COMPANY"), WILL BE HELD ON MAY 9, 1997, AT 9:00 A.M. LOCAL TIME, AT THE OFFICES
OF THE COMPANY AT 5430 LBJ FREEWAY, SUITE 1740, DALLAS, TEXAS, FOR THE FOLLOWING
PURPOSES:
(1) TO ELECT ONE DIRECTOR FOR A TERM OF TWO YEARS, AND UNTIL HIS
SUCCESSOR IS DULY ELECTED AND QUALIFIED; AND TO ELECT THREE
DIRECTORS EACH FOR A TERM OF THREE YEARS, AND UNTIL THEIR
SUCCESSORS ARE DULY ELECTED AND QUALIFIED; AND
(2) TO CONSIDER AND ACT UPON A PROPOSAL TO APPROVE AND ADOPT THE
KEYSTONE CONSOLIDATED INDUSTRIES, INC. 1997 LONG-TERM INCENTIVE
PLAN; AND
(3) TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
THE BOARD OF DIRECTORS HAS FIXED THE CLOSE OF BUSINESS ON MARCH 27, 1997,
AS THE RECORD DATE FOR DETERMINING THE STOCKHOLDERS ENTITLED TO NOTICE OF AND TO
VOTE AT THE ANNUAL MEETING. A COMPLETE LIST OF THE STOCKHOLDERS ENTITLED TO
VOTE AT THE ANNUAL MEETING WILL BE MADE AVAILABLE FOR INSPECTION BY ANY
STOCKHOLDER OF RECORD AT THE OFFICES OF KEYSTONE DURING ORDINARY BUSINESS HOURS
FROM APRIL 7, 1997, THROUGH THE TIME OF THE ANNUAL MEETING FOR ANY PURPOSE
GERMANE TO THE ANNUAL MEETING.
IN ORDER TO ENSURE THAT YOU ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTAGE-PAID
ENVELOPE. IF YOU CHOOSE, YOU MAY STILL VOTE IN PERSON AT THE ANNUAL MEETING
EVEN THOUGH YOU PREVIOUSLY SIGNED YOUR PROXY. YOU MAY REVOKE YOUR PROXY BY
FOLLOWING THE PROCEDURES SPECIFIED IN THE ACCOMPANYING PROXY STATEMENT. YOUR
VOTE, WHETHER GIVEN BY PROXY OR IN PERSON AT THE ANNUAL MEETING, WILL BE HELD IN
CONFIDENCE BY THE INSPECTOR OF ELECTION FOR THE ANNUAL MEETING IN ACCORDANCE
WITH THE COMPANY'S BYLAWS.
BY ORDER OF THE BOARD OF DIRECTORS,
SANDRA K. MYERS
SECRETARY
DALLAS, TEXAS
APRIL 17, 1997
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
THREE LINCOLN CENTRE
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 9, 1997
THIS PROXY STATEMENT AND THE ACCOMPANYING PROXY CARD ARE BEING FURNISHED TO
THE STOCKHOLDERS OF KEYSTONE CONSOLIDATED INDUSTRIES, INC., A DELAWARE
CORPORATION ("KEYSTONE" OR THE "COMPANY"), IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF KEYSTONE FOR USE AT THE
1997 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT 9:00 A.M. ON FRIDAY, MAY 9,
1997, AT THE COMPANY'S OFFICES AT 5430 LBJ FREEWAY, SUITE 1740, DALLAS, TEXAS
AND AT ANY ADJOURNMENT OR POSTPONEMENT THEREOF (THE "ANNUAL MEETING"). ANY
STOCKHOLDER EXECUTING A PROXY HAS THE POWER TO REVOKE IT AT ANY TIME BEFORE IT
IS VOTED. A PROXY MAY BE REVOKED BY EITHER (I) FILING WITH THE INSPECTOR OF
ELECTION A WRITTEN REVOCATION OF THE PROXY; (II) APPEARING AT THE ANNUAL MEETING
AND CASTING A VOTE CONTRARY TO THAT INDICATED ON THE PROXY; OR (III) SUBMITTING
A DULY EXECUTED PROXY BEARING A LATER DATE. ATTENDANCE AT THE ANNUAL MEETING
ALONE, HOWEVER, WILL NOT IN ITSELF CONSTITUTE THE REVOCATION OF A PROXY. THIS
PROXY STATEMENT AND THE ACCOMPANYING PROXY CARD ARE FIRST BEING MAILED TO
STOCKHOLDERS ON OR ABOUT APRIL 28, 1997. AN ANNUAL REPORT FOR THE YEAR ENDED
DECEMBER 31, 1996 IS ENCLOSED HEREWITH.
ONLY STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MARCH 27, 1997,
(THE "RECORD DATE") WILL BE ENTITLED TO VOTE AT THE ANNUAL MEETING. AS OF THE
RECORD DATE, THERE WERE 9,208,014 SHARES OF KEYSTONE'S COMMON STOCK, $1.00 PAR
VALUE PER SHARE ("COMMON STOCK"), AND 435,458 SHARES OF SERIES A PREFERRED STOCK
("PREFERRED STOCK"), OUTSTANDING AND ENTITLED TO VOTE. EACH SHARE OF COMMON
STOCK AND EACH SHARE OF PREFERRED STOCK ENTITLES THE HOLDER THEREOF TO ONE VOTE.
SHARES OF COMMON STOCK AND PREFERRED STOCK VOTE TOGETHER AS ONE CLASS ON ALL
MATTERS SUBMITTED TO STOCKHOLDERS. (SHARES OF PREFERRED STOCK MAY BE ENTITLED
TO ADDITIONAL VOTING RIGHTS UNDER APPLICABLE LAW WITH RESPECT TO CERTAIN
MATTERS, BUT NO SUCH ADDITIONAL RIGHTS ARISE IN CONNECTION WITH THE MATTERS TO
BE CONSIDERED BY STOCKHOLDERS AT THE ANNUAL MEETING.) THE PRESENCE, IN PERSON
OR BY PROXY, OF THE HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK AND
PREFERRED STOCK VOTING AS ONE CLASS ENTITLED TO VOTE AT THE ANNUAL MEETING ARE
NECESSARY TO CONSTITUTE A QUORUM FOR THE CONDUCT OF BUSINESS AT THE ANNUAL
MEETING. SHARES OF STOCK THAT ARE VOTED TO ABSTAIN FROM ANY BUSINESS COMING
BEFORE THE ANNUAL MEETING AND BROKER/NOMINEE NON-VOTES WILL BE COUNTED AS BEING
IN ATTENDANCE AT THE ANNUAL MEETING FOR PURPOSES OF DETERMINING WHETHER A QUORUM
IS PRESENT.
EMPLOYEES PARTICIPATING IN THE KEYSTONE CONSOLIDATED INDUSTRIES, INC.
DEFERRED INCENTIVE PLAN OR THE DESOTO STOCK OWNERSHIP PLUS PLAN, WHO ARE
BENEFICIAL OWNERS OF COMMON STOCK UNDER SUCH PLANS, MAY USE THE ENCLOSED VOTING
INSTRUCTION CARD TO INSTRUCT THE PLAN TRUSTEES HOW TO VOTE THE SHARES HELD FOR
SUCH EMPLOYEES, AND THE TRUSTEES WILL, SUBJECT TO THE TERMS OF THE PLAN, VOTE
SUCH SHARES IN ACCORDANCE WITH SUCH INSTRUCTIONS.
CHASEMELLON SHAREHOLDER SERVICES, L.L.C. ("CHASE"), THE TRANSFER AGENT AND
REGISTRAR FOR THE COMMON STOCK, HAS BEEN APPOINTED BY THE BOARD OF DIRECTORS TO
RECEIVE PROXIES, TABULATE THE VOTE AND SERVE AS INSPECTOR OF ELECTION AT THE
ANNUAL MEETING. ALL PROXIES AND BALLOTS DELIVERED TO CHASE SHALL BE KEPT
CONFIDENTIAL BY CHASE IN ACCORDANCE WITH THE COMPANY'S BYLAWS.
THE COST OF PREPARING, PRINTING, ASSEMBLING AND MAILING THIS PROXY
STATEMENT AND OTHER MATERIAL FURNISHED TO STOCKHOLDERS IN CONNECTION WITH THE
SOLICITATION OF PROXIES WILL BE BORNE BY KEYSTONE. IN ADDITION TO THE
SOLICITATION OF PROXIES BY USE OF THE MAILS, OFFICERS, DIRECTORS, AND EMPLOYEES
OF KEYSTONE MAY SOLICIT PROXIES BY WRITTEN COMMUNICATION, TELEPHONE OR PERSONAL
CALLS FOR WHICH SUCH PERSONS WILL RECEIVE NO SPECIAL COMPENSATION.
ELECTION OF DIRECTORS
KEYSTONE'S CERTIFICATE OF INCORPORATION PROVIDES FOR THE BOARD OF DIRECTORS
TO BE DIVIDED INTO THREE CLASSES. THE BYLAWS OF THE COMPANY PROVIDE THAT THE
BOARD OF DIRECTORS SHALL CONSIST OF NOT LESS THAN FIVE AND NOT MORE THAN NINE
PERSONS, AS DETERMINED BY THE BOARD OF DIRECTORS FROM TIME TO TIME. THE NUMBER
OF DIRECTORS IS CURRENTLY NINE.
THE NOMINEES RECEIVING A PLURALITY OF THE VOTES OF THE SHARES PRESENT IN
PERSON OR REPRESENTED AT THE ANNUAL MEETING AND ENTITLED TO VOTE WILL BE ELECTED
TO THE CLASSES DESIGNATED AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND
QUALIFIED (EXCEPT IN CASES WHERE NO SUCCESSOR IS ELECTED DUE TO A REDUCTION IN
THE SIZE OF THE BOARD), OR EARLIER RESIGNATION, REMOVAL FROM OFFICE, DEATH OR
INCAPACITY. NEITHER SHARES AS TO WHICH AUTHORITY TO VOTE ON THE ELECTION OF
DIRECTORS HAS BEEN WITHHELD NOR BROKER NOMINEE NON-VOTES WILL BE COUNTED AS
AFFIRMATIVE VOTES TO ELECT DIRECTOR NOMINEES TO THE BOARD OF DIRECTORS.
ALL OF THE NOMINEES SET FORTH BELOW HAVE CONSENTED TO SERVE IF ELECTED TO
THE BOARD OF DIRECTORS. IF ANY INDIVIDUAL NOMINATED FOR A DIRECTORSHIP IS NOT
AVAILABLE FOR ELECTION, WHICH IS NOT ANTICIPATED, VOTES WILL BE CAST BY THE
PROXY HOLDER FOR SUCH SUBSTITUTE NOMINEE AS SHALL BE DESIGNATED BY THE BOARD OF
DIRECTORS.
HAROLD C. SIMMONS AND HIS AFFILIATES HOLD APPROXIMATELY 44.5% OF THE
OUTSTANDING SHARES OF COMMON STOCK AS OF THE RECORD DATE AND HAVE INDICATED
THEIR INTENTION TO VOTE SUCH SHARES "FOR" THE ELECTION OF ALL OF THE NOMINEES
FOR DIRECTOR AS SET FORTH IN THIS PROXY STATEMENT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
FOR THE BOARD OF DIRECTORS SET FORTH BELOW.
NOMINEES FOR BOARD OF DIRECTORS
THE FOLLOWING BIOGRAPHICAL INFORMATION HAS BEEN PROVIDED BY THE NOMINEES
FOR ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY FOR TERMS EXPIRING AT THE
1999 OR THE 2000 ANNUAL MEETING OF STOCKHOLDERS:
RICHARD N. ULLMAN DIRECTOR SINCE 1992
MR. ULLMAN, AGE 62, IS PRESIDENT OF FEDERAL COMPANIES, A PRIVATELY HELD
COMMERCIAL WAREHOUSE AND TRANSPORTATION COMPANY IN PEORIA, ILLINOIS, AND HAS
SERVED IN SUCH CAPACITY SINCE PRIOR TO 1992. HE IS A DIRECTOR OF FIRST OF
AMERICA BANK - ILLINOIS, N.A. AND CILCORP, INC. AND IS ALSO SERVING AS DIRECTOR
OF CHILDREN'S HOSPITAL OF ILLINOIS AT ST. FRANCIS, DIRECTOR OF ST. FRANCIS
MEDICAL CENTER, AND A TRUSTEE OF BRADLEY UNIVERSITY, ALL LOCATED IN PEORIA. MR.
ULLMAN IS A NOMINEE FOR A TERM EXPIRING IN 1999.
THOMAS E. BARRY DIRECTOR SINCE 1989
DR. BARRY, AGE 53, IS VICE PRESIDENT FOR EXECUTIVE AFFAIRS AT SOUTHERN
METHODIST UNIVERSITY AND HAS BEEN A PROFESSOR OF MARKETING IN THE EDWIN L. COX
SCHOOL OF BUSINESS AT SOUTHERN METHODIST UNIVERSITY SINCE PRIOR TO 1992. DR.
BARRY IS A NOMINEE FOR A TERM EXPIRING IN 2000.
WILLIAM P. LYONS DIRECTOR SINCE 1996
MR. LYONS, AGE 55, IS CHAIRMAN OF THE BOARD OF HOLMES PROTECTION GROUP,
INC., AN ELECTRONIC SECURITY SYSTEMS AND MONITORING COMPANY, AND HAS SERVED IN
SUCH CAPACITY SINCE 1995. HE IS ALSO CHAIRMAN OF JVL CORP., NOW AN INVESTMENT
FIRM, BUT FORMERLY A GENERIC PHARMACEUTICAL MANUFACTURER, SINCE 1992. MR. LYONS
IS ALSO PRESIDENT OF WILLIAM P. LYONS & CO., INC. SINCE PRIOR TO 1992, AND
MANAGING DIRECTOR OF MADISON PARTNERS, LLC, BOTH INVESTMENT FIRMS. HE IS ALSO A
DIRECTOR OF LYDALL, INC. AND VIDEO LOTTERY TECHNOLOGIES, INC. MR. LYONS IS A
NOMINEE FOR A TERM EXPIRING IN 2000.
WILLIAM SPIER DIRECTOR SINCE 1996
MR. SPIER, AGE 62, IS PRESIDENT AND CHAIRMAN OF SUTTON HOLDING CORP., A
PRIVATE INVESTMENT FIRM, AND HAS SERVED IN SUCH CAPACITY SINCE PRIOR TO 1992.
MR. SPIER WAS CHAIRMAN OF DESOTO FROM PRIOR TO 1992 TO SEPTEMBER 1996, CHIEF
EXECUTIVE OFFICER OF DESOTO FROM PRIOR TO 1992 TO JANUARY 1994 AND FROM
SEPTEMBER 1995 TO SEPTEMBER 1996. HE IS ALSO A DIRECTOR OF GEOTEK
COMMUNICATIONS, INC., EA INDUSTRIES, INC., INTEGRATED TECHNOLOGY USA, INC., AND
VIDEO LOTTERY TECHNOLOGIES, INC. MR. SPIER IS A NOMINEE FOR A TERM EXPIRING IN
2000.
OTHER BOARD MEMBERS
THE FOLLOWING BIOGRAPHICAL INFORMATION HAS BEEN PROVIDED BY THE DIRECTORS
WHOSE TERMS DO NOT EXPIRE AT THE ANNUAL MEETING:
PAUL M. BASS, JR. DIRECTOR SINCE 1989
MR. BASS, AGE 62, IS VICE CHAIRMAN OF FIRST SOUTHWEST COMPANY, A PRIVATELY
OWNED INVESTMENT BANKING FIRM, AND HAS SERVED AS A DIRECTOR SINCE PRIOR TO 1992.
MR. BASS IS ALSO CHAIRMAN OF RICHMAN GORDMAN HALF PRICE STORES, INC.; CHAIRMAN
OF MORAMERICA PRIVATE EQUITIES COMPANY; DIRECTOR AND CHAIRMAN OF THE AUDIT
COMMITTEE OF CALIFORNIA FEDERAL BANK; AND DIRECTOR AND MEMBER OF THE EXECUTIVE
COMMITTEE OF SOURCE SERVICES, INC. MR. BASS IS CURRENTLY SERVING AS A MEMBER OF
THE EXECUTIVE COMMITTEE OF ZALE-LIPSHY UNIVERSITY HOSPITAL AND AS CHAIRMAN OF
THE BOARD OF TRUSTEES OF SOUTHWESTERN MEDICAL FOUNDATION. MR. BASS' TERM AS A
DIRECTOR EXPIRES AT THE ANNUAL MEETING IN 1998.
DAVID E. CONNOR DIRECTOR SINCE 1992
MR. CONNOR, AGE 71, IS PRESIDENT OF DAVID E. CONNOR AND ASSOCIATES,
ADVISERS TO COMMERCE AND INDUSTRY, IN PEORIA, ILLINOIS AND HAS SERVED IN SUCH
CAPACITY SINCE PRIOR TO 1992. HE IS CHAIRMAN OF THE BOARD OF FIRST MIDWEST
BANKSHARES, QUINCY, ILLINOIS. HE IS ALSO DIRECTOR OF HEARTLAND COMMUNITY HEALTH
CLINIC, PEORIA, ILLINOIS; MUSEUM TRUSTEES OF AMERICA, WASHINGTON, D.C.; AND A
TRUSTEE OF BRADLEY UNIVERSITY, PEORIA, ILLINOIS. MR. CONNOR'S TERM AS A
DIRECTOR EXPIRES AT THE ANNUAL MEETING IN 1998.
GLENN R. SIMMONS DIRECTOR SINCE 1986
MR. SIMMONS, AGE 69, IS CHAIRMAN OF THE BOARD OF DIRECTORS OF KEYSTONE AND
HAS SERVED IN SUCH CAPACITY SINCE PRIOR TO 1992. MR. SIMMONS WAS CHIEF
EXECUTIVE OFFICER OF KEYSTONE FROM PRIOR 1992 TO FEBRUARY 1997. MR. SIMMONS HAS
SERVED AS VICE CHAIRMAN OF THE BOARD OF DIRECTORS OF CONTRAN CORPORATION
("CONTRAN"), A PRIVATELY OWNED DIVERSIFIED HOLDING COMPANY THAT MAY BE DEEMED TO
BE THE BENEFICIAL HOLDER OF APPROXIMATELY 41.6% OF THE OUTSTANDING COMMON STOCK
AS OF THE RECORD DATE, SINCE PRIOR TO 1992. MR. SIMMONS HAS BEEN A DIRECTOR OF
CONTRAN AND AN EXECUTIVE OFFICER AND/OR DIRECTOR OF VARIOUS COMPANIES RELATED TO
CONTRAN SINCE PRIOR TO 1992. HE IS VICE CHAIRMAN OF THE BOARD OF VALHI, INC.
("VALHI"), VICE CHAIRMAN OF THE BOARD OF VALCOR, INC. AND A DIRECTOR OF NL
INDUSTRIES, INC. ("NL") AND TREMONT CORPORATION ("TREMONT"), ALL OF WHICH
COMPANIES MAY BE DEEMED TO BE AFFILIATES OF KEYSTONE. MR. SIMMONS' TERM AS A
DIRECTOR EXPIRES AT THE ANNUAL MEETING IN 1999.
DONALD A. SOMMER DIRECTOR SINCE 1962
MR. SOMMER, AGE 68, SERVED AS A VICE PRESIDENT OF THE COMPANY PRIOR TO HIS
RETIREMENT IN 1982. MR. SOMMER IS A FIRST COUSIN TO THE SPOUSE OF J. WALTER
TUCKER, JR., A DIRECTOR OF THE COMPANY. MR. SOMMER'S TERM AS A DIRECTOR EXPIRES
AT THE ANNUAL MEETING IN 1998.
J. WALTER TUCKER, JR. DIRECTOR SINCE 1971
MR. TUCKER, AGE 71, IS VICE CHAIRMAN OF THE BOARD OF DIRECTORS OF THE
COMPANY AND HAS SERVED IN SUCH CAPACITY SINCE PRIOR TO 1992. MR. TUCKER HAS
SERVED AS A DIRECTOR, PRESIDENT, AND TREASURER OF TUCKER & BRANHAM, INC., A
PRIVATELY OWNED REAL ESTATE, MORTGAGE BANKING AND INSURANCE FIRM SINCE PRIOR TO
1992. MR. TUCKER IS ALSO A DIRECTOR OF COLUMBIAN MUTUAL LIFE INSURANCE COMPANY
AND VALHI. HE HAS ALSO BEEN AN EXECUTIVE OFFICER AND/OR DIRECTOR OF VARIOUS
COMPANIES RELATED TO VALHI AND CONTRAN SINCE 1982. MR. TUCKER'S SPOUSE IS A
FIRST COUSIN OF DONALD A. SOMMER, A DIRECTOR OF THE COMPANY. MR. TUCKER'S TERM
AS A DIRECTOR EXPIRES AT THE ANNUAL MEETING IN 1999.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
DURING THE FISCAL YEAR ENDING DECEMBER 31, 1996, THE BOARD OF DIRECTORS MET
FIVE TIMES. ALL DIRECTORS OF THE COMPANY WERE PRESENT AT MORE THAN 75% OF THE
MEETINGS OF THE BOARD OF DIRECTORS AND THE COMMITTEES OF THE BOARD OF DIRECTORS
ON WHICH THEY SERVED.
THE EXECUTIVE COMMITTEE, WHICH DID NOT MEET DURING 1996, EXERCISES ALL
POWERS AND AUTHORITY OF THE BOARD OF DIRECTORS IN THE MANAGEMENT OF THE BUSINESS
AND AFFAIRS OF THE COMPANY, TO THE EXTENT PERMITTED BY DELAWARE LAW, WHEN A
MEETING OF THE BOARD OF DIRECTORS IS NOT POSSIBLE. THE MEMBERS OF THE EXECUTIVE
COMMITTEE ARE MESSRS. BASS, SIMMONS AND SPIER.
THE MASTER TRUST COMMITTEE, WHICH MET THREE TIMES DURING 1996, EXERCISES
THE POWERS, RIGHTS AND RESPONSIBILITIES INCLUDED UNDER ARTICLES 3 AND 10 OF THE
KEYSTONE CONSOLIDATED INDUSTRIES, INC. MASTER RETIREMENT TRUST. THE MEMBERS OF
THE MASTER TRUST COMMITTEE ARE MESSRS. BASS, SPIER AND TUCKER.
THE BOARD OF DIRECTORS HAS A STANDING AUDIT COMMITTEE AND COMPENSATION
COMMITTEE. THE AUDIT COMMITTEE, DID NOT MEET IN 1996, REVIEWS AND EVALUATES
SIGNIFICANT MATTERS RELATING TO THE AUDIT AND INTERNAL CONTROLS OF THE COMPANY,
AND REVIEWS THE SCOPE AND RESULTS OF AUDIT AND NON-AUDIT ASSIGNMENTS OF THE
COMPANY'S INDEPENDENT ACCOUNTANTS. THE AUDIT COMMITTEE EXAMINES AND RECOMMENDS
FOR APPROVAL THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY, AND ANNUALLY
RECOMMENDS TO THE BOARD OF DIRECTORS THE APPOINTMENT OF, AND FEES PAID TO, THE
INDEPENDENT ACCOUNTANTS. RECOMMENDATIONS AND ACTIONS OF THE AUDIT COMMITTEE ARE
REPORTED TO THE FULL BOARD OF DIRECTORS. THE MEMBERS OF THE AUDIT COMMITTEE ARE
MESSRS. BASS, CONNOR AND ULLMAN.
THE COMPENSATION COMMITTEE, WHICH MET ONCE DURING 1996, REVIEWS AND
APPROVES THE AMOUNTS AND FORMS OF COMPENSATION PAID TO EXECUTIVE OFFICERS. THE
MEMBERS OF THE COMPENSATION COMMITTEE ARE MESSRS. BARRY, BASS AND SOMMER.
THE BOARD OF DIRECTORS DOES NOT HAVE A NOMINATING COMMITTEE.
EXECUTIVE OFFICERS
IN ADDITION TO GLENN R. SIMMONS AND J. WALTER TUCKER, JR., THE FOLLOWING
ARE CURRENTLY EXECUTIVE OFFICERS OF KEYSTONE:
HAROLD M. CURDY, AGE 49, IS VICE PRESIDENT - FINANCE AND TREASURER OF THE
COMPANY AND HAS SERVED IN SUCH CAPACITIES SINCE PRIOR TO 1992.
BERT E. DOWNING, JR., AGE 40, IS CORPORATE CONTROLLER OF THE COMPANY AND
HAS SERVED IN SUCH CAPACITY SINCE DECEMBER 1993. FROM PRIOR TO 1992 TO DECEMBER
1993, MR. DOWNING SERVED AS SENIOR MANAGER IN THE DALLAS OFFICE OF ERNST &
YOUNG, A PUBLIC ACCOUNTING FIRM.
RALPH P. END, AGE 59, HAS SERVED AS VICE PRESIDENT AND GENERAL COUNSEL
SINCE PRIOR TO 1992.
THOMAS J. GLAISTER, AGE 47, HAS SERVED AS PRESIDENT, KEYSTONE STEEL & WIRE,
A DIVISION OF THE COMPANY SINCE JANUARY 13, 1997. MR. GLAISTER WAS GENERAL
MANAGER, LOGISTICS OF LUKENS, INC., WASHINGTON, PA, PRIOR TO JOINING KEYSTONE
STEEL & WIRE. HE HELD VARIOUS MANAGEMENT POSITIONS AT LUKENS FROM PRIOR TO 1992
TO 1997.
