<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Keystone International, Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Donna D. Moore
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
N/A
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- - --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
- - --------------------------------------------------------------------------------
- - ---------------
(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
MARCH 17, 1994
Dear Fellow Shareholders:
You are cordially invited to attend the Company's annual meeting of
shareholders to be held at 10:00 a.m. on Wednesday, May 4, 1994, at The Junior
League of Houston, 1811 Briar Oaks Lane, Houston, Texas. A map is included on
the back page of the attached proxy statement for your convenience.
Information on the various matters on which the shareholders will act is
provided in the enclosed notice of the meeting and proxy statement. Your
directors urge you, whether or not you plan to attend the meeting in person, to
execute the enclosed proxy and return it promptly in the enclosed envelope,
which requires no postage if mailed in the United States. If a shareholder who
returns a proxy is able to attend the meeting, the proxy can be cancelled and
the shares voted in person at the meeting.
We hope you will participate in the annual meeting, either in person or by
proxy. Thank you for your continued interest and support of Keystone
International, Inc.
Sincerely,
/s/ R. A. LeBLANC
_________________________________
R. A. LeBlanc
Chairman of the Board of Directors
<PAGE> 3
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 1994
---------------------
Notice is hereby given that the annual meeting of the shareholders of
Keystone International, Inc. (the "Company") will be held at The Junior League
of Houston, 1811 Briar Oaks Lane, Houston, Texas, on Wednesday, May 4, 1994, at
10:00 a.m., Houston time, for the following purposes:
1. To elect four Class II Directors to serve until the third annual
meeting of shareholders following their election and until their successors
are elected and qualified;
2. To approve the adoption of the proposed 1994 Directors' Stock
Option Plan for non-employee directors;
3. To consider and act upon such other business as may properly be
presented to the meeting or any adjournment thereof.
Holders of record as of the close of business on March 8, 1994 will be
entitled to notice of and to vote at the meeting or any adjournment thereof.
Please sign and date the enclosed proxy and return it promptly in the
enclosed envelope provided for your convenience which requires no postage if
mailed in the United States. The prompt return of proxies will ensure a quorum
and save the Company the expense of further solicitation.
By Order of the Board of Directors
/s/ DONNA D. MOORE
__________________________________
Donna D. Moore
Secretary
March 17, 1994
<PAGE> 4
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being mailed to
shareholders commencing on or about March 17, 1994, in connection with the
solicitation by the Board of Directors of Keystone International, Inc. (the
"Company") of proxies to be voted at the annual meeting of shareholders to be
held in Houston, Texas on Wednesday, May 4, 1994, and at any adjournment
thereof, for the purposes set forth in the accompanying notice. Proxies will be
voted in accordance with the directions specified thereon and otherwise in
accordance with the judgment of the persons designated as proxies. ANY PROXY ON
WHICH NO DIRECTION IS SPECIFIED WILL BE VOTED FOR (I) ELECTION OF THE NOMINEES
NAMED HEREIN TO THE BOARD OF DIRECTORS AND (II) ADOPTION OF THE 1994 DIRECTORS'
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS. Any proxy may be revoked at any
time before its exercise by written notice of the person giving the proxy.
As of March 8, 1994, the record date for the determination of shareholders
entitled to vote at the meeting, there were outstanding and entitled to vote
shares of common stock of the Company. Each share of common stock
entitles the holder to one vote on each matter presented at the meeting.
ELECTION OF DIRECTORS
At the meeting, four Class II Directors are to be elected, each director to
hold office until the third annual meeting of shareholders following his
election. The persons named in the accompanying proxy have been designated by
the Board of Directors and, unless authority is withheld, they intend to vote
for the election of the nominees named below to the Board of Directors as Class
II Directors. All of the Class II nominees previously have been elected
directors by the shareholders. If any nominee should become unavailable for
election, the proxy may be voted for a substitute nominee selected by the
persons named in the proxy, or the Board may be reduced accordingly; however,
the Board of Directors is not aware of any circumstances likely to render any
nominee unavailable for election.
