<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:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
KEYSTONE INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
KEYSTONE INTERNATIONAL, INC.
9600 WEST GULF BANK DRIVE
HOUSTON, TEXAS 77040
MARCH 18, 1996
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 1, 1996, 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,
/s/ NISHAN TESHOIAN
Nishan Teshoian
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 1, 1996
---------------------
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 1, 1996, at
10:00 a.m., Houston time, for the following purposes:
1. To elect four Class I 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 5, 1996 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 18, 1996
<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 18, 1996, 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 1, 1996, 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 5, 1996, the record date for the determination of shareholders
entitled to vote at the meeting, there were outstanding and entitled to vote
35,453,262 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 I 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
I Directors. All of the Class I nominees previously have been elected directors
by the shareholders, except for Constantine S. Nicandros, who has been nominated
by the Board to replace Martin E. Hamilton, who is retiring. 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 II and Class III Directors, whose terms are not
expiring at the 1996 annual meeting, is set forth below:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED ON
FEBRUARY 28, 1996(1)
-----------------------
PRINCIPAL POSITION DIRECTOR PERCENT
NAME WITH THE COMPANY AGE SINCE SHARES OF CLASS
- ------------------------------- ------------------ --- -------- -------- ---------
CLASS I DIRECTORS WHOSE TERM (IF ELECTED) WILL EXPIRE IN 1999
<S> <C> <C> <C> <C> <C>
Dale P. Jones(2)............... Director 59 1994 1,200 *
Constantine S. Nicandros....... Nominee 62 -- 2,000 *
W. Wayne Patterson (3)(4)...... Director 52 1984 1,141,212(6)(7) 3.2%
Wallace S. Wilson(4)........... Director 65 1974 37,918(6) .1%
</TABLE>
(Continued on following page)
<PAGE> 5
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
OWNED ON
FEBRUARY 28, 1996(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 WILL EXPIRE IN 1997
Arthur L. French............... Director and Executive 55 1991 8,771(6) *
Farrell G. Huber, Director 63 1980 1,130,236(7) 3.2%
Jr.(2)(5)....................
Allen F. Rhodes(3)(5).......... Director 71 1980 6,516(6) *
Nishan Teshoian(5)............. Chairman of the Board, 54 1995 455,704(7) 1.3%
President & Chief
Executive Officer
CLASS III DIRECTORS WHOSE TERM WILL EXPIRE IN 1998
Floyd A. Cailloux(2)(5)........ Director 82 1968 4,666,978(6) 13.2%
Bob G. Gower(3)................ Director 58 1993 13,000(6) *
F. O'Neil Griffin(2)(4)........ Director 69 1993 5,200 *
</TABLE>
- ------------
(1) Each person has voting and investment power with respect to the shares
listed and is a citizen of the United States.
(2) Member, Committee on Directors of the Board.
(3) Member, Compensation Committee of the Board.
(4) Member, Audit Committee of the Board.
(5) Member, Executive Committee of the Board.
(6) Includes currently exercisable stock options of 2,000 each for Messrs.
Patterson, Wilson, Rhodes, Cailloux, and Gower; and 1,437 shares for Mr.
French.
(7) 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 419,204 shares, or 1.2% of the class
outstanding held in the Company's Employees' Stock Ownership Plan of
which Mr. Teshoian is a Trustee. Each disclaim beneficial interest in
such shares.
* Less than 1/10th of 1% of outstanding shares.
Dale P. Jones joined Halliburton Company in 1965 and was elected to his
present position of vice chairman in 1995. Mr. Jones also serves on Halliburton
Company's executive committee and board of directors. Mr. Jones was appointed a
director of the Company in July 1994 to fill a vacancy on the board.
Constantine S. Nicandros is chairman of CSN & Company, a private investment
and consulting firm. Early in 1996, he retired as chairman, president and chief
executive of Conoco Inc. and vice chairman of the board of directors of its
parent, E. I. duPont de Nemours and Company. He is also a director of Cooper
Industries, Inc., Mitchell Energy & Development Corp. and Texas Commerce Bank,
N.A.
