<PAGE>
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:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-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 Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(i)(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:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
/1/Set forth the amount on which the filing fee is calculated and state how it
was determined.
[_] 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: _____________________________________________________________
<PAGE>
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
MARCH 20, 1995
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 3, 1995, 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 canceled 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,
[Signature of R.A. LeBlanc appears here]
R. A. LeBlanc
Chairman of the Board of Directors
<PAGE>
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 3, 1995
---------------------
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 3, 1995, at
10:00 a.m., Houston time, for the following purposes:
1. To elect three Class III Directors to serve until the third annual
meeting of shareholders following their election and until their
successors are elected and qualified;
2. 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 7, 1995 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
[SIGNATURE OF DONNA D. MOORE APPEARS HERE]
DONNA D. MOORE
Secretary
March 20, 1995
<PAGE>
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 21, 1995, 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 3, 1995, 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 ELECTION OF THE NOMINEES
NAMED HEREIN TO THE BOARD OF DIRECTORS. Any proxy may be revoked at any time
before its exercise by written notice of the person giving the proxy.
As of March 7, 1995, the record date for the determination of shareholders
entitled to vote at the meeting, there were outstanding and entitled to vote
35,318,178 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, three Class III 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
III Directors. All of the Class III nominees previously have been elected
directors by the shareholders, except for Mr. Griffin who was appointed in
November 1993 to fill a vacancy on the Board. 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 II Directors, whose terms are not
expiring at the 1995 annual meeting, is set forth below:
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
ON
FEBRUARY 28,
1995(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 (IF REELECTED) WILL EXPIRE IN 1998
Floyd A. Cailloux
(2)(3)................. Director 81 1968 4,664,978 13.2%
Bob G. Gower(4)......... Director 57 1993 4,000 *
F. O'Neil Griffin(3)(5). Director 68 1993 3,200 *
CLASS I DIRECTORS WHOSE TERM WILL EXPIRE IN 1996
Martin E. Hamilton(2)(5) Director 82 1977 93,611(6) .3%
Dale P. Jones(3)........ Director 58 1994 1,200 *
W. Wayne
Patterson(4)(5)........ Director 51 1984 1,139,212(6) 3.2%
Wallace S. Wilson(5).... Director 64 1974 37,918 .1%
CLASS II DIRECTORS WHOSE TERM WILL EXPIRE IN 1997
Arthur L. French........ Director and Executive 54 1991 7,192 *
Vice President
Farrell G. Huber,
Jr.(2)(3).............. Director 62 1980 1,129,789(6) 3.2%
R. A. LeBlanc(2)........ Chairman of the Board 65 1970 661,431(6) 1.9%
and Chief Executive Officer
Allen F. Rhodes(2)(4)... Director 70 1980 4,516 *
</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) 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; 4,440 shares held by various trusts of which Mr.
Hamilton is a trustee; and 428,416 shares, or 1.2% of the class outstanding
held in the Company's Employees' Stock Ownership Plan of which Mr. LeBlanc
is a Trustee. Messrs. Patterson, Huber, Hamilton and LeBlanc disclaim
beneficial interest in such shares.
*Less than 1/10th of 1% of outstanding shares.
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.
Bob G. Gower is chairman of the board and chief executive officer of Lyondell
Petrochemical Company. Prior to his promotion as chairman in 1994, he had
served as president and chief executive officer since 1988.
F. O'Neil Griffin is a private investor. He was chairman and owner of First
National Bank of Kerrville, which he purchased in 1984, until its merger with
Norwest Corporation in December 1994. Mr. Griffin was appointed a director in
November 1993 to fill the vacancy on the board resulting from the retirement of
Paul C. Koomey.
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.
2
<PAGE>
Martin E. Hamilton is a private investor.
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.
Dale P. Jones joined Halliburton Company in 1965 and was elected to his
present position of president in 1989. Mr. Jones also serves on Halliburton
Company's executive committee and board of directors. Mr. Jones was appointed a
director in July 1994 to fill the vacancy on the board resulting from the
resignation of Donato F. Raimondi.
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.
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 -- Compensation Committee Report on Executive
Compensation--Insider Participation in Compensation Decisions"). 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.