NOMINEES AND CONTINUING DIRECTORS
Certain information concerning the nominees, together with comparable
information for the Class I and Class III Directors, whose terms are not
expiring at the 1994 annual meeting, is set forth below:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED ON
FEBRUARY 3, 1994(1)
----------------------
PRINCIPAL POSITION DIRECTOR PERCENT
NAME WITH THE COMPANY AGE SINCE SHARES OF CLASS
---- ---------------- --- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
CLASS II DIRECTORS WHOSE TERM (IF REELECTED) WILL EXPIRE IN 1997
Arthur L. French............... Director and Executive 53 1991 3,309 *
Vice President
Farrell G. Huber, Jr.(2)(3)... Director 61 1980 1,136,078(8) 3.2%
R. A. LeBlanc(2)............... Chairman of the Board 64 1970 232,550 0.7%
and Chief Executive
Officer
Allen F. Rhodes(2)(4)(5)....... Director 69 1980 4,516 *
</TABLE>
(Continued on following page)
2
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED ON
FEBRUARY 3, 1994(1)
----------------------
PRINCIPAL POSITION DIRECTOR PERCENT
NAME WITH THE COMPANY AGE SINCE SHARES OF CLASS
---- ------------------ --- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
CLASS III DIRECTOR NOMINEES WHOSE TERM WILL EXPIRE IN 1995
Floyd A. Cailloux(2)(3)........ Director 80 1968 4,670,778 13.3%
Malcolm D. Clark(6)............ Director, President and 53 1987 95,898 0.3%
Chief Operating
Officer
Bob G. Gower(4)................ Director 56 1993 4,000 *
F. O'Neil Griffin(3)........... Director 67 1993 3,200 *
CLASS I DIRECTORS WHOSE TERM WILL EXPIRE IN 1996
Martin E. Hamilton(2)(4)(5).... Director 81 1977 91,391(8) 0.3%
.
W. Wayne Patterson(4)(5)...... Director 50 1984 1,142,188(8) 3.2%
Donato F. Raimondi(3)(7)....... Director 60 1992 1,000 *
Wallace S. Wilson(5)........... Director 63 1974 39,918 0.1%
</TABLE>
- - ------------
(1) Each person has voting and investment power with respect to the shares
listed and, unless otherwise noted, is a citizen of the United States.
(2) Member, Executive Committee of the Board.
(3) Member, Committee on Directors of the Board.
(4) Member, Compensation Committee of the Board.
(5) Member, Audit Committee of the Board.
(6) A British subject.
(7) An Italian citizen.
(8) Includes an aggregate of 1,116,912 shares, or 3.2% of the class
outstanding, held by various trusts of which Mr. Huber and Mr. Patterson
each are trustees, 18,900 shares held by an additional trust of which Mr.
Patterson is a trustee, and 2,220 shares held by various trusts of which
Mr. Hamilton is trustee. Messrs. Patterson, Huber and Hamilton disclaim
any beneficial interest in such shares.
* Less than 1/10th of 1% of outstanding shares.
Arthur L. French joined the Company in May 1989 as Executive Vice
President. Prior thereto, he was president and chief operating officer of Fisher
Controls International, Inc., a subsidiary of Monsanto Corporation, for seven
years.
Farrell G. Huber, Jr., is chairman of the board of Houston-Huber, Inc., a
private investment company. Mr. Huber also is a director of Rawson-Koenig, Inc.,
a manufacturer of truck bodies and similar products.
R. A. LeBlanc has been employed by the Company since 1959. He was elected
Chairman of the Board and Chief Executive Officer of the Company in 1985
following several years' service as President and Chief Operating Officer. Mr.
LeBlanc also is a director of BJ Services Company, an oilfield cementing and
service company.
Allen F. Rhodes retired from the presidency of Arnco Technology Trust, a
metallurgical research firm in 1993. He has also been a private business advisor
and consulting engineer since his retirement in 1987 as president and chief
executive officer of Anglo Energy Limited, an oilfield contract drilling firm.
He is Chairman of the Compensation Committee of the Board of Directors. Mr.
Rhodes also is a director of Rawson-Koenig, Inc.
3
<PAGE> 6
Floyd A. Cailloux, a retired Chairman of the Board of the Company, is
presently engaged in the management of his own investments. He continues to
serve the Company as Chairman of the Executive Committee and Chairman of the
Committee on Directors of the Board of Directors.
Malcolm D. Clark has served as President and Chief Operating Officer of the
Company since January 1986. Prior thereto, Mr. Clark served for fourteen years
as managing director of Keystone Valve (U.K.) Ltd., the British manufacturing
subsidiary of the Company.
Bob G. Gower has served as president of Lyondell Petrochemical Company
since 1985, and has also been its chief executive officer since 1988.
F. O'Neil Griffin is chairman and owner of First National Bank of
Kerrville, which he purchased in 1984. He served as chairman and chief executive
officer of the Mountain Banks Ltd. in Denver, Colorado from 1975 until 1982,
prior to which he was vice chairman of First City Bancorporation of Texas, Inc.
Mr. Griffin was appointed a director in November 1993 to fill the vacancy on the
board resulting from the retirement of Paul C. Koomey.
Martin E. Hamilton is a private investor who served as a vice president of
Taylor Publishing Company for several years before his retirement in 1972.
W. Wayne Patterson is chairman of the board and chief executive officer of
Texas Microsystems, Inc., a privately held manufacturer of industrial computer
products (see "Other Information -- Certain Transactions"). Before assuming his
present position in May 1989, he was employed by the Company for fifteen years,
most recently as Executive Vice President and Chief Financial Officer. Mr.
