<PAGE>
 
                                                                    Exhibit 10.4

                         EXECUTIVE SEVERANCE AGREEMENT

     AGREEMENT by and between Keystone International, Inc. (the "Company") and 
Nishan Teshoian (the "Employee"), dated as of the 15th day of December, 1995.

     The Board of Directors of the Company (the "Board") has determined that it 
is in the best interests of the Company and its shareholders to assure that the 
Company will have the continued dedication of the Employee, notwithstanding the 
possibility, threat, or occurrence of a Change of Control (as defined below) of 
the Company. The Board believes it is imperative to diminish the inevitable 
distraction of the Employee by virtue of the personal uncertainties and risks 
created by a pending or threatened Change of Control, to encourage the 
Employee's full attention and dedication to the Company currently and in the 
event of any threatened or pending Change of Control, and to provide the 
Employee with compensation arrangements upon a Change of Control which provide 
the Employee with individual financial security and which are competitive with 
those of other corporations and, in order to accomplish these objectives, the 
Board has caused the Company to enter into this Agreement.

     NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

     1. Certain Definitions. (a) The "Effective Date" shall be the first date 
during the "Change of Control Period" (as defined in Section 1(b)) on which a 
Change of Control occurs. Anything in this Agreement to the contrary 
notwithstanding, if the 

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Employee's employment with the Company is terminated involuntarily prior to the 
date on which a Change of Control occurs, and it is reasonably demonstrated that
such termination (1) was at the request of a third party who has taken steps 
reasonably calculated to effect a Change of Control or (2) otherwise arose in 
connection with or in anticipation of a Change of Control, then for all purposes
of this Agreement the "Effective Date" shall mean the date immediately prior to 
the date of such termination.

     (b) The "Change of Control Period" is the period commencing on the date 
hereof and ending on the fifth anniversary of such date.

     2. Change of Control. For the purpose of this Agreement, a "Change of 
Control" shall mean:

     (i) The acquisition (other than from the Company) by any person, entity or 
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities 
Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership, (within the 
meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of 
either the then outstanding shares of common stock or the combined voting power 
of the Company's then outstanding voting securities entitled to vote generally 
in the election of directors; or

     (ii) Individuals who, as of the date hereof, constitute the Board (as of 
the date hereof the "Incumbent Board") cease for any reason to constitute at 
least a majority of the Board, provided, however, that any person becoming a 
director subsequent to the date hereof whose election, or nomination for 
election by the Company's shareholders, was approved by a vote of at least a 
majority of the directors then comprising the 

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<PAGE>
 
Incumbent Board (other than an election or nomination of an individual whose 
initial assumption of office is in connection with an actual or threatened 
election contest relating to the election of the Directors of the Company, as 
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 
Exchange Act) shall be, for purposes of this Agreement, considered as though 
such person were a member of the Incumbent Board; or

     (iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, with respect to which persons who were
the stockholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, or a liquidation or dissolution of the Company or of the sale of all
or substantially all of the assets of the Company; provided, however, that a
judicially supervised reorganization under 11 U.S.C. (S)101 et. seq. shall not
be considered a Change of Control.

     3. Employment Period. The Company hereby agrees to continue the Employee in
its employ, and the Employee hereby agrees to remain in the employ of the 
Company, in accordance with the terms and provisions of this Agreement for the 
period commencing on the Effective Date and ending on the third anniversary of 
such date (the "Employment Period").

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<PAGE>
 
     4. Terms of Employment. (a) Position and Duties.

     (i) During the Employment Period, (A) the Employee's position (including 
status, offices, titles and reporting requirements), authority, duties and 
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B) the
Employee's services shall be performed at the location where the Employee was
employed immediately preceding the Effective Date or any office or location
which is the headquarters of the Company and is less than thirty-five (35) miles
from such pre-Effective Date location.

