UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal year ended December 31, 1994
[ ] Transition Report to Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from to.
Commission File Number 1-470
AMERICAN STANDARD INC.
(Exact name of registrant as specified in its charter)
DELAWARE 25-0900465
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey 08855-6820
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (908) 980-6000
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K. (Not applicable; Registrant has outstanding no equity securities
required to be registered under the Securities Exchange Act of 1934.)
Aggregate market value of the voting stock (common stock) held by non-affiliates
of the Registrant: Not applicable; all of the voting stock of the Registrant is
owned by its parent, American Standard Companies Inc.
Number of shares outstanding of each of the Registrant's classes of common
stock, as of the close of business on March 10, 1995:
Common Stock, $.01 par value 1,000 Shares
Documents incorporated by reference: None
The Registrant meets the conditions set forth in General Instruction (J) (1) (a)
and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.
<PAGE>
TABLE OF CONTENTS
(Reduced disclosure format)
Page
PART I
Item 1. Business. 2
Item 2. Properties. 6
Item 3. Legal Proceedings. 7
Item 4. Not required under reduced disclosure format as contemplated by
General Instruction J to Form 10-K.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters. 9
Item 6. Not required under reduced disclosure format as contemplated by
General Instruction J to Form 10-K.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations (reduced disclosure format). 9
Item 8. Financial Statements and Supplementary Data. 12
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 38
PART III
Items 10, 11, 12, and 13 are not required under reduced disclosure format as
contemplated by General Instruction J to Form 10-K
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K. 38
<PAGE>
PART I
ITEM 1. BUSINESS
American Standard Inc., a Delaware corporation, (the "Company") was
incorporated in 1929. All of its outstanding common stock is owned by American
Standard Companies Inc. (formerly named ASI Holding Corporation) a Delaware
corporation that was formed in 1988 by Kelso & Company, L.P. ("Kelso") to effect
the acquisition (the "Acquisition") of American Standard Inc. Hereinafter,
"American Standard" or "the Company" will refer to the Company, to American
Standard Companies Inc. or to American Standard Inc., including its
subsidiaries, as the context requires. ASI Holding Corporation changed its name
to American Standard Companies Inc. in November 1994. In the first quarter of
1995 American Standard Companies Inc. sold 15,112,300 shares of its common stock
at an initial price to the public of $20 per share in an initial public offering
(the "Offering"). The Offering yielded net proceeds of approximately $282
million which were used to reduce indebtedness of American Standard Inc.
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (56%
of 1994 sales); bathroom and kitchen fixtures and fittings (27% of 1994 sales);
and braking control systems for medium-sized and heavy trucks, buses, trailers
and utility vehicles (17% of 1994 sales). American Standard is a market leader
in each of these business segments in the principal geographic areas in which it
competes. The Company's brand names include TRANE(R) and AMERICAN STANDARD(R)
for air conditioning systems, AMERICAN STANDARD(R), IDEAL-STANDARD(R) and
STANDARD(R) for plumbing products and WABCO(R) for braking and related systems.
The Company emphasizes technologically advanced products such as air
conditioning systems that utilize energy-efficient compressors and
environmentally-preferred refrigerants, water-saving plumbing products and
commercial vehicle braking and related systems (including antilock braking
systems, "ABS") that utilize electronic controls. At December 31, 1994, American
Standard had 94 manufacturing facilities in 32 countries.
Overview of Business Segments
American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Automotive Products (formerly named
Transportation Products).
Air Conditioning Products. American Standard is a leading U.S. manufacturer of
air conditioning systems for both domestic and export sales, and also
manufactures air conditioning systems outside the United States. Air
Conditioning Products manufactures air conditioning systems that are sold
primarily under the TRANE(R) and AMERICAN STANDARD(R) names. Over one-half of
Air Conditioning Products' sales in 1994 was in the replacement, renovation and
repair markets which have been less cyclical than the new residential and
commercial construction markets. Air Conditioning Products' sales in these
periods to the commercial and residential markets represented approximately 75%
and 25%, respectively, of Air Conditioning Products' total sales. Management
believes that Air Conditioning Products is well positioned for growth because of
its high quality, brand-name products, significant existing market shares, the
introduction of new product features such as electronic controls, the expansion
of its broad distribution network and conversion to environmentally-preferred
refrigerants.
Air Conditioning Products began with the 1984 acquisition by the Company of The
Trane Company, a manufacturer and distributor of air conditioning products since
1913. Air conditioning products are sold primarily under the TRANE(R) and
AMERICAN STANDARD(R) names. In 1994 Air Conditioning Products, with revenues of
$2,480 million, accounted for approximately 56% of the Company's sales and 51%
of its operating income. Air Conditioning Products derived approximately 16% of
its sales in 1994 from operations outside the United States and over half from
the replacement, renovation and repair markets, which in general are less
cyclical than the new residential and commercial construction markets.
Air Conditioning Products manufactures three general types of air conditioning
systems. The first, called "unitary," which is sold for residential and
commercial applications, is a factory-assembled central air conditioning system
which generally encloses in one or two units all the components to cool or heat,
clean, dehumidify or humidify, and move air. The second, called "applied," is
typically custom-engineered for commercial use and involves field installation
of several different components of the air conditioning system. Trane is a world
leader in both unitary and applied air conditioning products. The third type,
called "mini-split," is a small unitary air conditioning system, generally for
residential use, which operates without air ducts. Air Conditioning Products
manufactures and distributes mini-split units principally in the Far East and
Europe.
Product and marketing programs have been, and are being, developed to increase
penetration in the growing replacement, repair, and servicing businesses, in
which margins are higher than on sales of original equipment. Much of the
equipment sold in the fast-growing air conditioning markets of the 1960's and
1970's is reaching the end of its useful life. Also, equipment sold in the
1980's is likely to be replaced earlier than originally expected with
higher-efficiency products recently developed to meet required efficiency
standards and to capitalize on the availability of environmentally-preferred
refrigerants.
At December 31, 1994 Air Conditioning Products had 28 manufacturing plants in 8
countries, employing approximately 16,000 people.
Plumbing Products
American Standard is a leading manufacturer in Europe and a number of other
countries of bathroom and kitchen fixtures and fittings for the residential and
commercial construction markets and retail sales channels. Plumbing Products
manufactures and distributes its products under the AMERICAN STANDARD(R),
IDEAL-STANDARD(R) and STANDARD(R) names. Management believes that Plumbing
Products is well positioned for growth due to the high quality of its brand-name
products, significant existing market shares in a number of countries and the
expansion of existing operations in developing market areas throughout the world
(principally the Far East, Latin America and Eastern Europe).
In 1994 Plumbing Products, with revenues of $1,218 million, accounted for 27 %
of the Company's sales and 31 % of its operating income. Plumbing Products
derived approximately 73 % of its total 1994 sales from operations outside the
United States.
Approximately 53% of Plumbing Products' sales consists of vitreous china
fixtures, 26% consists of fittings (typically brass), 7% consists of bathtubs,
and the remainder consists of related plumbing products. Throughout the world
these products are generally sold through wholesalers and distributors and
installed by plumbers and contractors. In the United States sales through the
retail channel have continued to grow and accounted for approximately 24% of
U.S. Plumbing Products' sales in 1994. In total the residential market accounts
for approximately 75% of Plumbing Products' sales, with the commercial and
industrial markets providing the remaining 25%.
Plumbing Products operates through three primary geographic groups: European
Plumbing Products, the Americas Group (comprising U.S. Plumbing Products and
Americas International), and the Far East Group. Plumbing Products' fittings
operations are organized as the Worldwide Fittings Group, which has primary
responsibility for faucet technology, product development and manufacturing,
with manufacturing facilities in Europe, the U.S., and Mexico. Worldwide
Fittings sales and operating results are reported in the three primary
geographic groups within which it operates.
European Plumbing Products, which sells products primarily under the brand name
IDEAL-STANDARD(R), manufactures and distributes bathroom and kitchen fixtures
and fittings through subsidiaries or joint ventures in Germany, Italy, France,
England, Greece, the Czech Republic, Bulgaria, Spain, Portugal, and Egypt.
U.S. Plumbing manufactures bathroom and kitchen fixtures and fittings, selling
under the brand names AMERICAN STANDARD(R) and STANDARD(R) in the United States.
Americas International manufactures bathroom and kitchen fixtures and fittings,
selling under the names AMERICAN STANDARD(R), IDEAL-STANDARD(R), and
STANDARD(R), through its wholly owned operations in Mexico, Canada, and Brazil
and its majority-owned subsidiaries in Central America.
The Far East Group manufactures bathroom and kitchen fixtures and fittings,
selling under the names AMERICAN STANDARD(R), IDEAL-STANDARD(R), and STANDARD(R)
through its wholly owned operations in South Korea, its majority-owned
operations in Thailand and the Philippines, and its manufacturing joint venture
in Indonesia and is developing a new joint venture in Vietnam. The Company is
also significantly expanding its operations in the People's Republic of China
("PRC").
At December 31, 1994, Plumbing Products employed approximately 16,200 people
and, including affiliated companies, had 52 manufacturing plants in 22
countries.
Automotive Products
Automotive Products is a leading manufacturer, primarily in Europe and Brazil,
of brake and related systems for the commercial and utility vehicle industry.
Its most important products are pneumatic braking systems and related electronic
and other control systems (including antilock braking systems) marketed under
the WABCO(R) name for medium-size and heavy trucks, tractors, buses, trailers
and utility vehicles. American Standard supplies vehicle manufacturers such as
Mercedes-Benz, Volvo, Iveco (Fiat), RVI (Renault) and Rover. Management believes
that Automotive Products is well positioned to benefit from improved market
conditions in Europe and Brazil and increasing demand in a number of markets
(including the U.S. commercial and utility vehicle markets) for ABS and other
sophisticated electronic control systems, as well as from the technological
advances embodied in the Company's products and its close relationships with a
number of vehicle manufacturers.
In 1994 Automotive Products, with sales of $759 million, accounted for 17 % of
the Company's sales and 17% of its operating income. The Company believes that
Automotive Products is a worldwide technological leader in the heavy truck and
bus braking industry. Electronic controls, first introduced in ABS in the early
1980's, are increasingly applied in other systems sold to the commercial vehicle
industry.
The Company's Automotive products are sold directly to vehicle and component
manufacturers. Spare parts are sold through both original equipment
manufacturers and an independent distribution network. Although the business is
not dependent on a single or related group of customers, sales of truck braking
systems are dependent on the demand for heavy trucks. Principal competitors are
Knorr, Robert Bosch, and Bendix.
The WABCO(R) ABS system, which the Company believes leads the market, has been
installed in approximately 726,000 heavy trucks, buses, and trailers worldwide
since 1981. Annual sales volume in Europe has significantly increased in recent
years to approximately 132,000 units in 1994 and to 44,000 units annually in
other markets, primarily the United States and Japan. In addition, Automotive
Products has developed electronically controlled pneumatic gear shifting
systems, electronically controlled air suspension systems, and automatic
climate-control and door-control systems for the commercial vehicle industry.
Automotive Products and affiliated companies have 14 manufacturing facilities
and 7 sales organizations operating in 17 countries. Principal manufacturing
operations are in Germany, France, the United Kingdom, and Brazil. Automotive
Products has joint ventures in the United States with Rockwell International
(Rockwell WABCO), in Japan with Sanwa Seiki (SANWAB), and in India with TVS
Group (Clayton Sundaram). There is also a licensee in the PRC.
In January 1994 the Company acquired Perrot, a German brake manufacturer.
Through this acquisition the Company will be able to offer complete brake
systems for trucks, buses and trailers, especially in the important and growing
air-disc brake business.
At December 31, 1994, Automotive Products employed approximately 5,600 people.
<PAGE>
ITEM 2. PROPERTIES
At December 31, 1994 the Company conducted its manufacturing activities through
94 plants in 32 countries, of which the principal facilities are as follows:
Business
Segment Location Major Products Manufactured at Location
Air Conditioning Clarksville, TN Commercial unitary air conditioning
Products Fort Smith, AK Commercial unitary air conditioning
La Crosse, WI Applied air conditioning systems
Lexington, KY Air handling products
Macon, GA Commercial air conditioning systems
Pueblo, CO Applied air conditioning systems
Rushville, IN Air handling products
Trenton, NJ Residential gas furnaces and air handlers
Tyler, TX Residential air conditioning
Waco, TX Water source heat pumps and air handling
products
Charmes, France Applied air conditioning systems
Epinal, France Applied air conditioning systems
Mirecourt, France Mini-splits and air handling products
Plumbing Products Salem, OH Enameled-steel fixtures and acrylic
bathtubs
Tiffin, OH Vitreous china
Trenton, NJ Vitreous china
Toronto, Canada Vitreous china and enameled-steel
fixtures
Hull, England Vitreous china and acrylic bathtubs
Middlewich, England Vitreous china
Dole, France Vitreous china and acrylic bathtubs
Neuss, Germany Vitreous china
Wittlich, Germany Brass plumbing fittings
Orcenico, Italy Vitreous china
Brescia, Italy Vitreous china
Mexico City, Mexico Vitreous china, water heaters
Monterrey, Mexico Brass plumbing fittings
Bangkok, Thailand Vitreous china
Seoul, South Korea Brass plumbing fittings
Manila, Philippines Vitreous china
Automotive Campinas, Brazil Braking equipment
Products Leeds, England Braking equipment
Claye-Souilly, France Braking equipment
Hanover, Germany Braking equipment
Mannheim, Germany Foundation brakes
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company's U.S. operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air, water and soil and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. A number of the
Company's plants are in the process of making changes or modifications to comply
with such laws and regulations as well as undertaking response actions to
address soil and groundwater issues at certain of its facilities. The Company is
a party to a number of remedial actions under various federal and state
environmental laws and regulations that impose liability on companies to clean
up, or contribute to the cost of cleaning up, sites at which hazardous wastes or
materials were disposed or released, including approximately 30 proceedings
under the Comprehensive Environmental Response, Compensation and Liability Act
and similar state statutes in which the Company has been named a potentially
responsible party or a third party by a potentially responsible party.
Expenditures in 1992, 1993 and 1994 to evaluate and remediate such sites were
not material. On the basis of the Company's historical experience and
information currently available, the Company believes that these environmental
actions will not have a material adverse effect on its financial condition,
results of operations or liquidity.
Additional sites may be identified for environmental remediation in the future,
including properties previously transferred by the Company and with respect to
which the Company may have contractual indemnification obligations. The Company
cannot estimate at this time the ultimate aggregate costs of all remedial
actions because of (a) uncertainties surrounding the nature and application of
environmental regulations, (b) the Company's lack of information about
additional sites at which it may be listed as a potentially responsible party,
(c) the level of clean-up that may be required at specific sites and choices
concerning the technologies to be applied in corrective actions, (d) the number
of contributors and the financial capacity of others to contribute to the cost
of remediation at specific sites and (e) the time periods over which remediation
may occur.
American Standard Inc. is the defendant in a lawsuit brought by Entech Sales &
Service, Inc., on behalf of an alleged class of contractors engaged in the
service and repair of commercial air conditioning equipment. The suit, which was
filed on March 5, 1993, in the United States District Court for the Northern
District of Texas, alleges principally that the manner in which Air Conditioning
Products distributes repair service parts for its equipment violates the Federal
antitrust laws. It demands $680 million in damages (which would be subject to
trebling under the antitrust laws) and injunctive relief. American Standard Inc.
has filed an answer denying all claims of violation and is defending itself
vigorously. The district court recently denied class certification with respect
to two of the three violations alleged in the suit. These alleged violations may
now only be asserted by Entech on its own behalf. With respect to the one claim
which was certified as a class action, alleging a price fixing conspiracy,
management believes that, on the basis of the facts now known to it, the claim
is without merit. In management's opinion the litigation will not have any
material adverse effect on the financial position, cash flows, or results of
operations of the Company.
On May 31, 1994, the Company's Salem, Ohio plant received a Request for
Information Pursuant to the Clean Air Act from the U.S. Environmental Protection
Agency (Region 5). This request was fully complied with by July 22, 1994. During
the development of the response, American Standard noted several questions
concerning the status of certain air sources. On August 2, 1994, American
Standard Inc. proposed to enter a consensual "Findings and Orders" with the Ohio
Environmental Protection Agency to resolve these questions. The potential for
and amount of any penalties is uncertain. However, the Company does not expect
that these matters will result in material liabilities.
On December 15, 1992 the Company, along with 15 other major manufacturers of
plumbing fittings, was sued in the Superior Court of the State of California,
County of San Francisco by the State of California. The same companies were sued
in a companion case, filed the same day, by the Natural Resources Defense
Council and a second environmental group. In each case plaintiffs sought
injunctive relief, civil penalties and compensatory damages, alleging, inter
alia, that faucets sold by the parties discharged lead into drinking water in
excess of minimum standards allegedly established by Proposition 65. Pursuant to
Proposition 65, a discharge of lead into a source of drinking water in excess of
0.5 micrograms per day is prohibited, although the State of California has not
yet established any methodology for measuring this discharge. The Company
believes that the lead limitations should not apply to faucets because faucets
are not a "source" of drinking water as contemplated by the legislation (e.g.,
reservoirs, streams, etc.). The suits also claim that warnings provided with the
fittings relating to such lead discharge are inadequate. Although most of the
Company's fittings contain and discharge some amount of lead, the lead content
of the Company's fittings is one of the lowest in the industry, and all of the
Company's fittings will fall below the proposed federal discharge standard and
fall below the current federal weight standards mentioned above. The Company
believes its exposure in the California suits is minimal, if any. The Company
also believes that its low-lead fittings and its continuing efforts to further
reduce lead content will afford the Company a competitive edge. The discharge
claim in the State's case has been dismissed and has been appealed.
For a discussion of German tax issues see Note 7 of Notes to Consolidated
Financial Statements (see Item 14(a) of Part IV hereof).
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's only issued and outstanding common equity, 1,000 shares of common
stock, $.01 par value, is owned by American Standard Companies Inc. There is no
established public trading market for these shares.
There were no dividends declared on the Company's common stock in 1993 or 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Reduced disclosure format)
The following should be read in conjunction with the Company's consolidated
financial statements and notes thereto included elsewhere herein.
The Company's operating results improved in 1994, due principally to volume
increases and cost reductions in each of its three business segments, as most
markets recovered from a worldwide recession. Consolidated sales for 1994 were
$4,457 million, an increase of $627 million, or 16% (with little effect from
foreign exchange), from $3,830 million in 1993. Sales increased for all three
segments with gains of 18% for Air Conditioning Products, 4% for Plumbing
Products and 35% for Automotive Products.
Operating income for 1994 was $355 million, an increase of $73 million, or 26%
(with little effect from foreign exchange), from $282 million in 1993 as a
result of gains in each segment, especially Automotive Products and Air
Conditioning Products. Operating income for 1994 included charges of $26 million
related to employee severance, the consolidation of production facilities and
the implementation of other cost reduction actions. In 1994 the Company also
provided $14 million for losses on operating assets expected to be disposed of
prior to the expiration of their originally estimated useful lives. The year
1993 included $8 million of charges for plant shutdowns and other cost reduction
actions. Excluding those charges from the respective years, operating income
would have increased to $395 million from $290 million, or 36%, in 1994 over
1993.
<PAGE>
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
(Dollars in millions)
Sales:
Air Conditioning Products $2,480 $2,100 $1,892
Plumbing Products 1,218 1,167 1,170
Automotive Products 759 563 730
$4,457 $3,830 $3,792
Operating Income:
Air Conditioning Products $ 182 $ 133 $ 104
Plumbing Products 111 108 108
Automotive Products 62 41 88
Operating Income (a) 355 282 300
Interest expense (259) (278) (289)
Corporate Items (b) (111) (85) (63)
Loss before income taxes and extraordinary $ (15) $ (81) $ (52)
item
</TABLE>
(a)Includes special charges of $40 million in 1994 applicable to consolidation
of production facilities, employee severance, other cost reduction actions and
a provision for loss on the early disposition of certain assets; and $8
million in 1993 related to plant shutdowns and other cost reduction actions.
(b)Corporate items include administrative and general expenses, accretion
charges on postretirement benefit liabilities, equity in net income (loss) of
affiliated companies, minority interest, foreign exchange transaction gains
and losses and miscellaneous income and expense. In 1994 such expenses
included a one-time special charge of $20 million in connection with the
amendment of certain agreements in anticipation of the initial public offering
of American Standard Companies Inc. common stock.
Sales of Air Conditioning Products increased 18% to $2,480 million for 1994
from $2,100 million for 1993, as a result of significant sales gains in the U.S.
and expanding international sales. Sales in the U.S. improved significantly from
depressed levels primarily as a result of recovery in commercial and residential
replacement and new-construction markets. Commercial markets represent
approximately 75% of Air Conditioning Products total sales. Over 60% of U.S.
sales for Air Conditioning Products is from the replacement, renovation and
repair markets. The U.S. sales increase was primarily attributable to the
improved markets and gains in market share.
Operating income of Air Conditioning Products increased 37% to $182 million
in 1994 from $133 million in 1993. This gain was primarily the result of
increased operating income in the United States due to higher sales together
with cost reductions.
Sales of Plumbing Products increased 4% (6% excluding the unfavorable
effects of foreign exchange) to $1,218 million in 1994 from $1,167 million in
1993. The exchange-adjusted improvement resulted from sales increases of 4% for
international operations and 11% for the U.S. operations. The sales gain for the
international operations was led by volume and price gains as economic
conditions in several countries (particularly the United Kingdom and Germany)
showed modest improvement over the prior year. The strength of the European
operations has been sales in the replacement market, which has more than made up
for the effects of poor new-construction markets. Sales also increased in
Thailand, Korea and Mexico, all on higher volumes. These increases were offset
partly by lower sales in Canada and Brazil where poor economic conditions
continued, and by the effect of the deconsolidation of operations in the
People's Republic of China ("PRC") which in April 1994 were contributed to the
new joint venture operating in that country. Sales in the U.S. increased as a
result of improved markets and an expanded retail customer base. A basic shift
from the wholesale distribution channel to the retail sales channel has been
developing over recent years, a trend the Company believes will continue and
will result in increased sales because of strong product and brand-name
recognition. Retail markets accounted for 24% of the total 1994 U.S. plumbing
products sales, up from 20% in 1993.
Operating income of Plumbing Products was $111 million for 1994 compared
with $108 million for 1993 as a result of improvements in international
operations. Operating income gains reflected the sales improvements and cost
reductions in most operations. In the U.S. improvements from increased sales and
cost reductions at manufacturing facilities were more than offset by a provision
of $14 million related to certain assets that will be disposed of prior to the
expiration of their originally estimated useful lives. Overall Plumbing
ProductsO results were also negatively affected by a provision of $5 million
related to employee severance and other cost reduction actions, compared to $1
million of similar charges in 1993. Excluding such provisions from the
respective years, operating income would have increased to $130 million from
$109 million, or 19%, in 1994 from 1993.
Sales of Automotive Products for 1994 were $759 million, an increase of $196
million, or 35%, from $563 million in 1993. Unit volume of truck and bus
production in Western Europe improved significantly and aftermarket sales grew
solidly. Sales of Perrot, a German brake manufacturer which the Company acquired
in January 1994, accounted for $62 million of the gain. Sales volumes were
significantly higher in the U.K. (as a result of the growing utility vehicle
business in that country), in Sweden (where truck manufacturing increased by
approximately 50%) and in Brazil, France and Spain (where demand also
increased).
Operating income for Automotive Products was $62 million in 1994, an
increase of 51% compared with $41 million in 1993. The increase was primarily
attributable to increased sales volume and the effect of cost reductions, partly
offset by a loss experienced by Perrot. Operating income for 1994 reflected
charges of $14 million related to employee severance and the consolidation of
production facilities. Charges of a similar nature in 1993 totalled $2 million.
Excluding those charges from the respective years, operating income would have
increased to $76 million from $43 million, or 77%, in 1994 over 1993.
Interest expense for 1994 decreased $19 million compared to 1993 primarily
as a result of lower overall interest rates achieved through a 1993 refinancing.
This improvement occurred despite a $7 million increase in interest expense
related to the 12-3/4% Junior Subordinated Debentures issued in June 1993 in
exchange for American Standard Inc.'s 12-3/4% Exchangeable Preferred Stock.
Corporate items increased $26 million in 1994 principally because of a special
charge of $20 million paid in connection with the amendment of certain
agreements in anticipation of the initial public stock offering of American
Standard Companies Inc.
The income tax provisions for 1994 and 1993 were $62 million and $36
million, respectively, despite losses (before income taxes and extraordinary
items) of $15 million and $81 million for 1994 and 1993, respectively. These
provisions reflected the taxes payable on profitable foreign operations, offset
partly in 1993 by tax benefits from certain foreign net operating losses. The
provision for 1994 was adversely affected by less favorable tax treatment with
respect to certain foreign items, primarily in Germany. Other factors
contributing to the unusual relationship between the pre-tax results and the tax
provision for both years are the nondeductibility for tax purposes of the
amortization of goodwill and the effects of other purchase accounting
adjustments and the share allocations made by the ESOP as well as tax rate
differences and withholding taxes on foreign earnings. See Note 7 of Notes to
Consolidated Financial Statements.
As a result of the redemption of debt in 1994 with the proceeds of an
October borrowing under the Company's bank credit agreement and in 1993 as a
result of the 1993 refinancing, 1994 and 1993 included extraordinary charges of
$9 million and $92 million, respectively (including call premiums, the write-off
of unamortized debt issuance costs and in 1993 the loss on cancellation of
foreign currency swap contracts), on which no tax benefit was available. In
addition the first quarter of 1995 will include a similar extraordinary charge
of $30 million in connection with the debt repayment resulting from a 1995 first
quarter refinancing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management's Report On Financial Statements
The accompanying consolidated balance sheets at December 31, 1994 and 1993, and
related consolidated statements of operations, stockholders' deficit and cash
flows for the years ended December 31, 1994, 1993 and 1992, have been prepared
in conformity with generally accepted accounting principles, and the Company
believes the statements set forth a fair presentation of financial condition
and results of operations. The Company believes that the accounting systems and
related controls that it maintains are sufficient to provide reasonable
assurance that the financial records are reliable for preparing financial
statements and maintaining accountability for assets. The concept of reasonable
assurance is based on the recognition that the cost of a system of internal
control must be related to the benefits derived and that the balancing of those
factors requires estimates and judgment. Reporting on the financial affairs of
the Company is the responsibility of its principal officers, subject to audit
by independent auditors, who are engaged to express an opinion on the Company's
financial statements. The Board of Directors has an Audit Committee of
non-employee Directors which meets periodically with the Company's financial
officers, internal auditors, and the independent auditors and monitors the
accounting affairs of the Company.