BILL J. JOHNSON, AGE 60, HAS SERVED AS PRESIDENT, SHERMAN WIRE, A DIVISION
OF THE COMPANY, SINCE FEBRUARY 1995. MR. JOHNSON SERVED AS VICE PRESIDENT &
GENERAL MANAGER, SHERMAN WIRE, SINCE PRIOR TO 1992.
SANDRA K. MYERS, AGE 53, IS CORPORATE SECRETARY OF THE COMPANY AND
EXECUTIVE SECRETARY OF CONTRAN AND HAS SERVED IN BOTH CAPACITIES SINCE PRIOR TO
1992.
ROBERT W. SINGER, AGE 60, IS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE
COMPANY AND HAS SERVED IN SUCH CAPACITIES SINCE FEBRUARY 1997. MR. SINGER
SERVED AS PRESIDENT AND CHIEF OPERATING OFFICER SINCE PRIOR TO 1992. HE HAS
SERVED AS VICE PRESIDENT OF VALHI AND CONTRAN SINCE PRIOR TO 1992.
CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS
AS SET FORTH UNDER THE CAPTION "SECURITY OWNERSHIP," HAROLD C. SIMMONS,
THROUGH CONTRAN AND OTHER ENTITIES, MAY BE DEEMED TO BENEFICIALLY OWN
APPROXIMATELY 45% OF THE OUTSTANDING COMMON STOCK AS OF THE RECORD DATE AND,
THEREFORE, MAY BE DEEMED TO CONTROL THE COMPANY. THE COMPANY AND OTHER ENTITIES
THAT MAY BE DEEMED TO BE CONTROLLED BY OR AFFILIATED WITH MR. SIMMONS SOMETIMES
ENGAGE IN (A) INTERCORPORATE TRANSACTIONS SUCH AS GUARANTEES, MANAGEMENT AND
EXPENSE SHARING ARRANGEMENTS, SHARED FEE ARRANGEMENTS, JOINT VENTURES,
PARTNERSHIPS, LOANS, OPTIONS, ADVANCES OF FUNDS ON OPEN ACCOUNT, AND SALES,
LEASES AND EXCHANGES OF ASSETS, INCLUDING SECURITIES ISSUED BY BOTH RELATED AND
UNRELATED PARTIES, AND (B) COMMON INVESTMENT AND ACQUISITION STRATEGIES,
BUSINESS COMBINATIONS, REORGANIZATIONS, RECAPITALIZATIONS, SECURITIES
REPURCHASES AND PURCHASES AND SALES (AND OTHER ACQUISITIONS AND DISPOSITIONS) OF
SUBSIDIARIES, DIVISIONS OR OTHER BUSINESS UNITS, WHICH TRANSACTIONS HAVE
INVOLVED BOTH RELATED AND UNRELATED PARTIES AND HAVE INCLUDED TRANSACTIONS THAT
RESULTED IN THE ACQUISITION BY ONE RELATED PARTY OF A PUBLICLY-HELD MINORITY
EQUITY INTEREST IN ANOTHER RELATED PARTY. THE COMPANY CONTINUOUSLY CONSIDERS,
REVIEWS AND EVALUATES AND UNDERSTANDS THAT CONTRAN AND RELATED ENTITIES
CONSIDER, REVIEW AND EVALUATE TRANSACTIONS OF THE TYPE DESCRIBED ABOVE.
DEPENDING ON THE BUSINESS, TAX AND OTHER OBJECTIVES THEN RELEVANT, IT IS
POSSIBLE THAT THE COMPANY MIGHT BE A PARTY TO ONE OR MORE OF SUCH TRANSACTIONS
IN THE FUTURE. IN CONNECTION WITH THESE ACTIVITIES, THE COMPANY MAY CONSIDER
ISSUING ADDITIONAL EQUITY SECURITIES OR INCURRING ADDITIONAL INDEBTEDNESS. THE
COMPANY'S ACQUISITION ACTIVITIES HAVE IN THE PAST AND MAY IN THE FUTURE INCLUDE
PARTICIPATION IN THE ACQUISITION OR RESTRUCTURING ACTIVITIES CONDUCTED BY OTHER
COMPANIES THAT MAY BE DEEMED TO BE CONTROLLED BY HAROLD C. SIMMONS. IT IS THE
POLICY OF THE COMPANY TO ENGAGE IN TRANSACTIONS WITH RELATED PARTIES ON TERMS,
IN THE OPINION OF THE COMPANY, NO LESS FAVORABLE TO THE COMPANY THAN COULD BE
OBTAINED FROM UNRELATED PARTIES.
NO SPECIFIC PROCEDURES ARE IN PLACE THAT GOVERN THE TREATMENT OF
TRANSACTIONS AMONG THE COMPANY AND ITS RELATED ENTITIES, ALTHOUGH SUCH ENTITIES
MAY IMPLEMENT SPECIFIC PROCEDURES AS APPROPRIATE FOR PARTICULAR TRANSACTIONS.
IN ADDITION, UNDER APPLICABLE PRINCIPLES OF LAW, IN THE ABSENCE OF STOCKHOLDER
RATIFICATION OR APPROVAL BY DIRECTORS WHO MAY BE DEEMED DISINTERESTED,
TRANSACTIONS INVOLVING CONTRACTS AMONG COMPANIES UNDER COMMON CONTROL MUST BE
FAIR TO ALL COMPANIES INVOLVED. FURTHERMORE, DIRECTORS AND OFFICERS OWE
FIDUCIARY DUTIES OF GOOD FAITH AND FAIR DEALING TO ALL STOCKHOLDERS OF THE
COMPANIES FOR WHICH THEY SERVE.
GLENN R. SIMMONS, J. WALTER TUCKER, JR., AND SANDRA K. MYERS ARE NOT
SALARIED EMPLOYEES OF THE COMPANY. THE COMPANY HAS CONTRACTED WITH CONTRAN, ON
A FEE BASIS PAYABLE IN QUARTERLY INSTALLMENTS, TO PROVIDE CERTAIN ADMINISTRATIVE
AND OTHER SERVICES TO THE COMPANY IN ADDITION TO THE SERVICES OF MR. SIMMONS AND
MS. MYERS, INCLUDING CONSULTING SERVICES OF CONTRAN EXECUTIVE OFFICERS PURSUANT
TO THE INTERCORPORATE SERVICES AGREEMENT BETWEEN CONTRAN AND THE COMPANY, A COPY
OF WHICH IS INCLUDED AS EXHIBIT 10.1 IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FILED ON APRIL 14, 1997, (THE "INTERCORPORATE SERVICES AGREEMENT"). THE FEE
INCURRED DURING 1996 WAS $465,000. THE COMPANY COMPENSATES TUCKER & BRANHAM,
INC. FOR CERTAIN CONSULTING SERVICES OF MR. TUCKER ON AN HOURLY BASIS AS HIS
SERVICES ARE REQUESTED. THE FEES PAID TUCKER & BRANHAM, INC. DURING 1996 WERE
$79,000.
CERTAIN OF KEYSTONE'S PROPERTY, LIABILITY AND CASUALTY INSURANCE RISKS ARE
PARTIALLY INSURED OR REINSURED BY A CAPTIVE INSURANCE SUBSIDIARY OF VALHI. THE
PREMIUMS AND CLAIMS PAID IN CONNECTION THEREWITH WERE APPROXIMATELY $689,000 FOR
THE YEAR ENDED DECEMBER 31, 1996.
AIRCRAFT SERVICES WERE PURCHASED FROM VALHI IN THE AMOUNT OF $172,000 FOR
THE YEAR ENDED DECEMBER 31, 1996.
IN THE OPINION OF MANAGEMENT AND THE BOARD OF DIRECTORS, THE TERMS OF THE
TRANSACTIONS DESCRIBED ABOVE WERE NO LESS FAVORABLE TO THE COMPANY THAN THOSE
THAT COULD HAVE BEEN OBTAINED FROM AN UNRELATED ENTITY.
CERTAIN LITIGATION
HAROLD C. SIMMONS, GLENN R. SIMMONS AND CERTAIN COMPANIES RELATED TO
KEYSTONE ARE PARTIES TO THE LITIGATION DESCRIBED BELOW.
IN NOVEMBER 1991, A PURPORTED DERIVATIVE COMPLAINT WAS FILED IN THE COURT
OF CHANCERY OF THE STATE OF DELAWARE, NEW CASTLE COUNTY, (ALAN RUSSELL KAHN V.
TREMONT CORPORATION, ET AL., NO. 12339), IN CONNECTION WITH THE PURCHASE BY
TREMONT OF 7.8 MILLION SHARES OF NL COMMON STOCK FROM VALHI (THE "NL STOCK
PURCHASE"). IN ADDITION TO VALHI, THE COMPLAINT NAMED AS DEFENDANTS TREMONT AND
THE MEMBERS OF TREMONT'S BOARD OF DIRECTORS, INCLUDING GLENN R. SIMMONS AND
HAROLD C. SIMMONS. THE COMPLAINT ALLEGED, AMONG OTHER THINGS, THAT THE NL STOCK
PURCHASE CONSTITUTED A WASTE OF TREMONT'S ASSETS AND THAT TREMONT'S BOARD OF
DIRECTORS HAD BREACHED ITS FIDUCIARY DUTIES TO TREMONT'S PUBLIC STOCKHOLDERS. A
TRIAL ON THIS MATTER WAS HELD IN JUNE 1995 AND IN MARCH 1996 THE COURT ISSUED
ITS OPINION RULING IN FAVOR OF THE DEFENDANTS AND CONCLUDED THAT THE NL STOCK
PURCHASE DID NOT CONSTITUTE AN OVERREACHING BY VALHI, THAT TREMONT'S PURCHASE
PRICE IN THE NL STOCK PURCHASE WAS FAIR AND THAT IN ALL OTHER RESPECTS THE NL
STOCK PURCHASE WAS FAIR TO TREMONT. IN JUNE 1996, THE PLAINTIFFS FILED AN
APPEAL WITH THE DELAWARE SUPREME COURT. A HEARING BEFORE A THREE-JUDGE PANEL OF
THE SUPREME COURT WAS HELD IN DECEMBER 1996, AND AN EN BANC HEARING BEFORE THE
FULL SUPREME COURT WAS HELD IN FEBRUARY 1997. VALHI BELIEVES, AND UNDERSTANDS
THAT TREMONT AND THE OTHER DEFENDANTS BELIEVE, THAT THE ACTION IS WITHOUT MERIT.
IN SEPTEMBER 1996, A COMPLAINT WAS FILED IN THE SUPERIOR COURT OF NEW YORK,
BERGEN COUNTY, CHANCERY DIVISION (SEINFELD V. SIMMONS, ET AL., NO. C-336-96)
AGAINST VALHI, NL AND CERTAIN CURRENT AND FORMER MEMBERS OF NL'S BOARD OF
DIRECTORS. THE COMPLAINT, A DERIVATIVE ACTION ON BEHALF OF NL, ALLEGES, AMONG
OTHER THINGS, THAT NL'S AUGUST 1991 "DUTCH AUCTION" TENDER OFFER WAS AN UNFAIR
AND WASTEFUL EXPENDITURE OF NL'S FUNDS. THE COMPLAINT SEEKS, AMONG OTHER
THINGS, TO RESCIND NL'S PURCHASE OF APPROXIMATELY 10.9 MILLION SHARES OF NL
COMMON STOCK FROM VALHI PURSUANT TO THE DUTCH AUCTION, AND THE PLAINTIFF HAS
STATED THAT DAMAGES SOUGHT ARE $149 MILLION. VALHI AND THE OTHER DEFENDANTS
HAVE ANSWERED THE COMPLAINT AND HAVE DENIED ALL ALLEGATIONS OF WRONGDOING.
VALHI BELIEVES, AND UNDERSTANDS THAT EACH OF THE OTHER DEFENDANTS BELIEVE, THE
COMPLAINT IS WITHOUT MERIT AND THAT EACH INTENDS TO DEFEND THE ACTION
VIGOROUSLY. TRIAL IS SCHEDULED TO BEGIN IN NOVEMBER 1997.
SECURITY OWNERSHIP OF MANAGEMENT
AS OF MARCH 27, 1997, THE COMPANY'S NOMINEES FOR DIRECTORS, DIRECTORS, THE
EXECUTIVE OFFICERS NAMED IN THE SUMMARY COMPENSATION TABLE BELOW, AND THE DIREC-
TORS AND EXECUTIVE OFFICERS AS A GROUP, BENEFICIALLY OWNED, AS DEFINED BY THE
RULES OF THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), THE SHARES
OF COMMON STOCK AND PREFERRED STOCK SHOWN IN THE FOLLOWING TABLE.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)
COMBINED
OWNERSHIP OF
COMMON AND
NAME OF PREFERRED
BENEFICIAL OWNER PERCENT STOCK
COMMON PERCENT OF PREFERRED OF PERCENT OF
STOCK (#) CLASS (2) STOCK (#) CLASS (2) CLASS (2)
<S> <C> <C> <C> <C> <C>
THOMAS E. BARRY (5) 5,200 - 0 - -
PAUL M. BASS, JR. (3)(5) 12,500 - 0 - -
DAVID E. CONNOR (5) 6,500 - 0 - -
HAROLD M. CURDY (6) 18,831 - 0 - -
BERT E. DOWNING, JR. (6) 1,794 - 0 - -
RALPH P. END (6) 4,764 - 0 - -
WILLIAM P. LYONS (7) 36,127 - 0 - -
GLENN R. SIMMONS (4)(6) 68,600 - 0 - -
ROBERT W. SINGER (6) 43,250 - 0 - -
DONALD A. SOMMER (5) 33,964 - 0 - -
WILLIAM SPIER (7)(8)(9) 226,412 2.5 193,537 44.4 4.4
J. WALTER TUCKER, JR. 153,450 1.7 0 - 1.6
RICHARD N. ULLMAN (5) 5,500 - 0 - -
ALL DIRECTORS AND 632,628 6.8 193,537 44.4 8.5
EXECUTIVE OFFICERS AS A
GROUP (16 PERSONS)
(3)(4)(5)(6)(7)(8)(9)(10)
<FN>
<F1>
(1) ALL BENEFICIAL OWNERSHIP IS SOLE AND DIRECT EXCEPT AS OTHERWISE SET FORTH
HEREIN. INFORMATION AS TO THE BENEFICIAL OWNERSHIP OF COMMON STOCK AND
PREFERRED STOCK HAS EITHER BEEN FURNISHED TO THE COMPANY BY OR ON BEHALF OF
THE INDICATED PERSONS OR IS TAKEN FROM REPORTS ON FILE WITH THE SECURITIES
AND EXCHANGE COMMISSION.
<F2>
(2) PERCENTAGE OMITTED IF LESS THAN 1%.
<F3>
(3) INCLUDES 2,500 SHARES OF COMMON STOCK HELD IN DISCRETIONARY ACCOUNTS BY
FIRST SOUTHWEST COMPANY, A LICENSED BROKER-DEALER, ON BEHALF OF CERTAIN OF
ITS CLIENTS, AS TO WHICH MR. BASS HAS VOTING AND DISPOSITIVE AUTHORITY.
MR. BASS SERVES AS VICE CHAIRMAN OF FIRST SOUTHWEST COMPANY. AS A RESULT
OF THE FOREGOING, MR. BASS MAY BE DEEMED TO BE THE BENEFICIAL OWNER OF SUCH
SHARES. HOWEVER, MR. BASS DISCLAIMS ALL SUCH BENEFICIAL OWNERSHIP.
<F4>
(4) GLENN R. SIMMONS IS THE BROTHER OF HAROLD C. SIMMONS. SEE FOOTNOTE (1) TO
THE "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" TABLE.
<F5>
(5) INCLUDES SHARES THAT SUCH PERSON OR GROUP COULD ACQUIRE UPON THE EXERCISE
OF OPTIONS EXERCISABLE WITHIN 60 DAYS OF THE RECORD DATE BY MESSRS. BARRY,
BASS, CONNOR, SOMMER AND ULLMAN FOR THE PURCHASE OF 5,000 SHARES EACH
PURSUANT TO THE KEYSTONE CONSOLIDATED INDUSTRIES, INC. 1992 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN.
<F6>
(6) INCLUDES SHARES THAT SUCH PERSON OR GROUP COULD ACQUIRE UPON THE EXERCISE
OF OPTIONS EXERCISABLE WITHIN 60 DAYS OF THE RECORD DATE BY MESSRS. CURDY,
DOWNING, END, SIMMONS, AND SINGER FOR THE PURCHASE OF 5,000, 1,200,
1,500, 27,500 AND 10,000 SHARES, RESPECTIVELY, PURSUANT TO THE COMPANY'S
STOCK OPTION PLAN.
<F7>
(7) INCLUDES SHARES THAT SUCH PERSON OR GROUP COULD ACQUIRE UPON THE EXERCISE
OF OPTIONS EXERCISABLE WITHIN 60 DAYS OF THE RECORD DATE BY MESSRS. LYONS
AND SPIER FOR THE PURCHASE OF 3,732 AND 22,395 SHARES,
RESPECTIVELY, PURSUANT TO THE COMPANY'S STOCK OPTION PLAN. THESE OPTIONS
REPRESENT OPTIONS GRANTED UNDER THE DESOTO, INC. 1992 STOCK OPTION PLAN
WHICH WERE EXCHANGED FOR KEYSTONE OPTIONS AT THE TIME OF THE COMPANY'S
ACQUISITION OF DESOTO ON SEPTEMBER 27, 1996.
<F8>
(8) INCLUDES 184,017 SHARES OF COMMON STOCK OWNED BY COATINGS GROUP, A PRIVATE
CORPORATION CONTROLLED BY WILLIAM SPIER.
<F9>
(9) INCLUDES 193,537 SHARES OF PREFERRED STOCK OWNED BY COATINGS GROUP, A
PRIVATE CORPORATION CONTROLLED BY WILLIAM SPIER.
<F10>
IN ADDITION TO THE FOREGOING, THE SHARES OF COMMON STOCK SHOWN AS
BENEFICIALLY OWNED BY THE DIRECTORS AND EXECUTIVE OFFICERS OF KEYSTONE AS A
GROUP INCLUDE 5,760 SHARES THAT THE REMAINING EXECUTIVE OFFICERS OF
KEYSTONE HAVE THE RIGHT TO ACQUIRE UPON THE EXERCISE WITHIN 60 DAYS
SUBSEQUENT TO THE RECORD DATE OF STOCK OPTIONS GRANTED PURSUANT TO THE
COMPANY'S STOCK OPTION PLAN.
</FN>
</TABLE>
THE FOLLOWING TABLE SETS FORTH THE STOCKHOLDERS KNOWN TO THE COMPANY TO BE THE
BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMMON STOCK OR PREFERRED STOCK
OUTSTANDING AS OF THE RECORD DATE.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
COMBINED
OWNERSHIP OF
COMMON AND
PREFERRED
NAME AND ADDRESS OF COMMON PERCENT PREFERRED PERCENT STOCK
BENEFICIAL OWNER STOCK OF CLASS STOCK (#) OF PERCENT
(#) (1) CLASS CLASS (1)
(1)
<S> <C> <C> <C> <C> <C>
HAROLD C. SIMMONS (2)(3) 4,094,609 44.5% - - 42.5%
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240
DIMENSIONAL FUND ADVISORS INC. (4) 524,300 5.7% - - 5.4%
1299 OCEAN AVENUE, 11TH FLOOR
SANTA MONICA, CALIFORNIA 90401
COATINGS GROUP, INC. (5) 184,017 2.0% 193,537 44.5% 3.9%
444 MADISON AVENUE
38TH FLOOR
NEW YORK, NEW YORK 10022
VALHAL CORP. - - 145,152 33.3% 1.5%
555 FIFTH AVENUE, 17TH FLOOR
NEW YORK, NEW YORK 10033
PARKWAY M&A CAPITAL CORP. 98,174 1.1% 96,769 22.2% 2.0%
444 MADISON AVENUE
38TH FLOOR
NEW YORK, NEW YORK 10022
<FN>
<F1>
(1) PERCENTAGE OMITTED IF LESS THAN 1%.
<F2>
(2) THE SHARES OF COMMON STOCK SHOWN AS BENEFICIALLY OWNED BY HAROLD C. SIMMONS
INCLUDES 3,362,509, 326,050, 250,000, 115,550 AND 30,000 SHARES OF COMMON
STOCK HELD BY CONTRAN, NL, THE HAROLD SIMMONS FOUNDATION, INC. (THE
"FOUNDATION"), THE CONTRAN DEFERRED COMPENSATION TRUST NO. 2 (THE "DEFERRED
COMPENSATION TRUST") AND THE COMBINED MASTER RETIREMENT TRUST (THE "MASTER
TRUST"), RESPECTIVELY.
CONTRAN AND NL DIRECTLY HOLD APPROXIMATELY 36.5% AND 3.5%, RESPECTIVELY, OF
THE OUTSTANDING COMMON STOCK. VALHI AND TREMONT ARE THE HOLDERS OF
APPROXIMATELY 55.6% AND 17.7%, RESPECTIVELY, OF THE OUTSTANDING COMMON
STOCK OF NL. CONTRAN HOLDS, DIRECTLY OR INDIRECTLY THROUGH RELATED
ENTITIES, APPROXIMATELY 91.8% AND 40.3% OF THE OUTSTANDING COMMON STOCK OF
VALHI AND TREMONT, RESPECTIVELY. SUBSTANTIALLY ALL OF CONTRAN'S
OUTSTANDING VOTING STOCK IS HELD BY TRUSTS ESTABLISHED FOR THE BENEFIT OF
HAROLD C. SIMMONS' CHILDREN AND GRANDCHILDREN (TOGETHER, THE "TRUSTS"), OF
WHICH MR. SIMMONS IS THE SOLE TRUSTEE. AS SOLE TRUSTEE OF EACH OF THE
TRUSTS, MR. SIMMONS HAS THE POWER TO VOTE AND DIRECT THE DISPOSITION OF
THE SHARES OF CONTRAN STOCK HELD BY EACH OF THE TRUSTS; HOWEVER, MR.
SIMMONS DISCLAIMS BENEFICIAL OWNERSHIP THEREOF.
HAROLD C. SIMMONS IS CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER OF VALHI AND CONTRAN AND CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER OF CERTAIN RELATED ENTITIES THROUGH WHICH CONTRAN MAY BE DEEMED TO
CONTROL VALHI. ADDITIONALLY, HE IS CHAIRMAN OF THE BOARD OF NL AND IS A
DIRECTOR OF TREMONT.
THE MASTER TRUST HOLDS APPROXIMATELY 0.3% OF THE OUTSTANDING SHARES OF
COMMON STOCK. THE MASTER TRUST IS A TRUST FORMED BY VALHI TO PERMIT THE
COLLECTIVE INVESTMENT BY TRUSTS THAT MAINTAIN THE ASSETS OF CERTAIN
EMPLOYEE BENEFIT PLANS ADOPTED BY VALHI AND RELATED COMPANIES, INCLUDING
KEYSTONE. HAROLD C. SIMMONS IS SOLE TRUSTEE OF THE MASTER TRUST AND SOLE
MEMBER OF THE TRUST INVESTMENT COMMITTEE FOR THE MASTER TRUST. THE TRUSTEE
AND MEMBERS OF THE TRUST INVESTMENT COMMITTEE FOR THE MASTER TRUST ARE
SELECTED BY VALHI'S BOARD OF DIRECTORS. HAROLD C. SIMMONS AND GLENN R.
SIMMONS ARE MEMBERS OF VALHI'S BOARD OF DIRECTORS AND ARE BOTH PARTICIPANTS
IN ONE OR MORE OF THE EMPLOYEE BENEFIT PLANS THAT INVEST THROUGH THE MASTER
TRUST; HOWEVER, BOTH SUCH PERSONS DISCLAIM BENEFICIAL OWNERSHIP OF THE
SHARES OF COMMON STOCK HELD BY THE MASTER TRUST, EXCEPT TO THE EXTENT OF
THEIR RESPECTIVE VESTED BENEFICIAL INTERESTS THEREIN.
THE FOUNDATION HOLDS APPROXIMATELY 2.7% OF THE OUTSTANDING SHARES OF COMMON
STOCK. THE FOUNDATION IS A TAX-EXEMPT FOUNDATION ORGANIZED AND EXISTING
EXCLUSIVELY FOR CHARITABLE PURPOSES. HAROLD C. SIMMONS IS CHAIRMAN OF THE
BOARD AND CHIEF EXECUTIVE OFFICER OF THE FOUNDATION.
THE DEFERRED COMPENSATION TRUST HOLDS APPROXIMATELY 1.3% OF THE OUTSTANDING
SHARES OF COMMON STOCK. NATIONSBANK OF TEXAS N.A. SERVES AS TRUSTEE OF THE
DEFERRED COMPENSATION TRUST (THE "TRUSTEE"). CONTRAN ESTABLISHED THE
DEFERRED COMPENSATION TRUST AS AN IRREVOCABLE "RABBI TRUST" TO ASSIST
CONTRAN IN MEETING CERTAIN DEFERRED COMPENSATION OBLIGATIONS THAT IT OWES
TO HAROLD C. SIMMONS. IF THE DEFERRED COMPENSATION TRUST ASSETS ARE
INSUFFICIENT TO SATISFY SUCH OBLIGATIONS, CONTRAN MUST SATISFY THE BALANCE
OF SUCH OBLIGATIONS. PURSUANT TO THE TERMS OF THE DEFERRED COMPENSATION
TRUST, CONTRAN (I) RETAINS THE POWER TO VOTE THE SHARES HELD BY THE
DEFERRED COMPENSATION TRUST, (II) SHARES DISPOSITIVE POWER OVER SUCH SHARES
WITH THE TRUSTEE AND (III) MAY BE DEEMED THE INDIRECT BENEFICIAL OWNER OF
SUCH SHARES.