     (ii) During the Employment Period, and excluding any periods of vacation 
and sick leave to which the Employee is entitled, the Employee agrees to devote 
reasonable attention and time during normal business hours to the business and 
affairs of the Company and, to the extent necessary to discharge the 
responsibilities assigned to the Employee hereunder, to use the Employee's 
reasonable best efforts to perform faithfully and efficiently such 
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Employee to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Employee's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Employee prior to the Effective
Date, the continued conduct of

                                       4
<PAGE>
 
such activities (or the conduct of activities similar in nature and scope 
thereto) subsequent to the Effective Date shall not thereafter be deemed to 
interfere with the performance of the Employee's responsibilities to the 
Company.

     (b) Compensation. (i) Base Salary. During the Employment Period, the 
Employee shall receive an annual base salary (the "Annual Base Salary") which 
shall be paid in equal installments on a monthly basis, at least equal to twelve
times the highest monthly base salary paid or payable to the Employee by the 
Company and its affiliates in respect of the twelve month period immediately 
preceding the month in which the Effective Date occurs. During the Employment 
Period, the Annual Base Salary shall be reviewed at least annually and shall be 
increased at any time and from time to time as shall be substantially consistent
with increases in base salary awarded in the ordinary course of business to 
other key employees of the Company and its affiliates. Any increase in Annual 
Base Salary shall not serve to limit or reduce any other obligation to the 
Employee under this Agreement. Annual Base Salary shall not be reduced after any
such increase and the term Annual Base Salary as utilized in this Agreement 
shall refer to Annual Base Salary as so increased. As used in this Agreement, 
the term "affiliates" shall include any company controlled by, controlling or 
under common control with the Company.

     (ii) Annual Bonus. In addition to Annual Base Salary, the Employee shall be
awarded, for each fiscal year during the Employment Period, an annual bonus (an 
"Annual Bonus") in cash (or cash and stock if the Employee is then required to 
take a percentage of his bonus in stock pursuant to the Company's executive 
stock

                                       5
<PAGE>
 
ownership policy) at least equal to the highest annual bonus payable to the 
Employee from the Company and its subsidiaries in respect of the three fiscal 
years immediately preceding the fiscal year in which the Effective Date (or the 
annualized bonus for any fiscal year consisting of less than twelve full months 
or with respect to which the Employee has been employed by the Company for less 
than twelve full months).

     (iii) Incentives Savings and Retirement Plans. In addition to Annual Base 
Salary and Annual Bonus payable as herein provided, the Employee shall be 
entitled to participate during the Employment Period in all incentive, savings 
and retirement plans, practices, policies and programs applicable generally to 
other key employees of the Company and its subsidiaries. Such plans, practices, 
policies and programs, in the aggregate, shall provide the Employee with
compensation, benefits and reward opportunities at least as favorable as the
most favorable of such compensation, benefits and reward opportunities provided
by the Company for the Employee under such plans, practices, policies and
programs as in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Employee, as provided at any
time thereafter with respect to other key employees of the Company and its
subsidiaries.

     (iv) Welfare Benefit Plans. During the Employment Period, the Employee 
and/or the Employee's family, as the case may be, shall be eligible for 
participation in and shall receive all benefits under welfare benefit plans 
practices, policies and programs provided by the Company and its subsidiaries 
(including, without limitation, medical, prescription, dental, disability, 
salary continuance, employee life, group life, 

                                       6
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accidental death and travel accident insurance plans and programs), at least as 
favorable as the most favorable of such plans, practices, policies and programs 
in effect at any time during the 90-day period immediately preceding the 
Effective Date or, if more favorable to the Employee and/or the Employee's 
family, as in effect at any time thereafter with respect to other key employees 
of the Company and its subsidiaries.

     (v) Expenses. During the Employment Period, the Employee shall be entitled 
to receive prompt reimbursement for all reasonable employment expenses incurred 
by the Employee in accordance with the most favorable policies, practices and 
procedures of the Company and its subsidiaries in effect at any time during the 
90-day period immediately preceding the Effective Date or, if more favorable to 
the Employee, as in effect at any time thereafter with respect to other key 
employees of the Company and its subsidiaries.