W. Wayne Patterson is a private investor. He was chairman of the board and
chief executive officer of Texas Microsystems, Inc., a privately held
manufacturer of industrial computer products, from May 1989 until its merger
with Sequoia Systems, Inc. in 1995 (see "Other Information -- Compensation
Committee Report on Executive Compensation -- Insider Participation in
Compensation Decisions").
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.
2
<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.
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.
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.
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.
Allen F. Rhodes retired from the presidency of Arnco Technology Trust, a
metallurgical research firm in 1993. He also has 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 and also
is a director of Rawson-Koenig, Inc.
Nishan Teshoian became Chairman of the Board, Chief Executive Officer and
President in August 1995. Prior thereto, he was employed by Cooper Industries
for eighteen years in a series of successively more responsible management
positions culminating in his election in 1993 as executive vice president of
operations-tools and hardware.
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1995, the Board of Directors convened on seven occasions. Committees
of the Board held meetings as follows: Executive Committee -- five meetings;
Audit Committee -- two meetings; Compensation Committee -- thirteen meetings;
and Committee on Directors -- two meetings. Each director attended at least 90%
of all meetings of the Board and all committees on which he served during the
year.
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 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 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 ("Director Plan") approved by the
shareholders in 1994, directors may elect to receive discounted stock
3
<PAGE> 7
options in lieu of annual board retainers. 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. Aggregate
compensation paid to all non-employee directors during 1995 for service in all
such capacities aggregated $434,200; however, no individual director received
compensation in excess of $60,000 for board and committee service during the
year.
The Company also 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 1995, 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 42, who has served as
Vice President and Chief Financial Officer since 1989, and Gregory E. Hyland,
age 45, who became an executive officer of the Company upon his promotion to
President of its Engineered Products Group in September 1995. He also serves as
Vice President of the Company and President of Anderson, Greenwood & Co., a
wholly-owned subsidiary. Prior to joining Anderson, Greenwood & Co. as Vice
President of Sales & Marketing in 1991, he was vice president of sales &
marketing of BTR Inc.'s Edward Valve Unit.
CERTAIN EXECUTIVE COMPENSATION ARRANGEMENTS
In connection with Mr. Teshoian's acceptance of employment in July 1995, it
was agreed that he would be entitled to receive a severance payment in an amount
equal to his most recent bonus and two years' base pay if his employment were to
be terminated by the Company prior to July 31, 2000 (the "Severance
Arrangement"). The Board also agreed to consider "change of control" agreements
for senior executives, and in furtherance of this understanding severance
agreements were later entered into between the Company and Messrs. Teshoian,
French, Baldwin and Hyland under which each would become entitled to severance
benefits upon termination of employment or reduction in pay or duties following
any "change of control" occurring prior to December 15, 2000. In such event, Mr.
Teshoian would become entitled to receive severance benefits (without
duplicating any benefit payable under the Severance Arrangement) consisting of
(i) payment of an amount equal to three times his most recent annual base pay
and bonus, and (ii) continued participation in certain Company employee benefit
plans. All other participating senior executives would become entitled to two
years' compensation and benefits upon termination or reduction in pay or duties
following a "change of control". In general, a "change of control" would occur
upon (i) the acquisition of, or obtaining the right to vote, 30% or more of the
Company's outstanding common stock by any person or group, (ii) a change in the
majority of the Board (other than as approved by the incumbent members) or (iii)
upon consummation of any merger or reorganization which would result in the
Company's shareholders owning less than a majority of the combined enterprise.
