-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SwX/sVW5kb0dokDSY0QUK2Zi24tmMh7idJuqo/Nj53teKDh9+gTpwEjRt5xrToMl n2x+/PUXXBbprwJcpV6ecQ== 0000055604-97-000004.txt : 19970428 0000055604-97-000004.hdr.sgml : 19970428 ACCESSION NUMBER: 0000055604-97-000004 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970425 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE CONSOLIDATED INDUSTRIES INC CENTRAL INDEX KEY: 0000055604 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 370364250 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03919 FILM NUMBER: 97587529 BUSINESS ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2144580028 MAIL ADDRESS: STREET 1: 5430 LBJ FWY STE 1740 STREET 2: THREE LINCOLN CENTRE CITY: DALLAS STATE: TX ZIP: 75240 FORMER COMPANY: FORMER CONFORMED NAME: KEYSTONE STEEL & WIRE CO DATE OF NAME CHANGE: 19710506 DEF 14A 1 KEYSTONE PROXY 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.
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) 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) (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. (2) PERCENTAGE OMITTED IF LESS THAN 1%. (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. (4) GLENN R. SIMMONS IS THE BROTHER OF HAROLD C. SIMMONS. SEE FOOTNOTE (1) TO THE "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" TABLE. (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. (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. (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. (8) INCLUDES 184,017 SHARES OF COMMON STOCK OWNED BY COATINGS GROUP, A PRIVATE CORPORATION CONTROLLED BY WILLIAM SPIER. (9) INCLUDES 193,537 SHARES OF PREFERRED STOCK OWNED BY COATINGS GROUP, A PRIVATE CORPORATION CONTROLLED BY WILLIAM SPIER. 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.
THE FOLLOWING TABLE SETS FORTH THE STOCKHOLDERS KNOWN TO THE COMPANY TO BE THE BENEFICIAL OWNERS OF MORE THAN 5% OF THE COMMON STOCK OR PREFERRED STOCK OUTSTANDING AS OF THE RECORD DATE. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
COMBINED OWNERSHIP OF COMMON AND PREFERRED NAME AND ADDRESS OF COMMON PERCENT PREFERRED PERCENT STOCK BENEFICIAL OWNER STOCK OF CLASS STOCK (#) OF PERCENT (#) (1) CLASS CLASS (1) (1) 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 (1) PERCENTAGE OMITTED IF LESS THAN 1%. (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. (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. (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. (5) COATINGS GROUP, INC. IS A PRIVATE CORPORATION CONTROLLED BY WILLIAM SPIER.
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 $450 PER DAY FOR EACH BOARD OF DIRECTORS MEETING AND/OR COMMITTEE MEETING. DIRECTORS ARE ALSO REIMBURSED FOR REASONABLE EXPENSES INCURRED IN ATTENDING BOARD OF DIRECTORS AND/OR COMMITTEE MEETINGS. ON MAY 5, 1992 THE STOCKHOLDERS APPROVED THE KEYSTONE CONSOLIDATED INDUSTRIES, INC. 1992 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN ("DIRECTOR PLAN"), WHICH PROVIDES THAT EACH NON-EMPLOYEE DIRECTOR WILL BE GRANTED AN OPTION TO PURCHASE 1,000 SHARES OF COMMON STOCK ON THE THIRD BUSINESS DAY AFTER THE COMPANY ISSUES ITS PRESS RELEASE SUMMARIZING THE COMPANY'S ANNUAL FINANCIAL RESULTS FOR THE PRIOR FISCAL YEAR. THE EXERCISE PRICE OF THE OPTIONS WILL BE EQUAL TO THE LAST REPORTED SALE PRICE OF COMMON STOCK ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON THE DATE OF GRANT. OPTIONS GRANTED PURSUANT TO THE