BY VIRTUE OF THE HOLDING OF THE OFFICES, THE STOCK OWNERSHIP AND HIS
SERVICE AS TRUSTEE AS DESCRIBED ABOVE, HAROLD C. SIMMONS MAY BE DEEMED TO
CONTROL CERTAIN OF SUCH ENTITIES AND MR. SIMMONS AND CERTAIN OF SUCH
ENTITIES MAY BE DEEMED TO POSSESS INDIRECT BENEFICIAL OWNERSHIP OF CERTAIN
SHARES OF COMMON STOCK DIRECTLY HELD BY CERTAIN OF SUCH OTHER ENTITIES.
HOWEVER, MR. SIMMONS DISCLAIMS SUCH BENEFICIAL OWNERSHIP OF THE SHARES OF
COMMON STOCK BENEFICIALLY OWNED, DIRECTLY OR INDIRECTLY, BY ANY OF SUCH
ENTITIES.
THE INFORMATION CONTAINED IN THIS FOOTNOTE IS BASED ON INFORMATION PROVIDED
TO THE COMPANY BY VALHI, CONTRAN AND CERTAIN OF THEIR AFFILIATES AS OF THE
RECORD DATE.
<F3>
(3) THE SHARES OF COMMON STOCK SHOWN AS BENEFICIALLY OWNED BY HAROLD C. SIMMONS
ALSO INCLUDES 10,500 SHARES OF COMMON STOCK HELD BY MR. SIMMONS' WIFE, WITH
RESPECT TO ALL OF WHICH MR. SIMMONS DISCLAIMS BENEFICIAL OWNERSHIP.
<F4>
(4) DIMENSIONAL FUND ADVISORS INC. ("DIMENSIONAL"), A REGISTERED INVESTMENT
ADVISOR, IS DEEMED TO HAVE BENEFICIAL OWNERSHIP OF 524,300 SHARES OF COMMON
STOCK AS OF DECEMBER 31, 1996, ALL OF WHICH SHARES ARE HELD IN PORTFOLIOS
OF DFA INVESTMENT DIMENSIONS GROUP INC., A REGISTERED OPEN-END INVESTMENT
COMPANY, OR IN SERIES OF THE DFA INVESTMENT TRUST COMPANY, A DELAWARE
BUSINESS TRUST, OR THE DFA GROUP TRUST AND THE DFA PARTICIPATING GROUP
TRUST, INVESTMENT VEHICLES FOR QUALIFIED EMPLOYEE BENEFIT PLANS, ALL OF
WHICH DIMENSIONAL FUND ADVISORS INC. SERVES AS INVESTMENT MANAGER.
DIMENSIONAL DISCLAIMS BENEFICIAL OWNERSHIP OF ALL SUCH SHARES.
<F5>
(5) COATINGS GROUP, INC. IS A PRIVATE CORPORATION CONTROLLED BY WILLIAM
SPIER.
</FN>
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, REQUIRES
KEYSTONE'S EXECUTIVE OFFICERS, DIRECTORS AND PERSONS WHO OWN MORE THAN 10% OF A
REGISTERED CLASS OF KEYSTONE'S EQUITY SECURITIES TO FILE REPORTS OF OWNERSHIP
WITH THE COMMISSION, THE NEW YORK STOCK EXCHANGE AND KEYSTONE. BASED SOLELY ON
THE REVIEW OF THE COPIES OF SUCH REPORTS FILED WITH THE COMMISSION, KEYSTONE
BELIEVES THAT FOR 1996 ITS EXECUTIVE OFFICERS, DIRECTORS AND 10% STOCKHOLDERS
COMPLIED WITH ALL APPLICABLE FILING REQUIREMENTS UNDER SECTION 16(A).
DIRECTOR'S COMPENSATION
DIRECTORS OF KEYSTONE WHO ARE NOT SALARIED EMPLOYEES OF THE COMPANY RECEIVE
AN ANNUAL RETAINER OF $12,000. SUCH DIRECTORS ALSO RECEIVE A FEE OF $450 PER
DAY FOR EACH BOARD OF DIRECTORS MEETING AND/OR COMMITTEE MEETING. DIRECTORS ARE
ALSO REIMBURSED FOR REASONABLE EXPENSES INCURRED IN ATTENDING BOARD OF DIRECTORS
AND/OR COMMITTEE MEETINGS. ON MAY 5, 1992 THE STOCKHOLDERS APPROVED THE
KEYSTONE CONSOLIDATED INDUSTRIES, INC. 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION
PLAN ("DIRECTOR PLAN"), WHICH PROVIDES THAT EACH NON-EMPLOYEE DIRECTOR WILL BE
GRANTED AN OPTION TO PURCHASE 1,000 SHARES OF COMMON STOCK ON THE THIRD BUSINESS
DAY AFTER THE COMPANY ISSUES ITS PRESS RELEASE SUMMARIZING THE COMPANY'S ANNUAL
FINANCIAL RESULTS FOR THE PRIOR FISCAL YEAR. THE EXERCISE PRICE OF THE OPTIONS
WILL BE EQUAL TO THE LAST REPORTED SALE PRICE OF COMMON STOCK ON THE NEW YORK
STOCK EXCHANGE COMPOSITE TAPE ON THE DATE OF GRANT. OPTIONS GRANTED PURSUANT TO
THE DIRECTOR PLAN BECOME EXERCISABLE ONE YEAR AFTER THE DATE OF GRANT AND EXPIRE
ON THE FIFTH ANNIVERSARY FOLLOWING THE DATE OF GRANT. MR. GLENN R. SIMMONS'
SERVICES ARE MADE AVAILABLE TO THE COMPANY PURSUANT TO THE INTERCORPORATE
SERVICES AGREEMENT. IN ADDITION TO DIRECTOR SERVICES, MR. TUCKER PROVIDES
CERTAIN CONSULTING SERVICES TO THE COMPANY FOR WHICH THE COMPANY PAYS A COMPANY
RELATED TO MR. TUCKER. SEE "CERTAIN BUSINESS RELATIONSHIPS AND RELATED
TRANSACTIONS."
EXECUTIVE COMPENSATION
THE FOLLOWING TABLE SUMMARIZES ALL COMPENSATION PAID TO THE COMPANY'S CHIEF
EXECUTIVE OFFICER AND TO EACH OF THE COMPANY'S FOUR MOST HIGHLY COMPENSATED
EXECUTIVE OFFICERS OTHER THAN THE CHIEF EXECUTIVE OFFICER (EACH A "NAMED
EXECUTIVE OFFICER") FOR SERVICES RENDERED IN ALL CAPACITIES TO THE COMPANY FOR
THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ALL OTHER
NAME AND ANNUAL COMPENSATION SECURITIES COMPENSATION
PRINCIPAL POSITION ($)(1)
YEAR SALARY ($) BONUS($) UNDERLYING
OPTIONS (#)
<S> <C> <C> <C> <C> <C>
GLENN R. SIMMONS (2) 1996 126,923 250,000 125,000 -
CHIEF EXECUTIVE 1995 123,077 - - -
OFFICER 1994 175,000 - - -
HAROLD M. CURDY 1996 140,000 175,000 25,000 7,260
VICE PRESIDENT - 1995 132,000 60,000 - 7,425
FINANCE & TREASURER 1994 132,000 125,000 - 6,690
BERT E. DOWNING, JR. 1996 80,000 37,000 15,000 4,840
CORPORATE CONTROLLER 1995 76,000 20,000 - 4,655
1994 72,000 18,000 - -
RALPH P. END 1996 95,000 47,000 15,000 6,195
VICE PRESIDENT & 1995 93,000 30,000 - 6,559
GENERAL COUNSEL 1994 93,000 35,000 - 5,762
ROBERT W. SINGER (3) 1996 170,000 200,000 - 7,260
PRESIDENT 1995 170,000 62,500 - 7,425
1994 225,000 150,000 - 6,690
<FN>
<F1>
(1) AMOUNTS CONTRIBUTED BY THE COMPANY TO THE COMPANY'S 401(K) PLAN FOR THE
BENEFIT OF SUCH EXECUTIVE OFFICER.
<F2>
(2) GLENN R. SIMMONS, CHAIRMAN OF THE BOARD OF THE COMPANY, WAS FORMERLY CHIEF
EXECUTIVE OFFICER OF THE COMPANY PRIOR TO HIS RESIGNATION FROM SUCH
POSITION EFFECTIVE AS OF FEBRUARY 10, 1997. MR. SIMMONS IS NOT A SALARIED
EMPLOYEE OF THE COMPANY. THE REPORTED SALARY REPRESENTS AN ALLOCATION OF
HIS TIME DEVOTED TO KEYSTONE BUSINESS UNDER THE INTERCORPORATE SERVICES
AGREEMENT. SEE "CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS"
ABOVE. KEYSTONE, HOWEVER, PAID MR. SIMMONS A BONUS IN 1996.
<F3>
(3) ROBERT W. SINGER WAS FORMERLY PRESIDENT AND CHIEF OPERATING OFFICER PRIOR
TO ACCEPTING THE POSITION OF PRESIDENT AND CHIEF EXECUTIVE OFFICER
EFFECTIVE AS OF FEBRUARY 10, 1997. THE AMOUNTS SHOWN IN THE TABLE AS
COMPENSATION FOR MR. SINGER REPRESENT THE FULL AMOUNT PAID BY KEYSTONE FOR
SERVICES RENDERED TO KEYSTONE DURING 1996, LESS THE PORTION OF SUCH
COMPENSATION THAT IS EITHER CREDITED OR REIMBURSED TO KEYSTONE FOR SERVICES
MR. SINGER RENDERED TO VALHI PURSUANT TO THE INTERCORPORATE SERVICES
AGREEMENT. MR. SINGER'S REPORTED COMPENSATION EXCLUDES $55,000 AS SALARY
FOR SERVICES RENDERED BY MR. SINGER TO VALHI DURING 1996 FOR WHICH KEYSTONE
RECEIVED CREDIT UNDER THE INTERCORPORATE SERVICES AGREEMENT.
</FN>
</TABLE>
THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1996, WITH RESPECT TO STOCK OPTIONS GRANTED TO THE NAMED EXECUTIVE
OFFICERS. NO STOCK APPRECIATION RIGHTS WERE GRANTED, NO OPTIONS HAVE BEEN
GRANTED AT AN OPTION PRICE BELOW FAIR MARKET VALUE ON THE DATE OF THE GRANT AND
NO STOCK OPTIONS OR STOCK APPRECIATION RIGHTS WERE EXERCISED DURING 1996.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
NUMBER % OF TOTAL ANNUAL
OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TOEXERCISE PRICE
UNDERLYING EMPLOYEES OR BASE APPRECIATION FOR
OPTIONS IN FISCAL PRICE EXPIRATION OPTION TERM($)
NAME GRANTED* YEAR ($/SHARE) DATE
5% 10%
<S> <C> <C> <C> <C> <C> <C>
GLENN R. SIMMONS 125,000 69% $8.125 10/02/06 $638,721 $1,618,645
HAROLD M. CURDY 25,000 14 8.125 10/02/06 127,744 323,729
BERT E. DOWNING, JR.15,000 8 8.125 10/02/06 76,746 194,237
RALPH P. END 15,000 8 8.125 10/02/06 76,746 194,237
ROBERT W. SINGER - - - - -
-
</TABLE>
* OPTIONS WERE GRANTED ON OCTOBER 2, 1996, AND VEST 33-1/3%, 66-2/3%, AND 100%
ON THE FIRST, SECOND, AND THIRD ANNIVERSARY OF THE DATE OF GRANT,
RESPECTIVELY.
THE FOLLOWING TABLE PROVIDES INFORMATION, WITH RESPECT TO THE NAMED
EXECUTIVE OFFICERS, CONCERNING THE VALUE OF UNEXERCISED STOCK OPTIONS HELD AS OF
DECEMBER 31, 1996. IN 1996, NO NAMED EXECUTIVE OFFICER EXERCISED ANY STOCK
OPTIONS.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT
DECEMBER 31, 1996(#) DECEMBER 31, 1996 ($)(1)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
GLENN R. SIMMONS 22,500 130,000 N/A $15,625
HAROLD M. CURDY 3,000 27,000 N/A 3,125
BERT E. DOWNING, 800 16,200 N/A 1,875
JR.
RALPH P. END 900 15,600 N/A 1,875
ROBERT W. SINGER 6,000 4,000 N/A N/A
<FN>
<F1>
(1) THE VALUES SHOWN IN THE TABLE ARE BASED ON THE $8.25 PER SHARE CLOSING
PRICE OF THE COMMON STOCK ON DECEMBER 31, 1996, AS REPORTED BY THE NEW YORK
STOCK EXCHANGE COMPOSITE TAPE, LESS THE EXERCISE PRICE OF THE OPTIONS.
</FN>
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
DURING 1996, MATTERS REGARDING COMPENSATION OF EXECUTIVES WERE ADMINISTERED
BY THE COMPENSATION COMMITTEE (THE "COMMITTEE"). THE COMMITTEE IS COMPRISED OF
DIRECTORS WHO ARE NEITHER OFFICERS NOR EMPLOYEES OF THE COMPANY OR ITS
SUBSIDIARIES AND WHO ARE NOT ELIGIBLE TO PARTICIPATE IN ANY OF THE EMPLOYEE
BENEFIT PLANS ADMINISTERED BY IT. THE COMMITTEE ADOPTS COMPENSATION POLICIES
AND IS RESPONSIBLE FOR APPROVING ALL COMPENSATION OF EXECUTIVES PAID BY THE
COMPANY.
IT IS THE COMPANY'S POLICY THAT EMPLOYEE COMPENSATION, INCLUDING
COMPENSATION TO EXECUTIVES, BE AT A LEVEL WHICH ALLOWS THE COMPANY TO ATTRACT,
RETAIN, MOTIVATE AND REWARD INDIVIDUALS OF TRAINING, EXPERIENCE, AND ABILITY WHO
CAN LEAD THE COMPANY IN ACCOMPLISHING ITS GOALS. IT IS ALSO THE COMMITTEE'S
POLICY THAT COMPENSATION PROGRAMS MAINTAIN A STRONG RISK/REWARD RATIO, WITH A
SIGNIFICANT COMPONENT OF CASH COMPENSATION BEING TIED TO THE COMPANY'S FINANCIAL
RESULTS, CREATING A PERFORMANCE-ORIENTED ENVIRONMENT THAT REWARDS EMPLOYEES FOR
ACHIEVING PRE-SET FINANCIAL PERFORMANCE LEVELS. IT IS THE COMPANY'S POLICY TO
STRUCTURE ALL COMPENSATION ARRANGEMENTS TO BE DEDUCTIBLE FOR FEDERAL INCOME TAX
PURPOSES UNDER APPLICABLE PROVISIONS OF THE INTERNAL REVENUE CODE.
DURING 1996, THE COMPANY'S COMPENSATION PROGRAM WITH RESPECT TO ITS
EXECUTIVES CONSISTED OF THREE COMPONENTS: BASE SALARY, INCENTIVE BONUS, AND
STOCK OPTION/RESTRICTED STOCK INCENTIVE AWARDS.
BASE SALARY
THE COMMITTEE REVIEWS, IN CONSULTATION WITH THE CHIEF EXECUTIVE OFFICER
("CEO"), BASE SALARIES FOR EXECUTIVES AT LEAST ANNUALLY. THE COMMITTEE
APPROVES, WITH ANY MODIFICATIONS IT DEEMS APPROPRIATE, THE CEO'S RECOMMENDATIONS
FOR BASE SALARY LEVELS. BASE SALARIES FOR ALL SALARIED EMPLOYEES, INCLUDING
EXECUTIVE OFFICERS OF THE COMPANY, HAVE BEEN ESTABLISHED ON A POSITION-BY-
POSITION BASIS. ANNUAL INTERNAL REVIEWS OF SALARY LEVELS ARE CONDUCTED BY THE
COMPANY'S MANAGEMENT IN AN ATTEMPT TO RANK BASE SALARY AND JOB VALUE OF EACH
POSITION. THE RANGES OF SALARIES FOR COMPARABLE POSITIONS CONSIDERED BY
MANAGEMENT WERE BASED UPON MANAGEMENT'S GENERAL BUSINESS KNOWLEDGE AND NO
SPECIFIC SURVEY, STUDY OR OTHER ANALYTICAL PROCESS WAS UTILIZED TO DETERMINE
SUCH RANGES. ADDITIONALLY, NO SPECIFIC COMPANIES' OR GROUPS OF COMPANIES'
COMPENSATION WERE COMPARED WITH THAT OF THE COMPANY, NOR WAS AN ATTEMPT MADE TO
IDENTIFY OR OTHERWISE QUANTIFY THE COMPENSATION PAID BY THE COMPANIES THAT
SERVED AS A BASIS FOR SUCH INDIVIDUALS' GENERAL BUSINESS KNOWLEDGE. BASE SALARY
LEVELS ARE GENERALLY NOT INCREASED EXCEPT IN INSTANCES OF (I) PROMOTIONS, (II)
INCREASES IN RESPONSIBILITY OR (III) UNWARRANTED DISCREPANCIES BETWEEN JOB VALUE
AND THE CORRESPONDING BASE SALARY. THE COMPANY CONSIDERS GENERAL BASE SALARY
INCREASES FROM TIME TO TIME WHEN COMPETITIVE FACTORS SO WARRANT. OVER A PERIOD
OF YEARS, BASE SALARIES ARE DESIGNED TO BE BELOW THE MEDIAN ANNUAL CASH
COMPENSATION FOR COMPARABLE EXECUTIVES, BUT WHEN COMBINED WITH THE OTHER
COMPONENTS OF COMPENSATION CREATE A COMPETITIVE OR ABOVE MEDIAN TOTAL
COMPENSATION PACKAGE.
INCENTIVE BONUS PROGRAM
AWARDS UNDER THE COMPANY'S INCENTIVE BONUS PROGRAM REPRESENT A SIGNIFICANT
PORTION OF AN EXECUTIVE'S POTENTIAL ANNUAL CASH COMPENSATION AND ARE AWARDED AT
THE DISCRETION OF THE COMMITTEE ON RECOMMENDATION OF THE CEO. ANNUAL
PERFORMANCE REVIEWS ARE AN IMPORTANT FACTOR IN DETERMINING MANAGEMENT'S
RECOMMENDATION WHICH IS PRIMARILY BASED ON EACH INDIVIDUAL'S PERFORMANCE AND,
TO A LESSER EXTENT, ON THE COMPANY'S OVERALL PERFORMANCE. NO SPECIFIC FINANCIAL
OR BUDGET TESTS WERE APPLIED IN THE MEASUREMENT OF INDIVIDUAL PERFORMANCE. THE
EXECUTIVE'S PERFORMANCE IS TYPICALLY MEASURED BY THE ABILITY THE EXECUTIVE
DEMONSTRATES IN PERFORMING, IN A TIMELY AND COST EFFICIENT MANNER, THE FUNCTIONS
OF THE EXECUTIVE'S POSITION. THE COMPANY'S OVERALL PERFORMANCE IS TYPICALLY
MEASURED BY THE COMPANY'S HISTORICAL FINANCIAL RESULTS. NO SPECIFIC OVERALL
PERFORMANCE MEASURES WERE USED AND THERE IS NO SPECIFIC RELATIONSHIP BETWEEN
OVERALL COMPANY PERFORMANCE AND AN EXECUTIVE'S INCENTIVE BONUS.
STOCK OPTIONS/RESTRICTED STOCK
AN INTEGRAL PART OF THE COMPANY'S TOTAL COMPENSATION PROGRAM IS NON-CASH
INCENTIVE AWARDS IN THE FORM OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS
("SARS") AND RESTRICTED STOCK GRANTED TO EXECUTIVES. STOCK OPTION GRANTS, IN
PARTICULAR, ARE CONSIDERED AN ESSENTIAL ELEMENT OF THE COMPANY'S TOTAL
COMPENSATION PACKAGE FOR THE EXECUTIVES. THE COMMITTEE BELIEVES THAT STOCK
OPTIONS, SARS AND RESTRICTIVE STOCK AWARDS PROVIDE AN EARNINGS OPPORTUNITY BASED
ON THE COMPANY'S SUCCESS MEASURED BY COMMON STOCK PERFORMANCE. ADDITIONALLY,
AWARDS ESTABLISH AN OWNERSHIP PERSPECTIVE AND ENCOURAGE THE RETENTION OF
EXECUTIVES. INCENTIVE STOCK OPTIONS ARE GRANTED AT A PRICE NOT LESS THAN 100%
OF THE FAIR MARKET VALUE OF SUCH STOCK ON THE DATE OF GRANT. THE EXERCISE
PRICE OF ALL OPTIONS AND THE LENGTH OF PERIOD DURING WHICH THE OPTIONS MAY BE
EXERCISED ARE DETERMINED BY THE COMPENSATION COMMITTEE. THE COMPENSATION
COMMITTEE ALSO CONSIDERED THE NUMBER OF STOCK OPTIONS ALREADY OUTSTANDING IN
GRANTING NEW STOCK OPTIONS.
COMPENSATION OF CEO
DURING 1996, THE SERVICES OF THE CEO WERE PROVIDED PURSUANT TO THE TERMS OF
THE INTERCORPORATE SERVICES AGREEMENT. THE BOARD OF DIRECTORS CONSIDERED AND
APPROVED THE TERMS OF THE INTERCORPORATE SERVICES AGREEMENT, PURSUANT TO WHICH
THE SERVICES OF GLENN R. SIMMONS, THE COMPANY'S CHIEF EXECUTIVE OFFICER, WERE
PROVIDED. MR. SIMMONS WAS NOT A SALARIED EMPLOYEE OF THE COMPANY AND DOES NOT
PARTICIPATE IN THE COMPANY'S INCENTIVE BONUS PROGRAM.
THE FOREGOING REPORT IS SUBMITTED BY THE MEMBERS OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS.
DR. THOMAS E. BARRY
PAUL M. BASS
DONALD A. SOMMER, CHAIRMAN
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
EXCEPT FOR MR. SOMMER, WHO RETIRED AS VICE PRESIDENT OF THE COMPANY IN
1982, NO MEMBER OF THE COMPENSATION COMMITTEE IS OR HAS BEEN AN OFFICER OR
EMPLOYEE OF THE COMPANY OR ANY OF ITS SUBSIDIARIES. IN 1996, NO EXECUTIVE
OFFICER OF THE COMPANY SERVED ON THE COMPENSATION COMMITTEE OR AS A DIRECTOR OF
ANOTHER ENTITY, ONE OF WHOSE EXECUTIVE OFFICERS SERVED ON THE COMPANY'S
COMPENSATION COMMITTEE OR BOARD OF DIRECTORS.
PURSUANT TO COMMISSION REGULATIONS, THIS REPORT IS NOT "SOLICITING
MATERIAL," IS NOT DEEMED FILED WITH THE COMMISSION AND IS NOT TO BE
INCORPORATED BY REFERENCE IN ANY FILING OF THE COMPANY UNDER THE SECURITIES ACT
OF 1933 (THE "SECURITIES ACT") OR THE SECURITIES EXCHANGE ACT OF 1934 (THE
"EXCHANGE ACT").
PERFORMANCE GRAPH
THE FOLLOWING GRAPH REFLECTS A COMPARISON OF THE CUMULATIVE TOTAL RETURN OF
THE COMMON STOCK FROM DECEMBER 31, 1991 THROUGH DECEMBER 31, 1996, WITH THE
STANDARD & POOR'S 500 COMPOSITE INDEX AND THE STANDARD & POOR'S STEEL INDEX.
THE COMPARISON FOR EACH OF THE PERIODS ASSUMES THAT THE VALUE OF THE INVESTMENT
IN THE COMMON STOCK AND EACH INDEX WAS $100 ON DECEMBER 31, 1991 AND THAT ALL
DIVIDENDS WERE REINVESTED.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL SHAREHOLDER RETURN AMONG
KEYSTONE CONSOLIDATED INDUSTRIES, INC., S&P 500, AND S&P STEEL INDEX
[PERFORMANCE GRAPH GOES HERE]
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
KEYSTONE $100 $93 $95 $127 $107 $77
S&P 500 $100 $108 $118 $120 $165 $203
S&P STEEL $100 $129 $168 $162 $149 $131
</TABLE>
PURSUANT TO COMMISSION REGULATIONS, THIS PERFORMANCE GRAPH IS NOT
"SOLICITING MATERIAL," IS NOT DEEMED FILED WITH THE COMMISSION AND IS NOT TO BE
INCORPORATED BY REFERENCE IN ANY FILING OF THE COMPANY UNDER THE SECURITIES ACT
OR THE EXCHANGE ACT.