American Standard Inc.
Piscataway, New Jersey
February 16, 1995
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Standard Inc.
We have audited the accompanying consolidated balance sheets of American
Standard Inc. and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' deficit, and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Standard
Inc. and subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
New York, New York
February 16, 1995
<PAGE>
AMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in thousands)
Year ended December 31,
1994 1993 1992
Sales $4,457,465 $3,830,462 $3,791,929
Cost and expenses:
Cost of sales 3,377,271 2,902,562 2,852,230
Selling and administrative expenses 778,550 692,229 678,742
Other expense 57,381 38,281 24,672
Interest expense 259,437 277,860 288,851
4,472,639 3,910,932 3,844,495
Loss before income taxes and
extraordinary item (15,174) (80,470) (52,566)
Income taxes 62,512 36,165 4,672
Loss before extraordinary item (77,686) (116,635) (57,238)
Extraordinary loss on retirement of debt
(Note 10) (8,735) (91,932) -
Net loss (86,421) (208,567) (57,238)
Preferred dividend - (8,624) (15,707)
Net loss applicable to common shares $(86,421) $(217,191) $ (72,945)
See notes to consolidated financial statements.
<PAGE>
AMERICAN STANDARD INC.AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands except share data)
At December 31,
1994 1993
Assets
Current assets
Cash and cash equivalents $92,749 $53,237
Accounts receivable, less allowance for
doubtful accounts -1994, $19,569; 1993,$15,666 595,239 507,322
Inventories 323,220 325,819
Future income tax benefits 22,379 24,562
Other current assets 30,956 30,743
Total current assets 1,064,543 941,683
Facilities, at cost net of accumulated
depreciation 812,684 820,523
Other assets
Goodwill, net of accumulated amortization
1994, $208,973; 1993, $169,879 1,053,042 1,025,774
Debt issuance costs, net of accumulated
amortization 1994, $23,928; 1993, $9,670 64,095 78,102
Other 161,754 125,328
$ 3,156,118 $2,991,410
Liabilities and Stockholder's Deficit
Current liabilities
Loans payable to banks $70,271 $38,036
Current maturities of long-term debt 141,640 105,939
Accounts payable 350,489 307,326
Accrued payrolls 140,297 99,758
Other accrued liabilities 319,174 258,322
Taxes on income 46,822 47,003
Total current liabilities 1,068,693 856,384
Long-term debt 2,152,291 2,191,737
Other long-term liabilities
Reserve for postretirement benefits 437,708 387,038
Deferred tax liabilities 37,650 45,625
Other 235,976 204,170
Total liabilities 3,932,318 3,684,954
Commitments and contingencies
Stockholders' deficit
Preferred stock, Series A, $.01 par
value,1,000 shares issued and outstanding - -
Common stock, $.01 par value, 1,000
shares authorized,issued and outstanding - -
Capital surplus 214,634 211,333
Accumulated deficit (836,424) (750,003)
Foreign currency translation effects (151,721) (149,220)
Minimum pension liability adjustment (2,689) (5,654)
Total stockholders' deficit (776,200) (693,544)
$3,156,118 $2,991,410
See notes to consolidated financial statements.
<PAGE>
AMERICAN STANDARD INC.AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Dollars in thousands)
Year Ended December 31,
1994 1993 1992
Cash provided (used) by:
Operating activities:
Loss before extraordinary item $(77,686) $(116,635) $(57,238)
Depreciation (including asset loss
provision in 1994) 122,944 106,041 111,643
Amortization of goodwill 31,472 30,807 33,064
Non-cash interest 53,288 65,031 65,527
Non-cash stock compensation 28,479 25,679 23,076
Amortization of debt issuance costs 14,549 11,461 5,983
Loss (gain) on sale of fixed assets 1,259 2,963 (660)
Changes in assets and liabilities:
Accounts receivable (69,991) (48,680) (20,081)
Inventories 13,092 47,321 44,163
Accounts payable and accrued payrolls 63,413 40,124 (8,308)
Postretirement benefits 21,290 22,687 22,074
Income taxes (3,927) (4,232) (48,974)
Other long-term liabilities 32,795 13,271 3,805
Other, net 25,609 5,003 (428)
Net cash provided by operating activities 256,586 200,841 173,646
Investing activities:
Purchases of property, plant and
equipment (105,741) (90,474) (87,409)
Investments in affiliated companies (23,971) (7,556) (20,608)
Proceeds from disposals of property,
plant and equipment 14,783 4,003 11,133
Other (2,071) 4,514 10,703
Net cash used by investing activities (117,000) (89,513) (86,181)
Financing activities:
Proceeds from issuance of long-term debt 336,160 1,405,557 394,159
Repayment of long-term debt, including
redemption premiums (439,762) (1,427,989) (490,059)
Net change in revolving credit facility 30,816 7,000 -
Net change in other short-term debt (10,044) (61,600) 41,675
Purchases of parent company common stock (16,927) (12,194) (10,950)
Other financing costs (2,441) (76,762) (9,897)
Net cash used by financing activities (102,198) (165,988) (75,072)
Effect of exchange rate changes on cash and
cash equivalents 2,124 (3,652) (6,234)
Net increase (decrease) in cash and cash
equivalents 39,512 (58,312) 6,159
Cash and cash equivalents at beginning
of period 53,237 111,549 105,390
Cash and cash equivalents at end of period $92,749 $ 53,237 $111,549
See notes to consolidated financial statements.
<PAGE>
AAMERICAN STANDARD INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS'DEFICIT
(Dollars in thousands)
Foreign
Currency
Capital Accumulated Translation
Surplus Deficit Effects
Balance at December 31, 1991 $221,881 $(484,198)$(50,696)
Net Loss -- (57,238) --
American Standard Companies Inc. common (13,937) -- --
stock repurchased
Capital contributions from parent 3,756 -- --
Excess of value over cost of ESOP shares 14,416 -- --
allocated to employees
Stock dividend on exchangeable preferred (15,707) -- --
stock
Foreign currency Translation -- -- (36,176)
Balance at December 31, 1992 210,409 (541,436) (86,872)
Net Loss -- (208,567) --
American Standard Companies Inc. common (12,869) -- --
stock repurchased
Capital contributions from parent 5,313 -- --
Excess of value over cost of ESOP shares 17,094 -- --
allocated to employees
Stock dividend on exchangeable preferred (8,624) -- --
stock
Issuance of Series A Preferred Stock 10 -- --
Foreign currency Translation -- -- (62,348)
Balance at December 31, 1993 211,333 (750,003) (149,220)
Net Loss -- (86,421) --
American Standard Companies Inc. common (16,761) -- --
stock repurchased
Capital contributions from parent 4,925 -- --
Excess of value over cost of ESOP shares 15,137 -- --
allocated to employees
Foreign currency Translation -- -- (2,501)
Balance at December 31, 1994 $214,634 $(836,424)$(151,721)
See notes to consolidated financial statements.
<PAGE>
AMERICAN STANDARD INC.AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1. Description of the Company
American Standard Inc., a Delaware corporation (the "Company") was incorporated
in 1929. All of its outstanding common stock is owned by American Standard
Companies Inc. (formerly named ASI Holding Corporation) a Delaware corporation
that was formed in 1988 by Kelso & Company, L.P. ("Kelso") to effect the
acquisition (the "Acquisition") of American Standard Inc. For financial
statement purposes the Acquisition has been accounted for under the purchase
method. ASI Holding Corporation changed its name to American Standard Companies
Inc. in November 1994. Hereinafter, "American Standard" or "the Company" will
refer to the Company, to American Standard Companies Inc. or to American
Standard Inc., including its subsidiaries, as the context requires. In the first
quarter of 1995 American Standard Companies Inc. completed an initial public
offering of shares of its common stock (see Note 2).
Note 2. Initial Public Stock Offering of American Standard Companies Inc.
In the first quarter of 1995 American Standard Companies Inc. sold 15,112,300
shares of its common stock in an initial public offering (the "Offering"), at an
initial price to the public of $20 per share. The Offering yielded net proceeds
of approximately $282 million (including proceeds from the exercised portion of
the underwriters' over-allotment option and after deducting underwriting
discounts and expenses) which were transferred to American Standard Inc. and
used to reduce its indebtedness. Of the total net proceeds transferred, $270
million was contributed to the capital of American Standard Inc. and $12 million
was loaned under an intercompany demand note. The Offering and an amended bank
credit agreement were both part of a major refinancing completed in the first
quarter of 1995 (see Note 10). Had the Offering and the amended bank credit
agreement been completed as of January 1, 1994, interest expense in 1994 would
have been reduced by approximately $50 million and the loss before extraordinary
item would have been approximately $27 million. All share data herein reflect
the 2.5 to 1 stock split effected in December 1994.
Note 3. Accounting Policies
Consolidation - The financial statements include on a consolidated basis the
results of all majority-owned subsidiaries. All material intercompany
transactions are eliminated. Investments in affiliated companies are included at
cost plus the Company's equity in their net results.
Foreign Currency Translation - Assets and liabilities of foreign operations
where the functional currency is other than the U.S. dollar are translated at
year-end rates of exchange, and the income statements are translated at the
average rates of exchange for the period. Gains or losses resulting from
translating foreign currency financial statements are accumulated in a separate
component of stockholders' equity until the entity is sold or substantially
liquidated.
Gains or losses resulting from foreign currency transactions (transactions
denominated in a currency other than the entity's functional currency) are
included in net income except for those resulting from transactions which hedge
a net foreign currency exposure or long-term intercompany transactions of an
investment nature. For operations in countries that have hyper-inflationary
economies, net income includes gains and losses from translating assets and
liabilities at year-end rates of exchange, except for inventories and
facilities, which are translated at historical rates.
The losses from foreign currency transactions and translation losses in
countries with hyper-inflationary economies reflected in expense were $9.9
million in 1994, $21.9 million in 1993, and $19.3 million in 1992.
The allocation of purchase costs increased the net asset exposure of
foreign operations; however, since 1988 the effects of exchange volatility have
been ameliorated by the fact that a portion of the Company's borrowings has been
denominated in foreign currencies.
Revenue Recognition - Sales are recorded when shipment to a customer occurs.
Cash Equivalents - Cash equivalents include all highly liquid investments
with a maturity of three months or less when purchased.
Inventories - Inventory costs are determined by the use of the last-in,
first-out (LIFO) method on a worldwide basis, and inventories are stated at the
lower of such cost or realizable value.
Facilities - The Company capitalizes costs, including interest during
construction, of fixed asset additions, improvements, and betterments that add
to productive capacity or extend the asset life. Maintenance and repair
expenditures are charged against income. Significant investment grants are
amortized into income over the period of benefit.
Goodwill - Goodwill is being amortized over 40 years. The carrying value of
goodwill for each business is reviewed if the facts and circumstances, such as
significant declines in sales, earnings or cash flows or material adverse
changes in the business climate, suggest that it may be impaired. If any
impairment is indicated as a result of such reviews, the Company would measure
it using techniques such as comparing the undiscounted cash flow of the business
to its book value including goodwill or by obtaining appraisals of the related
business. To date no indications of impairment have arisen as to any material
portion of goodwill.
Debt Issuance Costs - The costs related to the issuance of debt are
capitalized and amortized to interest expense using the effective interest
method over the lives of the related debt.
Warranties - The Company provides for estimated warranty costs at the time
of sale. Warranty obligations beyond one year are included in other long-term
liabilities. Revenues from the sales of extended warranty contracts are deferred
and amortized on a straight-line basis over the terms of the contracts.
Postretirement Benefits - Postretirement benefits are provided for
substantially all employees of the Company, both in the United States and
abroad. In the United States the Company also provides various postretirement
health care and life insurance benefits for certain of its employees. Such
benefits are accounted for on an accrual basis using actuarial assumptions,
where appropriate.
Depreciation - Depreciation and amortization are computed on the
straight-line method based on the estimated useful life of the asset or asset
group.
<PAGE>
Research and Development Expenses - Research and development costs are
expensed as incurred except for costs incurred (after technological feasibility
is established) for computer software products expected to be sold. The Company
expended approximately $118 million in 1994, $110 million in 1993, and $110
million in 1992 for research activities and product development and for product
engineering. Expenditures for research and product development only were $39
million, $43 million, and $40 million in the respective years. Computer software
product development costs capitalized amounted to $2 million in each of 1994 and
1993.
Income Taxes - The Company recognizes deferred tax assets for the tax
effects of items that will be deducted for tax purposes in later years together
with the tax effects of income items included in current reporting for tax
purposes but in later years for financial statement purposes along with the
effects of certain tax attributes such as net operating losses.
The Company provides for United States income taxes and foreign withholding
taxes on foreign earnings expected to be repatriated. Deferred tax liabilities
are provided on the excess of the financial statement basis over the tax basis
of certain assets, primarily for inventories and fixed assets, including fair
value adjustments resulting from purchase accounting in connection with the
Acquisition; fixed assets due to accelerated depreciation deductions for tax
purposes; and non-permanent investments in certain foreign subsidiaries.
Financial Instruments with Off-Balance-Sheet Risk - The Company from time to
time enters into agreements in the management of foreign currency and interest
rate exposures. Gains and losses from underlying rate changes are included in
income unless the contract hedges a net investment in a foreign entity, a firm
commitment, or related debt instrument in which case gains and losses are
deferred as a component of foreign currency translation effects in stockholders'
equity or included as a component of the transaction.
Note 4. Stock Incentive Plan
In January 1995 American Standard Companies Inc. established the Stock Incentive
Plan (the "Stock Plan") under which awards of its common stock may be granted to
officers and other key executives and employees in the form of stock options,
stock appreciation rights, restricted stock, or restricted units. The maximum
number of shares or units that may be issued under the Stock Plan is 10% of the
number of shares of common stock issued and outstanding as of the completion of
the Offering in the first quarter of 1995, or approximately 7,600,000 shares.
Stock options to purchase 4,998,000 shares at the initial public offering price
of $20 per share were awarded to approximately 900 employees in the first
quarter of 1995. The awards vest ratably over three years and are exercisable
over a period of ten years.
<PAGE>
Note 5. Other Expense
Other income (expense) was as follows:
Year Ended December 31,
(Dollars in millions)
1994 1993 1992
Interest income $ 8.2 $ 8.5 $ 8.7
Royalties 3.5 2.6 3.8
Equity in net income (loss) of
affiliated companies 4.0 (0.1) 4.9
Minority interest (13.3) (14.0) (9.8)
Accretion expense (26.1) (30.5) (29.8)
Other, net (a) (33.7) (4.8) (2.5)
s (57.4) $ (38.3) $ (24.7)
(a) The 1994 amount includes a one-time special charge of $20 million incurred
in connection with the amendment of certain agreements in anticipation of the
initial public offering.
Note 6. Postretirement Benefits
The Company sponsors postretirement benefit plans covering substantially all
employees, including an Employee Stock Ownership Plan (the "ESOP") for the
Company's U.S. salaried employees and certain U.S. hourly employees. In 1988 in
conjunction with the Acquisition the ESOP purchased 12,500,000 shares of common
stock of American Standard Companies Inc. The ESOP is an individual account,
defined contribution plan. Through December 31, 1994, the valuation of the ESOP
shares has been determined by independent appraisals. By December 31, 1994, all
of the common stock initially acquired by the ESOP was allocated to the accounts
of eligible employees (primarily through basic allocations of 3% of covered
compensation and a matching Company contribution of up to 6% of covered
compensation invested in the Company's 401(k) savings plan by employees). The
Company intends to fund the ESOP in future years through contributions of cash
or shares of common stock.
Benefits under defined benefit pension plans on a worldwide basis are
generally based on years of service and employees' compensation during the last
years of employment. In the United States the Company also provides various
postretirement health care and life insurance benefits for certain of its
employees. Funding decisions are based upon the tax and statutory considerations
in each country. Accretion expense is the implicit interest cost associated with
amounts accrued and not funded and is included in "other expense". At December
31, 1994, funded plan assets related to pensions were held primarily in fixed
income and equity funds. Postretirement health and life insurance benefits are
not prefunded.
<PAGE>
The Company's postretirement plans' funded status and amounts recognized in
the balance sheet at December 31, 1994, and 1993 were:
<TABLE>
<CAPTION>
1994 1993
(Dollars in millions)
Assets in Accumulated Assets in Accumulated
Excess of Benefit Health and Excess of Benefit Health and
Accumulated Obligations Life Accumulated Obligations Life
Benefit in Excess of Insurance Benefit in Excess Insurance
Obligations Assets Benefits Obligations of Assets Benefits
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested $ 106.8 $ 528.9 - $ 105.2 $ 511.1 -
Non-vested 5.1 29.1 - 4.5 30.4 -
Accumulated benefit obligations 111.9 558.0 - 109.7 541.5 -
Additional amounts related to
projected pay increases 15.8 34.1 - 12.1 46.0 -
Total projected benefit obligations 127.7 592.1 $160.5 121.8 587.5 $ 175.4
Assets and book reserves relating to such
benefits:
Market value of funded assets 160.5 271.4 - 166.9 303.8 -
Reserve (asset) for postretirement benefits
net of recognized overfunding (37.6) 309.8 158.7 (36.8) 257.7 154.9
Additional minimum liability - 15.5 - - 19.0 -
122.9 596.7 158.7 130.1 580.5 154.9
Assets and book reserves in excess of
(less than) projected benefit
obligations $ (4.8) $4.6 $ (1.8) $8.3 $ (7.0) $ (20.5)
Consisting of:
Unrecognized prior services
benefit (cost) $ (8.0) $ .7 $ 10.7 $ (6.6) $ 3.4 $ 10.3
Unrecognized net gain (loss) from
actuarial experience 3.2 1.2 (12.5) 14.9 (16.0) (30.8)
Pension liability adjustment to
stockholders' deficit - 2.7 - - 5.6 -
$ (4.8) $ 4.6 $ (1.8) $ 8.3 $ (7.0) $ (20.5)
</TABLE>
<PAGE>
At December 31, 1994, the projected benefit obligation related to health and
life insurance benefits for active employees was $58.7 million and for retirees
was $101.8 million.
For certain plans, the additional minimum liability recorded by the Company
as part of its reserve for postretirement benefits was $15.5 million at December
31, 1994 ($19 million at December 31, 1993). The additional minimum liability is
the excess of the accumulated benefit obligation over plan assets and
accumulated benefit provisions. In connection with providing for the additional
minimum liability, an intangible asset was recorded, to the extent of
unrecognized prior service costs, which amounted to $12.8 million at December
31, 1994 ($13.4 million at December 31, 1993). The net charge in stockholders'
deficit was $2.7 million at December 31, 1994 (reduced from $5.6 million at
December 31, 1993).
The projected benefit obligation for postretirement benefits was determined
using the following assumptions:
1994 1993
--------------------- --------------------
Domestic Foreign Domestic Foreign
Discount rate 8.25% 5.75%-9.25% 7.25% 4.50%-8.50%
Long-term rate of inflation 2.80% 1.75%-5.25% 2.80% .50%-5.00%
Merit and promotional increase 1.70% 1.70% 1.70% 1.50%
Rate of return on plan assets 8.50% 7.25%-8.35% 8.75% 6.25%-9.50%
The weighted-average annual assumed rate of increase in the health care cost
trend rate is 9% for 1995 and is assumed to decrease gradually to 5% for 1999
and remain at that level thereafter. The health care cost trend rate assumption
has a significant effect on the amounts reported. For example, a change in the
assumed rate of one percentage point for each future year would change the
accumulated postretirement benefit obligation as of December 31, 1994, by $11
million and the annual postretirement cost by $1.4 million.
<PAGE>
<TABLE>
<CAPTION>
Postretirement cost had the following components:
Year ended December 31,
(Dollars in Millions)
1994 1993 1992
Health & Health & Health &
Pension Life Ins. Pension Life Ins. Pension Life Ins.
Benefits Benefits Benefits Benefits Benefits Benefits
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits
earned during the period $23.6 $ 3.8 $20.1 $ 3.4 $21.7 $ 3.0
Interest cost on the
projected benefit obligation 47.0 12.3 50.6 14.1 50.4 13.7
Less assumed return on plan assets:
Actual loss (return) on plan assets 13.0 -- (78.8) -- (35.7) --
Excess (shortfall) deferred (49.5) -- 42.9 -- (2.6) --
(36.5) -- (35.9) -- (38.3) --
Other, including amortization
of prior service cost 1.8 .2 2.7 .3 1.6 --
Defined benefit plan cost $35.9 $16.3 $37.5 $17.8 $35.4 $16.7
Accretion expense reclassified
to "other expense" $13.8 $12.3 $16.4 $14.1 $16.1 $13.7
Total postretirement costs were:
1994 1993 1992
Year Ended December 31,
(Dollars in millions)
Pension benefits $35.9 $37.5 $35.4
Health and life
insurance benefits 16.3 17.8 16.7
Defined benefit plan cost 52.2 55.3 52.1
Defined contribution
plan cost (a) 24.7 22.4 20.4
Total postretirement cost,
including accretion expense $76.9 $77.7 $72.5
<FN>
(a) Principally ESOP cost.
</FN>
</TABLE>
<PAGE>
Note 7. Income Taxes
The Company's loss before income taxes and extraordinary item, and the
applicable provision (benefit) for income taxes were:
1994 1993 1992
Year Ended December 31, (Dollars in millions)
Income (loss) before income taxes and
extraordinary item:
Domestic $(157.0) $(168.4) $ (170.1)
Foreign 141.8 87.9 117.5
Pre-tax loss (15.2) (80.5) (52.6)
Provision (benefit) for income taxes:
Current:
Domestic 10.5 12.4 5.1
Foreign 57.7 43.0 63.0
68.2 55.4 68.1
Deferred:
Domestic .8 1.1 (35.8)
Foreign (6.5) (20.3) (27.6)
(5.7) (19.2) (63.4)
Total provision $62.5 $36.2 $ 4.7
A reconciliation between the actual income tax expense provided and the
income tax benefit computed by applying the statutory federal income tax rate of
35% in 1994 and 1993 and 34% in 1992 to the loss before income taxes and
extraordinary item is as follows:
1994 1993 1992
Year Ended December 31, (Dollars in millions)
Tax benefit at statutory rate $(5.3) $(28.2) $(17.9)
Nondeductible goodwill charged to operations 10.0 10.4 10.5
Nondeductible ESOP allocations 6.8 6.1 4.9
Rate differences and withholding taxes related
to foreign operations 47.1 18.7 1.4
Foreign exchange (4.3) (7.0) (6.3)
State tax benefits (5.3) (5.5) (3.3)
Other, net (7.9) 8.7 5.5
Increase in valuation allowance 21.4 33.0 9.9
Total provision $62.5 $ 36.2 $ 4.7
<PAGE>
In addition to the 1994 and 1993 valuation allowance increases of $21.4
million and $33.0 million respectively, shown above, valuation allowances of
$3.2 million and $32.1 million, respectively, were also provided for the tax
benefits related to the extraordinary losses on retirement of debt (see Note
10). The 1993 valuation allowance and certain withholding taxes have been
adjusted to reflect the actual 1993 tax returns as filed.
The following table details the gross deferred tax liabilities and assets
and the related valuation allowances:
1994 1993
At December 31, (Dollars in millions)
Deferred tax liabilities:
Facilities (accelerated depreciation, capitalized
interest and purchase accounting differences) $142.3 $141.1
Inventory (LIFO and purchase accounting differences) 15.4 18.5
Employee benefits .6 11.0
Foreign investments 50.1 50.1
Other 31.1 26.2
239.5 246.9
Deferred tax assets:
Employee benefits (pensions and
other postretirement benefits) 128.2 110.7
Warranties 35.7 37.4
Alternative minimum tax 19.4 19.4
Foreign tax credits and net operating losses 44.0 47.8
Reserves 69.0 58.7
Other 46.7 46.0
Valuation allowances (118.8) (94.2)
224.2 225.8
Net deferred tax liabilities $15.3 $21.1
Deferred tax assets related to foreign tax credits, net operating loss
carryforwards and future tax deductions have been reduced by a valuation
allowance since realization is dependent in part on the generation of future
foreign source income as well as on income in the legal entity which gave rise
to tax losses. Other deferred tax assets have not been reduced by valuation
allowances because of carrybacks and existing deferred tax credits which reverse
in the carryforward period. The foreign tax credits and net operating losses are
available for utilization in future years. In some tax jurisdictions the
carryforward period is limited to as little as five years; in others it is
unlimited.
<PAGE>
As a result of the Acquisition (see Note 1) and the allocation of purchase
accounting (principally goodwill) to foreign subsidiaries, the book basis in the
net assets of the foreign subsidiaries exceeds the related U.S. tax basis in the
subsidiaries' stock. Such investments are considered permanent in duration, and
accordingly no deferred taxes have been provided on such differences, which are
significant. It is impracticable because of the complex legal structure of the
Company and the numerous tax jurisdictions in which the Company operates to
determine such deferred taxes.
Cash taxes paid were $70 million, $41 million, and $56 million in the years
1994, 1993 and 1992, respectively.
In connection with examinations of the tax returns of the Company's German
subsidiaries for the years 1984 through 1990, the German tax authorities have
raised questions regarding the treatment of certain significant matters. In
prior years the Company paid approximately $20 million of a disputed German
income tax. A suit is pending to obtain a refund of this tax. The Company
anticipates that the German tax authorities may propose other adjustments
resulting in additional taxes of approximately $120 million (at December 31,
1994, exchange rates) (principally relating to the 1988 to 1990 period), plus
interest, for the tax return years under audit. In addition, significant
transactions similar to those which gave rise to such possible adjustments
occurred in years subsequent to 1990. If the tax authorities should propose
adjustments for the 1988-1990 period, they might, after future tax audits,
propose tax adjustments that are comparable for years 1991 to 1993. The Company,
on the basis of the opinion of legal counsel, believes the tax returns are
substantially correct as filed and any such adjustments would be inappropriate
and intends to vigorously contest any adjustments which have been or may be
assessed. Accordingly, the Company had not recorded any loss contingency at
December 31, 1994, with respect to such matters.