     (vi) Fringe Benefits. During the Employment Period, the Employee shall be 
entitled to fringe benefits in accordance with the most favorable plans, 
practices, programs and policies of the Company and its subsidiaries in effect 
at any time during the 90-day period immediately preceding the Effective Date 
or, if more favorable to the Employee, as in effect at any time thereafter with 
respect to other key employees of the Company and its subsidiaries.

     (vii) Office and Support Staff. During the Employment Period, the Employee 
shall be entitled to an office or offices of a size and with furnishings and 
other appointments, and to secretarial and other assistance, at least equal to 
the most favorable of the foregoing provided to the Employee by the Company and 
its 

                                       7
<PAGE>
 
subsidiaries at any time during the 90-day period immediately preceding the 
Effective Date or, if more favorable to the Employee, as provided at any time 
thereafter with respect to other key employees of the Company and its 
subsidiaries.

     (viii) Vacation. During the Employment Period, the Employee shall be 
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and its subsidiaries as in effect for the 
Employee at any time during the 90-day period immediately preceding the 
Effective Date or, if more favorable to the Employee, as in effect at any time 
thereafter with respect to other key employees of the Company and its 
subsidiaries.

     5. Termination of Employment. (a) Death or Disability. The Executive's 
employment shall terminate automatically upon the Employee's death during the 
Employment Period. If the Company determines in good faith that Disability of 
the Employee has occurred during the Employment Period (pursuant to the 
definition of "Disability" as set forth below), it may give to the Employee 
written notice of its intention to terminate the Employee's employment. In such 
event, the Employee's employment with the Company shall terminate effective on 
the 30th day after receipt of such notice by the Employee (the "Disability 
Effective Date"), provided that, within the 30 days after such receipt, the 
Employee shall not have returned to full-time performance of the Employee's 
duties. For purposes of this Agreement, "Disability" shall mean the absence of 
the Employee from the Employee's duties with the Company on a full-time basis 
for 180 calendar days as a result of incapacity due to mental or physical 
illness which is determined to be total and permanent by a physician selected 
by the 

                                       8
<PAGE>
 
Company or its insurers and acceptable to the Employee or the Employee's legal 
representatives (such agreement as to acceptability not to be withheld 
unreasonably).

     (b) Cause. The Company may terminate the Employee's employment during the 
Employment Period for "Cause." For purposes of this Agreement, "Cause" means (i)
an act or acts of personal dishonesty taken by the Employee and intended to 
result in personal enrichment of the Employee at the expense of the Company, 
(ii) repeated material breaches by the Employee of the Employee's obligations 
under Section 4(a) of this Agreement (other than as a result of incapacity due 
to physical or mental illness) which are demonstrably willful and deliberate on 
the Employee's part and which are not remedied in a reasonable period of time 
after receipt of written notice from the Company specifying such breach or (iii)
the conviction of the Employee of a felony.

     (c) Good Reason. The Employee's employment may be terminated by the 
Employee during the Employment Period for Good Reason. For purposes of this 
Agreement, "Good Reason" means:

          (i) the assignment to the Employee of any duties inconsistent in any 
     respect with the Employee's position (including status, offices, titles and
     reporting requirements), authority, duties or responsibilities as
     contemplated by Section 4(a) of this Agreement, or any other action by the
     Company or any affiliate which results in a diminution in such position,
     authority, duties or responsibilities, excluding for this purpose an
     isolated, insubstantial and inadvertent action not taken in bad faith and
     which is remedied by the Company promptly after receipt of notice thereof
     given by the Employee;

                                       9
<PAGE>
 
          (ii) any failure by the Company to comply with any of the provisions 
     of Section 4(b) of this Agreement, other than an isolated, insubstantial
     and inadvertent failure not occurring in bad faith and which is remedied by
     the Company promptly after receipt of notice thereof given by the Employee;

          (iii) The Company's requiring the Employee to be based at any office 
     or location other than that described in Section 4(a)(i)(B) hereof, except
     for travel reasonably required in the performance of the Employee's
     responsibilities;

          (iv) any purported termination by the Company of the Employee's 
     employment otherwise than as expressly permitted by this Agreement; or

          (v) any failure by the Company to comply with and satisfy Section 
     11(c) of this Agreement.