DIRECTOR PLAN BECOME EXERCISABLE ONE YEAR AFTER THE DATE OF GRANT AND EXPIRE ON THE FIFTH ANNIVERSARY FOLLOWING THE DATE OF GRANT. MR. GLENN R. SIMMONS' SERVICES ARE MADE AVAILABLE TO THE COMPANY PURSUANT TO THE INTERCORPORATE SERVICES AGREEMENT. IN ADDITION TO DIRECTOR SERVICES, MR. TUCKER PROVIDES CERTAIN CONSULTING SERVICES TO THE COMPANY FOR WHICH THE COMPANY PAYS A COMPANY RELATED TO MR. TUCKER. SEE "CERTAIN BUSINESS RELATIONSHIPS AND RELATED TRANSACTIONS." EXECUTIVE COMPENSATION THE FOLLOWING TABLE SUMMARIZES ALL COMPENSATION PAID TO THE COMPANY'S CHIEF EXECUTIVE OFFICER AND TO EACH OF THE COMPANY'S FOUR MOST HIGHLY COMPENSATED EXECUTIVE OFFICERS OTHER THAN THE CHIEF EXECUTIVE OFFICER (EACH A "NAMED EXECUTIVE OFFICER") FOR SERVICES RENDERED IN ALL CAPACITIES TO THE COMPANY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ALL OTHER NAME AND ANNUAL COMPENSATION SECURITIES COMPENSATION PRINCIPAL POSITION ($)(1) YEAR SALARY ($) BONUS($) UNDERLYING OPTIONS (#) 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 (1) AMOUNTS CONTRIBUTED BY THE COMPANY TO THE COMPANY'S 401(K) PLAN FOR THE BENEFIT OF SUCH EXECUTIVE OFFICER. (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. (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 $55,000 AS SALARY FOR SERVICES RENDERED BY MR. SINGER TO VALHI DURING 1996 FOR WHICH KEYSTONE RECEIVED CREDIT UNDER THE INTERCORPORATE SERVICES AGREEMENT.
THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, WITH RESPECT TO STOCK OPTIONS GRANTED TO THE NAMED EXECUTIVE OFFICERS. NO STOCK APPRECIATION RIGHTS WERE GRANTED, NO OPTIONS HAVE BEEN GRANTED AT AN OPTION PRICE BELOW FAIR MARKET VALUE ON THE DATE OF THE GRANT AND NO STOCK OPTIONS OR STOCK APPRECIATION RIGHTS WERE EXERCISED DURING 1996. OPTION GRANTS IN 1996
POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER % OF TOTAL ANNUAL OF OPTIONS RATES OF STOCK SECURITIES GRANTED TOEXERCISE PRICE UNDERLYING EMPLOYEES OR BASE APPRECIATION FOR OPTIONS IN FISCAL PRICE EXPIRATION OPTION TERM($) NAME GRANTED* YEAR ($/SHARE) DATE 5% 10% GLENN R. SIMMONS 125,000 69% $8.125 10/02/06 $638,721 $1,618,645 HAROLD M. CURDY 25,000 14 8.125 10/02/06 127,744 323,729 BERT E. DOWNING, JR.15,000 8 8.125 10/02/06 76,746 194,237 RALPH P. END 15,000 8 8.125 10/02/06 76,746 194,237 ROBERT W. SINGER - - - - - -
* OPTIONS WERE GRANTED ON OCTOBER 2, 1996, AND VEST 33-1/3%, 66-2/3%, AND 100% ON THE FIRST, SECOND, AND THIRD ANNIVERSARY OF THE DATE OF GRANT, RESPECTIVELY. THE FOLLOWING TABLE PROVIDES INFORMATION, WITH RESPECT TO THE NAMED EXECUTIVE OFFICERS, CONCERNING THE VALUE OF UNEXERCISED STOCK OPTIONS HELD AS OF DECEMBER 31, 1996. IN 1996, NO NAMED EXECUTIVE OFFICER EXERCISED ANY STOCK OPTIONS. AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS AT DECEMBER 31, 1996(#) DECEMBER 31, 1996 ($)(1) NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE 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 (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.
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]
1991 1992 1993 1994 1995 1996 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
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.
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT BENEFICIAL OWNER OF OF CLASS BENEFICIAL OWNER- TITLE OF CLASS SHIP 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
EX-1 2 APPENDIX A 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. -----END PRIVACY-ENHANCED MESSAGE-----