Under German tax law, if an assessment is made for the years presently under
audit, the authorities may demand immediate payment of the amount assessed prior
to final resolution of the issues. The Company believes, on the basis of opinion
of legal counsel, that it is highly likely that a suspension of payment pending
final resolution would be obtained. If immediate payment were required, the
Company expects that it would be able to make such payment from available
sources of liquidity or credit support but that future cash flows and therefore
subsequent results of operations for any particular quarterly or annual period
could be adversely affected.
As a result of recent changes in German tax legislation, the Company's tax
provision in Germany was higher in 1994 and will be higher in the future. As a
result of this German tax legislation and the related additional tax provisions,
the Company believes its exposure to the issues under the audit referred to
above will be reduced for 1994 and future years.
American Standard Inc. makes substantial annual interest payments to its
Netherlands subsidiary. These interest payments have been exempt from U.S.
withholding tax under an income tax treaty between the United States and the
Netherlands. A provision in a new treaty raises the possibility that such
payments may become subject to 15% U.S. withholding tax. The Company has filed a
Competent Authority request with the Internal Revenue Service seeking a
determination that no withholding tax will be imposed. The Company believes,
based upon a recent IRS News Release that authorizes the requested relief, that
the Competent Authority request will be resolved favorably. If the Competent
Authority request is not resolved favorably, additional withholding taxes of
approximately $12 million per year could be imposed on the Company commencing in
1996. In such case, the Company will consider alternatives designed to mitigate
such increased withholding taxes; however, there is no assurance that such
alternatives will be found.
<PAGE>
Note 8. Inventories
The components of inventories are as follows:
1994 1993
At December 31, (Dollars in millions)
Finished products $160.2 $169.0
Products in process 82.5 78.0
Raw materials 80.5 78.8
Inventories at cost $323.2 $325.8
The carrying cost of inventories approximates current cost as a result of
purchase accounting adjustments which are offset by LIFO reserves.
Note 9. Facilities
The components of facilities, at cost, are as follows:
1994 1993
At December 31, (Dollars in millions)
Land $ 65.8 $ 66.2
Buildings 325.7 314.6
Machinery and equipment 776.2 739.9
Improvements in progress 75.2 54.4
Gross facilities 1,242.9 1,175.1
Less: accumulated depreciation 430.2 354.6
Net facilities $812.7 $820.5
<PAGE>
Note 10. Debt
The 1995 Refinancing - In the first quarter of 1995 the Company completed a
major refinancing (the "1995 Refinancing") consisting of: (i) the October 1994
amendment to the Company's 1993 credit agreement ("1993 Credit Agreement") which
provided an additional term loan of $325 million (the "October Borrowing"), the
proceeds of which were used to redeem $316.8 million in aggregate principal
amount of the Company's 14-1/4% Subordinated Discount Debentures Due 2003 and
12-3/4% Junior Subordinated Debentures Due 2003 and to pay redemption premiums
of $4.4 million and debt issuance and other costs in November 1994; (ii) the
Offering of common stock (see Note 2), the net proceeds of which, totaling $282
million, were used to repay indebtedness; and (iii) the February 1995 amendment
and restatement of the 1993 Credit Agreement (as so amended and restated, the
"1995 Credit Agreement"), which provided a secured multi-currency,
multi-borrower credit facility aggregating $1.0 billion, the proceeds of which
were used to replace outstanding borrowings under the 1993 Credit Agreement.
The 1995 Credit Agreement provides to American Standard Inc. and certain
subsidiaries (the "Borrowers") an aggregate, secured facility of $1.0 billion
available to all Borrowers as follows: (a) a $100 million U.S. Dollar Term Loan
Facility (the "Term Loan Facility") which expires in 2000; (b) a $250 million
U.S. Dollar Revolving Credit Facility and a $300 million Multi-currency
Revolving Credit Facility (the "Revolving Facilities") which expire in 2002; and
(c) a $350 million Multi-currency Periodic Access Credit Facility (the "Periodic
Access Facility") which expires in 2002.
The 1995 Credit Agreement provides lower interest costs, increased borrowing
capacity, less restrictive covenants and lower annual scheduled debt maturities
through 2001. Each of the outstanding revolving loans is due at the end of each
interest period (a maximum of six months). The Company may, however,
concurrently reborrow the outstanding obligations subject to compliance with
applicable conditions of the 1995 Credit Agreement.
After giving effect to the Offering and the 1995 Credit Agreement, the
Company's total indebtedness (including short-term debt) was approximately
$2,129 million, compared to $2,364 million at December 31, 1994, and the amounts
of long-term debt maturing from 1995 through 1999 were: 1995-$40 million;
1996-$64 million; 1997-$70 million; 1998-$81 million; and 1999-$231 million.
Borrowings under the Term Loan Facility bear interest at the London
interbank offered rate ("LIBOR") plus 1.5% and borrowings under the Periodic
Access Facility bear interest at LIBOR plus 1.75%. The Company pays a commitment
fee of 0.375% per annum on the unused portion of the Revolving Facilities and a
fee of 1.75% plus issuance fees for letters of credit. These rates are subject
to reduction in the event the Company attains certain financial ratios.
As a result of the redemption of debt in 1994 with the net proceeds of the
October Borrowing and in 1993 as a result of a 1993 refinancing, 1994 and 1993
included extraordinary charges of $9 million and $92 million, respectively,
related to the debt retired (including call premiums, the write-off of deferred
debt issuance costs, and in 1993 the loss on cancellation of foreign currency
swap contracts) on which there was no tax benefit (see Note 7). In addition, the
first quarter of 1995 will include an extraordinary charge of $30 million in
connection with the debt repayment resulting from the 1995 Refinancing.
<PAGE>
Short-term - At December 31, 1994, there were $38 million of short-term
borrowings outstanding and $52 million of letters of credit outstanding under
the 1993 Credit Agreement. Average borrowings under the revolving credit
facilities available under bank credit agreements for 1994, 1993, and 1992 were
$73 million, $39 million, and $14 million, respectively.
The Revolving Facilities under the 1995 Credit Agreement provide for
aggregate borrowings of up to $550 million for general corporate purposes, of
which up to $200 million may be used for the issuance of letters of credit and
$40 million of which is available for same-day short-term borrowings (Swingline
Loans). Loans under the Revolving Facilities bear interest at the prime rate
plus .75% or LIBOR plus 1.75% (subject to reduction in the event the Company
attains certain financial ratios). After completing the 1995 Refinancing, there
were $293 million of borrowings outstanding under the Revolving Facilities and
$52 million of letters of credit. Availability under the Revolving Facilities
was $205 million. The Revolving Facilities are short-term borrowings by their
terms under the 1995 Credit Agreement, and since approximately $218 million of
long-term debt under the 1993 Credit Agreement was replaced with loans under the
Revolving Facilities, a significantly larger amount of debt will be classified
as short-term subsequent to the 1995 Refinancing.
Other short-term borrowings are available outside the United States under
informal credit facilities and are typically a result of overdrafts. At December
31, 1994, the Company had $32 million of such foreign short-term debt
outstanding at an average interest rate of 11.2% per annum. The Company also had
an additional $50 million of unused foreign facilities. These facilities may be
withdrawn by the banks at any time.
Average short-term borrowings for 1994, 1993 and 1992 were $119 million,
$118 million and $104 million, respectively, at weighted average interest rates
of 9.40%, 8.97%, and 11.90%, respectively. Total short-term borrowings
outstanding at December 31, 1994, 1993 and 1992 were $70 million, $38 million,
and $99 million, respectively, at weighted average interest rates of 10.7%,
10.3%, and 12.5%, respectively.
Long-term - Long-term debt was as follows:
1994 1993
At December 31, (Dollars in millions)
1993 credit agreement $940.0 $689.9
9 1/4% sinking fund debentures, due in
installments from 1997 to 2016 150.0 150.0
10 7/8% senior notes due 1999 150.0 150.0
11 3/8% senior debentures due 2004 250.0 250.0
9 7/8% senior subordinated notes due 2001 200.0 200.0
10 1/2% senior subordinated discount
debentures (net of unamortized
discount of $221.4 million in 1994;
$272.9 million in 1993) due in
installments from 2003 to 2005 529.3 477.8
14 1/4% subordinated discount debentures - 175.0
12 3/4% junior subordinated debentures
(Note 11) - 141.8
Other long-term debt 74.6 63.1
2,293.9 2,297.6
Less current maturities 141.6 105.9
$2,152.3 $2,191.7
<PAGE>
Interest costs capitalized as part of the cost of constructing facilities
for the years ended December 31, 1994, 1993, and 1992, were $2.9 million, $2.7
million, and $3.1 million, respectively. Cash interest paid for those same years
on all outstanding indebtedness amounted to $186 million, $198 million, and $210
million, respectively.
The 1993 Credit Agreement loans and effective weighted average interest
rates in effect at December 31, were as follows:
1994 1993
U.S. Dollar Equivalent (Dollars in millions)
Periodic access loans:
British sterling loans at 8.59%
in 1994; 7.85% in 1993 $ 101.3 $ 95.8
Deutschemark loans at 7.56%
in 1994; 9.06% in 1993 50.9 49.4
Canadian dollar loans at 8.44%
in 1994; 6.5% in 1993 7.5 20.2
French franc loans at 8.00%
in 1994; 9.17% in 1993 14.9 18.5
Italian lira loans at 12.19% in 1993 - 8.7
Total periodic access loans 174.6 192.6
Term loans:
Tranche A U.S. dollar loans at 9.25%
in 1994; 6.5% in 1993 222.2 225.0
Tranche B Deutschemark loans
at 7.31% in 1994; 7.88% in 1993 136.0 172.3
Tranche C U.S. dollar loans at 8.40%
in 1994; 6.01% in 1993 82.2 100.0
Tranche D U.S. dollar loans at
8.94% in 1994 325.0 -
Total term loans 765.4 497.3
Total 1993 credit agreement long-term loans 940.0 689.9
Revolver loans at 9.7% in 1994; 7.5% in 1993 38.0 7.0
Total 1993 credit agreement loans $ 978.0 $ 696.9
<PAGE>
The 9 7/8% Senior Subordinated Notes may be redeemed at the Company's
option, in whole or in part, on and after June 1, 1998, at redemption prices
declining from 102.82% in 1998 to 100% on June 1, 2000, and thereafter. The 10
1/2% Senior Subordinated Discount Debentures may be redeemed at the Company's
option, in whole or in part, on and after June 1, 1998, at redemption prices
declining from 104.66% in 1998 to 100% on June 1, 2002, and thereafter. The
payment of the principal and interest on the 9 7/8% Senior Subordinated Notes
and on the 10 1/2% Senior Subordinated Discount Debentures (together the "Senior
Subordinated Debt") is subordinated in right of payment to the payment when due
of all Senior Debt (as defined in the related indenture) of the Company,
including all indebtedness under the credit agreements, the 9 1/4% Sinking Fund
Debentures, the 10 7/8% Senior Notes, and the 11 3/8% Senior Debentures (the
said notes and debentures together the "Senior Securities").
The 9 1/4% Sinking Fund Debentures are redeemable at the Company's option,
in whole or in part, at redemption prices declining from 105.55% in 1994 to 100%
in 2006 and thereafter. The 10 7/8% Senior Notes are not redeemable by the
Company. The 11 3/8% Senior Debentures are redeemable at the option of the
Company, in whole or in part, on or after May 15, 1997, at redemption prices
declining from 105.69% in 1997 to 100% on May 15, 2002, and thereafter.
Obligations under the 1995 Credit Agreement are guaranteed by American
Standard Inc. and significant domestic subsidiaries of American Standard Inc.
(with foreign borrowings also guaranteed by certain foreign subsidiaries) and
are secured by U.S., Canadian, and U.K. properties, plant and equipment; by
liens on receivables, inventories, intellectual property and other intangibles;
and by a pledge of the stock of American Standard Inc. and nearly all shares of
subsidiary stock. In addition, the obligations of American Standard Inc. under
the Senior Securities are secured, to the extent required by the related
indentures, by mortgages on the principal U.S. properties of American Standard
Inc. equally and ratably with the indebtedness under the 1995 Credit Agreement.
The 1995 Credit Agreement contains various covenants that limit, among other
things, indebtedness, dividends on and redemption of capital stock of the
Company, purchases and redemptions of other indebtedness of the Company
(including its outstanding debentures and notes), rental expense, liens, capital
expenditures, investments or acquisitions, disposal of assets, the use of
proceeds from asset sales and certain other business activities and require the
Company to meet certain financial tests. In order to maintain compliance with
the covenants and restrictions contained in previous bank credit agreements, the
Company from time to time had to obtain waivers and amendments. The Company
believes it is currently in compliance with the covenants of the 1995 Credit
Agreement but may have to obtain similar waivers or amendments in the future.
The indentures related to the Company's debentures and notes contain various
covenants which, among other things, limit debt and preferred stock of the
Company and its subsidiaries, dividends on and redemption of capital stock of
the Company and its subsidiaries, redemption of certain subordinated obligations
of the Company, the use of proceeds from asset sales and certain other business
activities.
Note 11. Exchange of Exchangeable Preferred Stock
On June 30, 1993, in exchange for all of the Company's outstanding shares of 12
3/4% Exchangeable Preferred Stock, the Company issued $141.8 million of 12 3/4%
Junior Subordinated Debentures Due 2003 to the holder of the Exchangeable
Preferred Stock. Those debentures were sold by the holder in a registered public
offering in August 1993. The Company received none of the proceeds of this
offering. In November 1994 the debentures were redeemed with part of the
proceeds of the October Borrowing.
<PAGE>
Note 12. Fair Values of Financial Instruments
The carrying amounts and estimated fair values of selected financial instruments
at December 31, 1994 are as follows:
(Dollars in millions) Carrying Fair
Amount Value
1993 credit agreement loans $940 $940
10 7/8% senior notes 150 152
11 3/8% senior debentures 250 257
9 7/8% senior subordinated notes 200 194
10 1/2% senior subordinated
discount debentures 529 480
9 1/4% sinking fund debentures 150 136
Other loans 75 75
The fair values presented above are estimates as of December 31, 1994 and
are not necessarily indicative of amounts the Company could realize or settle
currently or indicative of the intent or ability of the Company to dispose of or
liquidate such instruments.
The following methods and assumptions were used by the Company in estimating
the fair value of financial instruments held:
Long- and short-term debt - The fair values of the Company's 1993 Credit
Agreement loans are estimated using indicative market quotes obtained from a
major bank. The fair values of senior notes, senior debentures, senior
subordinated notes, senior subordinated discount debentures and sinking fund
debentures are based on indicative market quotes obtained from a major
securities dealer. The fair values of other loans approximate their carrying
value.
Cash and cash equivalents - The carrying amount reported in the balance sheet
for cash and cash equivalents approximates its fair value.
Note 13. Related Party Transactions
Since 1988 the Company has paid Kelso an annual fee of $2.75 million for
providing management consulting and advisory services. In December 1994 the
Company paid Kelso a one-time fee of $20 million in connection with the
amendment of certain agreements in anticipation of the Company's initial public
offering including an amendment eliminating future payments of the $2.75 million
annual fee, but providing for the continuation of such services. In June 1993
American Standard Inc. issued 1,000 shares of a new, non-voting Series A
Preferred Stock, par value $.01 per share (with a liquidation value of $11,500),
for $10,000 to an affiliate of Kelso & Company.
<PAGE>
Note 14. Commitments and Contingencies
Future minimum rental commitments under the terms of all noncancellable
operating leases in effect at December 31, 1994, were: 1995 - $32 million; 1996
- $29 million; 1997 - $22 million; 1998 - $16 million; 1999 - $12 million; and
thereafter - $38 million. Net rental expenses for operating leases were $45
million, $34 million, and $32 million for the years ended December 31, 1994,
1993, and 1992, respectively.
The Company and certain of its subsidiaries are parties to a number of
pending legal and tax proceedings. The Company is also subject to federal, state
and local environmental laws and regulations and is involved in environmental
proceedings concerning the investigation and remediation of numerous sites. In
those instances where it is probable that the Company will incur costs as a
result of such proceedings which can be reasonably determined, the Company has
recorded a liability. The Company believes that these legal, tax and
environmental proceedings will not have a material adverse effect on its
consolidated financial position, cash flows or results of operations.
The tax returns of the Company's German subsidiaries are currently under
examination by the German tax authorities (see Note 7).
Note 15. Segment Data
Sales and operating income by geographic location for the years ended December
31, 1994, 1993, and 1992, are shown in the following tables. Identifiable assets
are also shown as at years ended 1994, 1993, and 1992.
<PAGE>
<TABLE>
<CAPTION>
Segment data 1994 1993 1992
<S> <C> <C> <C>
Year Ended December 31, (Dollars in millions)
Sales
Air Conditioning Products $2,480 $2,100 $1,892
Plumbing Products 1,218 1,167 1,170
Automotive Products 759 563 730
Total sales $4,457 $3,830 $3,792
Geographic distribution:
United States $2,465 $2,096 $1,877
Europe 1,572 1,315 1,588
Other 550 483 392
Eliminations (130) (64) (65)
Total sales $4,457 $3,830 $3,792
Operating Income
Air Conditioning Products $ 182 $133 $104
Plumbing Products 111 108 108
Automotive Products 62 41 88
Total operating income (a) $ 355 $282 $300
Geographic distribution:
United States $ 168 $125 $ 96
Europe 144 118 180
Other 43 39 24
Total operating income 355 282 300
Financing and corporate items (b) 370 363 352
Loss before income taxes and extraordinary item (15) (81) (52)
Income taxes 62 36 5
Loss before extraordinary item $ (77) $(117) $(57)
<FN>
(a)Includes special charges of $40 million in 1994 applicable to consolidation
of production facilities, employee severance, other cost reduction actions,
and a provision for loss on the early disposition of certain assets; and $8
million in 1993 related to plant shutdowns and other cost reduction actions.
(b)Includes a one-time special charge of $20 million in 1994 incurred in
connection with the amendment of certain agreements in anticipation of the
Company's initial public stock offering.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Segment Data (continued) 1994 1993 1992
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Assets
Air Conditioning Products $1,223 $1,167 $1,156
Plumbing Products 957 960 1,002
Automotive Products 755 652 722
Total identifiable assets $2,935 $2,779 $2,880
Geographic distribution:
United States $1,025 $1,013 $1,016
Europe 1,343 1,196 1,370
Other 567 570 494
Total identifiable assets 2,935 2,779 2,880
Prepaid charges 64 82 61
Future income tax benefits 22 25 33
Cash and cash equivalents 93 53 113
Corporate assets 42 52 49
Total assets $3,156 $2,991 $3,136
Capital expenditures:
Air Conditioning Products $ 45 $ 38 $ 33
Plumbing Products 55 46 48
Automotive Products 30 14 27
Total capital expenditures $ 130 $ 98 $ 108
Depreciation and amortization:
Air Conditioning Products $ 51 $ 53 $ 55
Plumbing Products 64 49 49
Automotive Products 39 35 37
Total depreciation and amortization $ 154 $ 137 $ 141
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Quarterly Data (Unaudited)
(Dollars in millions)
1994
First Second(a) Third Fourth(b)
<S> <C> <C> <C> <C>
Sales $989.6 $1,130.5 $1,188.8 $1,148.6
Cost of sales 746.3 857.3 883.5 890.2
Income (loss) before income taxes
and extraordinary item 3.4 3.5 26.2 (48.3)
Income taxes 16.7 14.9 15.1 15.8
Income (loss) before extraordinary
item (13.3) (11.4) 11.1 (64.1)
Extraordinary loss on retirement
of debt - - - (8.7)
Net income (loss) $(13.3) $ (11.4) $11.1 $ (72.8)
1993
First Second(c) Third Fourth
Sales $879.4 $995.5 $976.5 $979.1
Cost of sales 650.5 754.5 727.7 769.9
Income (loss) before income taxes and
extraordinary item (9.5) (28.2) 4.1 (46.9)
Income taxes 8.1 6.1 7.2 14.8
Loss before extraordinary item (17.6) (34.3) (3.1) (61.7)
Extraordinary loss on retirement
of debt - (91.9) - -
Net loss $ (17.6) $ (126.2) $ (3.1) $ (61.7)
<FN>
(a) Results for the second quarter of 1994 included pre-tax charges of $40
million ($34 million after tax) related to employee severance,
consolidation of production facilities, the implementation of cost
reduction actions, and a provision for losses on operating assets expected
to be disposed of prior to the expiration of their originally estimated
useful lives.
(b) The fourth quarter of 1994 included a one-time special charge of $20
million in connection with the amendment of certain agreements in
anticipation of the initial public offering of the Company's common stock.
(c) The second quarter of 1993 included $8 million of charges for plant
shutdowns and other cost reduction actions.
</FN>
</TABLE>
<PAGE>
IEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
Not required under reduced disclosure format as contemplated by General
Instruction J to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1 and 2. Financial statements and financial statement schedules
The financial statements and financial statement schedules are
listed in the accompanying index to financial statements on page 40
of this annual report on Form 10-K.
3. Exhibits
The exhibits are listed on the accompanying index to exhibits and
are incorporated herein by reference or are filed as part of this
annual report on Form 10-K.
(b) Reports on Form 8-K for the quarter ended December 31, 1994.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
American Standard Inc.
By: /s/ Emmanuel A. Kampouris
(Emmanuel A. Kampouris)
Chairman, President and Chief Executive Officer
March 31 , 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 31, 1995:
/S/ Emmanuel A. Kampouris
(Emmanuel A. Kampouris) Chairman, President and Chief Executive
Officer; Director(Principal Executive Officer)
/s/ Fred A. Allardyce
(Fred A. Allardyce) Vice President and Chief Financial Officer
(Principal Financial Officer)
/S/ G. Ronald Simon
(G. Ronald Simon) Vice President and Controller
(Principal Accounting Officer)
/s/ Steven E. Anderson
(Steven E. Anderson) Director
/s/ Horst Hinrichs
(Horst Hinrichs) Director
/S/ George H. Kerckhove
(George H. Kerckhove) Director
/s/ Shigeru Mizushima
(Shigeru Mizushima) Director
/s/ Frank T. Nickell
(Frank T. Nickell) Director
/s/ Roger W. Parsons
(Roger W. Parsons) Director
/s/ J. Danforth Quayle
(J. Danforth Quayle) Director
/s/ David M. Roderick
(David M. Roderick) Director
/s/ John Rutledge
(John Rutledge) Director
/s/ Joseph S. Schuchert
(Joseph S. Schuchert) Director
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
COVERED BY
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
1. Financial Statements
Consolidated Balance Sheet at
December 31, 1994, and 1993 15
Years ended December 31, 1994, 1993, and 1992:
Consolidated Statement of Operations 14
Consolidated Statement of Cash Flows 16
Consolidated Statement of Stockholders' Deficit 17
Notes to Financial Statements 18-34
Segment Data 35-36
Quarterly Data (Unaudited) 37
Report of Independent Auditors 13
2. Financial statement schedule, years ended
December 31, 1994, 1993, and 1992 40
VIII Valuation and Qualifying Accounts 42
All other schedules have been omitted because the information is not
applicable or is not material or because the information required is included
in the financial statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of American Standard
Inc. as of December 31, 1994 and 1993, and for each of the three years in the
period ended December 31, 1994, and have issued our report thereon dated
February 16, 1995 (included elsewhere in this Annual Report on Form 10-K).
Our audits also included the financial statement schedule of American
Standard Inc. listed in Item 14(a). This schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based
on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Ernst & Young LLP
New York, New York
February 16, 1995
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993, and 1992
(Dollars in thousands)
Description Foreign
Balance Additions Currency Balance
Beginning Charged to Other Translation End of
of Period Income Deductions Changes Effects Period
<S> <C> <C> <C> <C> <C> <C>
1994:
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 15,666 $10,208 $ (6,868)(A)$ 533 $ 30 $ 19,569
==============================================================================================
Reserve for
post-retirement $ 387,038 $44,352 $(23,062)(B) $ 3,188(C) $ 26,192 $437,708
benefits
==============================================================================================
1993:
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 12,827 $10,118 $ (6,584)(A) $ - $ (695) $ 15,666
=============================================================================================
Reserve for
post-retirement $ 368,868 $48,827 $(25,815)(B) $11,832(D)$(16,674) $387,038
benefits
=============================================================================================
1992:
Reserve deducted from
assets:
Allowance for doubtful
accounts receivable $ 14,667 $ 6,489 $ (7,262)(A) $ - $(1,067) $ 12,827
=============================================================================================
Reserve for
post-retirement $357,878 $47,374 $(24,495)(B) $ - $(11,889) $368,868
benefits
=============================================================================================
<FN>
The reserve for postretirement benefits excludes the activity for currently funded U.S.
pension plans.
(A) Accounts charged off.
(B) Payments made during the year.
(C) Includes $3 million reduction in minimum pension liability primarily offset
by $5 million from acquisition of new business.
(D) Includes $19 million increase in minimum pension liability offset by a $7
million reduction resulting from curtailment of certain plans.
</FN>
</TABLE>
<PAGE>
AMERICAN STANDARD INC.
INDEX TO EXHIBITS
(Item 14(a)3 - Exhibits Required by Item 601
of Regulation S-K and Additional Exhibits)
(The Commission File Number of American Standard Inc., the Registrant (sometimes
hereinafter referred to as the "Company"), and for all Exhibits incorporated by
reference, is 1-470, except those Exhibits incorporated by reference in filings
made by American Standard Companies Inc. (formerly named ASI Holding
Corporation) ("Holding") whose Commission File Number is 1-11415; prior to
filing its Registration Statement on Form S-2 on November 10, 1994, Holding's
Commission File Number was 33-23070.)
(3) (i) Restated Certificate of Incorporation of American Standard Inc.
(the "Company"); previously filed as Exhibit (3) (i) in the Company's Form 10-K
for the fiscal year ended December 31, 1988, and herein incorporated by
reference.
(ii) Certificate of Designation, Preferences and Relative,
Participating, Optional and other Special Rights of Preferred Stock and
Qualifications, Limitations and Restrictions thereof of Series A Preferred
Stock; previously filed as Exhibit (3) (ii) in the Company's Form 10-K for the
fiscal year ended December 31, 1993, and herein incorporated by reference.