Patterson is Chairman of the Audit Committee of the Board of Directors.
Donato F. Raimondi has been president and managing director of Raimondi
Valvole S.p.A., a valve manufacturing company headquartered in Milan, Italy
since 1971. He also serves on the boards of directors of several publicly held
Italian corporations.
Wallace S. Wilson is chairman of the board and chief executive officer of
Wilson Industries, Inc., a manufacturer and supplier of petroleum industry
equipment, supplies, and services. He also is a director of Howell Corporation.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1993 the Board of Directors convened on six regularly scheduled
occasions. Committees of the Board held meetings as follows: Executive
Committee -- six meetings; Audit Committee -- two meetings; Compensation
Committee -- six meetings; and Committee on Directors -- two meetings. Each
director attended all meetings of the Board and each committee on which he
served during the year, other than Mr. Raimondi who was unable to attend one
Board meeting and Mr. LeBlanc who was unable to attend one committee meeting.
The Company's operations are managed under the broad supervision and
direction of the Board of Directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
various Board functions are discharged by the standing committees of the Board.
The Executive Committee is authorized to exercise, to the extent permitted by
law, the power of the full Board of Directors when a meeting of the full Board
is not practicable or necessary. The functions of the Audit Committee are
described under the caption "Other Information -- Auditors." The Compensation
Committee is responsible for the formulation and adoption of all executive
compensation, retirement and insurance programs, subject to full Board approval
where legally required or in those instances where the underlying benefit
philosophy might be at variance with preexisting Board policies. The
Compensation Committee also supervises the administration of all employee
benefit and executive compensation programs, including the establishment of
specific criteria against which the Executive Officers' annual performance-based
compensation is measured. The Committee on Directors is responsible for
reviewing the functions and operation of the Board and its committees,
evaluating the performance of incumbent directors and developing a pool of
potential future board nominees. Shareholders
4
<PAGE> 7
who may wish to suggest individuals for possible future consideration for board
positions should direct recommendations to the Committee on Directors at the
Company's principal offices.
Directors not employed by the Company receive annual retainers of $24,000
for service on the Board, plus meeting fees of $750 for each meeting attended.
Board members also receive meeting fees of $750 for service on board committees,
and the chairman of each Committee receives an additional annual retainer fee of
$4,000. Aggregate compensation paid to non-employee directors during 1993 for
service in all such capacities aggregated $316,800. The Company maintains a
directors' retirement plan pursuant to which non-employee directors who meet
certain criteria (and, subject to certain limitations, their surviving spouses)
are paid a pension of $2,000 per month for up to a maximum of ten years. In
1993, the Company made aggregate payments of $50,000 to retired or deceased
directors pursuant to this plan. Executive officers who also serve on the Board
receive no additional compensation for so serving.
EXECUTIVE OFFICER TENURE AND IDENTIFICATION
The executive officers of the Company serve at the pleasure of the Board of
Directors and are subject to annual appointment by the Board at its first
meeting following the annual meeting of shareholders. All of the Company's
executive officers are identified under the caption "Nominees and Continuing
Directors," with the exception of Mark E. Baldwin, age 40, who has served as
Vice President and Chief Financial Officer since 1989. Prior to his most recent
promotion, Mr. Baldwin served as Corporate Treasurer for three years following
seven years of service in a series of successively more responsible accounting
and financial positions.
MANAGEMENT SHAREHOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at February 3, 1994 of (i) all directors
of the Company (including executive officers who are also directors and all
nominees for election at the 1994 annual meeting), (ii) each other executive
officer whose compensation exceeded $100,000 in 1993, and (iii) all directors
and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT
AND PERCENT
NATURE OF OF
NAME OF BENEFICIAL COMMON
BENEFICIAL OWNER OWNERSHIP STOCK
---------------- --------- -------
<S> <C> <C>
Floyd A. Cailloux............................................ 4,670,778 13.3%
Malcolm D. Clark............................................. 95,898 0.3%
Arthur L. French............................................. 3,309 *
Bob G. Gower................................................. 4,000 *
F. O'Neil Griffin............................................ 3,200 *
Martin E. Hamilton........................................... 91,391(1) 0.3%
Farrell G. Huber, Jr. ....................................... 1,136,078(1) 3.2%
R. A. LeBlanc................................................ 232,550 0.7%
W. Wayne Patterson........................................... 1,142,188(1) 3.2%
Donato F. Raimondi........................................... 1,000 *
Allen F. Rhodes.............................................. 4,516 *
Wallace S. Wilson............................................ 39,918 0.1%
Mark E. Baldwin.............................................. 5,973 *
All directors and executive officers
as a group (13 persons named above)........................ 6,313,887(2) 18.0%
</TABLE>
- - ------------
(1) Includes shares held in various trusts of which the named individual is a
trustee, but as to which he disclaims beneficial ownership, as follows:
Mr. Huber -- 1,116,912 shares, Mr. Patterson -- 1,135,812 shares, and Mr.