     For purposes of this Section 5(c), any good faith determination of "Good 
Reason" made by the Employee shall be conclusive.

     (d) Notice of Termination. Any termination by the Company for Cause or by 
the Employee for Good Reason shall be communicated by Notice of Termination to 
the other party hereto given in accordance with Section 12(b) of this Agreement.
For purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied 
upon, (ii) sets forth in reasonable detail the facts and circumstances claimed 
to provide a basis for termination of the Employee's employment under the 
provisions so indicated, and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than fifteen (15)

                                      10

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days after the giving of such notice). The failure by the Employee or the 
Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Employee or the Company hereunder or preclude the Employee or the Company
from asserting such fact or circumstance in enforcing the Employee's or the 
Company's rights hereunder.

     (e) Date of Termination. "Date of Termination" means the date of receipt of
the Notice of Termination or any later date specified therein, as the case may 
be; provided, however, that (i) if the Employee's employment is terminated by 
the Company other than for Cause or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination, and
(ii) if the Employee's employment is terminated by reason of death or
Disability, the Date shall be the date of death of the Employee or the
Disability Effective Date, as the case may be.

     6. Obligations of the Company upon Termination. (a) Good Reason; Other than
for Cause, Death or Disability. If, during the Employment Period, the Company 
shall terminate the Employee's employment other than for Cause, Disability or 
death or if the Employee shall terminate his employment for Good Reason:

          (i) the Company shall pay to the Employee in a lump sum in cash within
     30 days after the Date of Termination the aggregate of the following
     amounts;

               (A) to the extent not theretofore paid, the Employee's Annual 
          Base Salary through the Date of Termination; and 

                                      11

<PAGE>
 
               (B) the product of (x) the Annual Bonus (computed as if any bonus
          amount paid in stock pursuant to the Company's executive stock
          ownership policy was paid in cash) paid to the Employee for the last
          full fiscal year (if any) ending during the Employment Period or, if
          higher, the Annual Bonus paid to the Employee for the last fiscal year
          prior to the Effective Date (as applicable, the "Recent Bonus") and
          (y) a fraction, the numerator of which is the number of days in the
          current fiscal year through the Date of Termination and the
          denominator of which is 365; and

               (C) in the case of compensation previously deferred by the 
          Employee, all amounts previously deferred (together with any accrued
          interest thereon) and not yet paid by the Company, and any accrued
          vacation pay not yet paid by the Company (the sum of the amounts in
          clauses (A), (B), and (C) shall be hereinafter referred to as the
          "Accrued Obligations"); and

               (D) the product of (x) 3.00 and (y) the sum of (i) the Annual 
          Base Salary and (ii) the Recent Bonus; and

               (E) all amounts in the Employee's retirement plan accounts which 
          will become fully vested upon the Date of Termination notwithstanding
          the existing vesting schedule; and

                                      12

<PAGE>
 
          (ii) for three years from the Date of Termination, or such longer
     period as any plan, program, practice or policy may provide, the Company
     shall continue benefits to the Employee and/or the Employee's family at
     least equal to those which would have been provided to them in accordance
     with the plans, programs, practices and policies described in Section
     4(b)(iv) of this Agreement if the Employee's employment had not been
     terminated, including health insurance and life insurance, in accordance
     with the most favorable plans, practices, programs or policies of the
     Company and its subsidiaries during the 90-day period immediately preceding
     the Effective Date or, if more favorable to the Employee, as in effect at
     any time thereafter with respect to other key employees of the Company and
     its subsidiaries and their families and for purposes of eligibility for
     retiree benefits pursuant to such plans, practices, programs and policies,
     the Employee shall be considered to have remained employed until the end of
     the Employment Period and to have retired on the last day of such period.
     If the terms of any benefit plan referred to in this section do not permit
     continued participation by the Employee, then the Company will arrange for
     other coverage, providing substantially similar benefits.

          (iii) all options and similar awards granted to Employee by the
     Company shall immediately vest notwithstanding any vesting schedule in any
     option or award agreement.