(iii) Certificate of Elimination with respect to Exchangeable Preferred
Stock, dated September 22, 1994.
(iv) By-laws of the Company; previously filed as Exhibit (3) (ii) in
the Company's Form 10-K for the fiscal year ended December 31, 1988, and herein
incorporated by reference.
(4) (i) Indenture, dated as of November 1, 1986, between the Company and
Manufacturers Hanover Trust Company, Trustee, including the form of 9-1/4%
Sinking Fund Debenture Due 2016 issued pursuant thereto on December 9, 1986, in
the aggregate principal amount of $150,000,000; previously filed as Exhibit (4)
(iii) in the Company's Form 10-K for the fiscal year ended December 31, 1986,
and herein incorporated by reference.
<PAGE>
(ii) Instrument of Resignation, Appointment and Acceptance, dated as of
April 25, 1988 among the Company, Manufacturers Hanover Trust Company (the
"Resigning Trustee") and Wilmington Trust Company (the "Successor Trustee"),
relating to resignation of the Resigning Trustee and appointment of the
Successor Trustee under the Indenture referred to in Exhibit (4) (i) above;
previously filed as Exhibit (4) (ii) in Registration Statement No. 33-64450 of
the Company under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(iii) Indenture dated as of May 15, 1992, between the Company and First
Trust National Association, Trustee, relating to the Company's 10-7/8% Senior
Notes due 1999, in the aggregate principal amount of $150,000,000; previously
filed as Exhibit (4) (i) in the Company's Form 10-Q for the quarter ended June
30, 1992, and herein incorporated by reference.
(iv) Form of 10-7/8% Senior Notes due 1999 included as Exhibit A to the
Indenture described in (4) (iii) above.
(v) Indenture dated as of May 15, 1992, between the Company and First
Trust National Association, Trustee, relating to the Company's 11-3/8% Senior
Debentures due 2004, in the aggregate principal amount of $250,000,000;
previously filed as Exhibit (4) (iii) by the Company's Form 10-Q for the quarter
ended June 30, 1992, and herein incorporated by reference.
(vi) Form of 11-3/8% Senior Debentures due 2004 included as Exhibit A to
the Indenture described in (4) (v) above.
(vii) Form of Indenture, dated as of June 1, 1993, between the Company
and United States Trust Company of New York, as Trustee, relating to the
Company's 9-7/8% Senior Subordinated Notes Due 2001; previously filed as Exhibit
(4) (xxxi) in Amendment No. 1 to Registration Statement No. 33-61130 of the
Company under the Securities Act of 1933, as amended, and herein incorporated by
reference.
(viii) Form of Note evidencing the 9-7/8% Senior Subordinated Notes Due
2001 included as Exhibit A to the Form of Indenture referred
to in (4) (vii) above.
(ix) Form of Indenture, dated as of June 1, 1993, between the Company
and United States Trust Company of New York, as Trustee, relating to the
Company's 10-1/2% Senior Subordinated Discount Debentures Due 2005; previously
filed as Exhibit (4) (xxxiii) in Amendment No. 1 to Registration Statement No.
33-61130 of the Company under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(x) Form of Debenture evidencing the 10-1/2% Senior Subordinated
Discount Debentures Due 2005 included as Exhibit A to the Form of Indenture
referred to in (4) (ix) above.
(xi) Assignment and Amendment Agreement, dated as of June 1, 1993,
among the Company, Holding, certain subsidiaries of the Company, Bankers Trust
Company, as agent under the 1988 Credit Agreement, the financial institutions
named as Lenders in the 1988 Credit Agreement and certain additional Lenders and
Chemical Bank, as Administrative Agent and Arranger; previously filed as Exhibit
(4) (xiii) in Amendment No. 1 to Registration Statement No. 33-64450 of the
Company under the Securities Act of 1933, as amended, and herein incorporated by
reference..
(xii) Credit Agreement, dated as of June 1, 1993, among the Company,
Holding, certain subsidiaries of the Company and the lending institutions listed
therein, Chemical Bank, as Administrative Agent and Arranger; Bankers Trust
Company, The Bank of Nova Scotia, The Chase Manhattan Bank, N.A., Deutsche Bank
AG, The Long-Term Credit Bank of Japan, Ltd., New York Branch, and NationsBank
of North Carolina, N.A., as Managing Agents, and Banque Paribas, Citibank, N.A.,
and Compagnie Financiere de CIC et de l'Union Europeenne, New York Branch, as
Co-Agents; previously filed as Exhibit (4) (xiv) in Amendment No. 1 to
Registration Statement No. 33-64450 of the Company under the Securities Act of
1933, as amended, and herein incorporated by reference.
(xiii) First Amendment, Consent and Waiver, dated as of February 10,
1994, to the Credit Agreement referred to in (4) (xii) above; previously filed
as Exhibit (4) (xvii) in the Company's Form 10-K for the fiscal year ended
December 31, 1993, and herein incorporated by reference.
<PAGE>
(xiv) Second Amendment, dated as of October 21, 1994, to the Credit
Agreement referred to in paragraph (4) (xii) above; previously filed as Exhibit
(4) (xviii) in Registration Statement No. 33-56409 of Holding under the
Securities Act of 1933, as amended, filed November 10, 1994, and herein
incorporated by reference.
(xv) Assignment and Amendment Agreement dated as of February 9, 1995,
among Holding, the Company, certain subsidiaries of the Company, and the
financial institutions listed in Schedule I thereto (the Original Lenders); the
financial institutions listed in Schedule II thereto (the Continuing Lenders),
including Chemical Bank as Administrative Agent for the Original Lenders and
Continuing Lenders and as Collateral Agent for the Original Lenders and
Continuing Lenders; copy of Assignment and Amendment Agreement is being filed as
Exhibit (4) (xvi) by Holding in its Form 10-K for the fiscal year ended December
31, 1994 concurrently with the filing of the Company's Form 10-K for the same
year and herein incorporated by reference.
(xvi) Amended and Restated Credit Agreement, dated as of February 9,
1995, among Holding, the Company, certain subsidiaries of the Company and the
lending institutions listed therein, Chemical Bank, as Administrative Agent;
Citibank, N.A. and NationsBank, N.A. (Carolinas), as Senior Managing Agents;
Bank of America Illinois, The Bank of Nova Scotia, Bankers Trust Company, The
Chase Manhattan Bank, N.A., Compagnie Financiere de CIC et de L'Union
Europeenne, Credit Suisse, Deutsche Bank AG, The Industrial Bank of Japan Trust
Company, The Long-Term Credit Bank of Japan, Limited and The Sumitomo Bank,
Ltd., as Managing Agents; and The Bank of New York, Canadian Imperial Bank of
Commerce, The Fuji Bank, Limited and The Sanwa Bank Limited, as Co-Agents, with
exhibits but without schedules. (This Amended and Restated Credit Agreement
replaces the Credit Agreement dated as of June 1, 1993 (the "1993 Credit
Agreement"), referred to in Exhibit (4) (xii) above, but the Security documents
and the Guarantee Documents entered into pursuant to the 1993 Credit Agreement
continue in force and effect as amended by the Credit Documents Amendment
Agreement dated as of February 9, 1995 described in Exhibit (4) (xvii) below;
copy of Amended and Restated Credit Agreement is being filed as exhibit (4)
(xvii) by Holding in its Form 10-K for the fiscal year ended December 31, 1994
concurrently with the filing of the Company's Form 10-K for the same year and
herein incorporated by reference.
(xvii) Credit Documents Amendment Agreement dated as of February 9, 1995,
among Holding, the Company, certain domestic and foreign subsidiaries of the
Company, and Chemical Bank, as Administrative Agent and as Collateral Agent for
the Lenders under the Amended and Restated Credit Agreement dated as of February
9, 1995, described in Exhibit (4) (xvi) above; copy of Credit Documents
Amendment Agreement is being filed as Exhibit (4) (xviii) by Holding in its Form
10-K for the fiscal year ended December 31, 1994 concurrently with the filing of
the Company's Form 10-K for the same year and herein incorporated by reference.
(xviii) Stockholders Agreement, dated as of July 7, 1988, as amended as
of August 1, 1988, among Holding, Kelso ASI Partners, L.P., and the Management
Stockholders named therein; previously filed as Exhibit 4.19 in Amendment No. 2
in the Registration Statement No. 33-23070 of Holding under the Securities Act
of 1933, as amended, and herein incorporated by reference.
(xix) Amendment to Section 2.1 of the Stockholders Agreement referred
to in paragraph (4) (xviii) above, effective as of January 1, 1991; previously
filed as Exhibit (4) (xxvii) by Holding in its Form 10-K for the fiscal year
ended December 31, 1992, and herein incorporated by reference.
(xx) Supplement and Amendment dated as of September 4, 1991 to the
Stockholders Agreement, dated as of July 7, 1988, as amended, referred to in
paragraph (4) (xviii) above; previously filed as Exhibit (4) (ii) by Holding in
its Form 10-Q for the quarter ended September 30, 1991, and herein incorporated
by reference.
(xxi) Amended Section 6.1 of the Stockholders Agreement referred to in
paragraph (4) (xviii) above, effective as of September 2, 1993; previously filed
as Exhibit (4) (xxi) by Holding in its Form 10-K for the fiscal year ended
December 31, 1993, and herein incorporated by reference.
(xxii) Revised Schedule of Priorities effective as of November 21,
1994, as adopted by the Board of Directors of Holding, pursuant to the
Stockholders Agreement referred to in paragraph (4) (xviii) above; copy of
revised schedule is being filed as Exhibit (4) (xxiii) by Holding in its Form
10-K for the fiscal year ended December 31, 1994, concurrently with the filing
of Company's Form 10-K for the same year, and herein incorporated by reference.
<PAGE>
(xxiii) Amended and Restated Stockholders Agreement, dated as of December
2, 1994, among Holding, Kelso ASI Partners, L.P. and the Management Stockholders
named therein; previously filed as Exhibit (4) (xxi) in Amendment No. 1 to
Holding's Registration Statement No. 33-56409 under the Securities Act of 1933,
as amended, filed December 20, 1994, and herein incorporated by reference.
(xxiv) Form of Rights Agreement, dated as of January 5, 1995 between
Holding and Citibank, N.A. as Rights Agent; copy of Rights Agreement is being
filed as Exhibit (4) (xxv) by Holding in its Form 10-K for the fiscal year ended
December 31, 1994, concurrently with the filing of the Company's Form 10-K for
the same year, and herein incorporated by reference.
(10) *(i) American Standard Inc. Long-Term Incentive Compensation Plan, as
amended and restated as of February 3, 1995.
(ii) Trust Agreement for American Standard Inc. Long-Term Incentive
Compensation Plan and Supplemental Incentive Plan, as amended and restated as of
February 3, 1995.
(iii) American Standard Inc. Annual Incentive Plan; previously filed as
Exhibit (10) (vii) in the Company's Form 10-K for the fiscal year ended December
31, 1988, and herein incorporated by reference.
(iv) American Standard Inc. Management Partners' Bonus Plan effective
as of July 7, 1988; previously filed as Exhibit (10) (i) in the Company's Form
10-Q for the quarter ended September 30, 1988, and herein incorporated by
reference; amendments to Plan adopted on June 7, 1990, previously filed as
Exhibit (4) (ii) in the Company's Form 10-Q for the quarter ended June 30, 1990,
and herein incorporated by reference.
* Items in this series 10 consist of management contracts or
compensatory plans or arrangements with exception of (10) (x) and (xi).
(v) American Standard Inc. Executive Supplemental Retirement Benefit
Program, as restated to include all amendments through December 31, 1993;
previously filed as Exhibit (10) (vii) in the Company's Form 10-K for the fiscal
year ended December 31, 1993, and herein incorporated by reference.
(vi) American-Standard Employee Stock Ownership Plan, as amended and
restated as of January 1, 1994.
(vii) Amendment No. 1 to American Standard Employee Stock Ownership Plan
described in Exhibit (10) (vi) above, authorized December 1, 1994.
(viii) Amendment No. 2 to American Standard Employee Stock Ownership Plan
described in Exhibit (10) (vi) above, authorized March 2, 1995.
(ix) American-Standard Employee Stock Ownership Trust Agreement, dated as
of December 1, 1991, between ASI Holding Corporation and Fidelity Management
Trust Company (as successor to Citizens & Southern Trust company (Georgia),
N.A.), as trustee; previously filed as Exhibit (10) (xiv) in the Company's Form
10-K for the fiscal year ended December 31, 1991, and herein incorporated by
reference.
(x) Consulting Agreement made July 1, 1988, with Kelso & Company, L.P.
concerning general management and financial consulting services to the Company;
previously filed as Exhibit (10) (xviii) in the Company's Form 10-K for the
fiscal year ended December 31, 1988, and herein incorporated by reference.
(xi) Agreement, dated as of December 2, 1994, among Holding, the
Company and Kelso & Company, L.P., amending the Consulting Agreement referred to
in paragraph (10) (x) above; previously filed as Exhibit (10) (xi) in Amendment
No. 1 to Registration Statement No. 33-56409 under the Securities Act of 1933,
as amended, filed December 20, 1994, and herein incorporated by reference.
(xii) American Standard Inc. Supplemental Compensation Plan for Outside
Directors, as amended through February 3, 1995.
(xiii) ASI Holding Corporation 1989 Stock Purchase Loan Program;
previously filed as Exhibit (10) (i) in Holding's Form 10-Q for the quarter
ended September 30, 1989, and herein incorporated by reference.
(xiv) Corporate Officers Severance Plan adopted in December, 1990,
effective April 27, 1991; previously filed as Exhibit (10) (xix) in the
Company's Form 10-K for the fiscal year ended December 31, 1990, and herein
incorporated by reference.
(xv) Estate Preservation Plan adopted in December, 1990; previously
filed as Exhibit (10) (xx) in the Company's Form 10-K for the fiscal year ended
December 31, 1990, and herein incorporated by reference.
(xvi) Amendment adopted in March 1993 to Estate Preservation Plan
referred to in (10) (xv) above; previously filed as Exhibit (10) (xvii) in the
Company's Form 10-K for the fiscal year ended December 31, 1993, and herein
incorporated by reference.
(xvii) Summary of terms of Unfunded Deferred Compensation Plan, adopted
December 2, 1993; previously filed as Exhibit (10) (xviii) in the Company's Form
10-K for the fiscal year ended December 31, 1993, and herein incorporated by
reference.
(xviii) American Standard Inc. and Subsidiaries 1994-1995 Supplemental
Incentive Compensation Plan (formerly named TNE Incentive Plan), as amended
through February 3, 1995.
(27) Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1.00000
<CASH> 89,069
<SECURITIES> 3,680
<RECEIVABLES> 614,808
<ALLOWANCES> 19,569
<INVENTORY> 323,220
<CURRENT-ASSETS> 1,064,543
<PP&E> 1,242,864
<DEPRECIATION> 430,180
<TOTAL-ASSETS> 3,156,118
<CURRENT-LIABILITIES> 1,078,693
<BONDS> 2,152,291
<COMMON> 0
0
0
<OTHER-SE> (797,629)
<TOTAL-LIABILITY-AND-EQUITY> 3,156,118
<SALES> 4,457,465
<TOTAL-REVENUES> 4,457,465
<CGS> (3,377,271)
<TOTAL-COSTS> (3,377,271)
<OTHER-EXPENSES> (57,381)
<LOSS-PROVISION> (10,208)
<INTEREST-EXPENSE> (259,437)
<INCOME-PRETAX> (15,174)
<INCOME-TAX> 62,512
<INCOME-CONTINUING> (77,686)
<DISCONTINUED> 0
<EXTRAORDINARY> (8,735)
<CHANGES> 0
<NET-INCOME> (86,421)
<EPS-PRIMARY> (1.440)
<EPS-DILUTED> 0.000
</TABLE>
AMERICAN STANDARD INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
(As Amended and Restated as of February 3, 1995)
Section 1. Definitions
Whenever used herein, the following terms shall have the
meanings set forth below. Except when otherwise indicated by the
context, words in the masculine gender when used in the Plan shall also
indicate the feminine and neuter genders, the singular shall include the
plural, and the plural shall include the singular.
A. ASCI means American Standard Companies Inc., a Delaware
corporation, which is the successor in interest to ASI Holding
Corporation.
B. Award Opportunity or Long-Term Award Opportunity means,
(i) with respect to any Performance Period in the case of a Participant
who is not a Prior Participant, his Compensation Multiple for such Period,
provided that, if such Participant is a Qualified Participant,
(a) his Award Opportunity for each of the 1990-1992, 1991-
1993, 1992-1994 and 1993-95 Performance Periods shall not be less than his Total
Compensation Level for such Period, and
(b) his Award Opportunity for any Performance Period beginning
after December 31, 1992 shall not be less than his Total Compensation Level for
the 1992-1994 Performance Period;
(ii) with respect to any Performance Period beginning before Jan uary
1, 1992 in the case of a Prior Participant, his Award opportunity for any such
Period shall be his Total Compensation Level for such Period.
<PAGE>
C. Beneficiary means any one person or trust appointed by a
Participant in an unrevoked writing filed with the Committee directing
that, in the event of such Participant's death, payments to which such
Participant shall become entitled hereunder shall be paid to such
Beneficiary; provided that a Participant's Beneficiary shall be deemed
to be the estate or legal representative of such Participant if such
written appointment is revoked and not replaced by another such written
appointment filed with the Committee, or if the Beneficiary appointed by
a Participant fails to survive him.
D. Board means the Board of Directors of the Company.
E. Committee means the Management Development Committee of the Board
of Directors or such other committee appointed by the Board which shall
consist of three or more members of the Board or the Board of Directors
of ASCI each of whom is not eligible to participate in the Plan.
F. Company means American Standard Inc., a Delaware corporation.
G. Compensation Multiple of a Participant (other than a Prior
Participant) means his Performance Period Compensation Rate, multiplied
by 1.7 in the case of the Chief Executive Officer, by 1.3 in the case of
senior officers, and by 1.2 in the case of all other officers.
H. Employee means any person who is employed by ASCI, the Company or
a Subsidiary on a full-time basis.
I. Maximum Goal means, with respect to any Performance Period, such
measure or measures of performance of the Company and Subsidiaries
relative to and exceeding the Target Goal for such Period as the Com
mittee shall select.
J. Maximum Payout means the percentage of the Award Opportunities for
a Performance Period specified by the Committee pursuant to Section 4(a)
<PAGE>
as the value of such Award opportunities in the event of attainment of the
Maximum Goal for such Period. K. Minimum Goal means, with respect to any
Performance Period, such measure or measures of performance of the Company and
Subsidiaries relative to and below the Target Goal for such Period as the
Committee shall select. L. Minimum Payout means the percentage of the Award
Opportunities for a Performance Period specified by the Committee pursuant to
Section 4(a) as the value of such Award Opportunities in the event of attainment
of the Minimum Goal for such Period. M. Participant means a duly elected officer
of the Company or ASCI who is also an Employee and any officer of any Subsidiary
who is designed by the Committee as eligible to participate in the Plan. N.
Performance Period or Period means a period which shall start at the beginning
of each calendar year, commencing with the year 1989, and which shall extend for
the number of consecutive calendar months (which shall be no less than 24 and no
more than 48) fixed by the Committee pursuant to Section 4(a). O. Performance
Period Compensation Rate of a Participant (other than a Prior Participant) for
any Performance Period means his average annualized compensation rate during
such Period, determined by multiplying by twelve the result obtained by dividing
(x) the aggregate of all base salary payments (including contributions pursuant
to Sec. 401(k) and deductions pursuant to Sec. 125 of the Internal Revenue Code)
received by such Participant during his participation in such Perform ance
Period by (y) the number of whole and partial months of such Participant's
participation in such Performance Period.
<PAGE>
P. Plan means this American Standard Inc. Long-Term Incentive
Compensation Plan.
Q. Prior Participant means a former Participant who was not an
Employee after December 31, 1991.
R. Subsidiary means any corporation a majority of the outstanding
voting stock or voting power of which is beneficially owned directly or
indirectly by the Company.
S. Qualified Participant means a Participant whose participation in
the Plan began on or before January 1, 1992 and who was an Employee on
that date.
T. Share means a share of the Common Stock, par value $0.01, of ASCI.
U. Target Goal means, with respect to any Performance Period, such
measure or measures of desired performance of the Company and the
Subsidiaries for such Period as the Committee shall select.
V. Total Compensation Level of a Qualified or Prior Participant for
any Performance Period means the product of
(i) the percentage assigned by the Company with respect to his
salary grade in effect at the beginning of such Period, multiplied by
the sum of
(ii) the midpoint of such salary grade plus the Annual Incentive
Compensation Plan Target Award last assigned to such salary grade before the
beginning of such Performance Period.
Section 2. Purpose
The purpose of this Plan is to provide Participants with the
opportunity to earn financial rewards that are commensurate with the future
success of ASCI, the Company and the Subsidiaries and are
<PAGE>
consistent with compensation opportunities made available to similarly situated
executives in similar-sized organizations.
Section 3. Administration
The Plan shall be administered by the Committee. In addition
to such functions and responsibilities specifically assigned to the Committee
under the Plan, the Committee shall have the authority, subject to the
provisions of the Plan, to establish, adopt and revise such rules and
regulations and to make all such determinations relating to the Plan as it may
deem necessary or desirable for the administration of the Plan.
Section 4. Establishment of Performance Periods, Goals and
Long-Term Award Opportunities
(a) Performance Periods and Goals. The Committee shall fix the
duration of each Performance Period at the beginning of such Period and shall at
that time establish a Target Goal for such Period. At the same time or at any
time thereafter the Committee may establish either or both of a Minimum Goal and
a Maximum Goal for such Period. If a Minimum Goal is established, the Committee
shall at the same time specify the Minimum Payout for such Minimum Goal, and if
a Maximum Goal is established, the Committee shall at the same time specify the
Maximum Payout for such Maximum Goal.
(b) Grant of Award Opportunities. At the beginning of each
Performance Period, the Committee shall assign to each Participant an
Award Opportunity with respect to such Period.
(c) Adjustments. After the beginning of any Performance
Period, the Committee may, in its discretion, modify the Target Goal for
<PAGE>
such Period and, if established, the Minimum and Maximum Goals for such Period
and the Minimum and Maximum Payouts with respect thereto, if any such
modification is warranted by material acquisitions, dispositions, changes in
accounting practices, changes in strategy or any other factor or event that, in
the judgment of the Committee, merits such modification.
Section 5. Valuation and Payment of Award Opportunities
(a) Determination of Award Opportunities Earned. At the end of
each Performance Period, the Committee shall determine the level of actual
performance of the Company and the Subsidiaries during such Period as measured
against the Target Goal and (if established) the Minimum and Maximum Goals for
such Period; provided, however, that such determinations may be made by the
Committee, in its discretion, before the end of such Performance Period if the
Committee determines that any such Goal has been attained before the end of such
Period. Based on such determination of actual performance level, the Committee
shall then value the Award Opportunities for such Performance Period, which
value shall be:
1 zero (in which case no payments will be made with respect to such
Award Opportunities) if (x) the Minimum Goal for such Performance Period is not
achieved or (y) the Target Goal for such Period is not achieved and no Minimum
Goal was established for such Period;
1 if a Minimum Goal was established for such Performance Period, a
percentage of such Award Opportunities (which shall be no less than the Minimum
Payout with respect to such Minimum Goal but no more than 99%) corresponding to
the performance level of the Company and the
<PAGE>
Subsidiaries falling short of the Target Goal but achieving or exceeding
such Minimum Goal;
1 100% of such Award Opportunities if (x) the Target Goal for such
Period is achieved or (y) such Target Goal is exceeded and no Maximum Goal was
established for such Period;
1 if a Maximum Goal was established for such Performance Period, a
percentage of such Award Opportunities (which shall be more than 100% but less
than the Maximum Payout with respect to such Maximum Goal) corresponding to the
performance level of the Company and the Subsidiaries exceeding the Target Goal
but falling short of such Maximum Goal; and
1 if the Maximum Goal established for such Performance Period is
achieved, the Maximum Payout with respect to such Maximum Goal. As soon as
practicable after such performance level determination and Award Opportunity
valuation are made for a Performance Period, each Participant having an Award
Opportunity for such Period shall, subject to Section 5(b) and Section 6,
receive a payment equal to the value (if greater than zero) of such Award
Opportunity.
(b) Elective Deferral. At the request of a Participant, the
Committee may, in its discretion, provide for the deferral of payments due
hereunder to such Participant on such terms and conditions, and subject to such
procedures, as the Committee may establish.
Section 6. Prorations and Forfeitures
(a) Death, Disability, Good Reason and Retirement. Except
as otherwise provided in Section 6(c),
<PAGE>
(i) if a Participant ceases to be an Employee during any
Performance Period due to Disability, death, termination for Good Reason or
retirement under any retirement plan of ASCI, the Company or a Subsidiary, or
(ii) if an Employee becomes a Participant with respect to any
Performance Period after the beginning of such Performance Period, such
Participant or former Participant (or, in the event of the latter's death, his
Beneficiary) shall receive, if and when payments with respect to Award
Opportunities for such Performance Period are made, a payment equal to a
fraction of the value, as determined by the Committee pursuant to Section 5(a),
of such Participant's or former Participant's Award Opportunity (if any) with
respect to such Performance Period. The numerator of such fraction shall be the
number of days that such Participant or former Participant was a Participant
during such Period and the denominator shall be the total number of days in such
Period.
(b) Other Terminations. Except as otherwise provided in
Section 6(c), if a Participant ceases to be an Employee during any Performance
Period otherwise than due to Disability, death, termination for Good Reason or
retirement under any retirement plan of ASCI, the Company or a Subsidiary, such
Participant shall forfeit all rights to any and all of his Award Opportunities
the values of which had not yet been paid, provided that the Committee, in its
discretion, may waive such forfeiture in whole or in part.
(c) Cause. A Participant who ceases to be an Employee due
to termination for Cause shall forfeit all rights to any and all of his
Award Opportunities, the values of which had not yet been paid,
<PAGE>
notwithstanding that such Participant may be eligible to retire under a
retirement plan of ASCI, the Company or a Subsidiary.