4
<PAGE> 8
MANAGEMENT SHAREHOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at February 28, 1996 of (i) all
directors of the Company (including executive officers who are also directors),
(ii) each other executive officer whose compensation exceeded $100,000 in 1995,
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............................................. 4,666,978(2) 13.2%
Arthur L. French.............................................. 8,771(2) *
Bob G. Gower.................................................. 13,000(2) *
F. O'Neil Griffin............................................. 5,200 *
Martin E. Hamilton............................................ 95,611(1) .3%
Farrell G. Huber, Jr.......................................... 1,130,236(1) 3.2%
Dale P. Jones................................................. 1,200(2) *
W. Wayne Patterson............................................ 1,141,212(1)(2) 3.2%
Allen F. Rhodes............................................... 6,516(2) *
Nishan Teshoian............................................... 455,704(1) 1.3%
Wallace S. Wilson............................................. 37,918(2) .1%
Mark E. Baldwin............................................... 430,641(1)(2) 1.2%
Gregory E. Hyland............................................. 6,327 *
All directors and executive officers as a group (14 persons
named above)................................................ 6,463,198(3) 18.2%
</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. Teshoian -- 419,204 shares and Mr.
Baldwin -- 419,204 shares.
(2) Includes currently exercisable stock options covering 2,000 shares for
Messrs. Cailloux, Gower, Patterson, Rhodes and Wilson; 538 shares for Mr.
Baldwin and 1,437 shares for Mr. French.
(3) Includes, without duplication, all shares referred to in Note 1 above.
* Less than 1/10th of 1% of outstanding shares.
VOTE REQUIRED
The four nominees for election as Class I Directors at the 1996 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 5, 1996 (the
"record date"), shall be the duly elected Class I 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.
5
<PAGE> 9
OTHER INFORMATION
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's common stock at December 31, 1995 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.................................... 4,666,978 13.2%
FMR Corporation
82 Devenshire Street
Boston, Massachusetts 02109............................. 4,306,100 12.2%
The State Teachers Retirement Board of Ohio
275 East Broad Street
Columbus, Ohio 43215.................................... 3,091,230 8.7%
</TABLE>
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the periods indicated of each individual who was (i) the chief
executive officer at any time during the period or (ii) an executive officer of
the Company at December 31, 1995 whose compensation exceeded $100,000 during
1995 (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(1) OTHER(2) AWARDS(3) (SHARES) SATION(4)
- --------------------------------------------- ---- -------- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Nishan Teshoian.............................. 1995 $171,700 $218,875 -- $531,250 100,000 $13,700
Chairman, President & Chief Executive
Officer
R. A. LeBlanc(5)............................. 1995 $321,500 $103,986 -- $ -0- -0- $15,450
Chairman & Chief Executive Officer 1994 532,600 88,500 -- -0- -0- 16,775
1993 514,600 160,800 -- -0- 100,000 17,400
Arthur L. French............................. 1995 $296,900 $ 96,038 -- $ -0- -0- $10,650
Executive Vice President 1994 286,900 47,700 -- 35,162 50,000 8,375
1993 279,200 86,600 -- 0- 25,000 9,200
Mark E. Baldwin.............................. 1995 $168,000 $ 54,335 -- $ 7,982 5,000 $5,750
Vice President & Chief Financial Officer 1994 148,100 18,600 -- 69,329 -0- 4,375
1993 143,300 33,100 -- 30,343 -0- 4,700
Gregory E. Hyland............................ 1995 $155,000 $ 79,263 -- $ 10,436 5,000 $ 7,750
Vice President
</TABLE>
- ------------
(1) Includes aggregate discount under a program which permits senior
executives to receive a portion of bonuses earned in the form of stock
awards (see "Option Grants" below).
(2) The Company provides to certain of its Executive Officers benefits
consisting of payments under its medical reimbursement plan, 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.
(3) 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 aggregate
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, 1995 of $20.00, was as follows: Nishan Teshoian -- 25,000
(Footnotes continued on following page)
6
<PAGE> 10
shares, $500,000; R. A. LeBlanc -- 54,848 shares, $1,096,960; Arthur L.
French -- 1,626 shares, $32,520; Mark E. Baldwin -- 5,992 shares,
$119,840; and Gregory E. Hyland -- 4,156 shares, $83,120.
(4) Represents contributions by the Company for the accounts of the named
individuals under defined contribution retirement plans in which
substantially all domestic employees participate.
(5) Retired July 31, 1995.