Hamilton -- 2,220 shares.
(2) Includes, without duplication, all shares referred to in Note 1 above.
* Less than 1/10th of 1% of outstanding shares.
5
<PAGE> 8
ADOPTION OF 1994 DIRECTORS' STOCK OPTION PLAN
For a number of years, management has sought to encourage an increase in
the ownership of the Company's common stock by directors who are not employed by
the Company. To this end, shareholders will be asked at the 1994 annual meeting
to approve the adoption of the 1994 Directors' Stock Option Plan (the "Plan"),
pursuant to which non-employee directors could elect to forego their annual
retainer fees in exchange for the receipt by them of options to purchase shares
of the Company's common stock at discounted prices. Both the number of shares to
be covered by options and the exercise price of any options will be subject to
annual determination through application of a formula.
In general, the Plan provides that in November of each year, each director
who is not employed by the Company or any of its subsidiaries may irrevocably
elect for the Plan year commencing the following June 1 to accept options in
lieu of his annual retainer fees. The number of shares to be covered by such
option grants is to be 1/12th of the annual retainer fee. Thus, at the present
annual retainer fee of $24,000 (which has been in effect since 1990), a director
who elects to participate in the Plan would become entitled, if reelected to the
Board at the next annual meeting, to receive in lieu of the annual board
retainer an option to purchase 2,000 shares of the Company's common stock. The
aggregate exercise price for the shares covered by the option will be equal to
their fair market value immediately following the annual meeting, less $24,000.
Accordingly, if the average trading price for the common stock were to be, for
example, $30 on the day following an annual meeting, non-employee directors who
have elected to participate in the Plan would each receive an option to purchase
2,000 shares of common stock at a per share exercise price of $18. Options
granted under the Plan would not vest or become exercisable until one year
following the date of grant and would expire at the earlier of 10 years from the
date of grant or one year after the participating director ceases to be such,
except that options which are unvested at the date of any director's cessation
of director status would be rescinded and settled in cash. Upon any "change of
control," all options outstanding under the Plan would automatically vest and be
converted into an amount in cash equal to the then fair market value for the
shares covered by the option, less the option exercise price of the shares. For
this purpose, a "change of control" would occur if (i) any person acquires more
than 50% of the Company's outstanding common stock or (ii) at any time, less
than 50% of the Company's directors have not been continuously incumbent for at
least 18 months.
Management is of the view that, through operation of the Plan, the
Company's ability to continue to attract independent directors will be enhanced
and the continued service of independent directors will be encouraged by
facilitating their purchase of an equity interest in the Company at no
additional cash cost to the Company. The Plan was presented by management to and
approved by the Board in November 1993, subject to the approval of shareholders
at the 1994 annual meeting.
VOTE REQUIRED
The four nominees for election as Class II Directors at the 1994 annual
meeting who receive the greatest number of votes cast for election by the
holders of common stock of record at the close of business on March 8, 1994 (the
"record date"), shall be the duly elected Class II Directors upon completion of
the vote tabulation at the meeting, provided a majority of the outstanding
shares as of the record date are present in person or by proxy at the meeting.
The affirmative vote of the majority of the shares represented in person or by
proxy at the annual meeting is required to adopt the Plan.
Votes will be tabulated by Continental Stock Transfer & Trust Company, the
transfer agent and registrar for the common stock, and the results will be
certified by election inspectors who are required to resolve impartially any
interpretive questions as to the conduct of the vote. Any proxy containing an
abstention from voting will be sufficient to represent the shares at the meeting
for purposes of determining whether a quorum is present, but will not count as a
vote for or against any director nominee with respect to which the holder has
abstained from voting. Abstentions and broker non-votes (i.e. proxies marked to
indicate that the shares are not being voted) with respect to the proposed Plan
will have the same effect as negative votes. In tabulating votes on the proposed
plan, a record will be made of the number of shares voted for and against the
proposal, the number of shares with respect to which authority to vote has been
withheld and the number of shares held of record by broker-dealers present at
the meeting but not voting, all of which will be presented in the Company's
post-meeting report to shareholders.
6
<PAGE> 9
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at February 3, 1994 of each shareholder
who is known by the Company to own beneficially more than 5% of the outstanding
common stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES COMMON STOCK
------------------- --------- ------------
<S> <C> <C>
Floyd A. Cailloux
9600 West Gulf Bank Drive
Houston, Texas 77040.................................... 4,670,778 13.3%
Thompson, Siegel & Walmsley, Inc.