(d) Definitions. For purposes of Sections 6(a), (b) and (c),
the terms "Cause," "Good Reason" and "Disability" have the meanings set forth in
Annex A to this Plan.
Section 7. Form of Payments and Withholdings
All payments hereunder shall, at the discretion of the
Committee, be in cash, Shares or a combination of such Shares and cash, net of
any federal, state, local or foreign tax and social security withholdings that
the Company or ASCI, in its sole judgment, shall deem appropriate, with any
Shares included in any such payment subject to such terms, conditions and
restrictions as shall be adopted by the Board on the Committee's recommendation.
Section 8. Non-Transferability
None of a Participant's rights or interests (including any
amounts payable) hereunder, may be assigned or pledged, nor may any such right
or interest be transferred except, in the event of a Participant's death, to his
Beneficiary.
Section 9. Beneficiaries
Any payments due under this Plan to a deceased Participant
shall be paid to his Beneficiary. A Beneficiary appointment may be changed or
revoked by a Participant at any time, provided that the change or revocation is
in writing and filed with the Committee.
Section 10. Rights of Employment
<PAGE>
Participation in the Plan shall not confer upon any
Participant any right to continue to be an officer of the Company, ASCI or any
Subsidiary or to continue to be an Employee, nor shall participation in the Plan
interfere in any way with the right of ASCI, the Company or a Subsidiary at any
time to terminate a Participant's employment.
Section 11. Expenses
All expenses of administering the Plan shall be borne by the
Company and ASCI and shall not be charged to any pension, retirement, profit
sharing, group insurance, or other benefit plan of the Company or ASCI.
Section 12. Relationship to Other Benefits
No payment under the Plan shall be taken into account in
determining any payments, benefits, coverage levels or participation rates under
any other incentive compensation plan of the Company or ASCI, or under any
pension, retirement, profit sharing, group insurance or other benefit plan of
ASCI, the Company or any Subsidiary.
Section 13. Effective Date; Amendments and Termination;
Governing Law
(a) The Plan shall become effective upon its adoption by
the Board.
(b) The Board, upon recommendation of the Committee, shall
have the right to amend, suspend, or terminate the Plan at any time; however, no
such action of the Board shall diminish, reduce, alter, or
<PAGE>
impair a Participant's rights with respect to any Award Opportunities assigned
to him before the date of such amendment, suspension, or termi nation of the
Plan without the consent of such Participant.
(c) This Plan and all rights and obligations hereunder shall
be construed in accordance with and governed by the laws of the State of
Delaware, without reference to any principles of conflict of laws.
TRUST AGREEMENT FOR AMERICAN STANDARD INC.
LONG-TERM INCENTIVE COMPENSATION PLAN AND
SUPPLEMENTAL INCENTIVE PLAN
(As Amended and Restated in its
Entirety As of February 3, 1995)
This Trust Agreement dated as of January 1, 1993, and amended and restated
in its entirety as of February 3, 1995, by and among American Standard Companies
Inc., a Delaware corporation, American Standard Inc., a Delaware corporation,
and Robert M. Kennedy, as Trustee, provides, on the terms and conditions set
forth below, for the establishment and administration of a trust to hold shares
of Common Stock issued as payouts under the American Standard Inc. Long-Term
Incentive Compensation Plan and the Supplemental Incentive Plan.
1. Definitions.
For purposes of this Trust Agreement, the following definitions shall
apply:
ASCI means American Standard Companies Inc., a Delaware corporation, which
is the successor in interest to ASI Holding Corporation.
<PAGE>
1 Beneficiary means any one person or trust appointed by a Participant in
an unrevoked writing filed with the Company directing that, in the event of such
Participant's death, all of such Participant's rights under and interests in the
Plan, as recorded pursuant to this Trust, shall vest in such person or trust,
provided that a Participant's Beneficiary shall be deemed to be the estate or
legal representative of such Participant if such written appointment is revoked
and not replaced by another such written appointment filed with the Company, or
if a Participant's Beneficiary does not survive such Participant.
2 Board means the Board of Directors of the Company.
3 Cash Value means the value of the Shares credited to a Participant's
Share Award Account, which shall be determined as follows: if the Shares in the
Participant's Share Value Account
(A) are retained in the Trust or sold to ASCI, the Company or a Subsidiary,
based on the Fair Market Value as of the last day of the month in which the
Participant's Termination Date occurs or
(B) are sold to any person other than ASCI, the Company or a Subsidiary to
effect a distribution in cash, the net proceeds of any such sale; provided that,
any sale by the Trustee to effect a distribution hereunder shall be effected as
of the last day of the month in which the Participant's Termination Date occurs.
4 Committee means the Management Development Committee, or such other
committee appointed by the Board, consisting of three or more persons who may or
may not be directors or officers of the Company or ASCI, to administer this
Trust Agreement.
5 Common Stock means the common stock, par value $0.01 per share, of ASCI.
6 Company means American Standard Inc., a Delaware corporation.
7 Creditor means a general creditor of ASCI, the Company or a Subsidiary,
as appropriate, and Judgment Creditor means a Creditor who has obtained a
judgment against ASCI, the Company or a Subsidiary, as appropriate, from a court
of competent jurisdiction and who has made written demand to ASCI, the Company
or such Subsidiary for payment on such judgment which has gone unsatisfied for
at least 180 days.
8 Fair Market Value on any date means the closing price of a Share on such
date as reported on the New York Stock Exchange consolidated reporting system.
<PAGE>
9 Insolvent means the inability to pay debts as they mature or being
subject to proceedings as a debtor under the United States Bankruptcy Code, and
Insolvency means the state of being insolvent.
10 Participant means an employee of ASCI, the Company or one of its
Subsidiaries who participates in the Plan.
11 Plan means either the American Standard Inc. Long-Term Incentive
Compensation Plan or the Supplemental Incentive Plan, as either is in effect
from time to time.
12 Plan Payout means a payment made pursuant to Section 5(a) of the Long
Term Incentive Plan or pursuant to the payout provisions of the Supplemental
Incentive Plan.
13 Share means a share of Common Stock.
14 Share Award Account means a separate account established under the
Trustee with respect to which the Participant's interests under the Plan are
credited.
15 Subsidiary means a corporation in which the Company owns, directly or
indirectly, more than 50 % of the voting power represented by stock entitled to
vote for the election of directors, or a partnership in which the Company owns,
directly or indirectly, at least 50 % of the capital or profits interests in
such partnership.
16 Restatement Date means February 3, 1995.
17 Termination Date of a Participant means the date on which such
Participant's employment with ASCI, the Company and each of its Subsidiaries
terminates for any reason, including death.
18 Trust means the trust fund established under this Trust Agreement.
19 Trustee means R. M. Kennedy or such successor trustee as shall be
appointed by the Committee pursuant to Section 18 hereof.
2 Establishment and Duration of Trust; Trustees Powers.
The Trust is hereby established under the Plan to fulfill certain
obligations thereunder of ASCI, the Company and the Company's Subsidiaries to
Participants. The Trust shall continue in effect until terminated by action of
the Board.
The Trustee shall invest and reinvest the assets of the Trust without
distinction between principal and income; provided, however, that the Trustee
shall hold in the Trust all Shares that it receives, and the Trustee shall
distribute such Shares to the Participants (or to their Beneficiaries) entitled
to such distributions when and as directed by the Committee in accordance with
the terms of the Incentive Plan. The Committee shall direct the investment of
any cash contributions to the Trust in its discretion. Pending investment of any
such cash contributions, the Trustee may temporarily invest and reinvest such
contributions in any marketable short- and medium-term fixed income securities,
United States Treasury Bills, other short- and medium-term government
obligations, commercial paper, other money market instruments and part interests
in any one or more of the foregoing, or may maintain cash balances consistent
with the liquidity needs of the Trust as determined by the Trustee. The
Committee may direct the Trustee to maintain separate investment funds, allocate
contributions among such funds, and make transfers among such funds.
<PAGE>
Subject to the provisions hereof, the Trustee shall be authorized and
empowered to exercise any and all of the following rights, powers and privileges
with respect to any cash, securities or other properties held by the Trustee in
trust hereunder:
1 To sell, exchange, mortgage or lease any such property and to convey,
transfer or dispose of any such property on such terms and conditions as the
Trustee deems appropriate.
2 To grant options for the sale, transfer, exchange or disposal of any such
property and to exercise any subscription rights or conversion privileges with
respect to any securities held in the Trust Fund.
3 To exercise all voting rights pertaining to any securities; to consent to
or request any action on the part of the issuer of any such securities; and to
give general or special proxies or powers of attorney with or without power of
substitution.
4 To collect and receive any and all money and other property of whatsoever
kind or nature due or owing or belonging to the Trust Fund and to give full
discharge and acquaintance therefor; and to extend the time of payment of any
obligation at any time owing to the Trust Fund, as long as such extension is for
a reasonable period and continues reasonable interest.
5 To cause any securities or other property to be registered in, or
transferred to, the individual name of the Trustee or in the name of one or more
of its nominees, or one or more nominees of any system for the centralized
handling of securities, or to retain such investments unregistered and in form
permitting transferability by delivery (provided that the books and records of
the Trust at all times show that all such investments are a part of the Trust
Fund).
6 To settle, compromise or submit to arbitration any claims, debts or
damages due or owing to or from the Trust; to commence or defend suits or legal
proceedings whenever, in its judgment, any interest of the Trust requires it;
and to represent the Trust in all suits or legal proceedings in any court of law
or equity or before any other body or tribunal, insofar as such suits or
proceedings relate to any property forming part of the Trust Fund or to the
administration of the Trust Fund.
7 Generally, to do all acts, whether or not expressly authorized, which are
necessary or appropriate to carry out the intent of this Trust Agreement.
3 Contribution of Shares to Trust.
As of the date any Plan Payout authorized under the Plan which consists in
whole or in part of Shares is made, ASCI or the Company shall contribute to the
Trust, for credit to the Share Award Account of each Participant who is granted
such a Plan Payout, that number of whole and fractional Shares, valued at their
Fair Market Value on such date, equal to the percentage of such Plan Payout
consisting of Shares.
4 Share Award Accounts.
Each Participant's Share Award Account shall record the number of Shares
and fractions thereof credited to such Share Award Account as a Plan Payout and
the date as of which each such Plan Payout was made.
<PAGE>
5 Voting Rights.
Shares credited to each Participant's Share Award Account shall be voted by
the Trustee as recommended by the Board on its proxy voting card.
6 Distributions from Trust.
The Committee may at any time direct that the Shares credited to a
Participant's Share Award Account be distributed from the Trust. If not earlier
distributed in accordance with the foregoing sentence, upon the termination of a
Participant's employment, such Participant (or, in the event of his death, his
Beneficiary) shall be entitled to a distribution from the Trust of all Shares
credited to his Share Award Account; provided that, so long as such direction
shall not cause the Company or ASCI to breach any covenant or otherwise incur a
default under any credit or other financing agreement to which it is a party,
ASCI or the Company may direct the Trustee to pay the Participant (or his
Beneficiary) the Cash Value of such Shares in lieu of a distribution in Shares.
Notwithstanding the foregoing, in the case of any Participant whose employment
terminated prior to the Restatement Date and, as of the Restatement Date, whose
Share Award Account is credited with Shares, such Shares and any other property
credited to such Account shall be distributed to such Participant as soon as
administratively practicable following the Restatement Date, but in any event,
no later than one year from such Date.
7 Issuance of Share Certificates.
If a Participant (or, in the event of his death, his Beneficiary) receives
a distribution of Shares pursuant to Section 6, the Trustee shall deliver to
such Participant or Beneficiary a certificate or certificates evidencing the
Shares credited to such Participant's Share Award Account, as soon as
administratively practicable after the Participant's Termination Date.
8 Changes in Capital Structure.
In the event of the payment of any dividend payable in, or the making of
any distribution of, Shares to holders of record of Shares during the period any
Shares awarded under the Plan are credited to a Participant's Share Award
Account; or in the event of any stock split, combination of Shares,
recapitalization or other similar change in the authorized capital stock of ASCI
during such period; or in the event of the merger or consolidation of ASCI into
or with any other corporation or the reorganization, dissolution or liquidation
of ASCI during such period; there shall be credited to such Participant's Share
Award Account such new, additional or other shares of capital stock of any
class, or other property (including cash), as such Participant would be entitled
to receive as a matter of law if such Participant were a shareholder of ASCI at
the time of such event.
9 Administration.
This Trust Agreement shall be administered by the Committee, which shall
have full power and authority (to the extent not inconsistent with the terms and
purposes of the Plan and this Trust Agreement) to interpret and carry out the
terms of, and to establish, amend or rescind rules and regulations relating to,
this Trust Agreement; to appoint a recordkeeper for this Trust Agreement and to
rescind any such appointment; and to take such other actions and to make such
other determinations relating to this Trust Agreement as may be necessary or
advisable in connection with the Plan. The Board or the Committee may, by
resolution or written direction, delegate to any agent or agents it shall
appoint, including any officer or employee of the Company or ASCI, the authority
to exercise any of its administrative duties and responsibilities hereunder.
<PAGE>
All forms required to be filed hereunder and all other communications with
respect hereto shall be addressed to the Committee, the Company, ASCI or the
Trustee, as the case may be, in care of the Secretary, American Standard Inc.,
One Centennial Avenue, Piscataway, New Jersey, 08855-6820, or to such other
address as the Committee, ASCI, the Company or the Trustee, as the case may be,
may designate from time to time.
10 Trust Subject to Creditor Claims.
Notwithstanding any other provision of this Trust Agreement or the Plan,
the Trustee shall hold the assets of the Trust for the benefit of Creditors to
the extent provided in Sections 11 and 12 hereof. No Participant or Beneficiary
shall have any rights greater than the rights of any other unsecured Creditor,
and no Participant or Beneficiary shall have any right against or security
interest in the Trust.
11 Effects of Insolvency.
Upon receipt of any written allegation of the Insolvency of ASCI, the
Company or any Subsidiary which has an interest in the Trust, the Trustee shall
suspend the making of any distribution from the Trust and shall immediately
notify ASCI, the Company and any affected Subsidiary in writing of such
allegation. Within 30 days of receipt of such an allegation, the Trustee shall
determine whether ASCI, the Company or the relevant Subsidiary is Insolvent. If
the Trustee determines ASCI, the Company or the relevant Subsidiary to be
Insolvent, or if the Trustee otherwise has actual knowledge that ASCI, the
Company or the relevant Subsidiary is Insolvent, the Trustee shall hold the
portion of the Trust held for the benefit of such entity for the benefit of its
Creditors until otherwise instructed by a court of competent jurisdiction. If
the Trustee determines that ASCI, the Company or the relevant Subsidiary is not
Insolvent, the Trustee shall resume making appropriate distributions from the
Trust to Participants and Beneficiaries in accordance with this Agreement.
Notwithstanding the foregoing, if the Board, the Chief Executive Officer or the
Chief Financial Officer of ASCI, the Company or the relevant Subsidiary delivers
to the Trustee a sworn statement that ASCI, the Company or such Subsidiary is
Insolvent, the Trustee shall make distributions from the portion of the Trust
held for the benefit of such entity only as directed by a court of competent
jurisdiction.
12 Judgment Creditor Claims.
In addition to the rights of Creditors set forth in Section 11 hereof, and
notwithstanding any other provision of this Trust Agreement, the assets of the
Trust shall at all times be available to satisfy claims of Judgment Creditors.
Upon receipt by the Trustee of proof satisfactory to the Trustee that a Creditor
is a Judgment Creditor, the Trustee shall satisfy the claim of such Judgment
Creditor, to the extent possible, from the assets of the Trust, and the Trustee
shall be fully indemnified hereunder in satisfying such claim.
13 Distributions Due to Certain Tax Consequences.
Notwithstanding any provision of this Trust Agreement other than Sections
11 and 12 hereof, if a Participant (or Beneficiary) is determined to be subject
to United States federal income tax on any portion of his interest in the Trust
prior to the time of distribution of such interest that portion of such interest
shall be distributed by the Trustee to such Participant or Beneficiary. A
portion of a Participant's (or Beneficiary's) interest in the Trust shall be
determined to be subject to United States federal income tax upon the earliest
of (i) receipt by the Participant (or Beneficiary) of a notice of deficiency
<PAGE>
from the United States Internal Revenue Service with respect to such interest
which is not contested by such Participant (or Beneficiary); (ii) execution of a
closing agreement between the Participant (or Beneficiary) and the Internal
Revenue Service which provides that such interest is includible in the
Participant's (or Beneficiary's) gross income; and (iii) a final determination
by the United States Tax Court or any other federal court which holds that such
interest is includible in the Participant's (or Beneficiary's) gross income.
14 Reports and Records.
The Trustee shall:
1 keep accurate and detailed accounts of all investments, receipts,
disbursements and other transactions in the Trust as he shall deem necessary and
proper with respect to his administration of the Trust, and permit inspection of
such accounts, records and assets of the Trust by any duly authorized
representative of the Company or ASCI at any time during usual business hours; 2
make such periodic reports to the Company or ASCI as it shall reasonably
request; 3 prepare and timely file such tax returns and other reports, together
with supporting data and schedules, as may be required of the Trustee by law,
with any taxing authority or any other government authority, whether local,
state or federal.
15 Taxes.
ASCI, the Company and each participating Subsidiary agree that their
respective share of all income, deductions and credits of the Trust belong to
them as owners for income tax purposes and shall, as appropriate, be included on
their tax returns. The Company or ASCI shall from time to time pay taxes
(references in this Trust Agreement to the payment of taxes shall include
interest and applicable penalties) of any and all kinds whatsoever which at any
time are lawfully levied or assessed upon or become payable in respect of the
Trust, the income or any property forming a part thereof, or any security
transaction pertaining thereto. Any amounts distributed from the Trust shall be
reduced by the amount of any withholding taxes required by law, and the Trustee
shall have the responsibility to withhold and pay such amounts to the
appropriate governmental authorities. The Trustee shall inform the Company and
ASCI in writing of all amounts withheld and of all distributions hereunder to a
Participant or Beneficiary. The Trustee shall be entitled to satisfy such
withholding tax obligations and payments to a Participant or Beneficiary by
retaining an appropriate number of Shares and selling such Shares.
16 For the Benefit of the Trustee.
1 Expenses of the Trustee. The Company or ASCI shall reimburse the Trustee
for any expenses incurred by the Trustee including, but not limited to, all
proper charges and disbursements of the Trustee, and reasonable fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding). The Trustee's entitlement to
reimbursement hereunder shall not be affected by the resignation or removal of
the Trustee or by the termination of the Trust.
2 Indemnification of Trustee. ASCI or the Company shall indemnify, defend
and hold the Trustee harmless from and against any claim, liability, cost or
expense (including reasonable attorneys' fees) asserted against, imposed on or
suffered or incurred by the Trustee in the good-faith carrying out of his duties
and responsibilities hereunder and in his good-faith compliance with any written
instructions delivered to him by the Company or ASCI with respect thereto.
<PAGE>
17 Resignation and Removal of Trustee.
The Trustee may be removed by the Committee at any time. The Trustee may
resign at any time upon notice in writing to the Company and ASCI.
18 Successor Trustee.
Upon the removal or resignation of the Trustee, the Committee may designate
a successor Trustee to act hereunder, which shall have the same powers and
duties as those conferred upon the Trustee. Upon such designation, and upon the
written acceptance of the successor Trustee, the former Trustee shall, if
necessary, assign, transfer and pay over to such successor Trustee the assets
then constituting the Trust. A successor Trustee shall have all the rights and
powers under this Trust Agreement as an original Trustee.
19 Amendment of Trust.
All contributions made by ASCI, the Company or any Subsidiary shall be
irrevocable; provided that, the Company or ASCI may amend, in whole or in part,
any or all of the provisions of this Trust Agreement, provided that no such
amendment may affect the rights, protections, duties or responsibilities of the
Trustee without his consent and, provided further, that no such amendment may
permit any part of the corpus or income of the Trust to be returned or diverted
to the Company or ASCI.
20 No Right of Alienation or Employment.
Except as required in Sections 10 through 12 hereof, at no time prior to
the satisfaction of all liabilities with respect to Participants and their
Beneficiaries shall any part of the corpus and/or income of the Trust be used
for, or diverted to purposes other than for the exclusive purpose of providing
benefits to Participants and their Beneficiary. No Participant or Beneficiary
shall have any right or interest in the assets of the Trust which is greater
than the rights of any Creditor. The assets of the Trust shall not be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge. This Trust Agreement does not give any Participant a right to continued
employment with ASCI, the Company or any Subsidiary.
21 Headings. Section headings in this Trust Agreement are for reference
only. In the event of a conflict between a heading and the content of a Section,
the content of the Section shall control.
22 Construction.
This Trust Agreement shall be construed and regulated by the laws of the
State of New York except where such laws are superseded by federal laws.
23 Successors.
This Trust Agreement shall be binding upon, and the powers herein granted
to the Committee, the Company, ASCI and the Trustee, respectively, shall be
exercisable by, the respective successors and assigns of the Committee, the
Company, ASCI and the Trustee.
<PAGE>
24 Separability.
If any part of this Trust Agreement shall be found to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remaining provisions hereof. Such invalid or unenforceable part shall be fully
separable and this Trust Agreement shall be construed and enforced as if such
part had not been inserted herein.
25 Gender and Number.
Whenever used herein, the masculine shall be interpreted to include the
feminine and neuter, the neuter to include the masculine and feminine, the
singular to include the plural and the plural to include the singular, in each
case unless the context requires otherwise.
Assignment.
The benefits payable under this Trust Agreement may not be assigned,
alienated, pledged, attached or garnished.
IN WITNESS WHEREOF, each of the parties hereto has executed or caused to be
executed this Trust Agreement as of the date and year first written above.
AMERICAN STANDARD COMPANIES INC.
------------------------------
By:
Its:
AMERICAN STANDARD INC.
------------------------------
By:
Its:
THE TRUSTEE:
------------------------------
ROBERT M. KENNEDY
AMERICAN-STANDARD
EMPLOYEE STOCK OWNERSHIP PLAN
Section 1. Nature of the Plan.
The purpose of this Plan is to enable participating Employees
to share in the growth and prosperity of ASI Holding Corporation (the "Company")
and to provide Members with an opportunity to accumulate capital for their
future economic security. The primary purpose of the Plan is to enable Members
to acquire stock ownership interests in the Company. Therefore, the Trust
established under the Plan is designed to invest primarily in Company Stock.
As originally adopted effective as of April 23, 1988, the Plan
was a stock bonus plan under Section 401(a) of the Code and an employee stock
ownership plan under Section 4975(e)(7) of the Code. The Plan has been amended
and restated as of January 1, 1994, and effective as of the Restatement Date,
will become a profit-sharing plan.
All Trust Assets held under the Plan will be administered,
distributed, forfeited and otherwise governed by the provisions of this Plan and
the related Trust Agreement. The Plan is administered by the Savings Plan Board
for the exclusive benefit of Members (and their Beneficiaries).
Section 2. Definitions.
In this Plan, whenever the context so indicates, the singular
or plural number and the masculine, feminine or neuter gender shall be deemed to
include the other, the terms "he," "his" and "him" shall refer to a Member, and
the capitalized terms shall have the following meanings:
Account. . . . . . . . . . . One of two accounts maintained to record the
interest of a Member under the Plan. See Section 6.
Affiliate. . . . . . . . . . Any corporation which is a member of a
controlled group of corporations (within the meaning of Section 414(b) of the
Code) of which the Company is also a member or any trade or business (whether or
not incorporated) which is under common control with the Company (within the
meaning of Section 414(c) of the Code).
Allocation Date. . . . . . . December 31st of each year (the last day of
each Plan Year).
Basic Contributions. . . . . Employer Contributions required under Section
4(a).
Beneficiary. . . . . . . . . The person (or persons) entitled to receive
any benefit under the Plan in the event of a Member's death. See Section 14(b).
Board of Directors . . . . . The Board of Directors of the Company.
Break in Service . . . . . . A period of time commencing with the date on
which an Employee's Service terminates and ending on the date he resumes
Service. See Section 11(b).
Capital Accumulation . . . . A Member's vested, nonforfeitable interest in
his Accounts under the Plan. Each Member's Capital Accumulation shall be
determined in accordance with the provisions of Section 10 and distributed as
provided in Sections 12, 13 and 14.
Cash Account . . . . . . . . The Account which reflects each Member's
interest under the Plan attributable to Trust Assets other than Company Stock.
See Section 6.
Code . . . . . . . . . . . . The Internal Revenue Code of 1986, as amended.
Company. . . . . . . . . . . ASI Holding Corporation, a Delaware
corporation.
Company Stock. . . . . . . . Shares of any class of capital stock issued by
the Company.
Company Stock Account. . . . The Account which reflects each Member's
interest in Company Stock held under the Plan. See Section 6.
Compensation . . . . . . . . The total remuneration of an Employee for
Service (other than remuneration designated by the Plan Board (embodied in a
certificate filed by it with the Company) as not constituting Compensation) for
each Plan Year, before any payroll deductions (including any such deductions
attributable to Basic Tax Deferred Contributions and Additional Tax Deferred
Contributions under the Savings Plan or pursuant to Section 125(a) and 129(a) of
the Code, and without taking into account any remuneration paid to an Employee
with respect to the American-Standard Allowance under the Company's Flexible
Benefit Program. For any Plan Year after 1988 and prior to 1994, any amount in
excess of $200,000 (as adjusted for increases in the cost of living pursuant to
Section 401(a)(17) of the Code) shall be excluded. For any Plan Year after 1993,
any amount in excess of $150,000 (as adjusted for increases in the cost of
living pursuant to Section 401(a)(17) of the Code) shall be excluded.
Credited Service . . . . . . The elapsed period of an Employee's Service,
including Service prior to the effective date of the Plan. See Section 11.
Disability . . . . . . . . . The inability of an Employee to perform his
duties which is due to a medically determinable physical or mental impairment
and is, or would be, considered a disability under the American Standard Long
Term Disability Insurance Plan for Salaried Employees.