                                      13

<PAGE>
 
     (b) Death. If the Employee's employment is terminated by reason of the 
Employee's death during the Employment Period, this Agreement shall terminate 
without further obligations to the Employee's legal representatives under this 
Agreement, other than payment of the Accrued Obligations. All such Accrued 
Obligations shall be paid to the Employee's estate or beneficiary, as 
applicable, in a lump sum in cash within thirty (30) days of the Date of 
Termination. Anything in this Agreement to the contrary notwithstanding, the 
Employee's family shall be entitled to receive benefits at least equal to the 
most favorable benefits provided by the Company and any of its subsidiaries to 
surviving families of employees of the Company and such subsidiaries under such 
plans, programs, practices and policies relating to family death benefits, if 
any, in accordance with the most favorable plans, programs, practices and 
policies of the Company and its subsidiaries in effect at any time during the 
90-day period immediately preceding the Effective Date or, if more favorable to 
the Employee and/or the Employee's family, as in effect on the date of the 
Employee's death with respect to other key employees of the Company and its 
subsidiaries and their families.

     (c) Disability. If the Employee's employment is terminated by reason of the
Employee's Disability during the Employment Period, this Agreement shall 
terminate without further obligations to the Employee, other than payment of all
Accrued Obligations. All such Accrued Obligations shall be paid to the Employee 
in a lump sum in cash within 30 days of the Date of Termination. Anything in 
this Agreement to the contrary notwithstanding, the Employee shall also be 
entitled after the Disability Effective Date to receive disability and other 
benefits at least equal to the most

                                      14

<PAGE>
 
favorable of those provided by the Company and its subsidiaries to disabled 
employees and/or their families in accordance with such plans, programs, 
practices and policies relating to disability, if any, in accordance with the 
most favorable plans, programs, practices and policies of the Company and its 
subsidiaries in effect at any time during the 90-day period immediately 
preceding the Effective Date or, if more favorable to the Employee and/or the 
Employee's family, as in effect at any time thereafter with respect to other key
employees of the Company and its subsidiaries and their families.

     (d) Cause; Other than for Good Reason. If the Employee's employment shall 
be terminated for Cause during the Employment Period, this Agreement shall 
terminate without further obligations to the Employee other than the obligation 
to pay to the Employee the Annual Base Salary through the Date of Termination 
plus the amount of any compensation previously deferred by the Employee 
(together with accrued interest thereon) in each case to the extent theretofore 
unpaid. If the Employee terminates employment other than for Good Reason, this 
Agreement shall terminate without further obligations to the Employee, other 
than those obligations accrued or earned and vested (if applicable) by the 
Employee through the Date of Termination, including for this purpose, all 
Accrued Obligations. All such Accrued Obligations shall be paid to the Employee 
in a lump sum in cash within 30 days of the Date of Termination.

     (e) The payments made to Employee pursuant to this Agreement shall be in 
lieu of any amounts to which Employee would otherwise be entitled pursuant to 
the

                                      15

<PAGE>
 
paragraph labeled "Termination" in the letter dated July 12, 1995 to Employee 
from the Company describing the terms of Employee's employment.

     7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or 
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, policy, practice or program of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program.

     8. Full Settlement; Resolution of Disputes. (a) The Company's obligation to
make the payments provided for in this Agreement and otherwise to perform its 
obligations hereunder shall not be affected by any set-off, counterclaim, 
recoupment, defense or other claim, right or action which the Company may have 
against the Employee or others. In no event shall the Employee be obligated to 
seek other employment or take any other action by way of mitigation of the 
amounts payable to the Employee under any of the provisions of this Agreement. 
The Company agrees to pay, to the full extent permitted by law, all legal fees 
and expenses which the Employee may incur as a result of any contest (regardless
of the outcome thereof) by the Company or others of the validity or 
enforceability of, or liability under, any 

                                      16

<PAGE>
 
provision of this Agreement or any guarantee of performance thereof, plus in
each case interest at the applicable Federal rate provided for in
Section 7872(f)(2) of the Code for any period during which the Company is in
default in its obligation to make any payment hereunder.
 