PENSION PLAN
KEYSTONE MAINTAINS A QUALIFIED, NONCONTRIBUTORY DEFINED BENEFIT PLAN WHICH
PROVIDES DEFINED RETIREMENT BENEFITS TO VARIOUS GROUPS OF ELIGIBLE EMPLOYEES
INCLUDING EXECUTIVE OFFICERS. NORMAL RETIREMENT AGE UNDER THE COMPANY'S PENSION
PLAN IS AGE 65. THE DEFINED BENEFIT FOR SALARIED EMPLOYEES, INCLUDING OFFICERS,
IS BASED ON A STRAIGHT LIFE ANNUITY. AN INDIVIDUAL'S MONTHLY BENEFIT IS THE SUM
OF THE FOLLOWING: (A) FOR CREDITED SERVICE PRIOR TO JANUARY 1, 1981, THE AMOUNT
DETERMINED BY HIS OR HER AVERAGE MONTHLY CASH COMPENSATION FOR THE FIVE YEARS OF
HIS OR HER HIGHEST EARNINGS PRIOR TO JANUARY 1, 1981, MULTIPLIED BY 1.1%,
MULTIPLIED BY THE YEARS OF CREDITED SERVICE, PLUS (B) FOR EACH YEAR OF SERVICE
BETWEEN 1980 AND 1989, THE AMOUNT DETERMINED BY THE SUM OF 1.2% MULTIPLIED BY
HIS OR HER AVERAGE MONTHLY CASH COMPENSATION THAT YEAR UP TO THE SOCIAL SECURITY
WAGE BASE AND 1.75% MULTIPLIED BY HIS OR HER AVERAGE MONTHLY CASH COMPENSATION
THAT YEAR IN EXCESS OF THE SOCIAL SECURITY WAGE BASE, PLUS (C) FOR EACH YEAR
SUBSEQUENT TO 1989, THE AMOUNT DETERMINED BY 1.2% MULTIPLIED BY HIS OR HER
AVERAGE MONTHLY CASH COMPENSATION THAT YEAR, BUT NOT LESS THAN $14.00 PER MONTH.
THE ESTIMATED ANNUAL BENEFITS PAYABLE UPON RETIREMENT AT NORMAL RETIREMENT
AGE FOR EACH OF THE SALARIED EMPLOYEES NAMED IN THE SUMMARY COMPENSATION TABLE,
ASSUMING CONTINUED EMPLOYMENT WITH THE COMPANY UNTIL NORMAL RETIREMENT AGE AT
CURRENT SALARY LEVELS ARE: HAROLD M. CURDY, $46,908; BERT E. DOWNING, JR.,
$26,992; RALPH P. END, $28,333; AND ROBERT W. SINGER, $27,475. GLENN R. SIMMONS
DOES NOT PARTICIPATE IN THE KEYSTONE PENSION PLAN.
ADOPTION OF THE KEYSTONE CONSOLIDATED INDUSTRIES, INC.
1997 LONG-TERM INCENTIVE PLAN
(PROPOSAL 2)
THE BOARD OF DIRECTORS (THE "BOARD") SEEKS THE APPROVAL BY THE COMPANY'S
STOCKHOLDERS OF THE KEYSTONE CONSOLIDATED INDUSTRIES, INC. 1997 LONG-TERM
INCENTIVE PLAN (THE "PLAN"). THE BOARD ADOPTED THE PLAN ON MARCH 4, 1997, TO BE
EFFECTIVE MAY 9, 1997, SUBJECT TO STOCKHOLDER APPROVAL. THE TEXT OF THE PLAN IS
ATTACHED AS APPENDIX A. THE DESCRIPTION OF THE PLAN IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE PLAN IN
APPENDIX A.
DESCRIPTION OF THE PLAN
GENERAL
PURPOSE. THE PURPOSE OF THE PLAN IS TO ADVANCE THE INTERESTS OF KEYSTONE
AND ITS STOCKHOLDERS BY PROVIDING INCENTIVES TO CERTAIN ELIGIBLE PERSONS WHO
CONTRIBUTE SIGNIFICANTLY TO THE STRATEGIC AND LONG-TERM PERFORMANCE OBJECTIVES
AND GROWTH OF THE COMPANY.
TYPES OF AWARDS. THE PLAN PROVIDES FOR AWARDS OR GRANTS OF STOCK OPTIONS,
STOCK APPRECIATION RIGHTS ("SARS"), RESTRICTED STOCK, PERFORMANCE GRANTS AND
OTHER AWARDS DEEMED BY THE INCENTIVE COMPENSATION COMMITTEE TO BE CONSISTENT
WITH THE PURPOSES OF THE PLAN (COLLECTIVELY, "AWARDS").
ELIGIBLE PERSONS. KEY INDIVIDUALS EMPLOYED BY, OR PERFORMING SERVICES FOR,
KEYSTONE OR ITS SUBSIDIARIES ARE ELIGIBLE TO RECEIVE AWARDS. A PERSON WHO IS
ELIGIBLE TO RECEIVE AN AWARD MAY BE A NONEMPLOYEE DIRECTOR OR SOME OTHER PERSON
WHO IS NOT EMPLOYED BY KEYSTONE.
ADMINISTRATION. GENERALLY, A COMMITTEE OF THE BOARD CONSISTING OF TWO OR
MORE INDIVIDUALS ADMINISTERS THE PLAN (THE "COMMITTEE"). THE PLAN PROVIDES
THAT THE INCENTIVE COMPENSATION COMMITTEE IS THE INITIAL COMMITTEE TO ADMINISTER
THE PLAN. IN CERTAIN OTHER INSTANCES, THE BOARD OR OTHER PERSONS MAY ADMINISTER
THE PLAN. THE PLAN REQUIRES THAT THE MEMBERSHIP OF THE COMMITTEE CONSIST OF
"NONEMPLOYEE DIRECTORS" AS DEFINED IN RULE 16B-3 PROMULGATED BY THE COMMISSION
UNDER THE EXCHANGE ACT AND "OUTSIDE DIRECTORS" AS DEFINED UNDER REGULATIONS
PROMULGATED BY THE DEPARTMENT OF TREASURY UNDER SECTION 162(M) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). MEMBERS OF THE COMMITTEE MUST
ALSO MEET ANY APPLICABLE REQUIREMENTS OF THE NEW YORK STOCK EXCHANGE. ELIGIBLE
PERSONS ENTITLED TO RECEIVE AWARDS INCLUDE MEMBERS OF THE COMMITTEE.
THE COMMITTEE DETERMINES THE ELIGIBLE PERSONS TO WHOM IT GRANTS AWARDS AND
THE TYPE, SIZE AND TERMS OF SUCH AWARDS. THE COMMITTEE MAY ALSO AMEND THE TERMS
OF ANY AWARD IN ANY MANNER THE COMMITTEE DEEMS APPROPRIATE IF THE COMMITTEE
COULD GRANT SUCH AMENDED AWARD AT THE TIME OF THE AMENDMENT. IN ADDITION, THE
COMMITTEE CAN CONSTRUE AND INTERPRET THE PLAN AND ANY AWARD GRANTED THEREUNDER
AND MAKE ALL OTHER DETERMINATIONS DEEMED NECESSARY OR ADVISABLE FOR THE
ADMINISTRATION OF THE PLAN.
NUMBER OF SHARES SUBJECT TO THE PLAN. THE PLAN RESERVES A MAXIMUM OF
300,000 SHARES OF KEYSTONE COMMON STOCK FOR AWARDS TO BE GRANTED UNDER THE PLAN,
SUBJECT TO CERTAIN ADJUSTMENTS. KEYSTONE COMMON STOCK ISSUED UNDER THE PLAN MAY
BE EITHER NEWLY ISSUED SHARES, TREASURY SHARES, REACQUIRED SHARES OR ANY
COMBINATION OF THE THREE. IF ANY SHARES OF KEYSTONE COMMON STOCK ISSUED AS
RESTRICTED STOCK UNDER THE PLAN ARE REACQUIRED BY THE COMPANY PURSUANT TO SUCH
RIGHTS, OR IF ANY AWARD IS CANCELED, TERMINATES OR EXPIRES UNEXERCISED, KEYSTONE
COMMON STOCK THAT WOULD OTHERWISE HAVE BEEN ISSUABLE PURSUANT TO SUCH AWARD WILL
BE AVAILABLE FOR ISSUANCE UNDER NEW AWARDS.
ANNUAL LIMIT ON AWARDS TO AN INDIVIDUAL. THE UNDERLYING SHARES OF KEYSTONE
COMMON STOCK ISSUABLE IN ANY SINGLE FISCAL YEAR UNDER AWARDS TO AN INDIVIDUAL
SHALL NOT EXCEED 300,000 SHARES.
LIMITATIONS ON TRANSFERS OF AWARDS. GENERALLY, AN AWARD IS NONTRANSFERABLE
EXCEPT BY APPROVAL OF THE COMMITTEE OR BY WILL OR THE LAWS OF DESCENT AND
DISTRIBUTION. INCENTIVE STOCK OPTIONS, HOWEVER, ARE TRANSFERABLE ONLY BY WILL
OR THE LAWS OF DESCENT AND DISTRIBUTION.
DESCRIPTION OF AWARDS UNDER THE PLAN
STOCK OPTIONS. AN AWARD OF A STOCK OPTION ("STOCK OPTION") IS THE RIGHT TO
PURCHASE A SPECIFIED NUMBER OF SHARES OF KEYSTONE COMMON STOCK AT A SPECIFIED
EXERCISE PRICE, BOTH OF WHICH THE COMMITTEE DETERMINES. THE COMMITTEE CAN
CHOOSE WHETHER OR NOT THE GRANT OF A STOCK OPTION REQUIRES THE RECIPIENT TO PAY
A PURCHASE PRICE AT THE TIME OF GRANT. THE COMMITTEE ALSO DETERMINES WHEN AND
HOW A STOCK OPTION BECOMES EXERCISABLE. THE TERM OF A STOCK OPTION, HOWEVER,
CANNOT EXCEED TEN YEARS. A STOCK OPTION MAY BE EITHER A NONQUALIFIED OR AN
INCENTIVE STOCK OPTION.
THE COMMITTEE MAY GRANT NONQUALIFIED STOCK OPTIONS TO ANY ELIGIBLE PERSON
UNDER THE PLAN. THE EXERCISE PRICE FOR NONQUALIFIED STOCK OPTIONS MAY BE AT ANY
PRICE THE COMMITTEE DETERMINES THAT IS ABOVE THE PAR VALUE FOR THE UNDERLYING
SHARES OF KEYSTONE COMMON STOCK.
THE COMMITTEE MAY ONLY GRANT INCENTIVE STOCK OPTIONS TO EMPLOYEES OF
KEYSTONE OR ITS SUBSIDIARIES. THE EXERCISE PRICE OF AN INCENTIVE STOCK OPTION
MAY NOT BE LESS THAN THE FAIR MARKET VALUE OF THE UNDERLYING SHARES OF KEYSTONE
COMMON STOCK ON THE DATE OF GRANT. THE MAXIMUM AGGREGATE FAIR MARKET VALUE OF
KEYSTONE COMMON STOCK (DETERMINED AS OF THE RESPECTIVE DATES OF GRANT) WITH
RESPECT TO WHICH INCENTIVE STOCK OPTIONS ARE FIRST EXERCISABLE BY ANY ONE
EMPLOYEE OF KEYSTONE OR ITS SUBSIDIARIES IN ANY CALENDAR YEAR CANNOT EXCEED
$100,000. IF THE COMMITTEE GRANTS AN INCENTIVE STOCK OPTION TO A EMPLOYEE
HOLDING MORE THAN TEN PERCENT OF THE VOTING POWER OF ALL CLASSES OF STOCK OF ANY
OF KEYSTONE OR ITS SUBSIDIARIES, THE OPTION CANNOT HAVE AN EXERCISE PRICE LOWER
THAN 110% OF FAIR MARKET VALUE ON THE DATE OF THE GRANT OR A TERM LONGER THAN
FIVE YEARS. IN ADDITION, THE RECIPIENT OF AN INCENTIVE STOCK OPTION CANNOT
EXERCISE THE OPTION BEYOND THE TIME AN INCENTIVE STOCK OPTION MAY BE EXERCISED
IN ORDER TO QUALIFY AS SUCH UNDER THE CODE.
PAYMENT OF THE EXERCISE PRICE OF A STOCK OPTION MUST BE MADE IN SUCH FORM
AS THE COMMITTEE DETERMINES IN ITS DISCRETION. IF THE COMMITTEE ALLOWS PAYMENT
TO BE MADE WITH SHARES OF KEYSTONE COMMON STOCK, SUCH SHARES ARE VALUED AT THEIR
FAIR MARKET VALUE ON THE DAY OF EXERCISE AND SHALL HAVE BEEN HELD BY THE OPTION
HOLDER FOR A PERIOD OF AT LEAST SIX MONTHS.
THE COMMITTEE MAY GRANT STOCK OPTIONS IN CONJUNCTION WITH ANY OTHER AWARD,
EXCEPT THAT AN INCENTIVE STOCK OPTION CANNOT HAVE AN ASSOCIATED AWARD THAT IS A
NONQUALIFIED STOCK OPTION. WHEN THE COMMITTEE AWARDS A STOCK OPTION IN
CONJUNCTION WITH AN ASSOCIATED AWARD, THE NUMBER OF KEYSTONE COMMON SHARES
SUBJECT TO THE STOCK OPTION MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT
THAT THE ASSOCIATED AWARD IS EXERCISED, PAID TO OR OTHERWISE RECEIVED BY THE
RECIPIENT, AS DETERMINED BY THE COMMITTEE.
STOCK APPRECIATION RIGHTS. SARS ARE RIGHTS TO RECEIVE (WITHOUT PAYMENT TO
THE COMPANY) CASH, KEYSTONE COMMON STOCK, OTHER PROPERTY OR ANY COMBINATION OF
THE THREE BASED ON THE INCREASE IN THE VALUE OF KEYSTONE COMMON STOCK FROM THE
DATE OF GRANT TO THE DATE OF EXERCISE. AN SAR AWARDED UNDER THE PLAN THAT IS
RELATED TO ANOTHER AWARD IS EXERCISABLE, SUBJECT TO APPLICABLE LAWS, RULES AND
REGULATIONS, ONLY TO THE EXTENT THAT THE OTHER AWARD IS EXERCISABLE AND THEN
ONLY DURING SUCH PERIOD OR PERIODS AS THE COMMITTEE DETERMINES. IN ADDITION, AN
SAR THAT IS ASSOCIATED WITH A STOCK OPTION IS EXERCISABLE ONLY WHEN THE FAIR
MARKET VALUE OF A SHARE OF KEYSTONE COMMON STOCK EXCEEDS THE EXERCISE PRICE PER
SHARE OF THE ASSOCIATED STOCK OPTION. IF AN SAR'S ASSOCIATED AWARD IS AN
INCENTIVE STOCK OPTION, THE EXERCISE OF THE SAR IS LIMITED TO THOSE INSTANCES
WHERE ITS EXERCISE WOULD NOT DISQUALIFY THE ASSOCIATED STOCK OPTION'S STATUS AS
AN INCENTIVE STOCK OPTION UNDER THE CODE. WHEN THE COMMITTEE AWARDS AN SAR IN
CONJUNCTION WITH AN ASSOCIATED AWARD, THE NUMBER OF SHARES OF KEYSTONE COMMON
STOCK SUBJECT TO THE SAR MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT
THAT THE ASSOCIATED AWARD IS EXERCISED, PAID TO OR OTHERWISE RECEIVED BY THE
RECIPIENT, AS DETERMINED BY THE COMMITTEE.
UPON THE EXERCISE OF AN SAR, THE HOLDER RECEIVES, AT THE ELECTION OF THE
COMMITTEE, CASH, SHARES OF KEYSTONE COMMON STOCK, OTHER CONSIDERATION OR ANY
COMBINATION OF THE THREE EQUAL IN VALUE (OR IN THE DISCRETION OF THE COMMITTEE,
LESS THAN) TO THE EXCESS OF THE FAIR MARKET VALUE OF THE SHARES OF KEYSTONE
COMMON STOCK SUBJECT TO SUCH EXERCISE OVER THE EXERCISE PRICE FOR SUCH SHARES AS
SPECIFIED IN THE SAR.
RESTRICTED STOCK. AN AWARD OF RESTRICTED STOCK IS AN AWARD OF A NUMBER OF
SHARES OF KEYSTONE COMMON STOCK THAT ARE SUBJECT TO CERTAIN RESTRICTIONS (E.G.,
SUCH STOCK SHALL BE ISSUED BUT NOT DELIVERED TO THE RECIPIENT AND, GENERALLY,
SHALL BE FORFEITED IF THE RECIPIENT'S EMPLOYMENT OR PERFORMANCE OF SERVICES FOR
KEYSTONE TERMINATES). SUCH RESTRICTIONS EXIST FOR A CERTAIN RESTRICTED PERIOD
AND IN ACCORDANCE WITH SUCH TERMS AS THE COMMITTEE SPECIFIES. PRIOR TO THE
EXPIRATION OF THE RESTRICTED PERIOD AND THE SATISFACTION OF ANY APPLICABLE
TERMS, A RECIPIENT WHO HAS RECEIVED AN AWARD OF RESTRICTED STOCK HAS THE RIGHTS
OF OWNERSHIP OF THE SHARES OF KEYSTONE COMMON STOCK SUBJECT TO SUCH AWARD,
INCLUDING THE RIGHT TO VOTE AND TO RECEIVE DIVIDENDS.
PERFORMANCE GRANTS. AT THE TIME AN AWARD OF A PERFORMANCE GRANT IS MADE,
THE COMMITTEE ESTABLISHES PERFORMANCE OBJECTIVES DURING A SPECIFIED AWARD
PERIOD. THE FINAL VALUE, IF ANY, OF A PERFORMANCE GRANT IS DETERMINED BY THE
DEGREE TO WHICH THE PERFORMANCE OBJECTIVES HAVE BEEN ACHIEVED DURING THE AWARD
PERIOD, SUBJECT TO ADJUSTMENTS THAT THE COMMITTEE MAY APPROVE BASED ON RELEVANT
FACTORS. PERFORMANCE OBJECTIVES MAY BE BASED ON THE PERFORMANCE OF THE
RECIPIENT, KEYSTONE, ONE OR MORE OF ITS SUBSIDIARIES OR ONE OR MORE OF THEIR
DIVISIONS OR UNITS, OR ANY COMBINATION OF THEREOF, AS THE COMMITTEE DETERMINES.
THE COMMITTEE MAY, IN ITS DISCRETION, MAKE ADJUSTMENTS IN THE COMPUTATION OF ANY
PERFORMANCE MEASURE. THE MAXIMUM VALUE OF AN AWARD OF A PERFORMANCE GRANT AS
ESTABLISHED BY THE COMMITTEE MAY BE A FIXED AMOUNT, AN AMOUNT THAT VARIES FROM
TIME TO TIME BASED ON THE VALUE OF KEYSTONE COMMON STOCK, OR AN AMOUNT THAT IS
DETERMINABLE FROM OTHER CRITERIA THE COMMITTEE SPECIFIES. PERFORMANCE GRANTS
MAY HAVE DIFFERENT CLASSES OR SERIES, HAVING DIFFERENT NAMES, TERMS AND
CONDITIONS.
THE COMMITTEE MAY GRANT AWARDS OF PERFORMANCE GRANTS IN CONJUNCTION WITH
OTHER AWARDS. IF AWARDED IN CONJUNCTION WITH AN ASSOCIATED AWARD, THE NUMBER OF
PERFORMANCE GRANTS MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT THAT THE
ASSOCIATED AWARD IS EXERCISED BY, PAID TO, OR OTHERWISE RECEIVED BY, THE
RECIPIENT, AS DETERMINED BY THE COMMITTEE.
THE COMMITTEE WILL GENERALLY DETERMINE THE VALUE OF AN AWARD OF A
PERFORMANCE GRANT AS PROMPTLY AS PRACTICABLE AFTER THE END OF THE AWARD PERIOD
OR UPON THE EARLIER TERMINATION OF THE RECIPIENT'S EMPLOYMENT OR PERFORMANCE OF
SERVICES. THE COMMITTEE MAY, HOWEVER, DETERMINE THE VALUE OF THE PERFORMANCE
GRANT AND PAY IT OUT AT ANY TIME DURING THE AWARD PERIOD. IF THE PERFORMANCE
GRANT DOES NOT HAVE AN ASSOCIATED AWARD, THE HOLDER OF THE PERFORMANCE GRANT
WILL BE PAID THE FINAL VALUE. IF THE PERFORMANCE GRANT HAS VALUE AND HAS AN
ASSOCIATED AWARD, HOWEVER, THE COMMITTEE WILL DETERMINE WHETHER TO CANCEL THE
PERFORMANCE GRANT AND PERMIT THE RECIPIENT TO RETAIN THE ASSOCIATED AWARD, TO
CANCEL THE ASSOCIATED AWARD AND PAY OUT THE VALUE OF THE PERFORMANCE GRANT OR TO
PAY OUT THE VALUE OF ONLY A PORTION OF THE PERFORMANCE GRANT AND TO CANCEL THE
ASSOCIATED AWARD AS TO AN APPROPRIATE PORTION THEREOF.
PAYMENT. PAYMENT OF AN AWARD SUCH AS A PERFORMANCE GRANT MAY BE MADE IN
CASH, SHARES OF KEYSTONE COMMON STOCK OR OTHER CONSIDERATION (FOR EXAMPLE, OTHER
KEYSTONE SECURITIES OR PROPERTY) OR A COMBINATION OF THE THREE, AND IN
ACCORDANCE WITH TERMS THE COMMITTEE SETS. THE COMMITTEE MAY ALSO PERMIT ANY
PAYMENTS UNDER AN AWARD BE DEFERRED UNTIL A LATER DATE UPON SUCH TERMS AS
DETERMINED BY THE COMMITTEE.
ADDITIONAL INFORMATION
ADJUSTMENTS IN SHARES OF KEYSTONE COMMON STOCK. UNDER THE PLAN, IF ANY
CHANGE IN THE OUTSTANDING SHARES OF KEYSTONE COMMON STOCK OCCURS BY REASON OF AN
EXTRAORDINARY OR UNUSUAL EVENT (E.G. STOCK SPLIT, STOCK DIVIDEND,
RECAPITALIZATION OR MERGER), THE COMMITTEE MAY DIRECT APPROPRIATE CHANGES IN THE
TERMS OF ANY AWARD OR THE NUMBER OF SHARES OF KEYSTONE COMMON STOCK AVAILABLE
FOR AWARDS. SUCH CHANGES MAY INCLUDE THE NUMBER OR KIND OF SECURITIES THAT MAY
BE SUBJECT TO, THE EXERCISE PRICE UNDER, OR ANY MEASURE OF PERFORMANCE OR THE
NUMBER OR VALUE OF ANY AWARD.
AMENDMENTS TO AWARDS. THE COMMITTEE MAY AMEND OR MODIFY ANY OUTSTANDING
AWARD IN ANY MANNER (INCLUDING, BUT NOT LIMITED TO, ACCELERATION OF THE DATE OF
EXERCISE OF OR PAYMENTS UNDER ANY AWARD) IF THE COMMITTEE COULD GRANT THE
AMENDED OR MODIFIED AWARD UNDER THE TERMS OF THE PLAN AT THE TIME OF SUCH
AMENDMENT OR MODIFICATION. ONLY IN CERTAIN CIRCUMSTANCES, HOWEVER, MAY THE
COMMITTEE AMEND OR MODIFY AN OUTSTANDING AWARD IN A MATERIAL MANNER THAT
ADVERSELY AFFECTS THE HOLDER OF THE AFFECTED AWARD WITHOUT THE HOLDER'S WRITTEN
CONSENT
SUBSTITUTION OF AWARDS. THE COMMITTEE MAY PERMIT HOLDERS OF AWARDS TO
SURRENDER OUTSTANDING AWARDS IN ORDER TO EXERCISE OR REALIZE THE RIGHTS UNDER
OTHER AWARDS. IN ADDITION, THE COMMITTEE MAY ALLOW OR REQUIRE HOLDERS OF AWARDS
TO EXCHANGE SUCH OUTSTANDING AWARDS FOR THE GRANT OF NEW AWARDS.
SIGNIFICANT CORPORATE EVENTS. IN THE EVENT OF DISSOLUTION OR LIQUIDATION
OF KEYSTONE, ALL OUTSTANDING AWARDS TERMINATE IMMEDIATELY PRIOR TO THE
CONSUMMATION OF SUCH DISSOLUTION OR LIQUIDATION ACTION, UNLESS OTHERWISE
PROVIDED BY THE COMMITTEE. IN THE EVENT OF A PROPOSED SALE OF ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF KEYSTONE OR THE MERGER OF KEYSTONE WITH OR
INTO ANOTHER CORPORATION, ALL RESTRICTIONS ON ANY OUTSTANDING AWARDS LAPSE AND
RECIPIENTS OF AWARDS BECOME ENTITLED TO THE FULL BENEFIT OF THEIR AWARDS
IMMEDIATELY PRIOR TO THE CLOSING DATE OF SUCH SALE OR MERGER, UNLESS OTHERWISE
PROVIDED BY THE COMMITTEE.
RIGHTS TO CONTINUE AS EMPLOYEE OR SERVICE PROVIDER. NEITHER THE PLAN NOR
ANY AWARD CONFERS ON ANY INDIVIDUAL ANY RIGHT TO CONTINUE IN THE EMPLOY OF, OR
PROVIDE SERVICES TO, KEYSTONE OR ITS SUBSIDIARIES.
EFFECTIVENESS OF RIGHTS AS STOCKHOLDERS. A RECIPIENT OF AN AWARD HAS NO
RIGHTS AS A STOCKHOLDER WITH RESPECT TO THE SHARES OF KEYSTONE COMMON STOCK
ISSUABLE PURSUANT TO THE AWARD UNTIL THE DATE OF ISSUANCE OF THE STOCK
CERTIFICATE FOR SUCH SHARES.