Notwithstanding the foregoing, in the case of collectively-bargained
Employees at the Salem, Ohio plant, Disability means that an Employee has been
totally disabled by bodily injury or disease so as to be prevented from
continuing employment with his Employer, such total disability has continued for
a period of at least six (6) months and, in the opinion of a qualified physician
designated by the Employer, such total disability will be permanent and
continuous during the remainder of the Employee's life; provided that, a
disability that
(i) was contracted, suffered or incurred while the Employee was engaged in
or resulted from having engaged in a criminal enterprise,
(ii) resulted from a self-inflicted injury,
(iii) resulted from habitual drunkenness or addiction to narcotics, or
(iv) military services which prevents the Employee or former Employee from
returning to work with the Employer and for which the Employee or former
Employee receives a pension from any agency of the United States or any state
government, shall not be considered a Disability.
Discretionary Contribu- tions. . . . . . . . . . . . Employer Contributions
in such amounts as may be determined by the Board of Directors. See Section
4(c).
Employee . . . . . . . . . . Any common-law employee of an Employer. A
leased employee, as described in Section 414(n) of the Code, is not an Employee
for purposes of this Plan.
Employer . . . . . . . . . . The Company, American Standard Inc. and each
other Affiliate which is designated as an Employer by the Board of Directors and
which adopts the Plan for the benefit of its Employees.
Employer Contributions . . . Payments made to the Trust by an Employer. See
Section 4. ERISA. . . . . . . . . . . . The Employee Retirement Income Security
Act of 1974, as amended.
Fair Market Value. . . . . . The fair market value of Company Stock, as
determined by the Plan Board for all purposes under the Plan based upon a
valuation by an independent appraiser using the enterprise basis of valuation.
Forfeiture . . . . . . . . . A Member's Accounts which does not become his
Capital Accumulation and which is forfeited under Section 10(b).
Highly Compensated Employee . . . . . . . . . . The term "Highly
Compensated Employee" includes highly compensated active Employees and highly
compensated former Employees. A highly compensated active Employee includes any
Employee who performs Service during the determination year and who, during the
look-back year: (1) received Statutory Compensation in - excess of $75,000 (as
adjusted for increases in the cost of living pursuant to Section 414(q)(1) of
the Code), (2) received Statutory Compensation in excess of - $50,000 (as
adjusted for increases in the cost of living pursuant to Section 414(q)(1) of
the Code) and was a member of the top-paid 20% group of Employees for the year,
or (3) was an officer of the Company or an Affiliate and received - Statutory
Compensation in excess of 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term "Highly Compensated Employee" also includes:
(1) Employees who are both described in the preceding sentence if the - term
"determination year" is substituted for the term "look-back year" and the
Employee is one of the 100 Employees who received the most Statutory
Compensation during the determination year, and (2) Employees who are 5% owners
- at any time during the look-back year or determination year. If no officer has
satisfied the Statutory Compensation requirement of (3) above during either a -
determination year or look-back year, the highest paid officer for such year
shall be treated as a "Highly Compensated Employee." For this purpose, the
determination year shall be the Plan Year. The look-back year shall be the
12-month period immediately preceding the determination year. A highly
compensated Former Employee includes any Employee who separated from Service (or
was deemed to have separated) prior to the determination year, performs no
Service during the determination year and was a highly compensated active
Employee for either the separation year or any determination year ending on or
after his 55th birthday. If an Employee is, during a determination year or
look-back year, a family member of either a 5% owner who is an active or former
Employee or a Highly Compensated Employee who is one of the ten most highly
compensated Employees ranked on the basis of Statutory Compensation for such
year, then the family member and the 5% owner or top-ten Highly Compensated
Employee shall be aggregated. In such case, the family member and 5% owner or
top-ten Highly Compensated Employee shall be treated as a single Employee
receiving Statutory Compensation and Plan contributions or benefits equal to the
sum of the Statutory Compensation and such contributions or benefits of the
family member and 5% owner or top-ten Highly Compensated Employee. For this
purpose, family member includes the spouse, lineal ascendants and descendants of
the Employee or former Employee and the spouses of such lineal ascendants and
descendants. The determination of who is a "Highly Compensated Employee,"
including the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated as
officers and the Statutory Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations thereunder.
Leave of Absence . . . . . . An authorization to an Employee to be absent
from work for a period of time which is certified by his Employer as a Leave of
Absence.
Matching Contributions . . . Employer Contributions in amounts related to
the Basic Tax Deferred Contributions and Basic Currently Taxed Contributions
made by or on behalf of a Member under the Savings Plan. See Section 4(b).
Member . . . . . . . . . . . Any Employee or former Employee who has met
the applicable eligibility requirements of Section 3 and who has not yet
received a complete distribution of his Capital Accumulation.
Pension Reversion Shares . . The shares of Company Stock acquired with the
proceeds of a loan that was repaid with assets transferred to the Plan in
conjunction with the termination of the Retirement Plan of American Standard
Inc. and Participating Subsidiary Companies.
Permanent Shutdown . . . . . The sale or closing of a division or plant of
any Employer or a complete department thereof. If the Plan Board finds that a
Permanent Shutdown h as occurred, it shall fix the date of such Permanent
Shutdown. An Employee shall be considered as separated due to a Permanent
Shutdown only if the termination of his Service does not occur more than six
months before the date of such Permanent Shutdown.
Plan . . . . . . . . . . . . The American-Standard Employee Stock Ownership
Plan, which includes this Plan and the Trust Agreement.
Plan Board . . . . . . . . . The Savings Plan Board under the Savings Plan,
which will also administer the Plan. See Section 17.
Plan Year. . . . . . . . . . The 12-month period ending on each Allocation
Date (and coinciding with each calendar year).
Restatement Date . . . . . . January 1, 1995 (or such later date as the
Plan Board shall determine).
Retirement . . . . . . . . . Termination of Service after attaining age 65,
or after attaining age 55 and completing 10 years of Credited Service.
Retirement Plan. . . . . . . Any defined benefit pension plan which is now
or ever was maintained by the Company or any Affiliate.
Savings Plan . . . . . . . . The Savings and Stock Ownership Plan of
American Standard Inc. and Participating Subsidiary Companies, a profit sharing
plan that includes a cash or deferred arrangement under Section 401(k) of the
Code.
Service. . . . . . . . . . . Employment with the Company or with an
Affiliate.
Statutory Compensation . . . The total remuneration paid to an Employee by
his Employer during the Plan Year for personal services rendered to the
Employer, excluding employer contributions to a plan of deferred compensation,
amounts realized in connection with stock options and amounts which receive
special tax benefits. For purposes of the definition of "Highly Compensated
Employee," "Statutory Compensation" shall include any Basic Tax Deferred
Contributions and Additional Tax Deferred Contributions made on his behalf for
the Plan Year to the Savings Plan. For any Plan Year after 1988 and before 1994,
any amount in excess of $200,000 (as adjusted for increases in the cost of
living pursuant to Section 401(a)(17) of the Code) shall be excluded. For any
Plan Year beginning after 1993, any amount in excess of $150,000 (as adjusted
for increases in the cost of living pursuant to Section 401(a)(17) of the Code)
shall be excluded.
Statutory Dollar Amount. . . For any Plan Year, $30,000, as may be
increased pursuant to Section 415(c)(1)(A) of the Code.
Trust. . . . . . . . . . . . The American-Standard Stock Bonus Trust,
created by the Trust Agreement entered into between the Company and the Trustee.
Trust Agreement. . . . . . . The Agreement between the Company and the
Trustee establishing the Trust and specifying the duties of the Trustee.
Trust Assets . . . . . . . . The Company Stock (and other assets) held in
the Trust for the Benefit of Members. See Section 5.
Trustee. . . . . . . . . . . The Trustee (and any successor trustee)
appointed by the Board of Directors (after consulting with the Plan Board) to
hold the Trust Assets.
<PAGE>
Section 3. Eligibility and Participation.
(a) Each Employee who was a Member on January 1, 1994 shall remain a
Member. Each other Employee who is compensated on a salaried basis shall become
a Member on his date of Service (or, if later, the date he becomes a salaried
Employee). An Employee whose terms of Service are covered by a collective
bargaining agreement shall not be eligible to participate in the Plan unless the
terms of such agreement specifically provide for participation in the Plan. (b)A
Member is entitled to share in the allocation of Basic Contributions,
Discretionary Contributions and Forfeitures under Section 6(a), (b) and (c) for
each Plan Year in which he is an eligible Employee on the Allocation Date,
provided that, any contrary or inconsistent provision of the Plan
notwithstanding, (i) if an Employee's Service is broken due to a Permanent
Shutdown the effective date of which is not December 31 of any Plan Year, or
(ii) if an Employee transfers to hourly-paid status as of a date other than
December 31 of any Plan Year, such Employee shall receive, for the Plan Year in
which such Permanent Shutdown or transfer occurs, a Basic Contribution based on
his Compensation during such Plan Year up to the date of such Permanent Shutdown
or such transfer. A Member is also entitled to share in the allocation of Basic
Contributions, Discretionary Contributions and Forfeitures for the Plan Year of
his Retirement, Disability or death. (c) In the event that a Member (who is not
a Highly Compensated Employee) terminates Service by reason of a Disability
which also constitutes "permanent and total disability" within the meaning of
Section 22(e)(3) of the Code, such Member shall continue to be eligible to share
in the allocation of Basic Contributions under Section 4(a), based upon his rate
of Compensation in effect at the time of his Disability, for all subsequent Plan
Years prior to the Plan Year in which he attains age 65 (or in which he dies, if
earlier). (d) A former Member who is reemployed by an Employer shall become a
Member as of the date of his reemployment if he is then in the class of
Employees eligible to participate in the Plan.
<PAGE>
Section 4. Employer Contributions. (a) Basic Contributions. Basic
Contributions shall be paid to the Trustee for each Plan Year in an amount equal
to 3% of the Compensation of all Members entitled under Section 3(b) and (c) to
share in the allocation of Basic Contributions for that Plan Year.
(b) Matching Contributions. Matching Contributions shall be paid to the
Trustee in an amount equal to 100% (50% for collectively bargained Employees at
the Salem, Ohio plant) of the Basic Tax Deferred Contributions and Basic
Currently Taxed Contributions made by or on behalf of each Member under the
Savings Plan for each pay period in the month, but only to the extent such Basic
Tax Deferred Contributions and Basic Currently Taxed Contributions do not
together exceed 6% of his Compensation for each pay period in the month.
Matching Contributions, Basic Currently Taxed Contributions
under the Savings Plan and Additional Currently Taxed Contributions under the
Savings Plan for Highly Compensated Employees shall be limited by the Plan Board
for any Plan Year to the extent necessary to satisfy one of the contribution
percentage requirements described in Section 401(m)(2) of the Code. If these
requirements would be exceeded for a Plan Year, the Basic Currently Taxed
Contributions and Additional Currently Taxed Contributions under the Savings
Plan shall first be reduced in accordance with the terms of the Savings Plan.
If, after such reduction, these requirements would still be exceeded, the Plan
Board shall direct the Trustee to distribute a portion of the Matching
Contributions made on behalf of a Highly Compensation Employee (and any earnings
thereon) to the Member no later than March 15th of the following Plan Year, to
the extent practicable, determined by reducing Matching Contributions made on
behalf of Highly Compensated Employees in order of the contribution percentages
beginning with the highest of such percentages.
Matching Contributions for Highly Compensated Employees shall
be limited by the Plan Board to the extent necessary to satisfy one of the
contribution percentage requirements described in Section 401(m) of the Code,
including Section 401(m)(2) of the Code, and Section 1.401(m)-1 and -2 of the
regulations thereunder. For this purpose, the Plan Board shall direct the
Trustee to distribute a portion of the Matching Contributions made on behalf of
a Highly Compensated Employee (together with any income attributable thereto) to
him no later than March 15th of the following Plan Year, determined by reducing
Matching Contributions made on behalf of Highly Compensated Employees in order
of the contribution percentages beginning with the highest of such percentages.
Any distribution and determination of income attributable to Matching
Contributions under this Section 4(b) shall be made in accordance with Section
1.401(m)-1(e) of the regulations under the Code.
Notwithstanding anything else contained herein to the
contrary, all or any portion of the Matching Contributions allocated to the
Accounts of any Member may, to the extent determined by the Plan Board, be
treated as qualified non-elective contributions (within the meaning of Section
401(m)(4)(C) of the Code) which are treated as employer contributions for
purposes of complying with the actual deferral percentage test set forth in
Section 401(k)(3) of the Code. In such event, such Matching Contributions shall
be treated as though Tax Deferred Contributions made under the Savings Plan and
shall be subject to the provisions of Section 3.1 (c) of the Savings Plan as
though such provisions were incorporated herein and made a part hereof.
(c) Discretionary Contributions. Discretionary Contributions may
be paid to the Trustee for each Plan Year in such amounts (or under such
formula) as may be determined from time to time by the Board of Directors.
(d) Timing of Contributions. Matching Contributions for each
month shall be paid to the Trustee as soon as practicable following the last day
of that month. Basic Contributions and Discretionary Contributions for each Plan
Year shall be paid to the Trustee not later than the due date (including
extensions) for filing the Company's Federal income tax return for the taxable
year with respect to which a deduction is to be claimed under Section 404(a) of
the Code. Employer Contributions may be paid in cash, in shares of Company Stock
and/or any other legally permissible form, as determined by the Board of
Directors.
(e) Suspension of Contributions. Employer Contributions shall
not be made for any Plan Year in which no amounts can be allocated to any
Member's Accounts by reason of the allocation limitations described in Section
7(a) or in amounts which are not deductible under Section 404(a) of the Code.
Any Employer Contributions which are not deductible under Section 404(a) of the
Code may be returned to the Employer by the Trustee (upon the direction of the
Board of Directors) within one year after the deduction is disallowed or after
it is determined that the deduction is not available. In the event that Employer
Contributions are paid to the Trust by reason of a mistake of fact, such
Employer Contributions may be returned to the Employer by the Trustee (upon the
direction of the Board of Directors) within one year after the payment to the
Trust.
(f) Allocation of Pension Reversion Shares. Upon acquisition,
the Pension Reversion Shares were credited to a "Reversion Suspense Account."
Unless the Plan Board otherwise determines, as long as there are Pension
Reversion Shares credited to the Reversion Suspense Account, Pension Reversion
Shares will be released from the Reversion Suspense Account for allocation to
Members' Company Stock Accounts at the times such Employer Contributions would
otherwise have been contributed and allocated in lieu of the Employer
Contributions required under Section 4(a) and (b). The number of Pension
Reversion Shares to be released in order to discharge the obligation to make the
Employer Contributions required under Section 4(a) and (b) shall be determined
based upon the Fair Market Value as of last valuation of the Company Stock
completed prior to date the Employer Contribution is allocated to the Accounts
of Members. The Board of Directors may also determine that any additional
Employer Contributions permitted under Section 4(b) or (c) will be made in the
form of releases of additional Pension Reversion Shares from the Reversion
Suspense Account.
The minimum number of Pension Reversion Shares to be released
from the Reversion Suspense Account for each Plan Year prior to the Restatement
Date is one-eighth of the total number of Pension Reversion Shares (or, if less,
the remaining balance in the Reversion Suspense Account). To the extent that
such minimum number exceeds the number of Pension Reversion Shares otherwise
required to be released to satisfy the obligations with respect to Employer
Contributions required to be made under Section 4(a) and (b), such excess shall
be treated as a Discretionary Contribution. Notwithstanding the foregoing, all
Pension Reversion Shares shall be released from the Reversion Suspense Account
effective as of the last Allocation Date prior to the Restatement Date.
(g) No Member Contribution. No Member shall be required or permitted to
make contributions to the Trust. ----------------------
Section 5. Investment of Trust Assets.
Trust Assets will be invested by the Trustee primarily in
Company Stock in accordance with directions from the Plan Board. Employer
Contributions (and other Trust Assets) may be used to acquire shares of Company
Stock from any Company shareholder or from the Company. The Trustee may also
invest Trust Assets in such other prudent investments as the Plan Board deems to
be desirable for the Trust, or Trust Assets may be held temporarily in cash. All
purchases of Company Stock by the Trustee shall be made only as directed by the
Plan Board and only at prices which do not exceed Fair Market Value as of the
date of purchase. The Plan Board may direct the Trustee to invest and hold up to
100% of the Trust Assets in Company Stock. Subject to the approval of the Board
of Directors, the Plan Board may direct the Trustee to sell shares of Company
Stock to any person (including the Company), provided that any such sale must be
made at a price not less favorable to the Plan than Fair Market Value as of the
date of the sale. Any sale of Company Stock under this Section 5 or pursuant to
Appendix 1 must comply with the fiduciary duties applicable to the Plan Board
under Section 404(a)(1) of ERISA.
Section 6. Allocations to Members' Accounts.
A Company Stock Account and a Cash Account shall be maintained to reflect
the interest of each Member under the Plan.
Company Stock Account. The Company
Stock Account maintained for each Member will be credited annually with his
allocable share of Company Stock (including fractional shares) purchased and
paid for by the Trust or contributed in kind to the Trust as an Employer
Contribution, with any Forfeitures of Company Stock and with any stock dividends
on Company Stock allocated to his Company Stock Account.
Cash Account. The Cash Account maintained for each Member will be credited
annually with his allocable share of Employer Contributions that are not in the
form of Company Stock, with any Forfeitures from Cash Accounts, with any cash
dividends on Company Stock allocated to his Company Stock Account (other than
currently distributed dividends) and any net income (or loss) of the Trust.
Notwithstanding the foregoing, any Employer Contributions made in cash made for
the purpose of facilitating cash distributions, will be deemed to have been made
in the shares of Company Stock previously allocated to the Stock Accounts of
those Members receiving such cash distributions. A Member's Cash Account will be
debited for the Member's share of any cash payments made by the Trustee for the
acquisition of Company Stock.
The allocations to Members' Accounts for each Plan Year will
be made as follows:
(a) Basic Contributions. Basic Contributions under Section 4(a) for each
Plan Year will be allocated as of the Allocation Date among the Accounts of
Members so entitled under Section 3(b) and (c) in an amount equal to 3% of the
Compensation of each such Member, subject to the allocation limitations
described in Section 7.
(b) Matching Contributions. Matching Contributions under Section 4(b) will
be allocated as of the last day of the month among the Accounts of the Members
on whose behalf they were made, subject to the allocation limitations described
in Section 7.
(c) Discretionary Contributions and Forfeitures. Any Discretionary
Contributions under Section 4(c) and Forfeitures under Section 10(b) for each
Plan Year will be allocated as of the Allocation Date among the Accounts of
Members so entitled under Section 3(b) in the ratio that the Compensation of
each such Members bears to the total Compensation of all such Members, subject
to the allocation limitations described in Section 7.
<PAGE>
(d) Net Income (or Loss) of the Trust. The net income (or loss) of the
Trust for each Plan Year will be determined as of the Allocation Date. Prior to
the allocation of Employer Contributions and Forfeitures for the Plan Year, each
Member's share of any net income (or loss) will be allocated to his Cash Account
in the ratio that the total balances of both his Accounts on the preceding
Allocation Date (reduced by any distribution of Capital Accumulation during the
Plan Year) bears to the sum of such Account balances for all Members as of that
date. The net income (or loss) of the Trust includes the increase (or decrease)
in the fair market value of Trust Assets (other than Company Stock), interest
income, dividends and other income and gains (or losses) attributable to Trust
Assets (other than any dividends on allocated Company Stock) since the preceding
Allocation Date, reduced by any expenses charged to the Trust Assets for that
Plan Year.
(e) Dividends on Company Stock. Any cash dividends received on shares of
Company Stock allocated to Members' Company Stock Accounts will be allocated to
the respective Cash Accounts of such Members. Any cash dividends received on
unallocated shares of Company Stock shall be included in the computation of the
net income (or loss) of the Trust. Any stock dividends received on Company Stock
shall be credited to the Accounts to which such Company Stock was allocated. Any
cash dividends which are distributed to Members (or their Beneficiaries)
currently under Section 13(a) shall not be credited to their Cash Accounts.
(f)Accounting for Allocations. The Plan Board shall establish accounting
procedures for the purpose of making the allocations to Members' Accounts
provided for in this Section 6. The Plan Board shall maintain adequate records
of the aggregate cost basis of Company Stock allocated to each Member's Company
Stock Account. Sub-accounts shall be established to reflect different classes of
Company Stock which may be allocated to a Member's Company Stock Account and for
other purposes deemed appropriate by the Plan Board. From time to time, the Plan
Board may modify the accounting procedures for the purposes of achieving
equitable and nondiscriminatory allocations among the Accounts of Members in
accordance with the general concepts of the Plan, the provisions of this Section
6 and the requirements of the Code and ERISA.
Section 7. Allocations Limitations.
(a). Except as provided in Section 3(c), the Annual Additions for each Plan
year with respect to any Member may not exceed the lesser of:
1. 25% of his Statutory Compensation; or
1. the Statutory Dollar Amount.
For this purpose, "Annual Additions" shall be the total of the Employer
Contributions and Forfeitures (including any income attributable to Forfeitures)
allocated to the Accounts of a Member for the Plan Year, plus his "annual
additions" under the Savings Plan for the Plan Year. In determining such Annual
Additions, Forfeitures of Company Stock shall be included at the Fair Market
Value as of the Allocation Date. Notwithstanding anything else contained herein
to the contrary, the purchase price of Pension Reversion Shares allocated to a
Member's Company Stock Account for a Plan Year shall be treated as the amount of
a Member's Annual Addition in respect of any Pension Reversion Shares Allocated
to the Member's Company Stock Account.
In addition, for any Member who is or was covered under the
Retirement Plan, Employer Contributions and Forfeitures may not be allocated to
his Accounts (under this Plan) in amounts which would cause the limitations
described in Section 415(e) of the Code to be exceeded for any Plan Year.
Except as provided below, if the aggregate amount that would
be allocated to a Member in the absence of these limitations would exceed the
amount set forth in these limitations, his "annual additions" under the Savings
Plan shall be reduced in accordance with the terms thereof prior to any
reduction in the allocations to his Accounts under this Plan. Any Forfeitures
which can not be allocated to a Member's Accounts by reason of these limitations
shall be credited to a "Forfeiture Suspense Account" and allocated as
Forfeitures under Section 6(c) for the next succeeding Plan Year (prior to the
allocation of Employer Contributions for such succeeding Plan Year). To the
extent permitted under Section 415 of the Code and the regulations thereunder
(including ss.1.415-6(b)(6)), any Employer Contributions which can not be
allocated to a Member's Accounts by reason of these limitations shall be
credited to an "Employer Contribution Suspense Account" and allocated pursuant
to Section 4 of the Plan for the next succeeding Plan Year (prior to the
allocation of any Employer Contributions for such succeeding Plan Year).
<PAGE>
(b) Increased Dollar Limitation. Under certain circumstances, the dollar
limitation set forth in Section 7(a)(2) may be increased to the extent provided
in Section 415(a)(6) of the Code, but only if not more than one-third of the
Employer Contributions for the Plan Year are allocated to the Accounts of
Members who are Highly Compensated Employees.
Section 8. Voting Company Stock.
Shares of Company Stock in the Trust shall be voted by the
Trustee only in such manner as shall be directed by the Plan Board, provided
that, prior to the Restatement Date, (i) if the Company (or any Affiliate) does
not have a class of securities required to be registered under Section 12 of the
Securities Exchange Act of 1934, each Member (or Beneficiary) will be entitled
to direct the voting of shares of Company Stock then allocated to his Company
Stock Account with respect to any corporate matter which involves the voting of
such shares at a shareholder meeting and which constitutes a merger,
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business or a similar transaction
specified in regulations under Section 409(e)(3) of the Code, or (ii) if the
Company (or any Affiliate) does have a class of securities required to be
registered under Section 12 of the Securities Exchange Act of 1934, each Member
(or Beneficiary) will be entitled to direct the voting of shares of Company
Stock then allocated to his Company Stock Account as to all matters with respect
to which such Company Stock is entitled to vote. Any allocated Company Stock
with respect to which Members may give voting directions pursuant to the
preceding sentence, but with respect to which such directions are not given,
shall not be voted.
Section 9. Disclosure to Members.
(a) Summary Plan Description. Each Member shall be furnished with the
summary plan description of the Plan required by Sections 102(a)(1) and
104(b)(1) of ERISA. Such summary plan description shall be updated from time to
time as required under ERISA and Department of Labor regulations thereunder.
(b) Summary Annual Report. Within nine months after each Allocation Date,
each Member shall be furnished with the summary annual report of the Plan
required by Section 104(b)(3) of ERISA, in the form prescribed in regulations of
the Department of Labor.
(c) Annual Statements. Following each Allocation Date, each Member shall be
furnished with a statement reflecting the following information:
(1) The balances (if any) in his Accounts as of the beginning of the Plan
Year.
(2) The amounts of the various Employer Contributions and Forfeitures
allocated to his Accounts for that Plan Year.
(3) The adjustments to his Accounts to reflect his share of dividends (if
any) on Company Stock and any net income (or loss) of the Trust for that Plan
Year.
(4). The new balances in his Accounts, including the number of shares of
Company Stock allocated to his Company Stock Account and the Fair Market Value
as of that Allocation Date.
(5). Information regarding his vested status under Section 12(a) of the
Plan.
<PAGE>
The statements provided to Members may include such additional information as
the Plan Board deems to be appropriate and may be furnished to Members more
often than annually.
(d) Additional Disclosure. The Plan Board shall make available for
examination by any Member copies of the Plan, the Trust Agreement and the latest
annual report of the Plan filed (on Form 5500) with the Internal Revenue
Service. Upon written request of any Member, the Plan Board shall furnish copies
of such documents and may make a reasonable charge to cover the cost of
furnishing such copies, as provided in regulations of the Department of Labor.
Section 10 Vesting and Forfeitures. (a) Vesting. A Member's interest in his
Accounts shall become 100% vested and nonforfeitable if he (A) is employed by
the Company or an Affiliate on or after his 65th birthday, (B) incurs a
Disability while employed by the Company or an Affiliate, (C) dies while
employed by the Company or an Affiliate, (D) is credited with at least five
years of Credited Service, or (E) terminates Service as a result of a Permanent
Shutdown.
That portion (if any) of a Member's Accounts which is attributable to
Matching Contributions under Section 4(b) shall be 100% vested and
nonforfeitable at all times.
(b) Forfeitures. To the extent that a Member is not vested, the non-vested
balances in his Accounts will become a Forfeiture as of the Allocation Date of
the Plan Year in which his employment terminates. All Forfeitures will be
reallocated to the Accounts of remaining Members, as provided in Section 6(c),
as of such Allocation Date.