OPTION GRANTS
The following table sets forth additional information with respect to stock
options granted in 1995 under the Company's 1985 Incentive Stock Plan to the
named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT ASSUMED
OF TOTAL RATES OF STOCK
OPTIONS MARKET PRICE APPRECIATION
GRANTED TO EXERCISE VALUE PER FOR OPTION TERM(2)
OPTIONS EMPLOYEES PRICE SHARE AT EXPIRATION -------------------------------
NAME GRANTED(1) IN 1995 PER SHARE GRANT DATE DATE 0% 5% 10%
- ------------------------------- --------- ---------- --------- ---------- ---------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nishan Teshoian................ 100,000 29.5% $ 21.75 $21.25 08/01/01 $672,703 $1,589,567
R. A. LeBlanc(3)............... 2,669 .8% 8.625 17.25 01/01/00 $23,020 35,740 51,128
Arthur L. French............... 1,437 .4% 8.625 17.25 01/01/00 12,394 19,243 27,528
Mark E. Baldwin................ 5,000 1.5% 17.50 17.50 01/18/05 55,028 139,452
538 .2% 8.625 17.25 01/01/00 4,640 7,204 10,306
Gregory E. Hyland.............. 5,000 1.5% 17.50 17.50 01/18/05 55,028 139,452
</TABLE>
- ------------
(1) 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 the result of using the SEC method of
calculations of 5% and 10% appreciation in value from the date of grant
to the end of the option term and, in the case of options granted at less
than fair market value, 0%. 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) Retired July 31, 1995.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to options
exercised during 1995 by Executive Officers and the year-end value of
unexercised options then held by them.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR END
ACQUIRED VALUE ---------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------- -------- ----------- -------------
<S> <C> <C> <C> <C>
Nishan Teshoian................... -0- $ -0- $ -0- $ -0-
R. A. LeBlanc(1).................. -0- -0- 30,373 -0-
Arthur L. French.................. -0- -0- 16,885 34,500
Mark E. Baldwin................... 5,000 4,687 6,322 12,500
Gregory E. Hyland................. -0- -0- -0- 12,500
</TABLE>
- ------------
(1) Retired July 31, 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 1995. The 1995
compensation program for executive officers who were incumbent at the beginning
of the year was approved by the Committee and ratified without change by the
Board of Directors in November 1994. The 1995 compensation package for Mr.
Teshoian, who joined the Company as its Chief Executive Officer on August 1,
1995, was negotiated at arm's length, approved by the Compensation Committee and
ratified by the Board of Directors during July 1995. Mr. Hyland did not become
an executive officer until September 1995, but inasmuch as this change in status
was not accompanied
7
<PAGE> 11
by any adjustment in Mr. Hyland's previous compensation package, his
compensation was not separately reviewed by the Committee for 1995.
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 the Chief Executive Officer and 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 in November 1994 to be paid during
1995 to the Company's then three highest paid "Executive Officers" (including
the then incumbent Chief Executive Officer) 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"). The
1995 authorized salaries for Mr. Teshoian and Mr. Baldwin were at annualized
rates which would have been in the second quartile of the Wyatt Survey.
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.
Although Mr. Teshoian's 1995 bonus was contractually agreed to in
connection with his acceptance of employment as compensation for the loss of his
accrued bonus and certain other employee benefits at his former employer, annual
bonuses are intended to reflect a general policy of requiring a minimum level of
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. 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 profitability.