FINANCING. IF THE COMMITTEE DEEMS IT ADVISABLE, KEYSTONE MAY ASSIST
RECIPIENTS OF AWARDS WITH FINANCING FROM KEYSTONE OR A THIRD PARTY SO AS TO
PERMIT THE PAYMENT OF TAXES WITH RESPECT TO AN AWARD OR TO ENABLE THE RECIPIENT
TO ACQUIRE, EXERCISE OR REALIZE THE RIGHTS OF AN AWARD. SUCH ASSISTANCE MAY
TAKE ANY FORM AS THE COMMITTEE CONSIDERS APPROPRIATE.
DEFERRALS. THE COMMITTEE MAY GRANT AN AWARD IN CONJUNCTION WITH THE
DEFERRAL OF A RECIPIENT'S COMPENSATION. THE COMMITTEE MAY PROVIDE THAT ANY SUCH
DEFERRED COMPENSATION BE FORFEITED TO THE COMPANY UNDER CERTAIN CIRCUMSTANCES,
SUBJECT TO AN INCREASE OR DECREASE IN VALUE BASED UPON SPECIFIED PERFORMANCE
MEASURES OR CREDITED WITH INCOME EQUIVALENTS UNTIL THE DATE OR DATES OF PAYMENT
OF THE AWARD.
ALTERNATIVE PAYMENTS FOR TAX WITHHOLDING. THE COMMITTEE MAY PERMIT A
RECIPIENT OF AN AWARD TO ELECT TO PAY TAXES REQUIRED TO BE WITHHELD WITH RESPECT
TO AN AWARD IN ANY APPROPRIATE MANNER (INCLUDING, WITHOUT LIMITATION, BY THE
SURRENDER TO THE COMPANY OF SHARES OF KEYSTONE COMMON STOCK OWNED BY SUCH
PERSON OR THAT WOULD OTHERWISE BE DISTRIBUTED, OR HAVE BEEN DISTRIBUTED, AS THE
CASE MAY BE, PURSUANT TO SUCH AWARD).
TERMINATION. THE PLAN TERMINATES ON THE EARLIER OF THE TENTH ANNIVERSARY
OF THE DATE THE PLAN IS APPROVED BY THE COMPANY'S STOCKHOLDERS OR SUCH TIME AS
THE BOARD ADOPTS A RESOLUTION TERMINATING THE PLAN. THE BOARD MAY EXTEND THE
PLAN FOR UP TO AN ADDITIONAL FIVE YEARS FOR THE GRANT OF AWARDS OTHER THAN
INCENTIVE STOCK OPTIONS.
AMENDMENTS TO THE PLAN. THE BOARD MAY AMEND THE PLAN AT ANY TIME. EXCEPT
IN CERTAIN CIRCUMSTANCES, NO AMENDMENT SHALL ADVERSELY AFFECT IN A MATERIAL
MANNER ANY RIGHT OF ANY RECIPIENT OF AN AWARD WITHOUT SUCH RECIPIENT'S WRITTEN
CONSENT.
REGISTRATION OF KEYSTONE COMMON STOCK UNDER PLAN . THE COMPANY INTENDS TO
REGISTER THE ISSUANCE OF THE SHARES OF KEYSTONE COMMON STOCK UNDER THE PLAN WITH
THE COMMISSION.
FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE PRINCIPAL CURRENT FEDERAL INCOME TAX
CONSEQUENCES OF TRANSACTIONS UNDER THE PLAN. IT DOES NOT DESCRIBE ALL FEDERAL
TAX CONSEQUENCES UNDER THE PLAN, NOR DOES IT DESCRIBE STATE, LOCAL OR FOREIGN
TAX CONSEQUENCES.
INCENTIVE STOCK OPTIONS. NO TAXABLE INCOME IS REALIZED BY THE RECIPIENT
UPON THE GRANT OR EXERCISE OF AN INCENTIVE STOCK OPTION. HOWEVER, THE EXERCISE
OF AN INCENTIVE STOCK OPTION MAY RESULT IN ALTERNATIVE MINIMUM TAX LIABILITY FOR
THE RECIPIENT. IF NO DISPOSITION OF SHARES ISSUED TO A RECIPIENT PURSUANT TO
THE EXERCISE OF AN INCENTIVE STOCK OPTION IS MADE BY THE RECIPIENT WITHIN TWO
YEARS FROM THE DATE OF GRANT OR WITHIN ONE YEAR AFTER THE TRANSFER OF SUCH
SHARES TO THE RECIPIENT, THEN UPON SALE OF SUCH SHARES, ANY AMOUNT REALIZED IN
EXCESS OF THE EXERCISE PRICE WILL BE TAXED TO THE RECIPIENT AS A LONG-TERM
CAPITAL GAIN AND ANY LOSS SUSTAINED WILL BE A LONG-TERM CAPITAL LOSS, AND NO
DEDUCTION WILL BE ALLOWED TO THE COMPANY FOR FEDERAL INCOME TAX PURPOSES.
IF THE SHARES OF KEYSTONE COMMON STOCK ACQUIRED UPON THE EXERCISE OF AN
INCENTIVE STOCK OPTION ARE DISPOSED OF PRIOR TO THE EXPIRATION OF THE TWO-YEAR
AND ONE-YEAR HOLDING PERIODS DESCRIBED ABOVE, GENERALLY THE RECIPIENT WILL
REALIZE ORDINARY INCOME IN THE YEAR OF DISPOSITION IN AN AMOUNT EQUAL TO THE
EXCESS (IF ANY) OF THE FAIR MARKET VALUE OF THE SHARES AT EXERCISE (OR, IF LESS,
THE AMOUNT REALIZED ON AN ARMS-LENGTH SALE OF SUCH SHARES) OVER THE EXERCISE
PRICE, AND THE COMPANY WILL BE ENTITLED TO DEDUCT SUCH AMOUNT. ANY FURTHER GAIN
REALIZED WILL BE TAXED AS SHORT-TERM OR LONG-TERM CAPITAL GAIN AND WILL NOT
RESULT IN ANY DEDUCTION BY THE COMPANY. SPECIAL RULES MAY APPLY WHERE ALL OR A
PORTION OF THE EXERCISE PRICE OF THE INCENTIVE STOCK OPTION IS PAID BY TENDERING
SHARES OF KEYSTONE COMMON STOCK.
IF AN INCENTIVE STOCK OPTION IS EXERCISED AT A TIME WHEN IT NO LONGER
QUALIFIES FOR THE TAX TREATMENT DESCRIBED ABOVE, THE OPTION IS TREATED AS A
NONQUALIFIED STOCK OPTION. GENERALLY, AN INCENTIVE STOCK OPTION WILL NOT BE
ELIGIBLE FOR THE TAX TREATMENT DESCRIBED ABOVE IF IT IS EXERCISED MORE THAN
THREE MONTHS FOLLOWING TERMINATION OF EMPLOYMENT (ONE YEAR FOLLOWING TERMINATION
OF EMPLOYMENT BY REASON OF PERMANENT AND TOTAL DISABILITY), EXCEPT IN CERTAIN
CASES WHERE THE INCENTIVE STOCK OPTION IS EXERCISED AFTER THE DEATH OF A
RECIPIENT.
NONQUALIFIED STOCK OPTIONS. WITH RESPECT TO NONQUALIFIED STOCK OPTIONS
GRANTED UNDER THE PLAN, NO INCOME IS REALIZED BY THE RECIPIENT AT THE TIME THE
OPTION IS GRANTED. GENERALLY, AT EXERCISE, ORDINARY INCOME IS REALIZED BY THE
RECIPIENT IN AN AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE EXERCISE PRICE AND
THE FAIR MARKET VALUE OF THE SHARES ON THE DATE OF EXERCISE, AND THE COMPANY
RECEIVES A TAX DEDUCTION FOR THE SAME AMOUNT, AND AT DISPOSITION, APPRECIATION
OR DEPRECIATION AFTER THE DATE OF EXERCISE IS TREATED AS EITHER SHORT-TERM OR
LONG-TERM CAPITAL GAIN OR LOSS, DEPENDING ON HOW LONG THE SHARES HAVE BEEN HELD.
SARS. THE GRANT OF AN SAR DOES NOT RESULT IN INCOME FOR THE GRANTEE OR IN
A DEDUCTION FOR THE COMPANY. UPON THE EXERCISE OF AN SAR, THE GRANTEE GENERALLY
RECOGNIZES ORDINARY INCOME AND THE COMPANY IS ENTITLED TO A DEDUCTION EQUAL TO
THE POSITIVE DIFFERENCE BETWEEN THE FAIR MARKET VALUES OF THE SHARES SUBJECT TO
THE SAR ON THE DATES OF GRANT AND EXERCISE.
RESTRICTED STOCK. A RECIPIENT OF RESTRICTED STOCK GENERALLY WILL BE
SUBJECT TO TAX AT ORDINARY INCOME RATES ON THE FAIR MARKET VALUE OF THE STOCK AT
THE TIME THE STOCK IS EITHER TRANSFERABLE OR IS NO LONGER SUBJECT TO FORFEITURE,
LESS ANY AMOUNT PAID FOR SUCH STOCK. THE COMPANY IS ENTITLED TO A CORRESPONDING
TAX DEDUCTION FOR THE AMOUNT OF ORDINARY INCOME RECOGNIZED BY THE RECIPIENT.
HOWEVER, A RECIPIENT WHO SO ELECTS UNDER SECTION 83(B) OF THE INTERNAL REVENUE
CODE WITHIN 30 DAYS OF THE DATE OF ISSUANCE OF THE RESTRICTED STOCK WILL REALIZE
ORDINARY INCOME ON THE DATE OF ISSUANCE EQUAL TO THE FAIR MARKET VALUE OF THE
SHARES OF RESTRICTED STOCK AT THAT TIME (MEASURED AS IF THE SHARES WERE
UNRESTRICTED AND COULD BE SOLD IMMEDIATELY), LESS ANY AMOUNT PAID FOR SUCH
STOCK. IF THE SHARES SUBJECT TO SUCH ELECTION ARE FORFEITED, THE RECIPIENT WILL
NOT BE ENTITLED TO ANY DEDUCTION, REFUND OR LOSS FOR TAX PURPOSES WITH RESPECT
TO THE ORDINARY INCOME PREVIOUSLY RECOGNIZED. UPON SALE OF THE SHARES AFTER THE
FORFEITURE PERIOD HAS EXPIRED, THE APPRECIATION OR DEPRECIATION SINCE THE SHARES
BECAME TRANSFERABLE OR FREE FROM RISK OF FORFEITURE (OR, IF A SECTION 83(B)
ELECTION WAS MADE, SINCE THE SHARES WERE ISSUED, TAKING INTO ACCOUNT THE
ORDINARY INCOME PREVIOUSLY RECOGNIZED) WILL BE TREATED AS LONG-TERM OR SHORT-
TERM CAPITAL GAIN OR LOSS. THE HOLDING PERIOD TO DETERMINE WHETHER THE
RECIPIENT HAS LONG-TERM OR SHORT-TERM CAPITAL GAIN OR LOSS BEGINS WHEN THE
RESTRICTION PERIOD EXPIRES (OR UPON EARLIER ISSUANCE OF THE SHARES, IF THE
RECIPIENT ELECTED IMMEDIATE RECOGNITION OF INCOME UNDER SECTION 83(B)).
PERFORMANCE AWARDS. THE RECIPIENT OF A PERFORMANCE AWARD WILL GENERALLY BE
SUBJECT TO TAX AT ORDINARY INCOME RATES ON ANY CASH RECEIVED AND THE FAIR
MARKET VALUE OF ANY KEYSTONE COMMON STOCK ISSUED UNDER THE AWARD, AND THE
COMPANY WILL GENERALLY BE ENTITLED TO A DEDUCTION EQUAL TO THE AMOUNT OF
ORDINARY INCOME REALIZED BY THE RECIPIENT. ANY CASH RECEIVED UNDER A
PERFORMANCE AWARD WILL BE INCLUDED IN INCOME AT THE TIME OF RECEIPT. THE FAIR
MARKET VALUE OF ANY KEYSTONE COMMON STOCK RECEIVED WILL ALSO GENERALLY BE
INCLUDED IN INCOME (AND A CORRESPONDING DEDUCTION WILL GENERALLY BE AVAILABLE TO
THE COMPANY) AT THE TIME OF RECEIPT. THE CAPITAL GAIN OR LOSS HOLDING PERIOD
FOR ANY KEYSTONE COMMON STOCK DISTRIBUTED UNDER A PERFORMANCE AWARD WILL BEGIN
WHEN THE RECIPIENT RECOGNIZES ORDINARY INCOME IN RESPECT OF THAT DISTRIBUTION.
APPROVAL
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES REPRESENTED
AND ENTITLED TO BE VOTED AT THE ANNUAL MEETING IS REQUIRED TO ADOPT THE PLAN.
BROKER/NOMINEE NON-VOTES WILL NOT BE COUNTED AS REPRESENTED AND ENTITLED TO VOTE
WITH REGARD TO ADOPTION OF THE PLAN AND, THEREFORE, WILL HAVE NO EFFECT ON ITS
ADOPTION. ABSTENTIONS WILL BE COUNTED AND WILL HAVE THE SAME EFFECT AS A VOTE
AGAINST THE ADOPTION OF THE PLAN.
PLAN BENEFITS
SINCE THE COMMITTEE GRANTS AWARDS IN ITS DISCRETION, THE BENEFITS THAT
RECIPIENTS OF AWARDS SHALL RECEIVE FROM THE PLAN ARE PRESENTLY INDETERMINABLE.
THE BOARD RECOMMENDS A VOTE "FOR" ADOPTION OF THE PLAN .
INDEPENDENT PUBLIC ACCOUNTANTS
COOPERS & LYBRAND, L.L.P., INDEPENDENT PUBLIC ACCOUNTANTS, HAVE AUDITED THE
COMPANY'S FINANCIAL STATEMENTS AND ARE CURRENTLY EXPECTED TO BE RETAINED TO
AUDIT THE FINANCIAL STATEMENTS FOR 1997. REPRESENTATIVES OF COOPERS & LYBRAND,
L.L.P. WILL BE PRESENT AT THE ANNUAL MEETING. THEY WILL HAVE AN OPPORTUNITY TO
MAKE A STATEMENT IF THEY DESIRE TO DO SO AND WILL BE AVAILABLE TO RESPOND TO
APPROPRIATE QUESTIONS.
STOCKHOLDER PROPOSALS
STOCKHOLDERS MAY SUBMIT PROPOSALS ON MATTERS APPROPRIATE FOR STOCKHOLDER
ACTION AT THE COMPANY'S ANNUAL MEETINGS, SUBJECT TO REGULATIONS ADOPTED BY THE
COMMISSION. THE COMPANY PRESENTLY INTENDS TO CALL THE NEXT ANNUAL MEETING
DURING MAY 1998. FOR SUCH PROPOSALS TO BE CONSIDERED FOR INCLUSION IN THE PROXY
STATEMENT AND FORM OF PROXY RELATING TO THE 1997 ANNUAL MEETING, THEY MUST BE
RECEIVED BY THE COMPANY NOT LATER THAN DECEMBER 29, 1997. SUCH PROPOSALS SHOULD
BE ADDRESSED TO: SECRETARY, KEYSTONE CONSOLIDATED INDUSTRIES, INC., THREE
LINCOLN CENTRE, 5430 LBJ FREEWAY, SUITE 1740, DALLAS, TEXAS 75240.
OTHER MATTERS
MANAGEMENT DOES NOT INTEND TO PRESENT, AND HAS NO INFORMATION AS OF THE
DATE OF PREPARATION OF THIS PROXY STATEMENT THAT OTHERS WILL PRESENT, ANY
BUSINESS AT THE ANNUAL MEETING OTHER THAN BUSINESS PERTAINING TO MATTERS SET
FORTH IN THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THIS PROXY STATEMENT.
HOWEVER, IF OTHER MATTERS REQUIRING THE VOTE OF THE STOCKHOLDERS PROPERLY COME
BEFORE THE MEETING, IT IS THE INTENTION OF THE PERSONS NAMED IN THE ENCLOSED
FORM OF PROXY TO VOTE THE PROXIES HELD BY THEM IN ACCORDANCE WITH THEIR BEST
JUDGMENT ON SUCH MATTERS.
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
APRIL 17, 1997
A COPY OF KEYSTONE'S 1996 FORM 10-K ANNUAL REPORT, AS FILED WITH THE
COMMISSION, IS INCLUDED IN KEYSTONE'S 1996 ANNUAL REPORT TO STOCKHOLDERS
DISTRIBUTED TO STOCKHOLDERS WITH THIS PROXY STATEMENT. ADDITIONAL COPIES ARE
AVAILABLE WITHOUT CHARGE BY WRITING TO: SECRETARY, KEYSTONE CONSOLIDATED
INDUSTRIES, INC., 5430 LBJ FREEWAY, SUITE 1740, DALLAS, TEXAS 75240.
VOTING INSTRUCTIONS
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 9, 1997
THE UNDERSIGNED, BEING PARTICIPANTS IN THE KEYSTONE CONSOLIDATED
INDUSTRIES, INC. DEFERRED INCENTIVE PLAN OR THE DESOTO STOCK OWNERSHIP PLUS
PLAN, HAVING RECEIVED THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT DATED
APRIL 17, 1997, AND ANNUAL REPORT TO STOCKHOLDERS, HEREBY INSTRUCTS THE TRUSTEE,
TO VOTE, AS SPECIFIED BELOW, ALL THE SHARES OF COMMON STOCK OF KEYSTONE
CONSOLIDATED INDUSTRIES, INC., A DELAWARE CORPORATION (THE "COMPANY"), HELD OF
RECORD BY THE TRUSTEE FOR THE ACCOUNT OF THE UNDERSIGNED AND ENTITLED TO VOTE ON
THE RECORD DATE, MARCH 27, 1997, AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON MAY 9, 1997, AND ALL ADJOURNMENTS OR POSTPONEMENTS THEREOF, AS DIRECTED
AND, IN THEIR DISCRETION, ON ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE
THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
************
(BACK SIDE)
PLEASE VOTE ALL SHARES ALLOCATED TO MY ACCOUNT IN THE KEYSTONE CONSOLIDATED
INDUSTRIES, INC. DEFERRED INCENTIVE PLAN OR THE DESOTO STOCK OWNERSHIP PLUS
PLAN, AS APPLICABLE, AS FOLLOWS:
1. ELECTION OF DIRECTORSNOMINEES: RICHARD N. ULLMAN FOR A TERM OF TWO YEARS;
DR. THOMAS E. BARRY, WILLIAM P. LYONS AND WILLIAM
SPIER EACH FOR A TERM OF THREE YEARS.
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY SINGLE
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW)
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED TO THE RIGHT TO VOTE FOR ALL NOMINEES
(EXCEPT AS MARKED TO LISTED TO THE RIGHT
THE CONTRARY)
[ ] [ ]
2. ADOPTION OF LONG-TERM
INCENTIVE PLAN
FOR AGAINST ABSTAIN
SIGNATURE
DATE: , 1997
PLEASE SIGN, DATE, AND RETURN THE CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
PROXY
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
5430 LBJ FREEWAY, SUITE 1740
DALLAS, TEXAS 75240
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 9, 1997
THE UNDERSIGNED, HAVING RECEIVED THE NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT DATED APRIL 17, 1997, AND ANNUAL REPORT TO STOCKHOLDERS, HEREBY
APPOINTS RALPH P. END AND SANDRA K. MYERS, OR EITHER OF THEM, PROXIES, WITH FULL
POWER OF SUBSTITUTION TO VOTE, AS SPECIFIED IN THIS PROXY, ALL THE SHARES OF
CAPITAL STOCK OF KEYSTONE CONSOLIDATED INDUSTRIES, INC., A DELAWARE CORPORATION
(THE "COMPANY"), HELD OF RECORD BY THE UNDERSIGNED AND ENTITLED TO VOTE ON THE
RECORD DATE, MARCH 27, 1997, AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AT
5430 LBJ FREEWAY, SUITE 1740, DALLAS, TX 75240 AT 9:00 A.M. LOCAL TIME ON MAY
9, 1997, AND ALL ADJOURNMENTS OR POSTPONEMENTS THEREOF, AS DIRECTED AND, IN
THEIR DISCRETION, ON ALL OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. THE UNDERSIGNED DIRECTS
SAID PROXIES TO VOTE AS SPECIFIED UPON THE ITEMS SHOWN ON THE REVERSE SIDE,
WHICH ARE REFERRED TO IN THE NOTICE OF ANNUAL MEETING AND SET FORTH IN THE PROXY
STATEMENT. THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE ACCOMPANYING
PROXY STATEMENT AND ANNUAL REPORT TO STOCKHOLDERS, AND HEREBY REVOKES ANY PROXY
OR PROXIES HERETOFORE GIVEN BY THE UNDERSIGNED RELATING TO THE ANNUAL MEETING.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
************
(BACK SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED "FOR" PROPOSALS 1 AND 2.
1. ELECTION OF DIRECTORSNOMINEES: RICHARD N. ULLMAN FOR A TERM OF TWO YEARS;
DR. THOMAS E. BARRY, WILLIAM P. LYONS AND WILLIAM
SPIER EACH FOR A TERM OF THREE YEARS.
(INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY SINGLE
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW)
FOR ALL NOMINEES WITHHOLD AUTHORITY
LISTED TO THE RIGHT TO VOTE FOR ALL NOMINEES
(EXCEPT AS MARKED TO LISTED TO THE RIGHT
THE CONTRARY)
[ ] [ ]
2. ADOPTION OF LONG-TERM
INCENTIVE PLAN
FOR AGAINST ABSTAIN
PLEASE MARK, DATE AND SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY CARD.
WHEN SHARES ARE HELD JOINTLY, BOTH HOLDERS SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL
TITLE. IF THE HOLDER IS A CORPORATION OR PARTNERSHIP, THE FULL CORPORATE OR
PARTNERSHIP NAME SHOULD BE SIGNED BY A DULY AUTHORIZED OFFICER.
SIGNATURE
SIGNATURE, IF SHARES HELD JOINTLY
DATE: , 1997
THIS PROXY MAY BE REVOKED AS SET FORTH IN THE KEYSTONE CONSOLIDATED INDUSTRIES,
INC. PROXY STATEMENT THAT ACCOMPANIED THIS PROXY.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF OF CLASS
BENEFICIAL OWNER-
TITLE OF CLASS
SHIP
<S> <C> <C> <C>
COMMON HAROLD C. SIMMONS 4,094,609(1)(2) 44.5%
5430 LBJ FREEWAY, SUITE 1700
DALLAS, TEXAS 75240
COMMON DIMENSIONAL FUND ADVISORS INC. 524,300 (3) 5.7%
1299 OCEAN AVENUE, 11TH FLOOR
SANTA MONICA, CALIFORNIA 90401
PREFERRED COATINGS GROUP, INC. 193,537 44.5%
444 MADISON AVENUE
38TH FLOOR
NEW YORK, NY 10022
PREFERRED VALHAL CORP. 145,152 33.3%
555 FIFTH AVENUE, 17TH FLOOR
NEW YORK, NY 10033
PREFERRED PARKWAY M&A CAPITAL CORPORATION 96,769 22.2%
444 MADISON AVENUE
38TH FLOOR
NEW YORK, NY 10022
</TABLE>
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
1997 LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE. THE PURPOSE OF THIS PLAN IS TO ADVANCE THE INTERESTS
OF KEYSTONE AND ITS STOCKHOLDERS BY PROVIDING INCENTIVES TO CERTAIN ELIGIBLE
PERSONS WHO CONTRIBUTE SIGNIFICANTLY TO THE STRATEGIC AND LONG-TERM PERFORMANCE
OBJECTIVES AND GROWTH OF THE COMPANY.
SECTION 2. DEFINITIONS. THE FOLLOWING TERMS SHALL HAVE THE MEANING
INDICATED:
(a) "ACTUAL VALUE" HAS THE MEANING SET FORTH IN SECTION 9.
(b) "ASSOCIATED AWARD" SHALL MEAN AN AWARD GRANTED CONCURRENTLY OR
SUBSEQUENTLY IN CONJUNCTION WITH ANOTHER AWARD.
(c) "AWARD" SHALL MEAN AN AWARD OF RIGHTS TO AN ELIGIBLE PERSON UNDER
THIS PLAN.
(d) "AWARD PERIOD" HAS THE MEANING SET FORTH IN SUBSECTION 9(B).
(e) "BENEFICIARY" HAS THE MEANING SET FORTH IN SECTION 16.
(f) "BOARD" SHALL MEAN THE BOARD OF DIRECTORS OF KEYSTONE.
(g) "CODE" SHALL MEAN THE INTERNAL REVENUE CODE OF 1986, AS IT NOW
EXISTS OR MAY BE AMENDED FROM TIME TO TIME, AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER, AS THEY MAY EXIST OR MAY BE AMENDED FROM TIME TO
TIME.