(c) A. Restoration of Forfeited Amounts. If a Member who is not vested is
reemployed prior to the occurrence of a five-year Break in Service, any portion
of his Account balances (attributable to the prior period of Service) that was
forfeited shall be restored as if there had been no Forfeiture. Such restoration
shall be made out of Forfeitures occurring in the Plan Year of reemployment
(prior to allocation under Section 6(c)). To the extent such Forfeitures are not
sufficient, the Employer shall make a special contribution to the Member's
restored Accounts. Any amount so restored to a Member shall not constitute an
Annual Addition under Section 7(a).
Section 11. Credited Service and Break in Service.
(a) Credited Service. An Employee's Credited Service shall include each
period of his Service, computed (in full years and days) from the date on which
his Service begins until the date on which his Service terminates. A Break in
Service that does not exceed one year, the period of a Leave of Absence and
absence from work while in military service (as long as the Employee returns to
work within 90 days after termination of the period of military service) shall
be included in an Employee's Credited Service. Credited Service shall include
such Service prior to the effective date of the Plan, and such Service with the
Company or any Affiliate. Credited Service shall also include employment with
any corporation or business which was or is merged into or consolidated with, or
substantially all of whose assets were or are acquired by, an Employer (or any
such corporation or business), to the extent that the Board of Directors by
resolution designates such employment as Credited Service.
<PAGE>
(b) Break in Service. A one-year Break in Service shall occur one year
after the date of an Employee's termination of Service. A five-year Break in
Service shall occur five years after the date of an Employee's termination of
Service. A Break in Service shall end in the event of an Employee's
reemployment. For purposes of determining the period of an Employee's Break in
Service, the period of a maternity/paternity absence (beginning after December
31, 1984) not exceeding one year, described in Section 411(a)(6)(E)(i) of the
Code, shall not be treated as a Break in Service. Notwithstanding the preceding
paragraph, solely with respect to collectively bargained Employees at the Salem,
Ohio plant, a Break in Service shall not occur if: (i) a discharged Employee is
rehired within 180 days from the date of a discharge; (ii) an Employee is
rehired within two (2) years of a discharge due to a permanent shutdown of a
plant, department or subdivision; (iii) an Employee is rehired within three (3)
years of a layoff; and (iv) an Employee returns to employment within two (2)
years of an absence due to a physical disability, except that an absence in
excess of two (2) years due to a compensable disability incurred on duty will
not result in a Break in Service if the Employee returns to work within 30 days
after the end of the period for which statutory compensation for such disability
was payable.
Section 12. When Capital Accumulation Will Be Distributed. (a) Except as
otherwise provided in Sections 12(c) and 13, a Member's Capital Accumulation
will be distributed following his termination of Service, but only at the time
and in the manner determined by the Plan Board and only upon receipt by the Plan
Board (on forms provided by it) of an application therefor. A written notice
shall be given to any Member (or Beneficiary) whose claim for a benefit under
the Plan is denied, setting forth the specific reasons for such denial; and such
Member (or Beneficiary) shall be afforded a reasonable opportunity for a full
and fair review by the Plan Board of the decision denying such claim.
Except as otherwise provided in this Section 12, a Member's Capital
Accumulation will normally be distributed in a lump sum as soon as practicable
following the date on which his Service terminates in order for the distribution
to be made in the same calendar year as the distribution of benefits from the
Savings Plan. If the value of a Member's Capital Accumulation exceeds $3,500, no
portion of his Capital Accumulation may be distributed to him before the year
following the calendar year in which he attains age 70 1/2 without his consent.
(b) In the event of a Member's Retirement, Disability or death,
distribution of his Capital Accumulation shall commence no later than the
Allocation Date of the Plan Year following the Plan Year in which his
Retirement, Disability or death occurs. A Participant's Capital Accumulation
attributable to any allocations described in Section 3(c) will be distributed
following his 65th birthday (or his death, if earlier). If a Member's Service
terminates for any other reason, prior to the Restatement Date, distribution of
his Capital Accumulation shall commence no later than the Allocation Date of the
sixth Plan Year following the Plan Year in which his Service terminates (unless
he is reemployed by the Company or an Affiliate). For this purpose, if a
Member's Capital Accumulation includes Financed Shares acquired with the
proceeds of an Acquisition Loan (as described in Appendix A), such shares shall
not be deemed to be a part of his Capital Accumulation until the Allocation Date
of the Plan Year in which the Acquisition Loan has been fully repaid.
The following alternative modes of distribution may be selected by the Plan
Board (after considering the available liquid assets of the Company and the
Trust):
1. Distribution of a Member's Capital Accumulation in a single lump sum; or
2. Distribution of a Member's Capital Accumulation in substantially equal,
annual installments over a period not exceeding five years; or
3. Any combination of the foregoing.
(c) Unless otherwise elected by a Member, distribution of his Capital
Accumulation shall commence not later than 60 days after the Allocation Date
coinciding with or next following his 65th birthday (or his termination of
Service, if later). The distribution of the Capital Accumulation of any Member
who attains age 70 in a Plan Year must commence not later than April 1st of the
next Plan Year (even if he has not terminated Service) and must be made in
accordance with the regulations under Section 401(a)(9) of the Code, including
Section 1.401(a)(9)-2. If the amount of a Member's Capital Accumulation cannot
be determined by the Plan Board by the date on which a distribution is to
commence, or if the Member cannot be located, distribution of his Capital
Accumulation shall commence within 60 days after the date on which his Capital
Accumulation can be determined or after the date on which the Plan Board locates
the Member.
(d) If any part of a Member's Capital Accumulation is retained in the Trust
after his Service ends, his Accounts will continue to be treated as described in
Section 6. However, except as otherwise provided in Section 3(b) and (c), such
Accounts shall not be credited with any additional Employer Contributions and
Forfeitures. If a Member whose Capital Accumulation exceeds $3,500 fails to
consent to a distribution before he attains age 65 or if a Member cannot be
located, his entire Capital Accumulation may be segregated and invested in
assets other than Company Stock (as determined by the Plan Board).
(e) Effective for distributions or withdrawals made under the Plan on or
after January 1, 1993 in an eligible rollover distribution, the Member or, if
applicable, the Member's Beneficiary or former spouse who is the alternate payee
under a Qualified Domestic Relations Order within the meaning of section 414(p)
of the Code may elect to have all or any portion of such distribution (but not
less than $200) paid directly to an eligible retirement plan. In such event, the
Plan Board shall direct the Trustee to make a direct rollover of the portion of
any such distribution subject to any such election to the specified eligible
retirement plan. Such direction and transfer shall be made in such manner, and
at such time, as the Plan Board shall establish in accordance with applicable
regulations. As used herein, the terms "direct rollover", "eligible retirement
plan" and "eligible rollover distribution" shall have the respective meanings
set forth in section 401(a)(31) of the Code and the regulations thereunder.
Section 13. Diversification.
(a) Cash Dividends. If so determined by the Board of Directors, any cash
dividends payable on Company Stock allocated to the Company Stock Accounts of
Members may be paid currently (or within 90 days after the end of the Plan Year
in which the dividends are paid to the Trust) in cash by the
<PAGE>
Trustee to such Members (or their Beneficiaries) on a
nondiscriminatory basis, or the Company may pay such dividends directly to the
Members (or Beneficiaries). Such distribution (if any) of cash dividends may be
limited to Members who are still Employees, may be limited to dividends on
shares of Company Stock which are then vested or may be applicable to cash
dividends on all shares allocated to Members' Company Stock Accounts.
(b) A Member who has attained age 55 and completed at least ten years of
participation in the Plan shall be notified of his right to elect to "diversify"
a portion of the balance in his Company Stock Account. An election to
"diversify" must be made on the prescribed form and filed with the Plan Board
within the 90-day period immediately following the Allocation Date of a Plan
Year in the Election Period. For purposes of this Section 13(b), the "Election
Period" means the period of six consecutive Plan Years beginning with the Plan
Year in which the Member first becomes eligible to make an election.
For each of the first five Plan Years in the Election Period, the Members
may elect to "diversify" an amount which does not exceed 25% of the balance in
his Company Stock Account, less all amounts previously "diversified" under this
Section 13(b). In the case of the sixth Plan Year in the Election Period, the
Member may elect to "diversify" an amount which does not exceed 50% of the
balance in his Company Stock Account, less all amounts previously "diversified"
under this Section 13(b). No "diversification" election shall be permitted if
the balance in a Member's Company Stock Account as of the Allocation Date of the
first Plan Year in the Election Period has a Fair Market Value of $500 or less,
unless and until the balance in his Company Stock Account as of a subsequent
Allocation Date in the Election Period exceeds $500.
Except as provided below, "diversification" will be effected by
distributing to the Member that portion of his Company Stock Account with
respect to which a "diversification" election is made. Any distribution under
this Section 13 shall occur within 90 days after the 90-day period in which the
election may be made and shall be treated as a distribution which is subject to
the provisions of Section 14 and 15. Notwithstanding the two immediately
preceding sentences, if the Savings Plan then provides at least three investment
funds (other than Company Stock) for the investment of assets, "diversification"
will be effected by transferring to the Savings Plan that portion of the
Member's Company Stock Account with respect to which a "diversification"
election is made.
Section 14. How Capital Accumulation Will Be Distributed.
(a) The trustee will make distributions from the Trust only as directed by
the Plan Board. Prior to the Restatement Date, distribution of a Member's
Capital Accumulation will be made in whole shares of Company Stock, cash or a
combination of both, as determined by the Plan Board; provided, however, that
the Plan Board shall notify the Member of his right prior to the Restatement
Date to demand distribution of his Capital Accumulation entirely in whole shares
of Company Stock (with only the value of any fractional share paid in cash).
After the Restatement Date, distribution of a Member's Capital Accumulation will
be made in cash. The amount of any cash distribution with respect to the balance
in a Member's Company Stock Account (including cash that is paid in lieu of a
fractional share) shall be based upon the Fair Market Value of Company Stock as
of the Allocation Date immediately preceding the date of distribution.
(b) Distribution of a Member's Capital Accumulation will be made to the
Member if living, and if not, to the Beneficiary appointed by the Member in
accordance with this Section 14(b). A Member may appoint any person or persons
(including a trust) as his Beneficiary to receive distribution of his Accounts
in the event of his death by filing an appointment with the Plan Board on a form
provided by it; except that, in the case of a Member who is legally married at
the time of his death, his Beneficiary shall be deemed to be the person to whom
he was so married at the date of his death, unless such Member had obtained, on
forms provided by the Plan Board, the consent of such person to his appointment
of another Beneficiary or Beneficiaries. Such consent must be written, must
designate a Beneficiary which can not be changed without the further consent of
the person giving such consent (unless such consent expressly permits
designations of other Beneficiaries by the Member without any requirement of
further consent), must acknowledge the effect of such election and must be
witnessed by a notary public. For this purpose, the Member's designated
Beneficiary under the Savings Plan shall be his Beneficiary under this Plan
unless he specifically designates otherwise. A deceased Member's entire Capital
Accumulation shall be distributed (i) in the case of a Beneficiary who is the
Member's surviving spouse, not later than the later of (A) the final Allocation
Date in the calendar year immediately following the calendar year in which the
Member died or (B) the final Allocation Date in the calendar year in which the
Member would have attained age 70 1/2 and (ii) in the case of a Beneficiary who
is not the Member's surviving spouse, not later than the final Allocation Date
in the calendar year immediately following the calendar year in which the Member
died, provided that, if the amount in the Member's Accounts is $3,500 or less,
such amount shall be paid to the Member's Beneficiary or Beneficiaries as soon
as practicable following the Member's death.
(c) The Company shall furnish the recipient of a distribution with the tax
consequences explanation required by Section 402(f) of the Code and shall comply
with the withholding requirements of Section 3405 of the Code with respect to
distributions from the Trust.
Section 15. Rights, Options and Restrictions on Company Stock.
(a) Any shares of Company Stock distributed by the Trust shall
be subject to a "right of first refusal." The right of first refusal shall
provide that, prior to any subsequent transfer, the shares must first be offered
for purchase in writing to the Company, and then to the Trust, at the then Fair
Market Value. A bona fide written offer from an independent prospective buyer
shall be deemed to be the Fair Market Value for this purpose. The Company and
the Plan Board (on behalf of the Trust) shall have a total of 14 days to
exercise the right of first refusal on the same terms offered by a prospective
buyer. The Company may require that a Member entitled to a distribution of
Company Stock execute an appropriate stock transfer agreement (evidencing the
right of first refusal) prior to receiving a certificate for Company Stock.
(b) The Company shall provide a "put option" to any Member (or Beneficiary)
who receives a distribution of Company Stock. The put option shall permit the
Member (or Beneficiary) to sell such Company Stock to the Company at any time
during two option periods, at the then Fair Market Value of Company Stock as of
the Allocation Date immediately preceding the beginning of the respective put
option period. The first put option period shall be for at least 60 days
beginning on the date of distribution. The second put option period shall be for
at least 60 days beginning after the new determination of Fair Market Value (and
notice to the Member thereof) in the following Plan Year. The Company may allow
the Plan Board to direct the Trustee to purchase shares of Company Stock
tendered to the Company under a put option. The payment for any Company Stock
sold under a put option shall be made within 30 days if the shares are
distributed as part of an installment distribution. If the shares are
distributed in a lump sum distribution, payment shall commence within 30 days
and may be made in a lump sum or in substantially equal, annual installments
over a period not exceeding five years, with adequate security provided and
interest payable at a reasonable rate on any unpaid installment balance (as
determined by the Company or the Plan Board).
(c) Shares of Company Stock held or distributed by the Trustee may include
such legend restrictions on transferability as the Company may reasonably
require in order to assure compliance with applicable Federal and state
securities laws. Except as otherwise provided in this Section 15, no shares of
Company Stock held or distributed by the Trustee may be subject to a put, call
or other option, or buy-sell or similar arrangement.
(d) Notwithstanding anything in this Plan to the contrary, as required
under the regulations prescribed under Section 4975 of the Code, the right of a
Member or his beneficiary to put Company Stock to the Company for purchase
pursuant to Section 15(a) of the Plan as in effect immediately prior to the
Restatement Date shall not be effected in any way by the restatement of the Plan
and, to the extent applicable, shall continue to apply after the Restatement
Date.
<PAGE>
Section 16. No Assignment of Benefits.
A Member's Capital Accumulation may not be anticipated,
assigned (either at law or in equity), alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process, except in
accordance with a "qualified domestic relations order" (as defined in Section
414(p) of the Code).
Section 17. Administration.
(a) Savings Plan Board. The Plan will be administered by the Savings Plan
Board under the Savings Plan. The Plan Board shall be the named fiduciary with
authority to control and manage the operation and administration of the Plan.
Plan Board action will be in accordance with the procedures set forth in the
Savings Plan.
(b) Powers and Duties of the Plan Board. The Plan Board shall have all
powers necessary to enable it to administer the Plan and the Trust Agreement in
accordance with their provisions, including without limitation the following:
1. resolving all questions relating to the eligibility of Employees to
become Members;
2. determining the appropriate allocations to Members' Accounts;
3. determining the amount of benefits payable to a Member (or Beneficiary),
and the time and manner in which such benefits are to be paid;
4. authorizing and directing all disbursements of Trust Assets by the
Trustee;
5. establishing procedures in accordance with Section 414(p) of the Code to
determine the qualified status of domestic relations orders and to administer
distributions under such qualified orders;
6. engaging any administrative, legal, accounting, clerical or other
services that it may deem appropriate;
7. construing and interpreting the Plan and the Trust Agreement and
adopting rules for administration of the Plan that are consistent with the terms
of the Plan documents and of ERISA and the Code;
8. compiling and maintaining all records it determines to be necessary,
appropriate or convenient in connection with the administration of the Plan;
9. reviewing the performance of the Trustee with respect to the Trustee's
administrative duties, responsibilities and obligations under the Plan and Trust
Agreement;
10. selecting an independent appraiser and determining the Fair Market Value
of Company Stock as of such dates as it determines to be necessary or
appropriate; and
11. executing agreements and other documents on behalf of the Plan and
Trust.
The Plan Board shall be responsible for directing the Trustee as to the
investment of Trust Assets. The Plan Board may delegate to the Trustee the
responsibility for investing Trust Assets other than Company Stock. The Plan
Board shall establish a funding policy and method for directing the Trustee to
acquire Company Stock (and for otherwise investing the Trust Assets) in a manner
that is consistent with the objectives of the Plan and the requirements of
ERISA. The Plan Board shall perform its duties under the Plan and the Trust
Agreement solely in the interests of the Members (and their Beneficiaries). Any
discretion granted to the Plan Board under any of the provisions of the Plan or
the Trust Agreement shall be exercised only in accordance with rules and
policies established by the Plan Board which shall be applicable on a
nondiscriminatory basis.
(c) Expenses. All reasonable expenses of administering the Plan and Trust
shall be charged to and paid out of the Trust Assets. The Company may, however,
pay all or any portion of such expenses directly, and payment of expenses by the
Company shall not be deemed to be Employer Contributions.
(d)Information to be Submitted to the Plan Board. To enable the Plan Board
to perform its functions, the Company shall supply full and timely information
to the Plan Board on all matters as the Plan Board may require, and shall
maintain such other records as the Plan Board may determine are necessary or
appropriate in order to determine the benefits due or which may become due to
Members (or Beneficiaries) under the Plan.
(e) Delegation of Fiduciary Responsibility. The Plan Board from time to
time may allocate to one or more of its members and/or may delegate to any other
persons or organizations any of its rights, powers, duties and responsibilities
with respect to the operation and administration of the Plan that are permitted
to be so delegated under ERISA; provided, however, that responsibility for
investment of the Trust Assets may not be allocated or delegated other than as
provided in Section 17(b). Any such allocation or delegation shall be made in
writing, shall be reviewed periodically by the Plan Board and shall be
terminable upon such notice as the Plan Board in its discretion deems reasonable
and proper under the circumstances.
(f) Bonding, Insurance and Indemnity. To the extent required under Section
412 of ERISA, the Company shall secure fidelity bonding for the fiduciaries of
the Plan. The Company (in its discretion) or the Trustee (as directed by the
Plan Board) may obtain a policy or policies of insurance for the Plan Board (and
other fiduciaries of the Plan) to cover liability or loss occurring by reason of
the act or omission of a fiduciary. If such insurance is purchased with Trust
Assets, the policy must permit recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation by such fiduciary. The Company
shall indemnify each member of the Plan Board (to the extent permitted by law)
against any personal liability or expense resulting from his service on the Plan
Board, except such liability or expense as may result from his own willful
misconduct.
(g) Notices, Statements and Reports. The Plan Board shall be the "Plan
Administrator" (as defined in Section 3(16)(A) of ERISA and Section 414(g) of
the Code) and shall be the designated agent of the Plan for the service of legal
process.
Section 18. Limitation on Members' Rights.
A Member's Capital Accumulation will be based only on his
vested interest in his Accounts and will be paid only from the Trust Assets. An
Employer, the Plan Board or the Trustee shall not have any duty or liability to
furnish the Trust with any funds, securities or other assets, except as
expressly provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed
to constitute a contract of employment or otherwise between an Employer and any
Employee, or to be a consideration for, or an inducement or condition of, any
employment. Nothing contained in this Plan shall be deemed to give an Employee
the right to be retained in the Service of an Employer or to interfere with the
right of an Employer to discharge, with or without cause, any Employee at any
time.
<PAGE>
Section 19. Future of the Plan.
The Board of Directors or an officer or any Employee of the
Company who is so authorized by the Board of Directors may amend, suspend or
terminate the Plan (in whole or in part) and the Trust Agreement. Such
amendment, suspension or termination shall be effected by executing a written
amendment to the Plan, and filing it with the records of the Plan. No amendment,
suspension nor termination of the Plan shall retroactively reduce the vested
rights of Members or permit any part of the Trust Assets to be diverted to or
used for any purpose other than for the exclusive benefit of the Members (and
their Beneficiaries).
If the Plan is terminated (or partially terminated),
participation of Members affected by the termination will end. If Employer
Contributions are not replaced by contributions to a comparable plan which
satisfies the requirements of Section 401(a) of the Code, the Accounts of only
those Members who are Employees on the effective date of such termination will
become nonforfeitable as of that date. A complete discontinuance of Employer
Contributions shall be deemed to be a termination of the Plan for this purpose.
After termination of the Plan, the Trust will be maintained
until the Capital Accumulations of all Members have been distributed. Capital
Accumulations may be distributed following termination of the Plan or
distributions may be deferred as provided in Section 14, as the Company shall
determine.
In the event of the merger or consolidation of this Plan with
another plan, or the transfer of Trust Assets (or liabilities) to another plan,
the Account balances of each Member immediately after such merger, consolidation
or transfer must be at least as great as immediately before such merger,
consolidation or transfer (as if the Plan had then terminated).
Section 20. "Top-Heavy" Contingency Provisions.
(a) The provisions of this Section 22 are included in the Plan pursuant to
Section 401(a)(10)(B)(ii) of the Code and shall become applicable only if the
Plan becomes a "top-heavy plan" under Section 416(g) of the Code for any Plan
Year.
(b) The determination as to whether the Plan becomes "top-heavy" for any
Plan Year shall be made as of the Allocation Date of the immediately preceding
Plan Year (or as of December 31, 1988, for the Plan Year ending on that date) by
considering the Plan together with the Savings Plan and the Retirement Plan. The
Plan (and the Savings Plan and the Retirement Plan) shall be "top-heavy" only if
the total of the account balances under the Plan and the Savings Plan and the
accrued benefits under the Retirement Plan for "key employees" as of the
determination date exceeds 60% of the total of the account balances and the
values of accrued benefits for all Members. For such purpose, account balances
and accrued benefit values shall be computed and adjusted pursuant to Section
416(g) of the Code. "Key employees" shall be certain Members (who are officers
or shareholders of an Employer) and Beneficiaries described in Section 416(i)(1)
or (5) of the Code; and in determining "key employees," the term "annual
compensation" in Section 416(i)-(1)(A) of the Code shall mean Statutory
Compensation.
(c) For any Plan Year in which the Plan is "top-heavy," each Member who is
an Employee on the Allocation Date (and who is not a "key employee") shall
receive a minimum allocation of Employer Contributions and Forfeitures which is
equal to the lesser of:
1. 3% of his Statutory Compensation; or
2. the same percentage of his Statutory Compensation as the allocation to
the "key employee" for whom the percentage is the highest for that Plan Year.
For this purpose, the allocation to the "key employee" shall include any Basic
Tax Deferred Contributions and Additional Tax Deferred Contributions made on his
behalf under the Savings Plan for that Plan Year.
(d) For any Plan Year in which the Plan is "top-heavy," Compensation and
Statutory Compensation of each Employee for purposes of the Plan shall not take
into account (i) for Plan Years beginning before 1994, any amount in excess of
$200,000, as adjusted for increases in the cost of living pursuant to Section
416(d)(2) of the Code or (ii) for Plan Years beginning after 1993, any amount in
excess of $150,000, as adjusted for increases in the cost of living pursuant to
Section 416(d)(2) of the Code.
(e) As of the first day of any Plan Year in which the Plan has become
"top-heavy," any Employee who is an Employee after the Plan has become
"top-heavy" shall become 100% vested in his Accounts if he is credited with at
least three years of Credited Service. If the Plan ceases to be "top-heavy," the
Capital Accumulation of a Member who, at that time, has less than three years of
Service shall thereafter be determined under the vesting provisions in Section
12(a), instead of the vesting provisions in this Section 22(e). If the Plan
ceases to be "top-heavy," a Member who, at that time, has three or more years of
Service shall continue to be 100% vested in his Account balances.
(f) For any Plan Year in which the Plan is "top-heavy," with respect to any
Member who is or was covered under the Retirement Plan, the "defined benefit
plan fraction" and the "defined contribution plan fraction" referred to in
Section 415(e) of the Code shall be computed by substituting "1.0" in lieu of
"1.25" in both denominators.
Section 21. Governing Law.
The provisions of this Plan and the Trust Agreement shall be
construed, administered and enforced in accordance with the laws of the State of
New York, to the extent such laws are not superseded by ERISA.
Section 22. Execution.
To record the amendment and restatement of this Plan, the
Company has caused this document to be executed on this __ day of ________,
199_.
ASI HOLDING CORPORATION
By___________________________
Title:_____________________
<PAGE>
Leveraging Provisions.
(a) The Plan may be used to receive loans (or other
extensions of credit) to finance the acquisition of Company Stock ("Acquisition
Loans"), with such loans to be repaid by Employer Contributions to the Trust and
dividends received on such Company Stock. The provisions of this Appendix 1
shall be applicable to the extent that the Plan incurs an Acquisition Loan.
Acquisition Loans.
(b) The Plan Board may direct the Trustee to incur Acquisition
Loans from time to time to finance the acquisition of Company Stock ("Financed
Shares") or to repay a prior Acquisition Loan. Financed Shares must be voting
common shares (or preferred shares convertible into voting common shares) of
Company Stock which constitute "employer securities" under Section 409(1) of the
Code. An installment obligation incurred in connection with the purchase of
Company Stock shall be treated as an Acquisition Loan. An Acquisition Loan shall
be for a specific term, shall bear a reasonable rate of interest and shall not
be payable on demand except in the event of default. An Acquisition Loan may be
secured by a pledge of the Financed Shares so acquired (or acquired with the
proceeds of a prior Acquisition Loan which is being refinanced). No other Trust
Assets may be pledged as collateral for an Acquisition Loan, and no lender shall
have recourse against Trust Assets other than any Financed Shares remaining
subject to pledge. Any pledge of Financed Shares must provide for the release of
the shares so pledged as payments on the Acquisition Loan are made by the
Trustee and such Financed Shares are allocated to Members' Company Stock
Accounts under Section 9(d). If the lender is a party in interest (as defined in
ERISA), the Acquisition Loan must provide for a transfer of Trust Assets to the
lender on default only upon and to the extent of the failure of the Trust to
meet the payment schedule of the Acquisition Loan.
(c) Acquisition Loan Payments.