5000 Monument Avenue
Richmond, Virginia 23230................................ 1,963,420 5.6%
The State Teachers Retirement Board of Ohio
275 East Broad Street
Columbus, Ohio 43215.................................... 2,024,430 5.8%
</TABLE>
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the years ended December 31, 1993, 1992 and 1991, of those
individuals who were at December 31, 1993 (i) the chief executive officer or
(ii) an executive officer of the Company whose compensation exceeded $100,000
during 1993 (collectively, the "Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
----------------------- ALL
ANNUAL COMPENSATION RESTRICTED STOCK OTHER
--------------------------------- STOCK OPTIONS COMPEN-
NAME & PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) AWARDS(2) (SHARES) SATION(3)
------------------------- ---- -------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
R. A. LeBlanc.............................. 1993 $514,600 $ 160,800 -- $ -0- 100,000 $17,400
Chairman & Chief Executive Officer 1992 490,100 166,700 -- 1,679,696 -0- 20,300
1991 490,100 177,500 -- -0- -0- 34,800
Malcolm D. Clark........................... 1993 $337,100 $ 105,400 -- $ -0- 50,000 $11,600
President & Chief Operating Officer 1992 321,000 109,200 -- 839,836 -0- 13,500
1991 321,000 116,300 -- -0- -0- 22,900
Arthur L. French........................... 1993 $279,200 $ 86,600 -- $ -0- 25,000 $ 9,200
Executive Vice President 1992 244,800 81,600 -- -0- -0- 10,300
1991 244,800 88,200 -- -0- -0- 16,900
Mark E. Baldwin............................ 1993 $143,300 $ 33,100 -- $ 30,343 -0- $ 4,700
Vice President & Chief Financial Officer 1992 124,700 31,200 -- 8,485 10,000 5,000
1991 124,700 31,100 -- 20,532 -0- 8,100
</TABLE>
- - ---------------
(1) The Company provides to certain of its Executive Officers benefits
consisting of payments under its medical reimbursement plan, personal use
of Company cars and club memberships, limited legal and accounting
services and other personal benefits. Since the value of such benefits
did not exceed the lesser of $50,000 or 10% of annual compensation for
any individual, amounts are omitted.
(2) Represents the aggregate value of restricted stock grant awards, based
upon the closing price for the common stock on the New York Stock
Exchange on the date of grant. All grants have been made subject to
forfeiture to the extent not vested upon any voluntary termination prior
to complete vesting five to seven years following the date of award and
to other customary restrictions under the Company's 1985 Incentive Stock
Plan. Restricted stock grant recipients are entitled to receive all cash
and stock dividends paid with respect to their shares. The total value of
year-end holdings of restricted stock at December 31, 1993, based upon
the closing price for the common stock on the New York Stock Exchange on
the date of grant, was as follows: R. A. LeBlanc $1,679,696, Malcolm D.
Clark $839,836, Arthur L. French $19,719, and Mark E. Baldwin $78,116.
(3) Represents contributions by the Company for the accounts of the named
individuals under defined contribution retirement plans in which
substantially all domestic employees participate and premiums paid by the
Company on behalf of the named individuals for term life insurance.
7
<PAGE> 10
OPTION GRANTS
The following table sets forth additional information with respect to stock
options granted in 1993 under the Company's 1985 Incentive Stock Plan to the
named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF STOCK
OPTIONS EXERCISE PRICE APPRECIATION
GRANTED TO OR BASE FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ------------------------
NAME GRANTED(1) IN 1993 SHARE DATE 5% 10%
---- --------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. A. LeBlanc............... 100,000 38.0% $24.625 1/4/2003 $1,487,569 $3,827,325
Malcolm D. Clark............ 50,000 19.0% 24.625 1/4/2003 743,785 1,913,663
Arthur L. French............ 25,000 9.5% 24.625 1/4/2003 371,892 956,831
Mark E. Baldwin ............ -0- -- -- -- -- --
All Executive
Officers (4 persons)...... 175,000 66.5% 24.625 1/4/2003 $2,603,246(3) $6,697,819(3)
</TABLE>
- - ---------------
(1) Granted on January 4, 1993. If a "change of control" were to occur prior
to exercise or expiration of the option, the entire option would
automatically be converted into an amount of cash equal to any unrealized
appreciation in the option.
(2) Potential values stated are based upon the assumption that the Company's
common stock will appreciate in value from the date of grant to the end
of the option term at the stated annualized rates (total appreciation of
63% and 159%, respectively). Such assumed rates of appreciation and
potential realizable values are not necessarily indicative of the
appreciation, if any, which may be realized in future periods.