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.
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 1994, the Board of Directors convened on six regularly scheduled
occasions. Committees of the Board held meetings as follows: Executive
Committee -- seven meetings; Audit Committee -- two meetings; Compensation
Committee -- four meetings; and Committee on Directors -- one meeting. Each
director attended all meetings of the Board and each committee on which he
served during the year, other than Messrs. Gower and Griffin, each of whom were
unable to attend one board 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 senior 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 such 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
3
<PAGE>
and developing a pool of potential future board nominees. Shareholders 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 $1,000 for each meeting
attended. Under the 1994 Directors' Stock Option Plan approved by the
shareholders last year, a director may elect to take his retainer in the form
of a discounted stock option. Board members also receive meeting fees of
$1,000 for service on board committees, and the chairman of each Committee
receives an additional annual retainer fee of $4,800. Compensation paid to
non-employee directors during 1994 for service in all such capacities
aggregated $209,500, which does not include retainer fees totaling $98,000 to
be issued in the form of discounted stock options in June 1995 under the 1994
Directors' Stock Option Plan. 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. To be eligible to receive
benefits under the retirement plan, one of the following must apply: (i) a
member has completed 10 years of service as an outside director, (ii) a member
has reached age 70, or (iii) a member dies while serving on the board. If a
member dies while serving on the Board, the member's eligible surviving spouse
would receive any benefits to which the member was entitled. In 1994, the
Company made aggregate payments of $72,000 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 41, who has served as
Vice President and Chief Financial Officer since 1989.
MANAGEMENT SHAREHOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at February 28, 1995 of (i) all
directors of the Company (including executive officers who are also directors
and all nominees for election at the 1995 annual meeting), (ii) each other
executive officer whose compensation exceeded $100,000 in 1994, and (iii) all
directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND
BENEFICIAL NATURE OF PERCENT OF
OWNER BENEFICIAL OWNERSHIP COMMON STOCK
---------- -------------------- ------------
<S> <C> <C>
Floyd A. Cailloux............................ 4,664,978 13.2%
Arthur L. French............................. 7,192 *
Bob G. Gower................................. 4,000 *
F. O'Neil Griffin............................ 3,200 *
Martin E. Hamilton........................... 93,611(1) .3%
Farrell G. Huber, Jr......................... 1,129,789(1) 3.2%
Dale P. Jones................................ 1,200 *
R. A. LeBlanc................................ 661,431(1) 1.9%
W. Wayne Patterson........................... 1,139,212(1) 3.2%
Allen F. Rhodes.............................. 4,516 *
Wallace S. Wilson............................ 37,918 .1%
Mark E. Baldwin.............................. 443,778(1)(2) 1.2%
All directors and executive officers as a
group (12 persons named above).............. 6,645,497(3) 18.8%
</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; Mr.
Hamilton-- 4,440 shares; Mr. LeBlanc -- 428,416 shares; and Mr. Baldwin --
428,416 shares.
(2)Includes currently exercisable stock option covering 5,000 shares.
(3)Includes, without duplication, all shares referred to in Note 1 above.
*Less than 1/10th of 1% of outstanding shares.
4
<PAGE>
VOTE REQUIRED
The three nominees for election as Class III Directors at the 1995 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 7, 1995
(the "record date"), shall be the duly elected Class III 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.
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.
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at December 31, 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......................... 4,664,978 13.2%
FMR Corporation
82 Devonshire Street Boston,
Massachusetts 02109.......................... 4,588,300 13.0%
The State Teachers Retirement Board of Ohio
275 East Broad Street
Columbus, Ohio 43215......................... 3,091,230 8.8%
Thompson, Siegel & Walmsley, Inc.