Accordingly, in establishing the annual bonus program, the Compensation
Committee has tied potential bonus compensation to the Company's operating
returns. Under the bonus program established for 1995, senior executives were
entitled to bonuses ranging from zero, if a 9% qualifying "threshold" return on
beginning capital had not been achieved, and increasing on a graduated scale
with the Company's performance to a limit of 100% of salary if a predetermined
16% "maximum" return on beginning capital had been met or exceeded. Based upon
the Company's 12% return on capital employed in the business, Messrs. French,
Baldwin and Mr. LeBlanc (prorated for his period of service) earned bonuses of
30% of salary for 1995, and pursuant to irrevocable elections made prior to the
beginning of the year, each received in lieu of 25% of the bonus earned
restricted stock grants for a number of shares of common stock having an
aggregate market price equal to 31.25% of the bonus earned. Messrs. Teshoian and
Hyland were not eligible to participate in the Compensation Committee
administered bonus program established for 1995. The Committee may in the future
consider that the continuing orderly development of the Company's business would
be served at that
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<PAGE> 12
time by weighing bonus calculations differently than at present or by including
performance criteria other than return on capital 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 interest 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. Except for awards of (i) a 5,000 share nonqualified stock
option grant to Mr. Baldwin and (ii) a 25,000 share restricted stock grant and a
100,000 nonqualified stock option grant to Mr. Teshoian in connection with his
acceptance of employment and (iii) restricted stock grants and stock options
issued as bonuses, no stock options or stock grants were awarded during the year
to Executive Officers under Compensation Committee administered programs.
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,
(except with respect to Mr. Teshoian whose profit sharing contribution
percentage is contractually fixed) with the only variances in annual credits
otherwise 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 $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 has served on the
Compensation Committee of the Board of Directors since 1993. In such capacity,
he participated in all Committee deliberations relating to the formulation of
executive compensation policies for 1995 and the administration of such
policies.
THE COMPENSATION COMMITTEE
Allen F. Rhodes, Chairman
Bob G. Gower
W. Wayne Patterson
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<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 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,
1995. The Fluid Controls Group is comprised of BWIP Holding, Inc., The Duriron
Company, Inc., Gorman-Rupp Company, Goulds Pumps, Inc., Graco, Inc., IDEX Corp.,
Parker-Hannifin Corporation, TRINOVA Corp. and Watts Industries, Inc. Moorco
International, Inc. is no longer included in this group since it was acquired by
FMC Corporation during 1995. The graph assumes that the value of the investment
in the Company's common stock and each index was $100.00 at December 31, 1990
and that all dividends were reinvested.
<TABLE>
<CAPTION>
Keystone
Measurement Period International, Peer Group
(Fiscal Year Covered) Inc. S&P 500 Only
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 115.46 130.47 131.12
1992 104.49 140.41 142.67
1993 116.96 154.56 169.60
1994 76.25 156.60 175.51
1995 91.71 214.86 203.85
</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 $50,000 annually.
Under arrangements entered into in connection with his retirement as
Chairman of the Board and Chief Executive Officer, R. A. LeBlanc is to provide
part-time consulting services to the Company through July 31, 2001, in exchange
for annual compensation and expense reimbursement payments aggregating
approximately $255,000. Thereafter, he will be entitled to receive an annual
lifetime retirement stipend of $60,000.
AUDITORS
Arthur Andersen LLP, 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 1996,
no formal action is proposed to be taken at the annual meeting with respect to
the continued employment of Arthur Andersen LLP inasmuch as no such action is
legally required. A representative of Arthur Andersen LLP plans to attend the
annual meeting and will be available to answer
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<PAGE> 14
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, 1995
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 1997 annual
meeting of shareholders is required to submit such proposal in writing to the
Secretary of the Company on or before December 8, 1996.
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 18, 1996
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<PAGE> 15
THIS MAP SHOWING THE LOCATION OF THE JUNIOR LEAGUE OF HOUSTON IS PROVIDED
FOR THE CONVENIENCE OF SHAREHOLDERS ATTENDING THE 1996 ANNUAL MEETING.
COMPLIMENTARY PARKING WILL BE PROVIDED. IN CASE OF ANY DIFFICULTY, PLEASE
TELEPHONE THE COMPANY AT (713) 466-1176.
(MAP)
<PAGE> 16
KEYSTONE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 1, 1996
The undersigned hereby appoints Nishan Teshoian 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 1, 1996, 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 Dale P. Jones,
Constantine S. Nicandros, W. Wayne Patterson and Wallace S.
Wilson, as "Class I" 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)
<PAGE> 17
The Board of Directors recommends a vote "FOR" the four 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 . . . . . . . ., 1996
. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
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.