(3) Based upon assumed annual rates of stock price appreciation of 5% and
10%, the aggregate market capitalization of the Company's outstanding
common stock would have increased by approximately $520 million and $1.3
billion, respectively. Accordingly, the optionees' gain as a percentage
of all shareholders' gain, based upon these assumed rates of
appreciation, would be .5%.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the unexercised
options to purchase shares of common stock which were granted in 1993 or prior
years under the Company's 1985 Incentive Stock Plan to the Executive Officers
and held by them at December 31, 1993. None of the named Executive Officers
exercised any stock options during 1993.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY
HELD AT YEAR END OPTIONS AT YEAR END(1)
----------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
R. A. LeBlanc.................... -0- 100,000 $ -0- $ 275,000
Malcolm D. Clark................. -0- 50,000 -0- 137,500
Arthur L. French................. -0- 25,000 -0- 68,750
Mark E. Baldwin.................. -0- 15,000 -0- 63,438
</TABLE>
- - ---------------
(1) Represents the difference between the closing price for the common stock
on the New York Stock Exchange on December 31, 1993 and any lesser
exercise price.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for 1993:
Under the supervision of the Compensation Committee, the Company has long
sought to maintain and enhance its profitability, and thus the value of its
common stock, by relating overall executive compensation and stock-based
benefits to its financial performance. In general, executive financial rewards
may be segregated into the following significant components: salary, bonus, and
stock ownership and other benefit plans.
Salary for senior executives (including the Chief Executive Officer and the
other "Executive Officers") is intended to be competitive with that paid in
comparably situated industries, with a reasonable degree of financial security
and flexibility afforded to those individuals who are regarded by the Board of
Directors as acceptably discharging the levels and types of responsibility
implicit in the various senior executive positions. In furtherance of this
objective, the Compensation Committee periodically, though not necessarily
annually, reviews the salary levels of a nonscientific sampling of companies
which are regarded by the Committee as having sufficiently similar financial and
operational characteristics to provide a reasonable basis for comparison. Though
no attempt is made to specifically "index" executive salary to that offered by
any particular sampling of companies, whether classified by geographic locale,
level of revenues or income, industry type or competitive position within a
particular industry, all are considered as useful benchmarks in administering
the Company's salary policy. In general, however, the Committee's principal
concern is with establishing compensation programs and setting executive
compensation at levels which are reflective of those prevailing in the flow
control industry for similar executive positions, with appropriate consideration
for the credentials, age, experience, and consistent performance of the
individual senior executives, as viewed in the Compensation Committee's
collective best judgment, which necessarily involves subjective as well as
objective elements.
Utilizing the criteria set forth above, the Compensation Committee
authorized for 1993 the following increases in salary for Executive Officers:
Mr. LeBlanc -- 5%; Mr. Clark -- 5%; Mr. French -- 15%; and Mr. Baldwin -- 15%.
While the Committee had approved 5% salary increases for the prior year, the
Executive Officers declined those increases since management had imposed a
salary freeze on all other North American salaries for that year. In light of
Mr. LeBlanc's prior salary history and the factors discussed in the preceding
paragraph, the Committee regarded the 5% increase in salary for 1993 to be
entirely appropriate. It made no effort to relate the salary of Mr. LeBlanc to
any element of corporate performance, because salary is not intended to be
quantitatively related to the Company's performance. Similarly, an incremental
5% of the raises awarded for 1993 to the other Executive Officers merely
reflected a moderate increase in salary for executives who, in the collective
best subjective judgment of the Committee, had clearly exceeded minimum
expectations for the positions involved. In the case of Messrs. French and
Baldwin, the additional 10% incremental raises were a reflection of the
acceptance by them of greater management responsibilities commensurate with
increased tenure and experience in their respective positions.
Annual bonuses reflect a policy of requiring a minimum level of Company
financial performance for the year before any bonuses are earned by senior
executives, with bonuses for achieving higher levels of performance directly
related to the level achieved. In setting such performance criteria, the
Committee considers the total compensation payable or potentially available to
the Executive Officers and other senior executives. While the development of any
business necessarily involves factors other than profitability, the Board's
primary emphasis in recent years has been on encouraging management to
concentrate on continuing the Company's historical increases in profitability.
Accordingly, in establishing the annual bonus program (which is set forth in
executive pay plans established by the Committee prior to the beginning of each
year), the Compensation Committee has tied potential bonus compensation to the
Company's return on assets. Under the bonus program for 1993, senior executives
were entitled to bonuses ranging from zero, if a 6% qualifying "threshold"
return on assets had not been achieved, and increasing on an arithmetic scale
with the Company's performance to a limit of 100% of salary if a predetermined
16% "maximum" return on assets had been met or exceeded. Based upon the
Company's 9% return on assets achieved in 1993, Mr. LeBlanc and the other
Executive Officers earned bonuses equal to 29% (22%, in the case of Mr. Baldwin)
of salary for the year. Although the "threshold" and "maximum" returns may be
adjusted from year-to-year to reflect current and
9
<PAGE> 12
foreseeable industry conditions, no adjustments were made by the Committee for
1993. While the Board may in the future consider that the continuing orderly
development of the Company's business would best be served at that time by
weighing bonus calculations to include performance criteria other than return on
assets, this has not been the case for the past three years. Accordingly, bonus
compensation for 1994 will continue to be measured exclusively on a
return-on-assets basis.