5000 Monument Avenue
Richmond, Virginia 23230..................... 1,861,077 5.3%
</TABLE>
5
<PAGE>
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the years ended December 31, 1994, 1993 and 1992, of those
individuals who were at December 31, 1994 (i) the chief executive officer or
(ii) an executive officer of the Company whose compensation exceeded $100,000
during 1994 (collectively, the "Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------ ------------------
RESTRICTED STOCK ALL OTHER
STOCK OPTION 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............ 1994 $532,600 $ 83,900 -- $ -0- -0- $16,775
Chairman & Chief 1993 514,600 160,800 -- -0- 100,000 17,400
Executive Officer 1992 490,100 166,700 -- 1,679,696 -0- 20,300
Malcolm D. Clark(4)...... 1994 $348,900 $ 55,000 -- $ -0- -0- $10,775
President & Chief 1993 337,100 105,400 -- -0- 50,000 11,600
Operating Officer 1992 321,000 109,200 -- 839,836 -0- 13,500
Arthur L. French......... 1994 $286,900 $ 45,200 -- $ 35,162 50,000 $ 8,375
Executive Vice President 1993 279,200 86,600 -- -0- 25,000 9,200
1992 244,800 81,600 -- -0- -0- 10,300
Mark E. Baldwin ......... 1994 $148,100 $ 17,600 -- $ 69,329 -0- $ 4,375
Vice President & Chief 1993 143,300 33,100 -- 30,343 -0- 4,700
Financial Officer 1992 124,700 31,200 -- 8,485 10,000 5,000
</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. Because 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 ten 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 number of year-end holdings of
restricted stock, and the value of such holdings based upon the closing
price for the common stock on the New York Stock Exchange at December 31,
1994 of $17.25, were as follows: R. A. LeBlanc--68,559 shares--$1,182,643;
Malcolm D. Clark--34,279 shares--$591,313; Arthur L. French--2,435 shares--
$42,004; and Mark E. Baldwin--6,011 shares--$103,690.
(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.
(4) Resigned February 20, 1995.
OPTION GRANTS
The following table sets forth additional information with respect to stock
options granted in 1994 under the Company's 1985 Incentive Stock Plan to the
named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED RATES
PERCENTAGE OF STOCK PRICE
OF TOTAL EXERCISE APPRECIATION FOR
OPTIONS OR BASE OPTION TERM
GRANTED TO PRICE (2)(3)
OPTIONS EMPLOYEES PER EXPIRATION -----------------
NAME GRANTED(1) IN 1994 SHARE DATE 5% 10%
---- --------- ---------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
R. A. LeBlanc........... -0-
Malcolm D. Clark(4)..... -0-
Arthur L. French........ 50,000 28.0% $19.3125 8/16/2004 602,186 1,530,852
Mark E. Baldwin......... -0-
All Executive Officers
(4 persons)............ 50,000 28.0% $19.3125 8/16/2004 602,186 1,530,852
</TABLE>
- --------
(1) Granted on August 16, 1994. 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.
6
<PAGE>
(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 $425 million and $1.1 billion,
respectively. Accordingly, the optionees' gain as a percentage of all
shareholders' gain, based upon these assumed rates of appreciation, would
be .14%.
(4) Resigned February 20, 1995.
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 1994 or prior
years under the Company's 1985 Incentive Stock Plan to the Executive Officers
and held by them at December 31, 1994. None of the named Executive Officers
exercised any stock options during 1994.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-
OPTIONS HELD AT YEAR END MONEY OPTIONS AT YEAR END
------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
R. A. LeBlanc........... -0- 100,000 $ -0- $ -0-
Malcolm D. Clark(1)..... -0- 50,000 -0- -0-
Arthur L. French........ -0- 75,000 -0- -0-
Mark E. Baldwin......... -0- 15,000 -0- -0-
</TABLE>
- --------
(1) Resigned February 20, 1995.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") has
furnished the following report on executive compensation for 1994. Except with
respect to stock option grants, all elements of compensation for 1994 were
approved by the Committee on November 2, 1993, and ratified without change by
the Board of Directors on November 17, 1993.