(h) "COMMITTEE" SHALL MEAN A COMMITTEE OF THE BOARD, IF ANY,
DESIGNATED BY THE BOARD TO ADMINISTER THIS PLAN THAT IS COMPRISED OF NOT
FEWER THAN TWO DIRECTORS AND SHALL INITIALLY MEAN THE INCENTIVE
COMPENSATION COMMITTEE OF THE BOARD. THE MEMBERSHIP OF THE COMMITTEE OR
ANY SUCCESSOR COMMITTEE (I) SHALL CONSIST OF "NONEMPLOYEE DIRECTORS" (AS
DEFINED IN RULE 16B-3) AND MEET ANY OTHER APPLICABLE REQUIREMENTS SO AS TO
COMPLY AT ALL TIMES WITH THE APPLICABLE REQUIREMENTS OF RULE 16B-3, (II)
SHALL CONSIST OF "OUTSIDE DIRECTORS" (AS DEFINED IN TREASURY REGULATION
S1.162-27(E)(3)(I) OR ANY SUCCESSOR REGULATION) AND MEET ANY OTHER
APPLICABLE REQUIREMENTS SO AS TO COMPLY AT ALL TIMES WITH THE APPLICABLE
REQUIREMENTS OF SECTION 162(M) AND (III) SHALL MEET ANY APPLICABLE
REQUIREMENTS OF ANY STOCK EXCHANGE OR OTHER MARKET QUOTATION SYSTEM ON
WHICH COMMON SHARES ARE LISTED. REFERENCES TO THE COMMITTEE HEREUNDER
SHALL INCLUDE THE BOARD OR THE DESIGNATED ADMINISTRATOR WHERE APPROPRIATE.
(i) "COMPANY" SHALL MEAN KEYSTONE AND ANY PARENT OR SUBSIDIARY OF
KEYSTONE.
(j) "COMMON SHARES" SHALL MEAN SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE, OF KEYSTONE AND STOCK OF ANY OTHER CLASS INTO WHICH SUCH
SHARES MAY THEREAFTER BE CHANGED.
(k) "DESIGNATED ADMINISTRATOR" HAS THE MEANING SET FORTH IN SECTION
3.
(l) "EFFECTIVE DATE" SHALL MEAN THE DATE THE BOARD ADOPTS THIS PLAN
(WHICH ADOPTION DATE MAY BE A DATE SUBSEQUENT TO THE DATE OF THE ACTUAL
ACTION TAKEN BY THE BOARD IF THE BOARD ACTION SETS FORTH SUCH SUBSEQUENT
ADOPTION DATE).
(m) "ELIGIBLE PERSON(S)" SHALL MEAN THOSE PERSONS WHO ARE KEY
EMPLOYEES OF THE COMPANY OR OTHER KEY INDIVIDUALS WHO PERFORM SERVICES FOR
THE COMPANY, INCLUDING, WITHOUT LIMITATION, DIRECTORS AND OFFICERS WHO ARE
NOT EMPLOYEES OF THE COMPANY.
(n) "EXCHANGE ACT" SHALL MEAN THE SECURITIES EXCHANGE ACT OF 1934, AS
IT NOW EXISTS OR MAY BE AMENDED FROM TIME TO TIME, AND THE RULES
PROMULGATED THEREUNDER, AS THEY MAY EXIST OR MAY BE AMENDED FROM TIME TO
TIME.
(o) "FAIR MARKET VALUE" SHALL MEAN SUCH VALUE AS DETERMINED BY THE
COMMITTEE IN ACCORDANCE WITH APPLICABLE LAW.
(p) "INCENTIVE STOCK OPTION" SHALL MEAN A STOCK OPTION THAT IS AN
INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE CODE. INCENTIVE
STOCK OPTIONS ARE SUBJECT, IN PART, TO THE TERMS, CONDITIONS AND
RESTRICTIONS DESCRIBED IN SECTION 6.
(q) "MAXIMUM VALUE" HAS THE MEANING SET FORTH IN SUBSECTION 9(A).
(r) "NONQUALIFIED STOCK OPTION" SHALL MEAN A STOCK OPTION THAT IS NOT
AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE CODE.
NONQUALIFIED STOCK OPTIONS ARE SUBJECT, IN PART, TO THE TERMS, CONDITIONS
AND RESTRICTIONS DESCRIBED IN SECTION 6.
(s) "OTHER KEYSTONE SECURITIES" SHALL MEAN KEYSTONE SECURITIES (WHICH
MAY INCLUDE, BUT NEED NOT BE LIMITED TO, UNBUNDLED STOCK UNITS OR
COMPONENTS THEREOF, DEBENTURES, PREFERRED STOCK, WARRANTS, SECURITIES
CONVERTIBLE INTO COMMON SHARES OR OTHER PROPERTY) OTHER THAN COMMON SHARES.
(t) "PARTICIPANT" SHALL MEAN AN ELIGIBLE PERSON TO WHOM AN AWARD HAS
BEEN GRANTED UNDER THIS PLAN.
(u) "PERFORMANCE GRANT" SHALL MEAN AN AWARD SUBJECT, IN PART, TO THE
TERMS, CONDITIONS AND RESTRICTIONS DESCRIBED IN SECTION 9, PURSUANT TO
WHICH THE RECIPIENT MAY BECOME ENTITLED TO RECEIVE CASH, COMMON SHARES,
OTHER KEYSTONE SECURITIES OR PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY
COMBINATION THEREOF, AS DETERMINED BY THE COMMITTEE.
(v) "PLAN" SHALL MEAN THIS KEYSTONE CONSOLIDATED INDUSTRIES, INC.
1997 LONG-TERM INCENTIVE PLAN.
(w) "PURCHASED OPTION" SHALL MEAN A STOCK OPTION THAT IS SOLD TO AN
ELIGIBLE PERSON AT A PRICE DETERMINED BY THE COMMITTEE. PURCHASED OPTIONS
ARE SUBJECT, IN PART, TO THE TERMS, CONDITIONS AND RESTRICTIONS DESCRIBED
IN SECTION 6.
(x) "RESTRICTED PERIOD" HAS THE MEANING SET FORTH IN SUBSECTION 8(B).
(y) "RESTRICTED STOCK" SHALL MEAN AN AWARD OF COMMON SHARES THAT ARE
ISSUED SUBJECT, IN PART, TO THE TERMS, CONDITIONS AND RESTRICTIONS
DESCRIBED IN SECTION 8.
(z) "RULE 16B-3" SHALL MEAN RULE 16B-3 PROMULGATED BY THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT AND ANY SUCCESSOR RULE.
(aa) "SECTION 162(M)" SHALL MEAN S162(M) OF THE CODE, ANY RULES OR
REGULATIONS PROMULGATED THEREUNDER, AS THEY MAY EXIST OR MAY BE AMENDED
FROM TIME TO TIME, OR ANY SUCCESSOR TO SUCH SECTION.
(bb) "STOCK APPRECIATION RIGHT" SHALL MEAN AN AWARD OF A RIGHT TO
RECEIVE (WITHOUT PAYMENT TO KEYSTONE) CASH, COMMON SHARES, OTHER KEYSTONE
SECURITIES OR PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY COMBINATION
THEREOF, AS DETERMINED BY THE COMMITTEE, BASED ON THE INCREASE IN THE VALUE
OF THE NUMBER OF COMMON SHARES SPECIFIED IN THE STOCK APPRECIATION RIGHT.
STOCK APPRECIATION RIGHTS ARE SUBJECT, IN PART, TO THE TERMS, CONDITIONS
AND RESTRICTIONS DESCRIBED IN SECTION 7.
(cc) "STOCK OPTION" SHALL MEAN AN AWARD OF A RIGHT TO PURCHASE COMMON
SHARES. THE TERM STOCK OPTION SHALL INCLUDE NONQUALIFIED STOCK OPTIONS,
INCENTIVE STOCK OPTIONS AND PURCHASED OPTIONS.
(dd) "TEN PERCENT EMPLOYEE" SHALL MEAN AN EMPLOYEE OF THE COMPANY WHO
OWNS STOCK REPRESENTING MORE THAN TEN PERCENT OF THE VOTING POWER OF ALL
CLASSES OF STOCK OF KEYSTONE OR ANY PARENT OR SUBSIDIARY OF KEYSTONE.
(ee) "TREASURY REGULATION" SHALL MEAN A FINAL, PROPOSED OR TEMPORARY
REGULATION OF THE DEPARTMENT OF TREASURY UNDER THE CODE AND ANY SUCCESSOR
REGULATION.
(ff) "KEYSTONE" SHALL MEAN KEYSTONE CONSOLIDATED INDUSTRIES, INC., A
DELAWARE CORPORATION.
SECTION 3. ADMINISTRATION. UNLESS THE BOARD SHALL DESIGNATE ITSELF OR A
DESIGNATED ADMINISTRATOR TO ADMINISTER THIS PLAN, THIS PLAN SHALL BE
ADMINISTERED BY THE COMMITTEE. IF AT ANY TIME RULE 16B-3 SO PERMITS WITHOUT
ADVERSELY AFFECTING THE ABILITY OF AWARDS TO EXECUTIVE OFFICERS OF KEYSTONE TO
COMPLY WITH THE CONDITIONS FOR RULE 16B-3 OR SECTION 162(M), THE COMMITTEE MAY
DELEGATE THE ADMINISTRATION OF THIS PLAN AND ANY OF ITS POWER AND AUTHORITY IN
WHOLE OR IN PART, ON SUCH TERMS AND CONDITIONS, AND TO SUCH PERSON OR PERSONS AS
IT MAY DETERMINE IN ITS DISCRETION (A "DESIGNATED ADMINISTRATOR").
THE COMMITTEE HAS ALL THE POWERS VESTED IN IT BY THE TERMS OF THIS PLAN,
SUCH POWERS TO INCLUDE EXCLUSIVE AUTHORITY TO SELECT THE ELIGIBLE PERSONS TO BE
GRANTED AWARDS UNDER THIS PLAN, TO DETERMINE THE TYPE, SIZE AND TERMS OF THE
AWARD TO BE MADE TO EACH ELIGIBLE PERSON SELECTED, TO MODIFY THE TERMS OF ANY
AWARD THAT HAS BEEN GRANTED, TO DETERMINE THE TIME WHEN AWARDS WILL BE GRANTED,
TO ESTABLISH PERFORMANCE OBJECTIVES, TO MAKE ANY ADJUSTMENTS NECESSARY OR
DESIRABLE AS A RESULT OF THE GRANTING OF AWARDS TO ELIGIBLE PERSONS LOCATED
OUTSIDE THE UNITED STATES AND TO PRESCRIBE THE FORM OF THE AGREEMENTS EMBODYING
AWARDS MADE UNDER THIS PLAN. THE COMMITTEE IS AUTHORIZED TO INTERPRET THIS PLAN
AND THE AWARDS GRANTED UNDER THIS PLAN, TO ESTABLISH, AMEND AND RESCIND ANY
RULES AND REGULATIONS RELATING TO THIS PLAN, AND TO MAKE ANY OTHER
DETERMINATIONS THAT IT DEEMS NECESSARY OR DESIRABLE FOR THE ADMINISTRATION OF
THIS PLAN. THE COMMITTEE MAY CORRECT ANY DEFECT OR SUPPLY ANY OMISSION OR
RECONCILE ANY INCONSISTENCY IN THIS PLAN OR IN ANY AWARD IN THE MANNER AND TO
THE EXTENT THE COMMITTEE DEEMS NECESSARY OR DESIRABLE TO CARRY IT INTO EFFECT.
ANY DECISION OF THE COMMITTEE IN THE INTERPRETATION AND ADMINISTRATION OF THIS
PLAN, AS DESCRIBED HEREIN, SHALL LIE WITHIN ITS SOLE AND ABSOLUTE DISCRETION AND
SHALL BE FINAL, CONCLUSIVE AND BINDING ON ALL PARTIES CONCERNED. THE COMMITTEE
MAY ACT ONLY BY A MAJORITY OF ITS MEMBERS IN OFFICE, EXCEPT THAT THE MEMBERS
THEREOF MAY AUTHORIZE ANY ONE OR MORE OF THEIR MEMBERS OR ANY OFFICER OF THE
COMPANY TO EXECUTE AND DELIVER DOCUMENTS OR TO TAKE ANY OTHER MINISTERIAL ACTION
ON BEHALF OF THE COMMITTEE WITH RESPECT TO AWARDS MADE OR TO BE MADE TO
PARTICIPANTS.
NO MEMBER OF THE COMMITTEE AND NO OFFICER OF THE COMPANY SHALL BE LIABLE
FOR ANYTHING DONE OR OMITTED TO BE DONE BY HIM, BY ANY OTHER MEMBER OF THE
COMMITTEE OR BY ANY OFFICER OF THE COMPANY IN CONNECTION WITH THE PERFORMANCE
OF DUTIES UNDER THIS PLAN, EXCEPT FOR HIS OWN WILLFUL MISCONDUCT OR AS EXPRESSLY
PROVIDED BY STATUTE. IN ADDITION TO ALL OTHER RIGHTS OF INDEMNIFICATION AND
REIMBURSEMENT TO WHICH A MEMBER OF THE COMMITTEE OR AN OFFICER OF THE COMPANY
MAY BE ENTITLED, THE COMPANY SHALL INDEMNIFY AND HOLD HARMLESS EACH SUCH MEMBER
OR OFFICER WHO WAS OR IS A PARTY OR IS THREATENED TO BE MADE A PARTY TO ANY
THREATENED, PENDING OR COMPLETED PROCEEDING OR SUIT IN CONNECTION WITH THE
PERFORMANCE OF DUTIES UNDER THIS PLAN AGAINST EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES), JUDGMENTS, FINES, LIABILITIES, LOSSES AND AMOUNTS PAID IN
SETTLEMENT ACTUALLY AND REASONABLY INCURRED BY HIM IN CONNECTION WITH SUCH
PROCEEDING OR SUIT, EXCEPT FOR HIS OWN WILLFUL MISCONDUCT OR AS EXPRESSLY
PROVIDED OTHERWISE BY STATUTE. EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES)
INCURRED BY SUCH MEMBER OR OFFICER IN DEFENDING ANY SUCH PROCEEDING OR SUIT
SHALL BE PAID BY THE COMPANY IN ADVANCE OF THE FINAL DISPOSITION OF SUCH
PROCEEDING OR SUIT UPON RECEIPT OF A WRITTEN AFFIRMATION BY SUCH MEMBER OR
OFFICER OF HIS GOOD FAITH BELIEF THAT HE HAS MET THE STANDARD OF CONDUCT
NECESSARY FOR INDEMNIFICATION AND A WRITTEN UNDERTAKING BY OR ON BEHALF OF SUCH
MEMBER OR OFFICER TO REPAY SUCH AMOUNT IF IT SHALL ULTIMATELY BE DETERMINED THAT
HE IS NOT ENTITLED TO BE INDEMNIFIED BY THE COMPANY AS AUTHORIZED IN THIS
SECTION.
SECTION 4. PARTICIPATION. CONSISTENT WITH THE PURPOSES OF THIS PLAN, THE
COMMITTEE SHALL HAVE EXCLUSIVE POWER TO SELECT THE ELIGIBLE PERSONS WHO MAY
PARTICIPATE IN THIS PLAN AND BE GRANTED AWARDS UNDER THIS PLAN. ELIGIBLE PERSONS
MAY BE SELECTED INDIVIDUALLY OR BY GROUPS OR CATEGORIES, AS DETERMINED BY THE
COMMITTEE IN ITS DISCRETION.
SECTION 5. AWARDS UNDER THIS PLAN.
(a) TYPES OF AWARDS. AWARDS UNDER THIS PLAN MAY INCLUDE, BUT NEED
NOT BE LIMITED TO, ONE OR MORE OF THE FOLLOWING TYPES, EITHER ALONE OR IN
ANY COMBINATION THEREOF: (I) STOCK OPTIONS, (II) STOCK APPRECIATION
RIGHTS, (III) RESTRICTED STOCK, (IV) PERFORMANCE GRANTS AND (V) ANY OTHER
TYPE OF AWARD DEEMED BY THE COMMITTEE IN ITS DISCRETION TO BE CONSISTENT
WITH THE PURPOSES OF THIS PLAN (INCLUDING, BUT NOT LIMITED TO, AWARDS OF OR
OPTIONS OR SIMILAR RIGHTS GRANTED WITH RESPECT TO UNBUNDLED STOCK UNITS OR
COMPONENTS THEREOF, AND AWARDS TO BE MADE TO PARTICIPANTS WHO ARE FOREIGN
NATIONALS OR ARE EMPLOYED OR PERFORMING SERVICES OUTSIDE THE UNITED
STATES).
(b) MAXIMUM NUMBER OF SHARES THAT MAY BE ISSUED. THERE MAY BE ISSUED
UNDER THIS PLAN (AS RESTRICTED STOCK, IN PAYMENT OF PERFORMANCE GRANTS,
PURSUANT TO THE EXERCISE OF STOCK OPTIONS OR STOCK APPRECIATION RIGHTS OR
IN PAYMENT OF OR PURSUANT TO THE EXERCISE OF SUCH OTHER AWARDS AS THE
COMMITTEE, IN ITS DISCRETION, MAY DETERMINE) AN AGGREGATE OF NOT MORE THAN
300,000 COMMON SHARES, SUBJECT TO ADJUSTMENT AS PROVIDED IN SECTION 15.
COMMON SHARES ISSUED PURSUANT TO THIS PLAN MAY BE EITHER AUTHORIZED BUT
UNISSUED SHARES, TREASURY SHARES, REACQUIRED SHARES OR ANY COMBINATION
THEREOF. IF ANY COMMON SHARES ISSUED AS RESTRICTED STOCK OR OTHERWISE
SUBJECT TO REPURCHASE OR FORFEITURE RIGHTS ARE REACQUIRED BY THE COMPANY
PURSUANT TO SUCH RIGHTS OR, IF ANY AWARD IS CANCELED, TERMINATES OR EXPIRES
UNEXERCISED, ANY COMMON SHARES THAT WOULD OTHERWISE HAVE BEEN ISSUABLE
PURSUANT THERETO WILL BE AVAILABLE FOR ISSUANCE UNDER NEW AWARDS.
(c) RIGHTS WITH RESPECT TO COMMON SHARES AND OTHER SECURITIES.
EXCEPT AS PROVIDED IN SUBSECTION 8(C) WITH RESPECT TO AWARDS OF RESTRICTED
STOCK AND UNLESS OTHERWISE DETERMINED BY THE COMMITTEE IN ITS DISCRETION, A
PARTICIPANT TO WHOM AN AWARD IS MADE (AND ANY PERSON SUCCEEDING TO SUCH A
PARTICIPANT'S RIGHTS PURSUANT TO THIS PLAN) SHALL HAVE NO RIGHTS AS A
STOCKHOLDER WITH RESPECT TO ANY COMMON SHARES OR AS A HOLDER WITH RESPECT
TO OTHER SECURITIES, IF ANY, ISSUABLE PURSUANT TO ANY SUCH AWARD UNTIL THE
DATE OF THE ISSUANCE OF A STOCK CERTIFICATE FOR SUCH COMMON SHARES OR
OTHER INSTRUMENT OF OWNERSHIP, IF ANY. EXCEPT AS PROVIDED IN SECTION 15, NO
ADJUSTMENT SHALL BE MADE FOR DIVIDENDS, DISTRIBUTIONS OR OTHER RIGHTS
(WHETHER ORDINARY OR EXTRAORDINARY, AND WHETHER IN CASH, SECURITIES, OTHER
PROPERTY OR OTHER FORMS OF CONSIDERATION, OR ANY COMBINATION THEREOF) FOR
WHICH THE RECORD DATE IS PRIOR TO THE DATE SUCH STOCK CERTIFICATE OR OTHER
INSTRUMENT OF OWNERSHIP, IF ANY, IS ISSUED. IN ALL EVENTS, A PARTICIPANT
WITH WHOM AN AWARD AGREEMENT IS MADE TO ISSUE COMMON SHARES IN THE FUTURE,
SHALL HAVE NO RIGHTS AS A STOCKHOLDER WITH RESPECT TO COMMON SHARES RELATED
TO SUCH AGREEMENT UNTIL ISSUANCE TO HIM OF A STOCK CERTIFICATE REPRESENTING
SUCH SHARES.
SECTION 6. STOCK OPTIONS. THE COMMITTEE MAY SELL PURCHASED OPTIONS OR
GRANT OTHER STOCK OPTIONS EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED
AWARDS, EITHER AT THE TIME OF GRANT OR BY AMENDMENT THEREAFTER; PROVIDED THAT AN
INCENTIVE STOCK OPTION MAY BE GRANTED ONLY TO ELIGIBLE PERSONS WHO ARE EMPLOYEES
OF THE COMPANY AND THE ASSOCIATED AWARD, IF ANY, IS PERMISSIBLE UNDER THE
TREASURY REGULATIONS. EACH STOCK OPTION GRANTED OR SOLD UNDER THIS PLAN SHALL BE
EVIDENCED BY AN AGREEMENT IN SUCH FORM AS THE COMMITTEE SHALL PRESCRIBE FROM
TIME TO TIME IN ACCORDANCE WITH THIS PLAN AND SHALL COMPLY WITH THE APPLICABLE
TERMS AND CONDITIONS OF THIS SECTION AND THIS PLAN, AND WITH SUCH OTHER TERMS
AND CONDITIONS, INCLUDING, BUT NOT LIMITED TO, RESTRICTIONS UPON THE STOCK
OPTION OR THE COMMON SHARES ISSUABLE UPON EXERCISE THEREOF, AS THE COMMITTEE, IN
ITS DISCRETION, SHALL ESTABLISH.
(a) THE EXERCISE PRICE OF A STOCK OPTION MAY BE LESS THAN, EQUAL TO,
OR GREATER THAN, THE FAIR MARKET VALUE OF THE COMMON SHARES SUBJECT TO SUCH
STOCK OPTION AT THE TIME THE STOCK OPTION IS GRANTED, AS DETERMINED BY THE
COMMITTEE; PROVIDED, HOWEVER, THAT IN THE CASE OF AN INCENTIVE STOCK OPTION
GRANTED TO AN EMPLOYEE OF THE COMPANY, THE EXERCISE PRICE SHALL NOT BE LESS
THAN THE FAIR MARKET VALUE OF THE COMMON SHARES SUBJECT TO SUCH STOCK
OPTION AT THE TIME THE STOCK OPTION IS GRANTED, OR IF GRANTED TO A TEN
PERCENT EMPLOYEE, SUCH EXERCISE PRICE SHALL NOT BE LESS THAN 110% OF SUCH
FAIR MARKET VALUE AT THE TIME THE STOCK OPTION IS GRANTED; BUT IN NO EVENT
WILL SUCH EXERCISE PRICE BE LESS THAN THE PAR VALUE OF SUCH COMMON SHARES.
(b) THE COMMITTEE SHALL DETERMINE THE NUMBER OF COMMON SHARES TO BE
SUBJECT TO EACH STOCK OPTION. IN THE CASE OF A STOCK OPTION AWARDED IN
CONJUNCTION WITH AN ASSOCIATED AWARD, THE NUMBER OF COMMON SHARES SUBJECT
TO AN OUTSTANDING STOCK OPTION MAY BE REDUCED ON AN APPROPRIATE BASIS TO
THE EXTENT THAT THE ASSOCIATED AWARD HAS BEEN EXERCISED, PAID TO OR
OTHERWISE RECEIVED BY THE PARTICIPANT, AS DETERMINED BY THE COMMITTEE.
(c) THE STOCK OPTION SHALL NOT BE EXERCISABLE:
(i) IN THE CASE OF ANY INCENTIVE STOCK OPTION GRANTED TO A TEN
PERCENT EMPLOYEE, AFTER THE EXPIRATION OF FIVE YEARS FROM THE DATE IT
IS GRANTED, AND, IN THE CASE OF ANY OTHER STOCK OPTION, AFTER THE
EXPIRATION OF TEN YEARS FROM THE DATE IT IS GRANTED. ANY STOCK OPTION
MAY BE EXERCISED DURING SUCH PERIOD ONLY AT SUCH TIME OR TIMES AND IN
SUCH INSTALLMENTS AS THE COMMITTEE MAY ESTABLISH; AND
(ii) UNLESS PAYMENT IN FULL IS MADE FOR THE SHARES BEING ACQUIRED
THEREUNDER AT THE TIME OF EXERCISE AS PROVIDED IN SUBSECTION 6(H); AND
(d) THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION AND SPECIFY IN
EACH AGREEMENT EMBODYING A STOCK OPTION THE EFFECT, IF ANY, THE TERMINATION
OF THE PARTICIPANT'S EMPLOYMENT WITH OR PERFORMANCE OF SERVICES FOR THE
COMPANY SHALL HAVE ON THE EXERCISABILITY OF THE STOCK OPTION; PROVIDED,
HOWEVER, THAT AN INCENTIVE STOCK OPTION SHALL NOT BE EXERCISABLE AT A TIME
THAT IS BEYOND THE TIME AN INCENTIVE STOCK OPTION MAY BE EXERCISED IN ORDER
TO RECEIVE FAVORABLE TREATMENT UNDER THE CODE.
(e) IN THE CASE OF AN INCENTIVE STOCK OPTION, THE AMOUNT OF THE
AGGREGATE FAIR MARKET VALUE OF COMMON SHARES (DETERMINED AT THE TIME OF
GRANT OF THE STOCK OPTION) WITH RESPECT TO WHICH INCENTIVE STOCK OPTIONS
ARE EXERCISABLE FOR THE FIRST TIME BY AN EMPLOYEE OF THE COMPANY DURING ANY
CALENDAR YEAR (UNDER ALL SUCH PLANS OF HIS EMPLOYER CORPORATION AND ITS
PARENT AND SUBSIDIARY CORPORATIONS) SHALL NOT EXCEED $100,000.