The Board of Directors is of the view that properly designed and
administered stock-based incentives for senior executives closely align the
executives' economic interests with those of shareholders and provide a direct
and continuing focus upon the goal of constantly striving to increase long-term
shareholder value. Accordingly, the Compensation Committee follows a policy of
making large stock option grants ("jumbo grants") only every fifth year to
senior executives. In the normal sequence, jumbo options were granted during
1993 to Messrs. LeBlanc, Clark and French. In the view of the Committee, the
Chief Executive Officer should be the principal beneficiary of long-term,
stock-based incentive compensation since he is the executive charged with
primary responsibility for establishing and implementing programs intended to
promote the long-term best interests of the Company, while the other senior
executives' primary focus should be shorter term. In setting the size of each
grant, it is the goal of the Committee to make the grants of such a size that
the potential incentive is sufficiently large to ensure the appropriate focus.
Thus, if over the five years prior to the earliest date at which the jumbo
options become exercisable, corporate performance is such as (for example) to
result in a doubling of the market price of the Company's common stock, 1993
jumbo options would then have unrealized values of $2,462,500, $1,231,250 and
$615,625 for Messrs. LeBlanc, Clark and French, respectively. At the same time,
the value of the Company's outstanding common stock at the date of the jumbo
option grants would have increased by an aggregate of approximately $860
million, without reinvestment of dividends.
The Company also maintains defined contribution retirement plans which are
fully funded by annual contributions of a percentage of Company income for the
benefit of substantially all domestic employees, including Executive Officers.
The profit-sharing percentages are uniformly applied to all participating
employees, with the only variances in annual credits to individual employee
accounts attributable to an employee's compensation and years of service with
the Company, and to differences in the profitability of the Company's domestic
operating divisions. For purposes of the divisional profitability component,
contributions for the accounts of Executive Officers are measured by the average
profitability of the entire Company.
THE COMPENSATION COMMITTEE
Martin E. Hamilton, Chairman
Paul C. Koomey
Allen F. Rhodes
10
<PAGE> 13
COMMON STOCK PERFORMANCE GRAPH
The following graph illustrates the yearly change in the cumulative total
shareholder return on the Company's common stock, compared with the cumulative
total return on (i) the Standard & Poor's 500 Stock Index and (ii) the Fluid
Controls Group Index maintained by a prominent money management firm, for the
five years ended December 31, 1993:(1)
<TABLE>
<CAPTION>
Keystone In-
Measurement Period ternational, Fluid Con-
(Fiscal Year Covered) Inc. S&P 500 trols Group(2)
--------------------- ----------- ------- --------------
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 144.19 131.69 98.87
1990 175.53 127.60 94.25
1991 202.67 166.47 122.52
1992 183.41 179.15 130.42
1993 205.31 197.21 156.23
</TABLE>
(1) Tabular data assumes that the value of the investment in Keystone common
stock and each index was $100.00 at December 31, 1988 and that all
dividends were reinvested.
(2) Consists of: BWIP Holding, Inc.; The Duriron Company, Inc.; Gorman-Rupp
Company; Goulds Pumps, Inc.; Graco, Inc.; IDEX Corp.; Moorco
International Inc.; Parker-Hannifin Corporation; TRINOVA Corp.; Watts
Industries, Inc; and Wheatley TXT Corp.
CERTAIN TRANSACTIONS
In May 1989, the Company sold its Texas Microsystems and BriskHeat
divisions to a company indirectly owned in part by W. Wayne Patterson, a
director of the Company, for cash, notes and other securities valued at
approximately $12,000,000, including $4,750,000 aggregate principal amount of
subordinated indebtedness. Of this amount, $4,250,000 is payable in installments
which commenced in 1993 and are scheduled to end in 1997, when the remaining
$500,000 is also due. All interest payments due through 1993 were made at or
prior to maturity, and the outstanding principal balance of the indebtedness has
been reduced to $3,607,000 at December 31, 1993. The terms of the transactions
were evaluated for the Company by Merrill Lynch Capital Markets, which rendered
its opinion thereon that the consideration received was fair from a financial
point of view. Management is of the opinion that the terms of the transactions
were at least as favorable to the Company as could have been obtained from
unaffiliated purchasers.
Floyd A. Cailloux, a director and retired Chairman of the Board, provides
consulting services to the Company upon request under arrangements which
contemplate the payment of annual consulting fees of $48,000 and reimbursement
for office accommodations and automobile and other miscellaneous expenses
aggregating approximately $40,000 annually.