Payments of principal and/or interest on any Acquisition Loan shall be made by
the Trustee (as directed by the Plan Board) only from Employer Contributions
paid in cash to enable the Trust to repay such Acquisition Loan, from earnings
attributable to such Employer Contributions and from any cash dividends received
by the Trust on shares of Company Stock (whether allocated or unallocated); and
the payments made with respect to an Acquisition Loan for a Plan Year must not
exceed the sum of such Employer Contributions, earnings and dividends for that
Plan Year (and prior Plan Years), less the amount of such payments for prior
Plan Years. If the Company is the lender with respect to an Acquisition Loan,
Employer Contributions may be paid in the form of cancellation of indebtedness
under the Acquisition Loan. If the Company is not the lender with respect to an
Acquisition Loan, the Company may elect to make payments on the Acquisition Loan
directly to the lender and to treat such payments as Employer Contributions.
Notwithstanding the other provisions of this Appendix 1, the Plan Board may
direct the Trustee to apply the proceeds from the sale of unallocated Financed
Shares to repay the Acquisition Loan (incurred to finance the purchase of such
Financed Shares) in the event of the sale of the Company or the termination of
the Plan or if the Plan ceases to be an employee stock ownership plan under
Section 4975(e)(7) of the Code. In the event that the Trustee is unable to make
payments of principal and/or interest on an Acquisition Loan when due, the Plan
Board (with the approval of the Board of Directors) may direct the Trustee to
sell any Financed Shares that have not yet been allocated to Members' Company
Stock Accounts or to obtain an Acquisition Loan in an amount sufficient to make
such payments.
(d) Allocation of Financed Shares. Any Financed Shares acquired by the
Trust shall initially be credited to a "Loan Suspense Account" and will be
allocated to the Company Stock Accounts of Members only as payments on the
Acquisition Loan are made by the Trustee. The number of Financed Shares to be
released from the Loan Suspense Account for allocation to Members' Company Stock
Accounts for each Plan Year shall be determined by the Plan Board (as of each
Allocation Date) as follows:
(1) Principal/Interest Method. The number of Financed Shares held in the
Loan Suspense Account immediately before the release for the current Plan Year
shall be multiplied by a fraction. The numerator of the fraction shall be the
amount of principal and/or interest paid on the Acquisition Loan for that Plan
Year. The denominator of the fraction shall be the sum of the numerator plus the
total payments of principal and interest on that Acquisition Loan projected to
be paid for all future Plan Years. For this purpose, the interest to be paid in
future years is to be computed by using the interest rate in effect as of the
current Allocation Date.
(2) Principal Only Method. The Plan Board may elect (as to each Acquisition
Loan) or the provisions of the Acquisition Loan may provide for the release of
Financed Shares from the Loan Suspense Account based solely on the ratio that
the payments of principal for each Plan Year bear to the total principal amount
of the Acquisition Loan. This method may be used only to the extent that: (A)
the Acquisition Loan provides for annual payments of principal and interest at a
cumulative rate that is not less rapid at any time than level annual payments of
such amounts for ten years; (B) interest included in any payment on the
Acquisition Loan is disregarded only to the extent that it would be determined
to be interest under standard loan amortization tables; and (C) the entire
duration of the Acquisition Loan repayment period does not exceed ten years,
<PAGE>
even in the event of a renewal, extension or refinancing of the Acquisition
Loan.
In each Plan Year in which Trust Assets are applied to make payments on an
Acquisition Loan, the Financed Shares released from the Loan Suspense Account in
accordance with the provisions of this Subsection (d) of this Appendix 1 shall
be allocated among the Company Stock Accounts of Members in the manner
determined by the Plan Board based upon the source of funds (Employer
Contributions, earnings attributable to Employer Contributions and cash
dividends on shares of Company Stock allocated to Members' Company Stock
Accounts or cash dividends on Financed Shares credited to the Loan Suspense
Account) used to make the payments on the Acquisition Loan. If cash dividends on
shares of Common Stock allocated to a Member's Company Stock Account are used
for payments on an Acquisition Loan, Financed Shares (representing that portion
of such payments and whose Fair Market Value is at least equal to the amount of
such dividends) released from the Loan Suspense Account shall be allocated to
that Member's Company Stock Account.
(e) Net Income (or Loss) and Dividends. The determination of the net income
(or loss) of the Trust shall not take into account any interest paid by the
Trust under an Acquisition Loan. Any cash dividends received on any Financed
Shares credited to the Loan Suspense Account shall be included in the
computation of the net income (or loss) of the Trust. Any stock dividends
received on Company Stock in the Loan Suspense Account shall be credited to the
Loan Suspense Account. The Plan Board shall keep separate records of Financed
Shares and of Employer Contributions (and any earnings thereon) made for the
purpose of enabling the Trust to repay any Acquisition Loan.
(f) Allocation Limitations.
(1) Annual Additions. Any Employer Contributions which are used by the
Trust (not later than the due date, including extensions, for filing the
Company's Federal income tax return for the taxable year with respect to which a
deduction is to be claimed under Section 404(a) of the Code) to pay interest on
an Acquisition Loan, and any Financed Shares which are allocated as Forfeitures,
shall not be included as Annual Additions under Section 7(a) of the Plan;
provided, however, that the provisions of this subsection (f)(1) of this
Appendix 1 shall be applicable only for a Plan Year in which not more than
one-third of the Employer Contributions applied to pay principal and/or interest
on an Acquisition Loan are allocated to Members who are Highly Compensated
Employees; and the Plan Board shall reallocate such Employer Contributions to
the extent it deems it to be appropriate to satisfy this special rule.
(2) Increased Dollar Limitation. Company Stock that is released from the
Loan Suspense Account by reason of payments on an Acquisition Loan for the Plan
Year shall be deemed to be contributed to the Trust for that Plan Year for
purposes of Section 7(b) of the Plan.
(3) Limitation on Electing or Deceased Shareholder. If an Acquisition Loan
was incurred in connection with a purchase of Company Stock by the Trust which
qualifies for the nonrecognition treatment of Section 1042 of the Code, the
allocation limitations set forth in Section 7 of the Plan shall be adjusted as
required pursuant to such Section 1042 during the period beginning on the date
of such purchase and ending on the tenth anniversary of the purchase or the
Allocation Date as of which shares are released from the Loan Suspense Account
as a result of the final payment on the Acquisition Loan.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
1. Nature of the Plan 1
2. Definitions 2
3. Eligibility and Participation 12
4. Employer Contributions. 14
5. Investment of Trust Assets. 19
6. Allocations to Members' Accounts. 20
7. Allocations Limitations 24
8. Voting Company Stock. 26
9. Disclosure to Members 27
10. Vesting and Forfeitures 29
11. Credited Service and Break in Service 30
12. When Capital Accumulation Will Be Distributed 32
13. Diversification 36
14. How Capital Accumulation Will Be Distributed 38
15. Rights, Options and Restrictions on
Company Stock 41
16. No Assignment of Benefits 43
17. Administration 44
18. Limitation on Members' Rights 48
19. Future of the Plan 49
20. "Top-Heavy" Contingency Provisions 50
21. Governing Law 53
22. Execution 53
AMERICAN-STANDARD
EMPLOYEE STOCK OWNERSHIP PLAN
(As Amended and Restated As of January 1, 1994)
AMERICAN-STANDARD
EMPLOYEE STOCK OWNERSHIP PLAN
(As Amended and Restated as of January 1, 1994)
Amendment No. 1
American Standard Companies Inc., (the "Company"), a Delaware
corporation which is the sponsor of the American-Standard Employee Stock
Ownership Plan (the "Plan"), hereby amends the Plan as follows, as authorized by
the Board of Directors of the Company on December 1, 1994:
I. Section 3(b) is amended to read as follows:
A Member is entitled to share in the allocations of Basic
Contributions and Discretionary Contributions under Sections 6(a) and (b) for
each Plan Year in which he is an eligible Employee on the Allocation Date,
provided that, any contrary or inconsistent provision of the Plan
notwithstanding, (i) if an Employee's Service is broken due to a Permanent
Shutdown the effective date of which is not December 31 of any Plan Year, or
(ii) if an Employee transfers to hourly-paid status as of a date other than
December 31 of any Plan Year, such Employee shall receive, for the Plan Year in
which such Permanent Shutdown or transfer occurs, a Basic Contribution based on
his Compensation during the Plan Year up to the date of such Permanent Shutdown
or transfer. A Member is also entitled to share in the allocations of Basic
Contributions and Discretionary Contributions for the Plan Year of his
Retirement, Disability, or death.
II. Add a sentence to the end of the first paragraph of Section 4(b)
as follows:
The amount of any Matching Contributions calculated under this
Section 4(b) shall be reduced by Forfeitures available for this purpose under
Section 6(c).
III. In Section 6, the first sentence of the paragraph called "Company
Stock Account" is amended to read as follows :
The Company Stock Account maintained for each Member will be
credited annually with his allocable share of Company Stock (including
fractional shares) purchased and paid for by the Trust or contributed in kind to
the Trust as an Employer Contribution, and with any stock dividends on Company
Stock allocated to his Company Stock Account.
IV. In Section 6, the first sentence of the paragraph called "Cash
Account" is amended to read as follows:
The Cash Account maintained for each Member will be credited
annually with his allocable share of Employer contributions that are not in the
form of Company Stock, with any cash dividends on Company Stock allocated to his
Company Stock Account (other than currently distributed dividends) and any net
income (or loss) of the Trust.
V. Section 6(c) is amended to read as follows:
(c) Discretionary Contributions and Forfeitures. Any
Discretionary Contributions under Section 4(c) for each Plan Year will be
allocated as of the Allocation Date among the accounts of Members so entitled
under Section 3(b) in the ratio that the Compensation of each such Member
<PAGE>
bears to the total Compensation of all Members, subject to the allocation
limitations described in Section 7. Forfeitures under Section 10(b) for each
Plan Year shall first be applied to restore Account balances under Section 10(c)
and then to reduce future Matching Contributions under Section 4(b).
VI. The words "and Forfeitures" is deleted from the second sentence of
Section 6(d).
VII. The third paragraph of Section 7(a) is amended to read as
follows:
Except as provided below, if the aggregate amount that would
be allocated to a Member in the absence of these limitations wold exceed the
amount set forth in these limitations, his "annual additions" under the Savings
Plan shall be reduced in accordance with the terms thereof prior to any
reduction in the allocation to his Accounts under this Plan. To the extent
permitted under the Code and the regulations thereunder (including 1.415-
6(b)(6)), any Employer Contributions which can not be allocated to a Member's
Accounts by reason of these limitations shall be credited to an "Employer
Contribution Suspense Account" and allocated pursuant to Section 4 of the Plan
(prior to the allocation of any Employer Contributions for such succeeding Plan
Year).
VIII. Section 10(b) is amended to read as follows:
(b) Forfeitures. To the extent that a Member is not vested,
the non-vested balances in his Accounts will become Forfeitures as of the date
on which his employment terminates. All Forfeitures will be applied as provided
in Section 6(c) as soon as administratively practicable.
IN WITNESS WHEREOF, American Standard Companies Inc., has caused this
Amendment No. 1 to the American-Standard Employee Ownership Plan (As Amended and
Restated As of January 1, 1994) to be executed by its undersigned duly
authorized officer this ___nd day of December 1994, effective as of January 1,
1995.
American Standard Companies Inc.
By:____________________________
Adrian B. Deshotel
Vice President-Human Resources
AMENDMENT No. 2 to the
American-Standard Employee
Stock Ownership Plan
(As Amended and Restated as of January 1, 1994)
This Amendment No. 2, dated as of March 2, 1995, hereby amends the American
Standard Employee Stock Ownership Plan (as Amended and Restated as of January 1,
1994)(hereinafter referred to as the "ESOP") as follows, as of the dates set
forth below:
The definition of the term "Accounts" in Section 2 of the ESOP is deleted
in its entirety and each reference in the ESOP to Accounts shall be changed to a
reference to "Company Stock Account" or, where the context implies a reference
to more than one Member, "Company Stock Accounts".
The definition of the term "Allocation Date" in Section 2 of the ESOP is
deleted in its entirety and a new definition is substituted therefor, to read as
follows:
December 31st of each year and such other date or dates as the Plan Board
shall determine from time to time.
The definition of the term "Cash Account" in Section 2 of the ESOP is
deleted in its entirety.
The definition of the term "Company" in Section 2 of the ESOP is amended to
delete the reference to "ASI Holding Corporation" and to substitute therefor
"American Standard Companies Inc."
<PAGE>
The definition of the term "Fair Market Value" in Section 2 of the ESOP is
deleted in its entirety and a new definition is substituted therefor, to read as
follows:
The fair market value of a Share of Company Stock on any date means (i) if
the Company Stock is traded on the New York Stock Exchange, the closing price of
a Share on such date as reported on the New York Stock Exchange consolidated
reporting system, (ii) if the Company Stock is publicly traded, but not on the
New York Stock Exchange, the closing price or the average of the closing bid and
asked prices, whichever is applicable, of a Share on such date as reported on
the principal reporting system on which the price of a Share is quoted, or (iii)
if the Company Stock is not publicly traded, the value determined by the Plan
Board based upon a valuation by an independent appraiser using generally
accepted methods of valuation.
The first sentence of Section 4(d) of the ESOP is amended to add the
parenthetical phrase "(or at such time as the Company shall elect)" at the end
thereof.
The third sentence of Section 4(f) of the ESOP is amended to delete the
phrase "as of the last valuation of the Company Stock completed prior to the
date the Employer Contribution is allocated to the Accounts of Members" and to
substitute therefor the phrase "as of the Allocation Date as of which such
Shares are allocated".
The introduction in Section 6 of the ESOP preceding Section 6(a), which
describes the nature of the Accounts established for Members under the ESOP, is
deleted in its entirety and a new introduction is substituted therefor, to read
as follows:
<PAGE>
A Company Stock Account shall be maintained to reflect the interest of each
Member under the Plan. The Company Stock Account for each Member will be
credited at least annually with his allocable share of (i) Employer
Contributions made to the Plan and (ii) the earnings experience of the assets
(including cash) held by the Plan for the benefit of all Members.
The allocations to Members' Accounts for each Plan Year will be made as
follows:
The second sentence of Section 6(d) is deleted in its entirety. The third
sentence of Section 6(d) is amended to delete the two parenthetical phrases
"(other than Company Stock)" and "(other than any dividends on allocated Company
Stock)".
Section 6(e) is deleted in its entirety and a new Section 6(e) is
substituted therefor, to read as follows:
(e) Dividends on Company Stock. Notwithstanding anything contained in
Section 6(d) to the contrary, any cash dividends on Company Stock that are
distributed to Members (or their Beneficiaries) currently pursuant to Section
13(a) shall not be credited to their Company Stock Accounts.
The third sentence of Section 6(f) is deleted in its entirety.
12. The first sentence of Section 8 is amended to delete the phrase "Shares
of Company Stock in the Trust shall be voted by the Trustee only in such manner
as shall be directed by the Plan Board" and to substitute therefor the phrase
"Shares of Company Stock in the Trust shall be
<PAGE>
voted by the Trustee in the manner set forth in the Trust Agreement".
13. The last sentence of Section 14(a) is amended to delete the phrase "the
Allocation Date immediately preceding the date of distribution" and to
substitute therefor the phrase "the date as of which the Member's employment
terminates (or such later date as of which such distribution is to be made in
accordance with such procedures as shall be established by the Plan Board from
time to time)".
14. Section 15(a) is deleted in its entirety.
15. The first sentence of Section 15(b) is amended in its entirety and a
new first sentence is substituted therefor, to read as follows:
If, at the time any shares of Company Stock are distributed to
a Member or a Beneficiary of a Member, the shares so
distributed are not regularly traded on an established
securities market, the Company shall provide a "put option" to
such Member (or Beneficiary)."
<PAGE>
16. The amendments to the ESOP made by paragraphs 1, 3, and 8 through 11
hereof shall be and become effective as of April 1, 1995. The remaining
amendments to the ESOP made hereby shall be and become effective as of February
3, 1995.
IN WITNESS WHEREOF, American Standard Companies Inc. has caused this
Amendment No. 2 to be executed by its undersigned duly authorized officer as of
the date and year first above written.
AMERICAN STANDARD COMPANIES INC.
By:__________________________________
Adrian B. Deshotel
Vice President - Human Resources
American Standard Inc.
Supplemental Compensation Plan for Outside Directors
(as amended through February 3, 1995)
1. Definitions
(a) "Administrator" means the Secretary of the Company.
(b) "ASCI" means American Standard Companies Inc., the successor in
interest to ASI Holding Corporation.
(c) "Beneficiary" means the single person or single trust designated by
a Participant in accordance with Section 9 to receive the payment provided by
Section 4 in the event of such Participant's death ; provided that a Beneficiary
so designated by a Participant may be changed by such Participant at any time
upon written notice delivered the Company in accordance with Section 9.
(d) "Board" means the Board of Directors of the Company.
(e) "Company" means American Standard Inc. or any successor thereto by
consolidation, merger or other resolution.
(f) "ESOP" means the American-Standard Employee Stock Ownership Plan,
as in effect from time to time.
(g) "Fair Market Value" on any date means the closing price of a Share
on such a date as reported on the New York Stock Exchange consolidated reporting
system.
(h) "Financing Documents" means any indentures, credit agreements or
other debt instruments or agreements entered into by ASCI or any of its
subsidiaries.
.(i) "Participant" means any director of the Company (other than
Messrs. Nickell and Schuchert) who is not an employee of the Company.
Participants are also referred to herein as "Outside Directors".
(j) "Plan" means this Supplemental Compensation Plan for Outside
Directors, as set forth herein and as amended from time to time.
(k) "Plan Account" means the account established for each Participant
pursuant to Section 2. . (l) "Prime Rate" means the minimum commercial
lending rate in effect from time to time as charged by Morgan Guaranty
Trust Company of New York on its New York loans.
(m) "Share" means a share of common stock of ASCI.
(n) "Unit" means the factor of $50,000 ($100,000 in the case of any
director first elected to the Board after January 1, 1993) calculated in
accordance with Section 2.
2. Plan Accounts.
<PAGE>
The Administrator shall establish a Plan Account hereunder for
each Participant as soon as he or she becomes a member of the Board.
Whenever a Plan Account is established, the Administrator
shall credit to such Plan Account, a number of Units and fractions thereof equal
in value to $50,000 ($100,000 in the case of any director first elected to the
Board after January 1, 1993), with the value of each Unit for the purpose of
calculating such credit being equal to the Fair Market Value of a Share on the
date immediately preceding the date that he or she becomes a member of the
Board.
3. Forfeiture
Upon the termination for cause of a Participant's membership
on the Board, there shall be forfeited all of the Units and fractions thereof
credited to his or her Plan Account.
Units or fractions thereof forfeited pursuant to this Section
3 shall not be allocated to the Plan Accounts of any other Participants.
4. Payments.
Upon the termination of a Participant's Board membership other
than for cause, such Participant (or, if such termination is due to his or her
death, his or her Beneficiary) shall receive from the Administrator a cash
payment, net of any required tax or other withholdings, in an amount equal to
the product of
(a) the number of Units and fractions thereof credited to his or her
Plan Account pursuant to Section 2,
multiplied by
(b) the Fair Market Value of one Share on the date immediately
preceding the date when such Participant's Board membership terminates.
Such payment shall become due and owing thirty days after the
calculation of its amount pursuant to this Section 4 can be made. No interest
shall accrue on such payment before the date on which it first becomes due and
owing. Thereafter, such payment shall accrue interest at the Prime Rate,
compounded annually, from the date such payment first becomes due and owing in
accordance with this Section 4 to the date such payment is made.
5. Payment Limitations.
Notwithstanding Section 4, no payment shall be made hereunder
unless
(a) no default has occurred and is continuing under any
Financing Document, and
(b) such payment would not result in the occurrence of an
event of default under any Financing Document or create a condition which would
or (in the sole judgment of the Administrator) might, with notice or lapse of
time or both, result in such an event of default.
If this Section 5 requires a payment deferral, such payment
(together with any interest thereon accrued and accruing pursuant to the last
sentence of Section 4) shall accrue interest at the Prime Rate, compounded
<PAGE>
annually, from the date such payment became due and owing in accordance with
Section 4 to the date such payment is made, at which time (but not before) the
amount of any interest accrued pursuant to Section 4 or this Section 5 shall
also be paid.
6. Participant's Rights Unsecured.
The rights of Participants or Beneficiaries to receive
payments under the Plan shall be unsecured and unfunded claims against the
general assets of the Company.
7. Non-assignability.
The right of a Participant or Beneficiary to the payment
provided in the Plan shall not be assigned, transferred, pledged or encumbered
or be subject in any manner to alienation or anticipation.
8. Amendment and Termination.
The Plan may at any time be amended, modified or terminated by
the Board; provided that no amendment, modification or termination shall,
without the consent of a Participant, reduce the number of Units and fractions
thereof credited to such Participant's Plan Account pursuant to Section 2.
9. Notices.
All notices to the Company under this Plan, including a
Participant's designation of a Beneficiary, shall be in writing and mailed or
hand delivered to the Secretary of the Company at its Corporate Headquarters.
10. Governing Law.
This Plan shall be governed by the laws of the State of New
York and shall be construed for all purposes in accordance with the laws of said
state.
AMERICAN STANDARD INC. AND SUBSIDIARIES
1994-1995 SUPPLEMENTAL INCENTIVE COMPENSATION PLAN
(as amended through February 3, 1995)
Plan Period
The Plan Period shall be May 1, 1994 through December 31, 1995.
Participants
Plan Participants shall be employees of the Corporation and its subsidiaries,
domestic and foreign, in the following participation categories:
- elected officers of the Corporation ("Officer Participants");
- non-officer Executive Level employees ("Executive Participants");
and
- Up to 500 non-executive Management Level employees who are designated
as Participants by the Officer Participants ("Management Participants").
Plan Award Opportunities and Forms of Awards
Plan Award Opportunities and forms of Awards will be as set forth in Schedule A
(for Officer Participants), Schedule B (for Executive Participants) and Schedule
C (for Management Participants).
Plan Award Targets
Each Participant shall receive a Plan Award, prorated as provided below, equal
to 50% of his Plan Award Opportunity as soon as practicable after a
determination that the Corporation's consolidated 1995 management reporting
operating earnings before interest and taxes ("1995 OEBIT") is at least $470
million. Such Plan Award shall be increased to up to 100% of the Participant's
Plan Award Opportunity if 1995 OEBIT is at least $515 million, with such
increase to be graduated to reflect a 1995 OEBIT falling between $470 million
and $515 million.
Forfeitures and Prorations
If a Participant's employment terminates for any reason other than retirement,
death or disability before December 31, 1995, such Participant shall receive no
Award under the Plan.
Provided a Participant's participation in the Plan shall have been for a minimum
of fifty-two weeks, if a Participant's participation commenced after May 1,
1994, and/or if a Participant's participation ends before December 31, 1995 due
to retirement, death or disability, such Participant's Plan Award shall be
prorated based on the number of full or partial weeks of participation divided
by 86 weeks.
<PAGE>
If a Participant's participation category changes during the Plan Period, his or
her Plan Award shall be prorated between the Plan Award amount that would have
been received for participation for the entire Plan Period in the earlier
participation category and the Plan Award amount that would have been received
for participation for the entire Plan Period in the later participation
category, based on the number of weeks of participation in each participation
category over a total of 86 weeks.
Plan Awards in Stock
Any shares of American Standard Companies Inc. common stock issued as Plan
Awards shall be issued to and governed by the Trust Agreement for the
American-Standard Long-Term and 1994- 1995 Supplemental Incentive Compensation
Plans.
Plan Awards in Cash
There shall be deducted from the cash portion of any Plan Awards such payroll
withholdings as the Corporation deems necessary.
Treatment of Plan Awards
Plan Awards will not be treated as compensation for purposes of the Savings Plan
of American Standard Inc. and Participating Subsidiary Companies, the
American-Standard Employee Stock Ownership Plan or any other benefits based on
compensation.
Administration of Plan
Except with respect to the designation of Management Participants, this Plan
will be administered by the Management Development Committee of the Board of
Directors or the delegate of said Committee.
The Board, upon recommendation of the Management Development Committee, shall
have the right to amend, suspend, or terminate the Plan at any time; however, no
such action of the Board shall diminish, reduce, alter or impair a Participant's
rights assigned to him before the date of such amendment, suspension, or
termination of the Plan without the consent of such Participant.
Other Provisions
Participation in the Plan shall not affect the right of the Company or any
affiliate thereof at any time to terminate the employment of any Participant. No
interest in this Plan shall be assignable or transferable except to the extent
provided in the Trust Agreement for the American-Standard Long-Term and
1994-1995 Supplemental Incentive Compensation Plans.
CERTIFICATE OF ELIMINATION
OF
AMERICAN STANDARD INC.
AMERICAN STANDARD INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of American Standard
Inc. held on September 2, 1993, resolutions were duly adopted setting forth the
proposed elimination of the series of Exchangeable Preferred Stock as set forth
herein:
WHEREAS on June 30, 1993 American Standard Inc. exchanged all of its
outstanding Exchangeable Preferred Stock for certain debentures, and
WHEREAS it is deemed desirable to eliminate all reference to Exchangeable
Preferred Stock in American Standard Inc.'s Restated Certificate of
Incorporation and to restore all of the issued and unexchanged and all of the
authorized and unissued shares of Exchangeable Preferred Stock to the status of
authorized and unissued shares of the class of Preferred Stock undesignated as
to series, now therefore it is
RESOLVED, that no shares of the series of Exchangeable Preferred Stock of
American Standard Inc. are outstanding and none will be issued, and further
RESOLVED, that a Certificate of Elimination be executed, which shall have
the effect when filed and recorded in Delaware of eliminating from the Restated
Certificate of Incorporation of American Standard Inc. all references to the
series of Exchangeable Preferred Stock.
SECOND: None of the authorized shares of the series of Exchangeable
Preferred Stock are outstanding and none will be issued.
THIRD: In accordance with the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Restated Certificate of
Incorporation of American Standard Inc. is hereby amended to eliminate all
reference to the series of Exchangeable Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, said American Standard Inc. has caused this certificate
to be signed by Frederick W. Jaqua, its Vice President, and attested by Israel
A. Stein, its Assistant Secretary, this 22nd day of September, 1994.
AMERICAN STANDARD INC.
By: /s/ Frederick W. Jaqua
Vice President
ATTEST:
By: /s/ Israel A. Stein
Assistant Secretary