(f) IT IS THE INTENT OF KEYSTONE THAT NONQUALIFIED STOCK OPTIONS
GRANTED UNDER THIS PLAN NOT BE CLASSIFIED AS INCENTIVE STOCK OPTIONS, THAT
THE INCENTIVE STOCK OPTIONS GRANTED UNDER THIS PLAN BE CONSISTENT WITH AND
CONTAIN OR BE DEEMED TO CONTAIN ALL PROVISIONS REQUIRED UNDER SECTION 422
AND THE OTHER APPROPRIATE PROVISIONS OF THE CODE AND ANY IMPLEMENTING
REGULATIONS (AND ANY SUCCESSOR PROVISIONS THEREOF), AND THAT ANY
AMBIGUITIES IN CONSTRUCTION SHALL BE INTERPRETED IN ORDER TO EFFECTUATE
SUCH INTENT.
(g) A PURCHASED OPTION MAY CONTAIN SUCH ADDITIONAL TERMS NOT
INCONSISTENT WITH THIS PLAN, INCLUDING BUT NOT LIMITED TO THE CIRCUMSTANCES
UNDER WHICH THE PURCHASE PRICE OF SUCH PURCHASED OPTION MAY BE RETURNED TO
THE HOLDER OF THE PURCHASED OPTION, AS THE COMMITTEE MAY DETERMINE IN ITS
SOLE DISCRETION.
(h) FOR PURPOSES OF PAYMENTS MADE TO EXERCISE STOCK OPTIONS, SUCH
PAYMENT SHALL BE MADE IN SUCH FORM (INCLUDING, BUT NOT LIMITED TO, CASH,
COMMON SHARES, THE SURRENDER OF ANOTHER OUTSTANDING AWARD UNDER THIS PLAN
OR ANY COMBINATION THEREOF) AS THE COMMITTEE MAY DETERMINE IN ITS
DISCRETION; PROVIDED, HOWEVER, THAT FOR PURPOSES OF MAKING SUCH PAYMENT IN
COMMON SHARES, SUCH SHARES SHALL BE VALUED AT THEIR FAIR MARKET VALUE ON
THE DAY OF EXERCISE AND SHALL HAVE BEEN HELD BY THE PARTICIPANT FOR A
PERIOD OF AT LEAST SIX (6) MONTHS.
SECTION 7. STOCK APPRECIATION RIGHTS. THE COMMITTEE MAY GRANT STOCK
APPRECIATION RIGHTS EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED AWARDS,
EITHER AT THE TIME OF GRANT OR BY AMENDMENT THEREAFTER. EACH AWARD OF STOCK
APPRECIATION RIGHTS GRANTED UNDER THIS PLAN SHALL BE EVIDENCED BY AN AGREEMENT
IN SUCH FORM AS THE COMMITTEE SHALL PRESCRIBE FROM TIME TO TIME IN ACCORDANCE
WITH THIS PLAN AND SHALL COMPLY WITH THE APPLICABLE TERMS AND CONDITIONS OF THIS
SECTION AND THIS PLAN, AND WITH SUCH OTHER TERMS AND CONDITIONS, INCLUDING, BUT
NOT LIMITED TO, RESTRICTIONS UPON THE AWARD OF STOCK APPRECIATION RIGHTS OR THE
COMMON SHARES ISSUABLE UPON EXERCISE THEREOF, AS THE COMMITTEE, IN ITS
DISCRETION, SHALL ESTABLISH.
(a) THE COMMITTEE SHALL DETERMINE THE NUMBER OF COMMON SHARES TO BE
SUBJECT TO EACH AWARD OF STOCK APPRECIATION RIGHTS. IN THE CASE OF AN
AWARD OF STOCK APPRECIATION RIGHTS IN CONJUNCTION WITH AN ASSOCIATED AWARD,
THE NUMBER OF COMMON SHARES SUBJECT TO AN OUTSTANDING AWARD OF STOCK
APPRECIATION RIGHTS MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT
THAT THE ASSOCIATED AWARD HAS BEEN EXERCISED, PAID TO OR OTHERWISE RECEIVED
BY THE PARTICIPANT, AS DETERMINED BY THE COMMITTEE.
(b) THE AWARD OF STOCK APPRECIATION RIGHTS SHALL NOT BE EXERCISABLE:
(i) UNLESS THE ASSOCIATED AWARD, IF ANY, IS AT THE TIME
EXERCISABLE; AND
(ii) IF THE ASSOCIATED AWARD IS A STOCK OPTION AND THE FAIR
MARKET VALUE PER SHARE OF THE COMMON SHARES ON THE EXERCISE DATE DOES
NOT EXCEED THE EXERCISE PRICE PER SHARE OF SUCH STOCK OPTION; AND
(iii) IF THE ASSOCIATED AWARD IS AN INCENTIVE STOCK OPTION
AND THE REQUIREMENTS UNDER THE TREASURY REGULATIONS ARE NOT MET.
(c) THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION AND SPECIFY IN
EACH AGREEMENT EMBODYING AN AWARD OF STOCK APPRECIATION RIGHTS THE EFFECT,
IF ANY, THE TERMINATION OF THE PARTICIPANT'S EMPLOYMENT WITH OR PERFORMANCE
OF SERVICES FOR THE COMPANY SHALL HAVE ON THE EXERCISABILITY OF THE AWARD
OF STOCK APPRECIATION RIGHTS.
(d) AN AWARD OF STOCK APPRECIATION RIGHTS SHALL ENTITLE THE HOLDER TO
EXERCISE SUCH AWARD OR TO SURRENDER UNEXERCISED AN ASSOCIATED AWARD (OR ANY
PORTION OF SUCH STOCK OPTION OR ASSOCIATED AWARD) TO KEYSTONE AND TO
RECEIVE FROM KEYSTONE IN EXCHANGE THEREOF, WITHOUT PAYMENT TO KEYSTONE,
THAT NUMBER OF COMMON SHARES HAVING AN AGGREGATE VALUE EQUAL TO (OR, IN THE
DISCRETION OF THE COMMITTEE, LESS THAN) THE EXCESS OF THE FAIR MARKET VALUE
OF ONE SHARE, AT THE TIME OF SUCH EXERCISE, OVER THE EXERCISE PRICE, TIMES
THE NUMBER OF SHARES SUBJECT TO THE AWARD OR THE ASSOCIATED AWARD, OR
PORTION THEREOF, THAT IS SO EXERCISED OR SURRENDERED, AS THE CASE MAY BE.
THE COMMITTEE SHALL BE ENTITLED IN ITS DISCRETION TO ELECT TO SETTLE THE
OBLIGATION ARISING OUT OF THE EXERCISE OF A STOCK APPRECIATION RIGHT BY THE
PAYMENT OF CASH OR OTHER KEYSTONE SECURITIES OR PROPERTY, OR OTHER FORMS OF
PAYMENT OR ANY COMBINATION THEREOF, AS DETERMINED BY THE COMMITTEE, EQUAL
TO THE AGGREGATE VALUE OF THE COMMON SHARES IT WOULD OTHERWISE BE OBLIGATED
TO DELIVER. ANY SUCH ELECTION BY THE COMMITTEE SHALL BE MADE AS SOON AS
PRACTICABLE AFTER THE RECEIPT BY THE COMMITTEE OF WRITTEN NOTICE OF THE
EXERCISE OF THE STOCK APPRECIATION RIGHT.
(e) A STOCK APPRECIATION RIGHT MAY PROVIDE THAT IT SHALL BE DEEMED TO
HAVE BEEN EXERCISED AT THE CLOSE OF BUSINESS ON THE BUSINESS DAY PRECEDING
THE EXPIRATION DATE OF THE STOCK APPRECIATION RIGHT OR OF THE RELATED STOCK
OPTION (OR OTHER AWARD), OR SUCH OTHER DATE AS SPECIFIED BY THE COMMITTEE,
IF AT SUCH TIME SUCH STOCK APPRECIATION RIGHT HAS A POSITIVE VALUE. SUCH
DEEMED EXERCISE SHALL BE SETTLED OR PAID IN THE SAME MANNER AS A REGULAR
EXERCISE THEREOF AS PROVIDED IN SUBSECTION 7(D) HEREOF.
SECTION 8. RESTRICTED STOCK. THE COMMITTEE MAY GRANT AWARDS OF RESTRICTED
STOCK EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED AWARDS, EITHER AT THE TIME
OF GRANT OR BY AMENDMENT THEREAFTER. EACH AWARD OF RESTRICTED STOCK UNDER THIS
PLAN SHALL BE EVIDENCED BY AN AGREEMENT IN SUCH FORM AS THE COMMITTEE SHALL
PRESCRIBE FROM TIME TO TIME IN ACCORDANCE WITH THIS PLAN AND SHALL COMPLY WITH
THE APPLICABLE TERMS AND CONDITIONS OF THIS SECTION AND THIS PLAN, AND WITH SUCH
OTHER TERMS AND CONDITIONS AS THE COMMITTEE, IN ITS DISCRETION, SHALL ESTABLISH.
(a) THE COMMITTEE SHALL DETERMINE THE NUMBER OF COMMON SHARES TO BE
ISSUED TO A PARTICIPANT PURSUANT TO THE AWARD OF RESTRICTED STOCK, AND THE
EXTENT, IF ANY, TO WHICH THEY SHALL BE ISSUED IN EXCHANGE FOR CASH, OTHER
CONSIDERATION, OR BOTH.
(b) UNTIL THE EXPIRATION OF SUCH PERIOD AS THE COMMITTEE SHALL
DETERMINE FROM THE DATE ON WHICH THE AWARD IS GRANTED AND SUBJECT TO SUCH
OTHER TERMS AND CONDITIONS AS THE COMMITTEE IN ITS DISCRETION SHALL
ESTABLISH (THE "RESTRICTED PERIOD"), A PARTICIPANT TO WHOM AN AWARD OF
RESTRICTED STOCK IS MADE SHALL BE ISSUED, BUT SHALL NOT BE ENTITLED TO THE
DELIVERY OF, A STOCK CERTIFICATE REPRESENTING THE COMMON SHARES SUBJECT TO
SUCH AWARD.
(c) UNLESS OTHERWISE DETERMINED BY THE COMMITTEE IN ITS DISCRETION, A
PARTICIPANT TO WHOM AN AWARD OF RESTRICTED STOCK HAS BEEN MADE (AND ANY
PERSON SUCCEEDING TO SUCH A PARTICIPANT'S RIGHTS PURSUANT TO THIS PLAN)
SHALL HAVE, AFTER ISSUANCE OF A CERTIFICATE FOR THE NUMBER OF COMMON SHARES
AWARDED AND PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD, OWNERSHIP OF
SUCH COMMON SHARES, INCLUDING THE RIGHT TO VOTE SUCH COMMON SHARES AND TO
RECEIVE DIVIDENDS OR OTHER DISTRIBUTIONS MADE OR PAID WITH RESPECT TO SUCH
COMMON SHARES (PROVIDED THAT SUCH COMMON SHARES, AND ANY NEW, ADDITIONAL OR
DIFFERENT SHARES, OR OTHER KEYSTONE SECURITIES OR PROPERTY, OR OTHER FORMS
OF CONSIDERATION THAT THE PARTICIPANT MAY BE ENTITLED TO RECEIVE WITH
RESPECT TO SUCH COMMON SHARES AS A RESULT OF A STOCK SPLIT, STOCK DIVIDEND
OR ANY OTHER CHANGE IN THE CORPORATION OR CAPITAL STRUCTURE OF KEYSTONE,
SHALL BE SUBJECT TO THE RESTRICTIONS HEREINAFTER DESCRIBED AS DETERMINED BY
THE COMMITTEE IN ITS DISCRETION), SUBJECT, HOWEVER, TO THE OPTIONS,
RESTRICTIONS AND LIMITATIONS IMPOSED THEREON PURSUANT TO THIS PLAN.
(d) THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION AND SPECIFY IN
EACH AGREEMENT EMBODYING AN AWARD OF RESTRICTED STOCK THE EFFECT, IF ANY,
THE TERMINATION OF THE PARTICIPANT'S EMPLOYMENT WITH OR PERFORMANCE OF
SERVICES FOR THE COMPANY DURING THE RESTRICTED PERIOD SHALL HAVE ON SUCH
AWARD OF RESTRICTED STOCK.
SECTION 9. PERFORMANCE GRANTS. THE COMMITTEE MAY GRANT AWARDS OF
PERFORMANCE GRANTS EITHER ALONE, OR IN CONJUNCTION WITH ASSOCIATED AWARDS,
EITHER AT THE TIME OF GRANT OR BY AMENDMENT THEREAFTER. THE AWARD OF A
PERFORMANCE GRANT TO A PARTICIPANT WILL ENTITLE HIM TO RECEIVE A SPECIFIED
AMOUNT DETERMINED BY THE COMMITTEE (THE "ACTUAL VALUE"), IF THE TERMS AND
CONDITIONS SPECIFIED IN THIS PLAN AND IN THE AWARD ARE SATISFIED. EACH AWARD OF
A PERFORMANCE GRANT SHALL BE SUBJECT TO THE APPLICABLE TERMS AND CONDITIONS OF
THIS SECTION AND THIS PLAN, AND TO SUCH OTHER TERMS AND CONDITIONS, INCLUDING
BUT NOT LIMITED TO, RESTRICTIONS UPON ANY CASH, COMMON SHARES, OTHER KEYSTONE
SECURITIES OR PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY COMBINATION THEREOF,
ISSUED WITH RESPECT TO THE PERFORMANCE GRANT, AS THE COMMITTEE, IN ITS
DISCRETION, SHALL ESTABLISH, AND SHALL BE EMBODIED IN AN AGREEMENT IN SUCH FORM
AND SUBSTANCE AS IS DETERMINED BY THE COMMITTEE.
(a) THE COMMITTEE SHALL DETERMINE THE VALUE OR RANGE OF VALUES OF A
PERFORMANCE GRANT TO BE AWARDED TO EACH PARTICIPANT SELECTED FOR AN AWARD
AND WHETHER OR NOT SUCH A PERFORMANCE GRANT IS GRANTED IN CONJUNCTION WITH
AN ASSOCIATED AWARD. AS DETERMINED BY THE COMMITTEE, THE MAXIMUM VALUE OF
EACH PERFORMANCE GRANT (THE "MAXIMUM VALUE") SHALL BE: (I) AN AMOUNT FIXED
BY THE COMMITTEE AT THE TIME THE AWARD IS MADE OR AMENDED THEREAFTER,
(II) AN AMOUNT THAT VARIES FROM TIME TO TIME BASED IN WHOLE OR IN PART ON
THE THEN CURRENT VALUE OF THE COMMON SHARES, OTHER KEYSTONE SECURITIES OR
PROPERTY, OR OTHER SECURITIES OR PROPERTY, OR ANY COMBINATION THEREOF OR
(III) AN AMOUNT THAT IS DETERMINABLE FROM CRITERIA SPECIFIED BY THE
COMMITTEE. PERFORMANCE GRANTS MAY BE ISSUED IN DIFFERENT CLASSES OR SERIES
HAVING DIFFERENT NAMES, TERMS AND CONDITIONS. IN THE CASE OF A PERFORMANCE
GRANT AWARDED IN CONJUNCTION WITH AN ASSOCIATED AWARD, THE PERFORMANCE
GRANT MAY BE REDUCED ON AN APPROPRIATE BASIS TO THE EXTENT THAT THE
ASSOCIATED AWARD HAS BEEN EXERCISED, PAID TO OR OTHERWISE RECEIVED BY THE
PARTICIPANT, AS DETERMINED BY THE COMMITTEE.
(b) THE AWARD PERIOD ("AWARD PERIOD") RELATED TO ANY PERFORMANCE
GRANT SHALL BE A PERIOD DETERMINED BY THE COMMITTEE. AT THE TIME EACH
AWARD IS MADE, THE COMMITTEE SHALL ESTABLISH PERFORMANCE OBJECTIVES TO BE
ATTAINED WITHIN THE AWARD PERIOD AS THE MEANS OF DETERMINING THE ACTUAL
VALUE OF SUCH A PERFORMANCE GRANT. THE PERFORMANCE OBJECTIVES SHALL BE
BASED ON SUCH MEASURE OR MEASURES OF PERFORMANCE, WHICH MAY INCLUDE, BUT
NEED NOT BE LIMITED TO, THE PERFORMANCE OF THE PARTICIPANT, THE COMPANY OR
ONE OR MORE OF ITS DIVISIONS OR UNITS, OR ANY COMBINATION OF THE FOREGOING,
AS THE COMMITTEE SHALL DETERMINE, AND MAY BE APPLIED ON AN ABSOLUTE BASIS
OR BE RELATIVE TO INDUSTRY OR OTHER INDICES OR ANY COMBINATION THEREOF.
THE ACTUAL VALUE OF A PERFORMANCE GRANT SHALL BE EQUAL TO ITS MAXIMUM VALUE
ONLY IF THE PERFORMANCE OBJECTIVES ARE ATTAINED IN FULL, BUT THE COMMITTEE
SHALL SPECIFY THE MANNER IN WHICH THE ACTUAL VALUE OF PERFORMANCE GRANTS
SHALL BE DETERMINED IF THE PERFORMANCE OBJECTIVES ARE MET IN PART. SUCH
PERFORMANCE MEASURES, THE ACTUAL VALUE OR THE MAXIMUM VALUE, OR ANY
COMBINATION THEREOF, MAY BE ADJUSTED IN ANY MANNER BY THE COMMITTEE IN ITS
DISCRETION AT ANY TIME AND FROM TIME TO TIME DURING OR AS SOON AS
PRACTICABLE AFTER THE AWARD PERIOD, IF IT DETERMINES THAT SUCH PERFORMANCE
MEASURES, THE ACTUAL VALUE OR THE MAXIMUM VALUE, OR ANY COMBINATION
THEREOF, ARE NOT APPROPRIATE UNDER THE CIRCUMSTANCES.
(c) THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION AND SPECIFY IN
EACH AGREEMENT EMBODYING A PERFORMANCE GRANT THE EFFECT, IF ANY, THE
TERMINATION OF THE PARTICIPANT'S EMPLOYMENT WITH OR PERFORMANCE OF SERVICES
FOR THE COMPANY DURING THE AWARD PERIOD SHALL HAVE ON SUCH PERFORMANCE
GRANT.
(d) THE COMMITTEE SHALL DETERMINE WHETHER THE CONDITIONS OF A
PERFORMANCE GRANT HAVE BEEN MET AND, IF SO, SHALL ASCERTAIN THE ACTUAL
VALUE OF THE PERFORMANCE GRANT. IF THE PERFORMANCE GRANT HAS NO ACTUAL
VALUE, THE AWARD AND SUCH PERFORMANCE GRANT SHALL BE DEEMED TO HAVE BEEN
CANCELED AND THE ASSOCIATED AWARD, IF ANY, MAY BE CANCELED OR PERMITTED TO
CONTINUE IN EFFECT IN ACCORDANCE WITH ITS TERMS. IF THE PERFORMANCE GRANT
HAS ANY ACTUAL VALUE AND:
(i) WAS NOT AWARDED IN CONJUNCTION WITH AN ASSOCIATED AWARD, THE
COMMITTEE SHALL CAUSE AN AMOUNT EQUAL TO THE ACTUAL VALUE OF THE
PERFORMANCE GRANT EARNED BY THE PARTICIPANT TO BE PAID TO HIM OR HIS
BENEFICIARY; OR
(ii) WAS AWARDED IN CONJUNCTION WITH AN ASSOCIATED AWARD, THE
COMMITTEE SHALL DETERMINE, IN ACCORDANCE WITH CRITERIA SPECIFIED BY
THE COMMITTEE (A) TO CANCEL THE PERFORMANCE GRANT, IN WHICH EVENT NO
AMOUNT WITH RESPECT THERETO SHALL BE PAID TO THE PARTICIPANT OR HIS
BENEFICIARY, AND THE ASSOCIATED AWARD MAY BE PERMITTED TO CONTINUE IN
EFFECT IN ACCORDANCE WITH ITS TERMS, (B) TO PAY THE ACTUAL VALUE OF
THE PERFORMANCE GRANT TO THE PARTICIPANT OR HIS BENEFICIARY AS
PROVIDED BELOW, IN WHICH EVENT THE ASSOCIATED AWARD MAY BE CANCELED OR
(C) TO PAY TO THE PARTICIPANT OR HIS BENEFICIARY, THE ACTUAL VALUE OF
ONLY A PORTION OF THE PERFORMANCE GRANTS, IN WHICH EVENT ALL OR A
PORTION OF THE ASSOCIATED AWARD MAY BE PERMITTED TO CONTINUE IN EFFECT
IN ACCORDANCE WITH ITS TERMS OR BE CANCELED, AS DETERMINED BY THE
COMMITTEE.
SUCH DETERMINATION BY THE COMMITTEE SHALL BE MADE AS PROMPTLY AS
PRACTICABLE FOLLOWING THE END OF THE AWARD PERIOD OR UPON THE EARLIER
TERMINATION OF EMPLOYMENT OR PERFORMANCE OF SERVICES, OR AT SUCH OTHER TIME
OR TIMES AS THE COMMITTEE SHALL DETERMINE, AND SHALL BE MADE PURSUANT TO
CRITERIA SPECIFIED BY THE COMMITTEE.
(e) PAYMENT OF ANY AMOUNT WITH RESPECT TO THE PERFORMANCE GRANTS THAT
THE COMMITTEE DETERMINES TO PAY AS PROVIDED ABOVE SHALL BE MADE BY KEYSTONE
AS PROMPTLY AS PRACTICABLE AFTER THE END OF THE AWARD PERIOD OR AT SUCH
OTHER TIME OR TIMES AS THE COMMITTEE SHALL DETERMINE, AND MAY BE MADE IN
CASH, COMMON SHARES, OTHER KEYSTONE SECURITIES OR PROPERTY, OR OTHER FORMS
OF PAYMENT, OR ANY COMBINATION THEREOF OR IN SUCH OTHER MANNER, AS
DETERMINED BY THE COMMITTEE IN ITS DISCRETION. NOTWITHSTANDING ANYTHING IN
THIS SECTION TO THE CONTRARY, THE COMMITTEE MAY, IN ITS DISCRETION,
DETERMINE AND PAY OUT THE ACTUAL VALUE OF THE PERFORMANCE GRANTS AT ANY
TIME DURING THE AWARD PERIOD.
SECTION 10. DEFERRAL OF COMPENSATION. THE COMMITTEE SHALL DETERMINE
WHETHER OR NOT AN AWARD SHALL BE MADE IN CONJUNCTION WITH THE DEFERRAL OF THE
PARTICIPANT'S SALARY, BONUS OR OTHER COMPENSATION, OR ANY COMBINATION THEREOF,
AND WHETHER OR NOT SUCH DEFERRED AMOUNTS MAY BE:
(a) FORFEITED TO THE COMPANY OR TO OTHER PARTICIPANTS OR ANY
COMBINATION THEREOF, UNDER CERTAIN CIRCUMSTANCES (WHICH MAY INCLUDE, BUT
NEED NOT BE LIMITED TO, CERTAIN TYPES OF TERMINATION OF EMPLOYMENT OR
PERFORMANCE OF SERVICES FOR THE COMPANY);
(b) SUBJECT TO INCREASE OR DECREASE IN VALUE BASED UPON THE
ATTAINMENT OF OR FAILURE TO ATTAIN, RESPECTIVELY, CERTAIN PERFORMANCE
MEASURES; AND/OR
(c) CREDITED WITH INCOME EQUIVALENTS (WHICH MAY INCLUDE, BUT NEED NOT
BE LIMITED TO, INTEREST, DIVIDENDS OR OTHER RATES OF RETURN) UNTIL THE DATE
OR DATES OF PAYMENT OF THE AWARD, IF ANY.
SECTION 11. DEFERRED PAYMENT OF AWARDS. THE COMMITTEE MAY SPECIFY THAT
THE PAYMENT OF ALL OR ANY PORTION OF CASH, COMMON SHARES, OTHER KEYSTONE
SECURITIES OR PROPERTY, OR ANY OTHER FORM OF PAYMENT, OR ANY COMBINATION
THEREOF, UNDER AN AWARD SHALL BE DEFERRED UNTIL A LATER DATE. DEFERRALS SHALL
BE FOR SUCH PERIODS OR UNTIL THE OCCURRENCE OF SUCH EVENTS, AND UPON SUCH TERMS,
AS THE COMMITTEE SHALL DETERMINE IN ITS DISCRETION. DEFERRED PAYMENTS OF AWARDS
MAY BE MADE BY UNDERTAKING TO MAKE PAYMENT IN THE FUTURE BASED UPON THE
PERFORMANCE OF CERTAIN INVESTMENT EQUIVALENTS (WHICH MAY INCLUDE, BUT NEED NOT
BE LIMITED TO, GOVERNMENT SECURITIES, COMMON SHARES, OTHER SECURITIES, PROPERTY
OR CONSIDERATION, OR ANY COMBINATION THEREOF), TOGETHER WITH SUCH ADDITIONAL
AMOUNTS OF INCOME EQUIVALENTS (WHICH MAY BE COMPOUNDED AND MAY INCLUDE, BUT NEED
NOT BE LIMITED TO, INTEREST, DIVIDENDS OR OTHER RATES OF RETURN OR ANY
COMBINATION THEREOF) AS MAY ACCRUE THEREON UNTIL THE DATE OR DATES OF PAYMENT,
SUCH INVESTMENT EQUIVALENTS AND SUCH ADDITIONAL AMOUNTS OF INCOME EQUIVALENTS TO
BE DETERMINED BY THE COMMITTEE IN ITS DISCRETION.