Under the supervision of the 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 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 by
durable goods manufacturers of comparable size, 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 and
is not intended to be quantitatively related to any element of the Company's
financial performance. In furtherance of these objectives, the Committee
periodically, though not necessarily annually, reviews the salary levels of a
sampling of companies regarded by the Committee as having sufficiently similar
characteristics to provide a reasonable basis for comparison. For example,
salaries authorized to be paid during 1994 to the company's three most highly
compensated operating officers were within the third quartile of salaries paid
in 1993 for comparable positions with companies included in the Wyatt Data
Services 1993 compensation survey of durable goods manufacturers in the $500
million to $1.25 billion revenue category (the "Wyatt Survey"), and the 1994
authorized salary for the Company's chief financial officer would have been in
the first quartile of the Wyatt Survey, reflecting his lesser tenure in a
7
<PAGE>
position of senior executive responsibility. Notwithstanding comparisons with
the Wyatt Survey, the Committee does not specifically "index" executive salary
to that offered by any particular sampling of companies, although it regards
such comparisons as useful benchmarks in administering the Company's salary
policy. The Wyatt Survey includes a broader range of companies than are
included in the "Fluid Controls Group" used by the Company for purposes of
stock performance comparability, since the latter grouping consists of direct
competitors against whose financial and market performance the Company's
performance can be most directly measured, while the Wyatt Survey encompasses a
broader range of manufacturers, many of whom are likely to compete with the
Company only for qualified executive personnel. Against this backdrop, the
Committee intends that the Company's Executive Officers be compensated through
salary levels that are sufficiently high to discourage the recruiting of
Company executives by other manufacturers, and also considers the credentials,
age, experience and consistent performance of the individual senior executives,
as viewed in the Committee's collective best judgment, all of which necessarily
involve subjective as well as objective elements.
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, the Compensation
Committee has tied potential bonus compensation to the Company's return on
assets. Under the bonus program established for 1994, senior executives were
entitled to bonuses ranging from zero, if a 7% 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 13%
"maximum" return on assets had been met or exceeded. The respective minimum and
maximum bonus measurement points were increased by one percentage point and
decreased by three percentage points, compared with prior year's bonus criteria
after extensive discussion between management and the Committee during 1993.
The new bonus criteria reflect the Committee's resolve that the hurdle for any
bonus consideration should be raised and its concurrence with management's
belief that the maximum bonus measurement point should be realistically
attainable under prevailing worldwide economic conditions. The Committee
concluded that the previous 16% return-on-assets maximum bonus level had become
unrealistically high in light of a virtual doubling of the Company's size
during the five-year duration of the previous formula and determined that the
new maximum bonus measurement point of 13% return on assets represented a
reasonable and attainable level at which maximum executive bonuses would be
earned. Based upon the Company's 7.8% return on assets achieved in 1994, Mr.
LeBlanc and the other senior operating officers within the Executive Officer
group earned bonuses equal to 13.8% of salary for the year; as provided in his
pay plan, Mr. Baldwin (the Company's chief financial officer) earned a bonus of
10.4% of salary and received a restricted stock grant covering approximately
400 shares of common stock. The Committee may in the future consider that the
continuing orderly development of the Company's business would best be served
at that time by weighting bonus calculations differently than at present or by
including performance criteria other than return on assets and, subject to any
necessary Board concurrence, reserves the right to do so when in its best
collective judgment such adjustments might be expected to result in enhanced
operating results for the Company.
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 and to that end the committee has followed a general policy
of awarding large stock option grants only every fifth year to senior
executives, most recently in 1993. However, the Committee deviated from the
general policy in 1994 and awarded Mr. French an option for 50,000 shares and a
restricted stock grant for 1,626 shares. The awards to Mr. French were in
recognition of his acceptance of worldwide operating responsibility for the
Company's safety and environmental, controls and specialty products divisions,
in addition to retaining other
8
<PAGE>
staff and operating responsibilities. In light of the significance of these
business units to the overall success of the Company, the Committee is of the
view that such an incentive represents an economically efficient method to
reward any exceptional future performance at no cash cost to the Company. Mr.
Baldwin was awarded a restricted stock grant for 3,000 shares in 1994 to
recognize his continued development as the Company's chief financial officer
and, in particular, his contributions to the Company's long-term strategic
financial planning process.
The Company also maintains defined contribution retirement plans which are
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.