11
<PAGE> 14
AUDITORS
Arthur Andersen & Co., a certified public accounting firm, has served as
the independent auditor of the Company for a number of years. While management
anticipates that this relationship will continue to be maintained during 1994,
no formal action is proposed to be taken at the annual meeting with respect to
the continued employment of Arthur Andersen & Co. inasmuch as no such action is
legally required. A representative of Arthur Andersen & Co. plans to attend the
annual meeting and will be available to answer appropriate questions. The
representative also will have an opportunity to make a statement at the meeting
if he so desires, although it is not expected that any statement will be made.
The Audit Committee of the Board of Directors assists the Board in assuring
that the accounting and reporting practices of the Company are in accordance
with all applicable requirements. The Committee reviews with the auditors the
scope of the proposed audit work and meets with the auditors to discuss matters
pertaining to the audit and any other matter which the Committee or the auditors
may wish to discuss. In addition, the Audit Committee would recommend the
appointment of new auditors to the Board of Directors if future circumstances
were to indicate that such action is desirable.
LIMITATION ON INCORPORATION BY REFERENCE
Notwithstanding any reference in prior or future filings of the Company
with the Securities and Exchange Commission which purports to incorporate this
proxy statement by reference into another filing, such incorporation shall not
include any material included herein under the captions "Other Information --
Compensation Committee Report" or "Other Information -- Common Stock Performance
Graph."
OTHER MATTERS
The annual report to shareholders covering the year ended December 31, 1993
has been mailed to each shareholder entitled to vote at the annual meeting or
accompanies this proxy statement.
Any shareholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1995 annual
meeting of shareholders is required to submit such proposals in writing to the
Secretary of the Company and must be received on or before November 18, 1994.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, several regular employees of
the Company may solicit proxies in person or by telephone.
The persons designated as proxies to vote shares at the meeting intend to
exercise their judgment in voting such shares on other matters that may properly
come before the meeting. Management does not expect that any matters other than
those referred to in this proxy statement will be presented for action at the
meeting.
By Order of the Board of Directors:
/s/ DONNA D. MOORE
____________________________________
Donna D. Moore
Secretary
March 17, 1994
12
<PAGE> 15
THIS MAP SHOWING THE LOCATION OF THE JUNIOR LEAGUE OF HOUSTON IS PROVIDED
FOR THE CONVENIENCE OF SHAREHOLDERS ATTENDING THE 1994 ANNUAL MEETING.
COMPLIMENTARY PARKING WILL BE PROVIDED. IN CASE OF ANY DIFFICULTY, PLEASE
TELEPHONE THE COMPANY AT (713) 466-1176.
[MAP TO BE AFFIXED]
<PAGE> 16
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KEYSTONE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 4, 1994
The undersigned hereby appoints R.A. LeBlanc and Mark E.
Baldwin, or either of them, each with power of substitution,
attorneys and proxies of the undersigned to vote all shares of
common stock of Keystone International, Inc. ("Company") which the
undersigned is entitled to vote at the annual meeting of
shareholders to be held on May 4, 1994, at The Junior League of
Houston, 1811 Briar Oaks Lane, Houston, Texas 77027 at 10:00 a.m.,
Houston time, and at any adjournment thereof.
1. / / FOR the election (except as indicated below) of
Arthur L. French, Farrell G. Huber, Jr., R.A. LeBlanc
and Allen F. Rhodes as "Class II" Directors.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT
NOMINEE'S NAME ON THE LINE PROVIDED
BELOW.
------------------------------------------
2. / / FOR / / AGAINST / / ABSTAIN
the adoption of the 1994 Directors' Stock Option Plan
for non-employee directors.
3. In their discretion, upon such other matters (including
procedural and other matters relating to the conduct of
the meeting) as may properly come before the meeting and
any adjournment thereof.
All as described in the Notice of Annual Meeting of Shareholders
and Proxy Statement, receipt of which is hereby acknowledged.
(PLEASE DATE AND SIGN ON REVERSE SIDE)
- - --------------------------------------------------------------------------------
<PAGE> 17
- - --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOUR DIRECTOR
NOMINEES AND A VOTE "FOR" THE ADOPTION OF THE 1994 DIRECTORS' STOCK
OPTION PLAN ("PLAN"). THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREON. IF NO CONTRARY SPECIFICATION IS MADE, THE
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTOR NOMINEES AND "FOR"
THE ADOPTION OF THE PLAN.
Dated this ... day of......., 1994
..................................
..................................
Signature(s) of Shareholder
Please sign exactly as your
name appears hereon. All
joint owners must sign. When
signing as executor,
administrator, trustee or
other representative, please
give your full title. If the
shares are registered in the
name of a corporation,
partnership, or other entity,
a duly authorized individual
must sign on its behalf and
give his or her title.
PLEASE DATE, SIGN AND MAIL
YOUR PROXY PROMPTLY.
PLEASE DO NOT FOLD THIS
PROXY.
- - --------------------------------------------------------------------------------