     (b) If there shall be any dispute between the Company and the Employee (i) 
in the event of any termination of the Employee's employment by the Company, 
whether such termination was for Cause, or (ii) in the event of any termination 
of employment by the Employee, whether Good Reason existed, then, unless and 
until there is a final, nonappealable judgment by a court of competent 
jurisdiction declaring that such termination was for Cause or that the 
determination by the Employee of the existence of Good Reason was not made in 
good faith, the Company shall pay all amounts, and provide all benefits, to the 
Employee's family or other beneficiaries, as the case may be, that the Company 
would be required to pay or provide pursuant to Section 6 as though such 
termination were by the Company without Cause or by the Employee for Good 
Reason; provided, however, that the Company shall not be required to pay any 
disputed amounts pursuant to this paragraph except upon receipt of an 
undertaking by or on behalf of the Employee to repay all such amounts to which 
the Employee is ultimately adjudged by such court not to be entitled.

     9. Certain Additional Payments by the Company. (a) Anything in this 
Agreement to the contrary notwithstanding, in the event it shall be determined 
that any payment or distribution by the Company to or for the benefit of the 
Employee, whether paid or payable or distributed or distributable pursuant to 
the terms of this 

                                      17

<PAGE>
 
Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or
any interest or penalties with respect to such excise tax (such excise tax,
together with any such interest and penalties, and hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes, including any income or Excise Tax imposed
upon the Gross-Up Payment, the net amount payable to Employee hereunder shall
be equal to the aggregate amount Employee would have received hereunder if such
Excise Tax were not applicable.

     (b) Subject to the provisions of Section 9(c), all determinations required 
to be made under this Section 9, including whether a Gross-Up Payment is 
required and the amount of such Gross-Up Payment, shall be made by Arthur 
Andersen & Co. (the "Accounting Firm") which shall provide detailed supporting 
calculations both to the Company and the Employee within 25 days of the Date of 
Termination, if applicable, or such earlier time as is requested by the Company.
The initial Gross-Up Payment, if any, as determined pursuant to this Section 
9(b), shall be paid to the Employee within 5 days of the receipt of the 
Accounting Firm's determination. If the Accounting Firm determines that no 
Excise Tax is payable to the Employee, it shall furnish the Employee with an 
opinion that he has substantial authority not to report any Excise Tax on his 
federal income tax return. Any determination by the Accounting Firm shall be 
binding upon the Company and the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the 

                                      18

<PAGE>
 
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Employee.

     (c) The Employee shall notify the Company in writing of any claim by the 
Internal Revenue Service that, if successful, would require the payment by the 
Company of the Gross-Up Payment. Such notification shall be given as soon as 
practicable but no later than ten business days after the Employee knows of such
claim and shall apprise the Company of the nature of such claim and the date on 
which such claim is requested to be paid. The Employee shall not pay such claim
prior to the expiration of the thirty-day period following the date on which the
Employee gives such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is due). If the
Company notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:

          (i) give the Company any information reasonably requested by the 
     Company relating to such claim;

          (ii) take such action in connection with contesting such claim as the 
     Company shall reasonably request in writing from time to time, including,
     without 

                                      19

<PAGE>
 
     limitation, accepting legal representation with respect to such claim by an
     attorney reasonably selected by the Company;

          (iii) cooperate with the Company in good faith in order effectively to
     contest such claim; 

          (iv) permit the Company to participate in any proceedings relating to 
     such claim;

provided, however, that the Company shall bear and pay directly all costs and 
expenses (including attorneys fees and any additional interest and penalties) 
incurred in connection with such contest and shall indemnify and hold the 
Employee harmless, on an after-tax basis, for any Excise Tax or income tax, 
including interest and penalties with respect thereto, imposed as a result of 
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 9(c), the Company shall control all 
proceedings taken in connection with such contest and, at its sole option, may 
pursue or forgo any and all administrative appeals, proceedings, hearings and 
conferences with the taxing authority in respect of such claim and may, at its 
sole option, either direct the Employee to pay the tax claimed and sue for a 
refund or contest the claim in any permissible manner, and the Employee agrees 
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee, on an interest-free basis and shall
indemnify and hold the Employee 

                                      20

<PAGE>
 
harmless, on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to any imputed
income with respect to such advance; and further provided that any extension of
the statute of limitations relating to payment of taxes for the taxable year of
the Employee with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other authority.