SECTION 12. TRANSFERABILITY OF AWARDS. EXCEPT AS MAY BE APPROVED BY THE
COMMITTEE, A PARTICIPANT'S RIGHTS AND INTEREST UNDER THIS PLAN OR ANY AWARD MAY
NOT BE ASSIGNED OR TRANSFERRED, HYPOTHECATED OR ENCUMBERED IN WHOLE OR IN PART
EITHER DIRECTLY OR BY OPERATION OF LAW OR OTHERWISE (EXCEPT IN THE EVENT OF A
PARTICIPANT'S DEATH), INCLUDING, BUT NOT BY WAY OF LIMITATION, EXECUTION, LEVY,
GARNISHMENT, ATTACHMENT, PLEDGE, BANKRUPTCY OR IN ANY OTHER MANNER; PROVIDED,
HOWEVER, THAT ANY INCENTIVE STOCK OPTION GRANTED PURSUANT TO THIS PLAN SHALL NOT
BE TRANSFERABLE OTHER THAN BY WILL OR THE LAWS OF DESCENT AND DISTRIBUTION AND
SHALL BE EXERCISABLE DURING THE PARTICIPANT'S LIFETIME ONLY BY HIM.
SECTION 13. AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THIS PLAN. THE
TERMS OF ANY OUTSTANDING AWARD UNDER THIS PLAN MAY BE AMENDED OR MODIFIED FROM
TIME TO TIME BY THE COMMITTEE IN ITS DISCRETION IN ANY MANNER THAT IT DEEMS
APPROPRIATE, (INCLUDING, BUT NOT LIMITED TO, ACCELERATION OF THE DATE OF
EXERCISE OF ANY AWARD AND/OR PAYMENTS THEREUNDER) IF THE COMMITTEE COULD GRANT
SUCH AMENDED OR MODIFIED AWARD UNDER THE TERMS OF THIS PLAN AT THE TIME OF SUCH
AMENDMENT OR MODIFICATION; PROVIDED THAT NO SUCH AMENDMENT OR MODIFICATION SHALL
ADVERSELY AFFECT IN A MATERIAL MANNER ANY RIGHT OF A PARTICIPANT UNDER THE AWARD
WITHOUT HIS WRITTEN CONSENT, UNLESS THE COMMITTEE DETERMINES IN ITS DISCRETION
THAT THERE HAVE OCCURRED OR ARE ABOUT TO OCCUR SIGNIFICANT CHANGES IN THE
PARTICIPANT'S POSITION, DUTIES OR RESPONSIBILITIES, OR SIGNIFICANT CHANGES IN
ECONOMIC, LEGISLATIVE, REGULATORY, TAX, ACCOUNTING OR COST/BENEFIT CONDITIONS
THAT ARE DETERMINED BY THE COMMITTEE IN ITS DISCRETION TO HAVE OR TO BE EXPECTED
TO HAVE A SUBSTANTIAL EFFECT ON THE PERFORMANCE OF THE COMPANY, OR ANY
AFFILIATE, DIVISION OR DEPARTMENT THEREOF, ON THIS PLAN OR ON ANY AWARD UNDER
THIS PLAN. THE COMMITTEE MAY, IN ITS DISCRETION, PERMIT HOLDERS OF AWARDS UNDER
THIS PLAN TO SURRENDER OUTSTANDING AWARDS IN ORDER TO EXERCISE OR REALIZE THE
RIGHTS UNDER OTHER AWARDS, OR IN EXCHANGE FOR THE GRANT OF NEW AWARDS, OR
REQUIRE HOLDERS OF AWARDS TO SURRENDER OUTSTANDING AWARDS AS A CONDITION
PRECEDENT TO THE GRANT OF NEW AWARDS UNDER THIS PLAN.
SECTION 14. TERMINATION OF A PARTICIPANT. FOR ALL PURPOSES UNDER THIS
PLAN, THE COMMITTEE SHALL DETERMINE WHETHER A PARTICIPANT HAS TERMINATED
EMPLOYMENT WITH, OR THE PERFORMANCE OF SERVICES FOR, THE COMPANY; PROVIDED,
HOWEVER, AN ABSENCE OR LEAVE APPROVED BY THE COMPANY SHALL NOT BE CONSIDERED AN
INTERRUPTION OF EMPLOYMENT OR PERFORMANCE OF SERVICES FOR ANY PURPOSE UNDER THIS
PLAN.
SECTION 15. DILUTION AND OTHER ADJUSTMENTS. IN THE EVENT OF ANY CHANGE IN
THE OUTSTANDING COMMON SHARES BY REASON OF ANY STOCK SPLIT, DIVIDEND, SPLIT-UP,
SPLIT-OFF, SPIN-OFF, RECAPITALIZATION, MERGER, CONSOLIDATION, RIGHTS OFFERING,
REORGANIZATION, COMBINATION OR EXCHANGE OF SHARES, A SALE BY KEYSTONE OF ALL OR
SUBSTANTIALLY ALL OF ITS ASSETS, ANY DISTRIBUTION TO STOCKHOLDERS OTHER THAN A
NORMAL CASH DIVIDEND, OR OTHER EXTRAORDINARY OR UNUSUAL EVENT, IF THE COMMITTEE
SHALL DETERMINE, IN ITS DISCRETION, THAT SUCH CHANGE EQUITABLY REQUIRES AN
ADJUSTMENT IN THE TERMS OF ANY AWARD OR THE NUMBER OF COMMON SHARES AVAILABLE
FOR AWARDS, SUCH ADJUSTMENT MAY BE MADE BY THE COMMITTEE AND SHALL BE FINAL,
CONCLUSIVE AND BINDING FOR ALL PURPOSES OF THIS PLAN. EACH ADJUSTMENT MADE
PURSUANT TO THIS SECTION SHALL BE MADE WITH A VIEW TOWARD PRESERVING THE VALUE
THE AFFECTED AWARD HAD PRIOR TO THE EVENT OR TRANSACTION GIVING CAUSE TO SUCH
ADJUSTMENT.
IN THE EVENT OF THE PROPOSED DISSOLUTION OR LIQUIDATION OF KEYSTONE, ALL
OUTSTANDING AWARDS SHALL TERMINATE IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH
PROPOSED ACTION, UNLESS OTHERWISE PROVIDED BY THE COMMITTEE. IN THE EVENT OF A
PROPOSED SALE OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF KEYSTONE OR THE
MERGER OF KEYSTONE WITH OR INTO ANOTHER CORPORATION, ALL RESTRICTIONS ON ANY
OUTSTANDING AWARDS SHALL LAPSE AND PARTICIPANTS SHALL BE ENTITLED TO THE FULL
BENEFIT OF ALL SUCH AWARDS IMMEDIATELY PRIOR TO THE CLOSING DATE OF SUCH SALE OR
MERGER, UNLESS OTHERWISE PROVIDED BY THE COMMITTEE.
SECTION 16. DESIGNATION OF BENEFICIARY BY PARTICIPANT. A PARTICIPANT MAY
NAME A BENEFICIARY TO RECEIVE ANY PAYMENT TO WHICH HE MAY BE ENTITLED WITH
RESPECT TO ANY AWARD UNDER THIS PLAN, IN THE EVENT OF PARTICIPANT'S DEATH, ON A
WRITTEN FORM TO BE PROVIDED BY AND FILED WITH THE COMMITTEE, AND IN A MANNER
DETERMINED BY THE COMMITTEE IN ITS DISCRETION (A "BENEFICIARY"). THE COMMITTEE
RESERVES THE RIGHT TO REVIEW AND APPROVE BENEFICIARY DESIGNATIONS. A
PARTICIPANT MAY CHANGE HIS BENEFICIARY FROM TIME TO TIME IN THE SAME MANNER,
UNLESS SUCH PARTICIPANT HAS MADE AN IRREVOCABLE DESIGNATION. ANY DESIGNATION OF
A BENEFICIARY UNDER THIS PLAN (TO THE EXTENT IT IS VALID AND ENFORCEABLE UNDER
APPLICABLE LAW) SHALL BE CONTROLLING OVER ANY OTHER DISPOSITION, TESTAMENTARY OR
OTHERWISE, AS DETERMINED BY THE COMMITTEE IN ITS DISCRETION. IF NO DESIGNATED
BENEFICIARY SURVIVES THE PARTICIPANT AND IS LIVING ON THE DATE ON WHICH ANY
AMOUNT BECOMES PAYABLE TO SUCH A PARTICIPANT'S BENEFICIARY, SUCH PAYMENT WILL BE
MADE TO THE LEGAL REPRESENTATIVES OF THE PARTICIPANT'S ESTATE, AND THE TERM
"BENEFICIARY" AS USED IN THIS PLAN SHALL BE DEEMED TO INCLUDE SUCH PERSON OR
PERSONS. IF THERE ARE ANY QUESTIONS AS TO THE LEGAL RIGHT OF ANY BENEFICIARY TO
RECEIVE A DISTRIBUTION UNDER THIS PLAN, THE COMMITTEE IN ITS DISCRETION MAY
DETERMINE THAT THE AMOUNT IN QUESTION BE PAID TO THE LEGAL REPRESENTATIVES OF
THE ESTATE OF THE PARTICIPANT, IN WHICH EVENT THE COMPANY, THE BOARD, THE
COMMITTEE, THE DESIGNATED ADMINISTRATOR (IF ANY), AND THE MEMBERS THEREOF, WILL
HAVE NO FURTHER LIABILITY TO ANYONE WITH RESPECT TO SUCH AMOUNT.
SECTION 17. FINANCIAL ASSISTANCE. IF THE COMMITTEE DETERMINES THAT SUCH
ACTION IS ADVISABLE, THE COMPANY MAY ASSIST ANY PARTICIPANT IN OBTAINING
FINANCING FROM THE COMPANY (OR UNDER ANY PROGRAM OF THE COMPANY APPROVED
PURSUANT TO APPLICABLE LAW), OR FROM A BANK OR OTHER THIRD PARTY, ON SUCH TERMS
AS ARE DETERMINED BY THE COMMITTEE, AND IN SUCH AMOUNT AS IS REQUIRED TO
ACCOMPLISH THE PURPOSES OF THIS PLAN, INCLUDING, BUT NOT LIMITED TO, THE
EXERCISE OF AN AWARD, THE PARTICIPATION THEREIN, AND/OR THE PAYMENT OF ANY TAXES
WITH RESPECT THERETO. SUCH ASSISTANCE MAY TAKE ANY FORM THAT THE COMMITTEE
DEEMS APPROPRIATE, INCLUDING, BUT NOT LIMITED TO, A DIRECT LOAN FROM THE
COMPANY, A GUARANTEE OF THE OBLIGATION BY THE COMPANY OR THE MAINTENANCE BY THE
COMPANY OF DEPOSITS WITH SUCH BANK OR THIRD PARTY.
SECTION 18. MISCELLANEOUS PROVISIONS.
(a) ANY PROCEEDS FROM AWARDS SHALL CONSTITUTE GENERAL FUNDS OF
KEYSTONE.
(b) NO FRACTIONAL SHARES MAY BE DELIVERED UNDER AN AWARD, BUT IN LIEU
THEREOF A CASH OR OTHER ADJUSTMENT SHALL BE MADE AS DETERMINED BY THE
COMMITTEE IN ITS DISCRETION.
(c) NO ELIGIBLE PERSON OR OTHER PERSON SHALL HAVE ANY CLAIM OR RIGHT
TO BE GRANTED AN AWARD UNDER THIS PLAN. DETERMINATIONS MADE BY THE
COMMITTEE UNDER THIS PLAN NEED NOT BE UNIFORM AND MAY BE MADE SELECTIVELY
AMONG ELIGIBLE PERSONS UNDER THIS PLAN, WHETHER OR NOT SUCH ELIGIBLE
PERSONS ARE SIMILARLY SITUATED. NEITHER THIS PLAN NOR ANY ACTION TAKEN
HEREUNDER SHALL BE CONSTRUED AS GIVING ANY ELIGIBLE PERSON ANY RIGHT TO
CONTINUE TO BE EMPLOYED BY OR PERFORM SERVICES FOR THE COMPANY, AND THE
RIGHT TO TERMINATE THE EMPLOYMENT OF OR PERFORMANCE OF SERVICES BY ELIGIBLE
PERSONS AT ANY TIME AND FOR ANY REASON IS SPECIFICALLY RESERVED.
(d) NO PARTICIPANT OR OTHER PERSON SHALL HAVE ANY RIGHT WITH RESPECT
TO THIS PLAN, THE COMMON SHARES RESERVED FOR ISSUANCE UNDER THIS PLAN OR IN
ANY AWARD, CONTINGENT OR OTHERWISE, UNTIL WRITTEN EVIDENCE OF THE AWARD
SHALL HAVE BEEN DELIVERED TO THE RECIPIENT AND ALL THE TERMS, CONDITIONS
AND PROVISIONS OF THIS PLAN AND THE AWARD APPLICABLE TO SUCH RECIPIENT (AND
EACH PERSON CLAIMING UNDER OR THROUGH HIM) HAVE BEEN MET.
(e) NO COMMON SHARES, OTHER KEYSTONE SECURITIES OR PROPERTY, OTHER
SECURITIES OR PROPERTY OR OTHER FORMS OF PAYMENT SHALL BE ISSUED HEREUNDER
WITH RESPECT TO ANY AWARD UNLESS COUNSEL FOR KEYSTONE SHALL BE SATISFIED
THAT SUCH ISSUANCE WILL BE IN COMPLIANCE WITH APPLICABLE LAW AND ANY
APPLICABLE RULES OF ANY STOCK EXCHANGE OR OTHER MARKET QUOTATION SYSTEM ON
WHICH COMMON SHARES ARE LISTED.
(f) IT IS THE INTENT OF KEYSTONE THAT THIS PLAN COMPLY IN ALL
RESPECTS WITH RULE 16B-3 AND SECTION 162(M) WITH RESPECT TO AWARDS GRANTED
TO EXECUTIVE OFFICERS OF KEYSTONE, THAT ANY AMBIGUITIES OR INCONSISTENCIES
IN CONSTRUCTION OF THIS PLAN BE INTERPRETED TO GIVE EFFECT TO SUCH
INTENTION AND THAT IF ANY PROVISION OF THIS PLAN IS FOUND NOT TO BE IN
COMPLIANCE WITH RULE 16B-3 OR SECTION 162(M), SUCH PROVISION SHALL BE
DEEMED NULL AND VOID WITH RESPECT TO AWARDS GRANTED TO EXECUTIVE OFFICERS
OF KEYSTONE TO THE EXTENT REQUIRED TO PERMIT SUCH AWARDS TO COMPLY WITH
RULE 16B-3 AND SECTION 162(M). IT IS ALSO THE INTENT OF KEYSTONE THAT THIS
PLAN COMPLY IN ALL RESPECTS WITH THE PROVISIONS OF THE CODE PROVIDING
FAVORABLE TREATMENT TO INCENTIVE STOCK OPTIONS, THAT ANY AMBIGUITIES OR
INCONSISTENCIES IN CONSTRUCTION OF THIS PLAN BE INTERPRETED TO GIVE EFFECT
TO SUCH INTENTION AND THAT IF ANY PROVISION OF THIS PLAN IS FOUND NOT TO BE
IN COMPLIANCE WITH THE INCENTIVE STOCK OPTION PROVISIONS OF THE CODE, SUCH
PROVISION SHALL BE DEEMED NULL AND VOID WITH RESPECT TO INCENTIVE STOCK
OPTIONS GRANTED TO EMPLOYEES OF THE COMPANY TO THE EXTENT REQUIRED TO
PERMIT SUCH INCENTIVE STOCK OPTIONS TO RECEIVE FAVORABLE TREATMENT UNDER
THE CODE.
(g) THE COMPANY SHALL HAVE THE RIGHT TO DEDUCT FROM ANY PAYMENT MADE
UNDER THIS PLAN ANY FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAXES
REQUIRED BY LAW TO BE WITHHELD WITH RESPECT TO SUCH PAYMENT. IT SHALL BE A
CONDITION TO THE OBLIGATION OF KEYSTONE TO ISSUE COMMON SHARES, OTHER
KEYSTONE SECURITIES OR PROPERTY, OTHER SECURITIES OR PROPERTY, OR OTHER
FORMS OF PAYMENT, OR ANY COMBINATION THEREOF, UPON EXERCISE, SETTLEMENT OR
PAYMENT OF ANY AWARD UNDER THIS PLAN, THAT THE PARTICIPANT (OR ANY
BENEFICIARY OR PERSON ENTITLED TO ACT) PAY TO KEYSTONE, UPON ITS DEMAND,
SUCH AMOUNT AS MAY BE REQUIRED BY THE COMPANY FOR THE PURPOSE OF SATISFYING
ANY LIABILITY TO WITHHOLD FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER
TAXES. IF THE AMOUNT REQUESTED IS NOT PAID, KEYSTONE MAY REFUSE TO ISSUE
COMMON SHARES, OTHER KEYSTONE SECURITIES OR PROPERTY, OTHER SECURITIES OR
PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY COMBINATION THEREOF.
NOTWITHSTANDING ANYTHING IN THIS PLAN TO THE CONTRARY, THE COMMITTEE MAY,
IN ITS DISCRETION, PERMIT AN ELIGIBLE PERSON (OR ANY BENEFICIARY OR PERSON
ENTITLED TO ACT) TO ELECT TO PAY A PORTION OR ALL OF THE AMOUNT REQUESTED
BY THE COMPANY FOR SUCH TAXES WITH RESPECT TO SUCH AWARD, AT SUCH TIME AND
IN SUCH MANNER AS THE COMMITTEE SHALL DEEM TO BE APPROPRIATE (INCLUDING,
BUT NOT LIMITED TO, BY AUTHORIZING KEYSTONE TO WITHHOLD OR AGREEING TO
SURRENDER TO KEYSTONE ON OR ABOUT THE DATE SUCH TAX LIABILITY IS
DETERMINABLE, COMMON SHARES, OTHER KEYSTONE SECURITIES, OTHER SECURITIES OR
PROPERTY, OR OTHER FORMS OF PAYMENT, OR ANY COMBINATION THEREOF, BY SUCH
PERSON OR A PORTION OF SUCH FORMS OF PAYMENT THAT WOULD OTHERWISE BE
DISTRIBUTED, OR HAVE BEEN DISTRIBUTED, AS THE CASE MAY BE, PURSUANT TO SUCH
AWARD TO SUCH PERSON, HAVING A FAIR MARKET VALUE EQUAL TO THE AMOUNT OF
SUCH TAXES).
(h) THE EXPENSES OF THIS PLAN SHALL BE BORNE BY THE COMPANY;
PROVIDED, HOWEVER, THE COMPANY MAY RECOVER FROM A PARTICIPANT OR HIS
BENEFICIARY, HEIRS OR ASSIGNS ANY AND ALL DAMAGES, FEES, EXPENSES AND COSTS
INCURRED BY THE COMPANY ARISING OUT OF ANY ACTIONS TAKEN BY A PARTICIPANT
IN BREACH OF THIS PLAN OR ANY AGREEMENT EVIDENCING SUCH PARTICIPANT'S
AWARD.
(i) THIS PLAN SHALL BE UNFUNDED. THE COMPANY SHALL NOT BE REQUIRED
TO ESTABLISH ANY SPECIAL OR SEPARATE FUND OR TO MAKE ANY OTHER SEGREGATION
OF ASSETS TO ASSURE THE PAYMENT OF ANY AWARD UNDER THIS PLAN, AND RIGHTS TO
THE PAYMENT OF AWARDS SHALL BE NO GREATER THAN THE RIGHTS OF THE COMPANY'S
GENERAL CREDITORS.
(j) BY ACCEPTING ANY AWARD OR OTHER BENEFIT UNDER THIS PLAN, EACH
PARTICIPANT AND EACH PERSON CLAIMING UNDER OR THROUGH HIM SHALL BE
CONCLUSIVELY DEEMED TO HAVE INDICATED HIS ACCEPTANCE AND RATIFICATION OF,
AND CONSENT TO, ANY ACTION TAKEN UNDER THIS PLAN BY THE COMPANY, THE BOARD,
THE COMMITTEE OR THE DESIGNATED ADMINISTRATOR (IF APPLICABLE).
(k) THE APPROPRIATE OFFICERS OF THE COMPANY SHALL CAUSE TO BE FILED
ANY REPORTS, RETURNS OR OTHER INFORMATION REGARDING AWARDS HEREUNDER OF ANY
COMMON SHARES ISSUED PURSUANT HERETO AS MAY BE REQUIRED BY APPLICABLE LAW
AND ANY APPLICABLE RULES OF ANY STOCK EXCHANGE OR OTHER MARKET QUOTATION
SYSTEM ON WHICH COMMON SHARES ARE LISTED.
(l) THE VALIDITY, CONSTRUCTION, INTERPRETATION, ADMINISTRATION AND
EFFECT OF THIS PLAN, AND OF ITS RULES AND REGULATIONS, AND RIGHTS RELATING
TO THIS PLAN AND TO AWARDS GRANTED UNDER THIS PLAN, SHALL BE GOVERNED BY
THE SUBSTANTIVE LAWS, BUT NOT THE CHOICE OF LAW RULES, OF THE STATE OF
DELAWARE.
(m) RECORDS OF THE COMPANY SHALL BE CONCLUSIVE FOR ALL PURPOSES UNDER
THIS PLAN OR ANY AWARD, UNLESS DETERMINED BY THE COMMITTEE TO BE INCORRECT.
(n) IF ANY PROVISION OF THIS PLAN OR ANY AWARD IS HELD TO BE ILLEGAL
OR INVALID FOR ANY REASON, THE ILLEGALITY OR INVALIDITY SHALL NOT AFFECT
THE REMAINING PROVISIONS OF THIS PLAN OR ANY AWARD, BUT SUCH PROVISION
SHALL BE FULLY SEVERABLE, AND THIS PLAN OR AWARD, AS APPLICABLE, SHALL BE
CONSTRUED AND ENFORCED AS IF THE ILLEGAL OR INVALID PROVISION HAD NEVER
BEEN INCLUDED IN THIS PLAN OR AWARD, AS APPLICABLE.
(o) THE TERMS OF THIS PLAN SHALL GOVERN ALL AWARDS UNDER THIS PLAN
AND IN NO EVENT SHALL THE COMMITTEE HAVE THE POWER TO GRANT ANY AWARD UNDER
THIS PLAN THAT IS CONTRARY TO ANY OF THE PROVISIONS OF THIS PLAN.
(p) FOR PURPOSES OF INTERPRETATION OF THIS PLAN, THE MASCULINE
PRONOUN INCLUDES THE FEMININE AND THE SINGULAR INCLUDES THE PLURAL WHEREVER
APPROPRIATE.
SECTION 19. PLAN AMENDMENT OR SUSPENSION. THIS PLAN MAY BE AMENDED OR
SUSPENDED IN WHOLE OR IN PART AT ANY TIME FROM TIME TO TIME BY THE BOARD. NO
AMENDMENT OF THIS PLAN SHALL ADVERSELY AFFECT IN A MATERIAL MANNER ANY RIGHT OF
ANY PARTICIPANT WITH RESPECT TO ANY AWARD PREVIOUSLY GRANTED WITHOUT SUCH
PARTICIPANT'S WRITTEN CONSENT, EXCEPT AS PERMITTED UNDER SECTION 13.
SECTION 20. PLAN TERMINATION. THIS PLAN SHALL TERMINATE UPON THE EARLIER
OF THE FOLLOWING DATES OR EVENTS TO OCCUR:
(a) UPON THE ADOPTION OF A RESOLUTION OF THE BOARD TERMINATING THIS
PLAN; OR
(b) THE TENTH ANNIVERSARY OF THE EFFECTIVE DATE; PROVIDED, HOWEVER,
THAT THE BOARD MAY, PRIOR TO SUCH DATE, EXTEND THE TERM OF THIS PLAN FOR AN
ADDITIONAL PERIOD OF UP TO FIVE YEARS FOR THE GRANT OF AWARDS OTHER THAN
INCENTIVE STOCK OPTIONS. NO TERMINATION OF THIS PLAN SHALL MATERIALLY
ALTER OR IMPAIR ANY OF THE RIGHTS OR OBLIGATIONS OF ANY PERSON, WITHOUT HIS
CONSENT, UNDER ANY AWARD PREVIOUSLY GRANTED UNDER THIS PLAN, EXCEPT THAT
SUBSEQUENT TO TERMINATION OF THIS PLAN, THE COMMITTEE MAY MAKE AMENDMENTS
OR MODIFICATIONS PERMITTED UNDER SECTION 13.
SECTION 21. EFFECTIVE DATE. THIS PLAN SHALL BE EFFECTIVE, AND AWARDS MAY
BE GRANTED UNDER THIS PLAN, ON OR AFTER THE EFFECTIVE DATE; PROVIDED, HOWEVER,
IF THIS PLAN IS NOT APPROVED BY AT LEAST A MAJORITY OF THE VOTES CAST BY THE
STOCKHOLDERS OF KEYSTONE AT A MEETING OF STOCKHOLDERS AT WHICH A QUORUM IS
PRESENT WITHIN ONE YEAR AFTER THE EFFECTIVE DATE THEN, IN SUCH EVENT, THIS PLAN
AND ALL AWARDS GRANTED PURSUANT TO THIS PLAN SHALL BE NULL AND VOID.