Preservation of Tax Deductibility of Executive Compensation. The Internal
Revenue Code (the "Code") generally disallows a tax deduction to public
corporations for compensation payments to the corporation's chief executive
officer and its four other most highly compensated executive officers in excess
of a $1 million individual annual limitation. Such excess payments may continue
to be deducted, however, if they are (i) performance based, as established by a
compensation committee consisting solely of "outside" directors, (ii) approved
by shareholders prior to payment, and (iii) certified by such a compensation
committee (subject to certain exceptions) as payable due to the satisfaction of
the performance goals. When and as it may appear to the Committee that
compensation might likely be earned by any Executive Officer in excess of the
permissible limits under any compensation program in effect for the ensuing
year, the Committee and the Board of Directors intend to submit the same to
shareholders for approval at the relevant annual meeting of shareholders and to
comply with any other applicable requirements of the Code, so as to secure for
the Company the deductibility of the entire amount of such compensation. Under
applicable regulations, any director serving on a public corporation's
compensation committee who was previously employed by the company will cease to
be an "outside" director for purposes of qualifying excess compensation
payments for deductibility, effective with the corporation's first
shareholders' meeting at which directors are elected after January 1, 1996.
Insider Participation in Compensation Decisions. W. Wayne Patterson served
for a number of years as the Company's executive vice president and chief
financial officer prior to his resignation in 1989 to participate in the
acquisition of certain businesses from the Company; however, Mr. Patterson has
continued to serve as a director of the Company and in 1993 was appointed to
fill a vacancy on the Compensation Committee of the Board of Directors. In such
capacity, he participated in all Committee deliberations relating to the
formulation of executive compensation policies for 1994 and the administration
of such policies.
In May 1989, the Company's Texas Microsystems and BriskHeat divisions were
sold to a corporation indirectly owned in part by Mr. Patterson 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 was payable in installments which commenced in 1993 and were
scheduled to end in 1997, but the entire remaining balance on the installment
note was retired during 1994. A $500,000 zero coupon note payable in 1997
remains outstanding. 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.
THE COMPENSATION COMMITTEE
Allen F. Rhodes, Chairman
Bob G. Gower
Martin E. Hamilton
W. Wayne Patterson
9
<PAGE>
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 the Standard & Poor's 500 Stock Index and a Peer Group, which
is referred to as the Fluid Controls Group, for the five years ended
December 31, 1994. The Fluid Controls Group is comprised 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. and Watts Industries, Inc. Wheatley TXT Corp. had been in this
group, but was merged with Dresser Industries during 1994 and has been removed
from the group. The graph assumes that the value of the investment in the
Company's common stock and each index was $100.00 at December 31, 1989 and that
all dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Keystone International, Inc...... $100.00 $121.73 $140.56 $127.20 $142.38 $92.82
S&P 500.......................... 100.00 96.89 126.42 136.05 149.76 151.74
Peer Group....................... 100.00 95.33 124.58 133.48 159.20 163.28
</TABLE>
CERTAIN TRANSACTIONS
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.
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 1995,
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.
10
<PAGE>
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, 1994
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 1996 annual
meeting of shareholders is required to submit such proposal in writing to the
Secretary of the Company on or before November 17, 1995.
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
[SIGNATURE OF DONNA D. MOORE APPEARS HERE]
DONNA D. MOORE
Secretary
March 20, 1995
11
<PAGE>
THIS MAP SHOWING THE LOCATION OF THE JUNIOR LEAGUE OF HOUSTON IS PROVIDED FOR
THE CONVENIENCE OF SHAREHOLDERS ATTENDING THE 1995 ANNUAL MEETING.
COMPLIMENTARY PARKING WILL BE PROVIDED. IN CASE OF ANY DIFFICULTY, PLEASE
TELEPHONE THE COMPANY AT (713) 466-1176.
[Area map of Houston showing meeting location appears here]
<PAGE>
KEYSTONE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 3, 1995
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 3, 1995, 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 Floyd A. Cailloux, Bob
G. Gower and F. O'Neil Griffin, as "Class III" Directors.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE LINE PROVIDED BELOW.
------------------------------------------------------------------
2. 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)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE THREE DIRECTOR NOMINEES.
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.
Dated this ... day of .........., 1995
......................................
......................................
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.