     (d) If, after the receipt by the Employee of an amount advanced by the 
Company pursuant to Section 9(c), the Employee becomes entitled to receive any 
refund with respect to such claim, the Employee shall (subject to the Company's 
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount 
advanced by the Company pursuant to Section 9(c), a determination is made that 
the Employee shall not be entitled to any refund with respect to such claims and
the Company does not notify the Employee in writing of its intent to contest 
such denial of refund prior to the expiration of thirty days after such 
determination, then such advance shall be forgiven and shall not be required to 
be repaid and the amount of such advance shall offset, to the extent thereof, 
the amount of Gross-Up Payment required to be paid.

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<PAGE>
 
     10. Confidential Information. The Employee shall hold in a fiduciary 
capacity for the benefit of the Company all secret or confidential information, 
knowledge or data relating to the Company or any of its subsidiaries, and their 
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.

     11. Successors. (a) This Agreement is personal to the Employee and without 
the prior written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This Agreement 
shall inure to the benefit of and be enforceable by the Employee's legal 
representatives.

     (b) This Agreement shall inure to the benefit of and be binding upon the 
Company and its successors and assigns.

     (c) The Company will require any successor (whether direct or indirect, by 
purchase, merger, consolidation, or otherwise) to all or substantially all of 
the business and/or assets of the Company to assume expressly and agree to 
perform this Agreement in the same manner and to the same extent that the 
Company would be 

                                      22

<PAGE>
 
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets.
 
     12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without reference to principles 
of conflict of laws. The captions of this Agreement are not part of the 
provisions hereof and shall have no force or effect. This Agreement may not be 
amended or modified otherwise than by a written agreement executed by the 
parties hereto and their respective successors and legal representatives.

     (b) All notices and other communications hereunder shall be in writing and 
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:

     If to the Employee:

     Nishan Teshoian  
     24 Misty Grove Circle
     The Woodlands, Texas 77380 

     If to the Company:

     Keystone International, Inc.
     9600 West Gulf Bank Road
     Houston, Texas 77240
     Attention: Board of Directors

or to such other address as either party shall have furnished to the other in 
writing in accordance herewith. Notice and communications shall be effective 
when actually received by the addressees.

                                      23

<PAGE>
 
     (c) The invalidity or unenforceability of any provision of this Agreement 
shall not affect the validity or enforceability of any other provision of this 
Agreement.
 
     (d) The Company may withhold from any amounts payable under this Agreement 
such Federal, state or local taxes as shall be required to be withheld pursuant 
to any applicable law or regulation.

     (e) The Employee's or the Company's failure to insist upon strict 
compliance with any provision hereof shall not be deemed to be a waiver of such 
provision or any other provision hereof.

     (f) This Agreement contains the entire understanding of the Company and the
Employee with respect to the subject matter hereof.

     (g) The Employee and the Company acknowledge the employment of the 
Employee by the Company is "at will", and, prior to the Effective Date, may be
terminated by either the Employee or the Company at any time. Upon a termination
of the Employee's employment prior to the Effective Date, there shall be no 
further rights under this Agreement.







     [Remainder of page intentionally left blank--signature page follows.]

                                      24

<PAGE>
 
     IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant to
the authorization from its Board of Directors, the Company has caused these 
presents to be executed in its name on its behalf, all as of the day and year 
first above written.

                                      /s/ Nishan Teshoian
                                      ---------------------------------
                                      Nishan Teshoian


                                      KEYSTONE INTERNATIONAL, INC.


                                      By: /s/ Allen F. Rhodes
                                         ------------------------------
                                         Chairman of the Compensation Committee
                                         of the Board of Directors









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