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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ For the Fiscal year ended December 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from __________ to_____________.
Commission File Number 33-64450
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 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 11, 1997:
<TABLE>
<CAPTION>
Common Stock
------------
<S> <C>
$.01 par value 1,000 Shares
</TABLE>
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.
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TABLE OF CONTENTS
(REDUCED DISCLOSURE FORMAT)
<TABLE>
<CAPTION>
PART I PAGE
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Item 1. Business. 1
Item 2. Properties. 5
Item 3. Legal Proceedings. 6
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. 7
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). 7
Item 8. Financial Statements and Supplementary Data. 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 31
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. 31
</TABLE>
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PART 1
ITEM 1. BUSINESS
American Standard Inc. (the "Company"), is a Delaware corporation incorporated
in 1929. All of its outstanding common stock is owned by American Standard
Companies Inc., a Delaware corporation that was formed in 1988 by Kelso &
Company, L.P. ("Kelso") to acquire 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.
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (59%
of 1996 sales); bathroom and kitchen fixtures and fittings (25% of 1996 sales);
and braking and control systems for medium-sized and heavy trucks, buses,
trailers and utility vehicles (16% of 1996 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), STANDARD(R) and PORCHER(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") utilizing electronic controls. At December 31, 1996,
American Standard had 106 manufacturing facilities in 35 countries.
OVERVIEW OF BUSINESS SEGMENTS
Through 1996 American Standard operated three business segments: Air
Conditioning Products, Plumbing Products and Automotive Products. In January
1997 the Company announced formation of its Medical Systems Group.
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 are sold primarily under the TRANE(R) and AMERICAN
STANDARD(R) names by the Trane Company ("Trane"). Sales to the commercial and
residential markets accounted for approximately 75% and 25%, respectively, of
Trane's total sales in 1996. Approximately 60% of Trane's sales in 1996 was in
the replacement, renovation and repair markets which have been less cyclical
than the new residential and commercial construction markets. Management
believes that Trane 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, conversion to products utilizing environmentally-preferred
refrigerants and expansion of operations to developing market areas throughout
the world, principally the Asia-Pacific area and Latin America.
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. In 1996 Trane, with revenues of $3,437 million, accounted
for approximately 59% of the Company's sales and 60% of its operating income
(excluding an asset impairment charge). Trane derived 29% of its 1996 sales from
outside the United States.
Trane 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. Trane manufactures and
distributes mini-split units in the Far East, Europe, the Middle East and Latin
America.
Trane competes in all of its markets on the basis of service to customers,
product quality and reliability, technological leadership and price.
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 generally 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.
1
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At December 31, 1996, Air Conditioning Products had 33 manufacturing
plants in 10 countries, employing approximately 20,700 people.
Plumbing Products. American Standard is a leading manufacturer in Europe, the
U.S. 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), STANDARD(R) and PORCHER(R)
names. Of Plumbing Products' 1996 sales, 74% was derived from operations outside
the United States and 26% from within. 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 1996 Plumbing Products, with revenues of $1,452 million, accounted for
25% of the Company's sales and 19% of its operating income (excluding an asset
impairment charge). Of Plumbing Products' sales, 45% consists of vitreous china
fixtures, 22% consists of fittings (typically brass), 9% 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 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 four primary geographic groups:
European Plumbing Products, U.S. Plumbing Products, Americas International and
the Asia Pacific 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 Germany, Bulgaria, the U.S., and Mexico. Worldwide Fittings sales and
operating results are reported in the four primary geographic groups within
which it operates.
European Plumbing Products, which sells products primarily under the brand
names IDEAL STANDARD(R) and PORCHER(R), manufactures and distributes bathroom
and kitchen fixtures and fittings through subsidiaries or joint ventures in
Germany, Italy, France, England, Greece, the Czech Republic, Spain, Portugal,
and Egypt. In November 1995 the Company acquired substantially all of the
remaining outstanding common shares and convertible bonds of Porcher S.A.
("Porcher"), a French manufacturer and distributor of plumbing products in which
the Company previously had an ownership interest of 32.88%.
U.S. Plumbing Products 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 Asia Pacific 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. In
1996, a wholly-owned marketing operation was established in Japan. The Company
is also significantly expanding its operations in the PRC.
Plumbing Products competes in most of its markets on the basis of service
to customers, product quality, reliability and price.
At December 31, 1996, Plumbing Products employed approximately 18,000
people and, including affiliated companies, had 57 manufacturing plants in 25
countries.
Automotive Products. Automotive Products ("WABCO") is a leading manufacturer,
primarily in Europe and Brazil, of braking 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 ABS) marketed under the WABCO(R) name for medium-size and heavy
trucks, tractors, buses, trailers and utility vehicles. WABCO supplies vehicle
manufacturers such as Mercedes-Benz, Volvo, Iveco (Fiat), RVI (Renault) and
Rover. Management believes that WABCO is well positioned to benefit from its
strong market positions in Europe and Brazil and from increasing demand for ABS
and other sophisticated electronic control systems in a number of markets
(including the commercial vehicle market in the United States, where phase-in of
ABS has been mandated beginning in 1997), as well as from the technological
advances embodied in the Company's products and its close relationships with a
number of vehicle manufacturers.
2
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In 1996 WABCO, with sales of $916 million, accounted for 16 % of the
Company's sales and 21% of its operating income (excluding an asset impairment
charge). The Company believes that WABCO 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.
WABCO's 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. Some of the Company's important
customers are Mercedes-Benz, Volvo, Iveco (Fiat), RVI (Renault) and Rover.
Principal competitors are Knorr, Robert Bosch, and Allied Signal. WABCO competes
primarily on the basis of customer service, quality and reliability of products,
technological leadership and price.
Through 1996 the WABCO(R) ABS system, which the Company believes leads the
market, has been installed in approximately 1.2 million heavy trucks, buses, and
trailers worldwide since 1981. Annual sales volume in Europe was approximately
146,000 units in 1996 (down from 175,000 units in 1995) and 67,000 units (56,000
units in 1995) annually in other markets, primarily the United States and Japan.
In addition, WABCO has developed electronically an advanced electronic braking
system, controlled pneumatic gear shifting systems, electronically controlled
air suspension systems, and automatic climate-control and door-control systems
for the commercial vehicle industry.
At December 31, 1996, WABCO and affiliated companies employed
approximately 5,800 people and had 14 manufacturing facilities and 7 sales
organizations operating in 17 countries. Principal manufacturing operations are
in Germany, France, the United Kingdom, the Netherlands and Brazil. WABCO has
joint ventures in the United States with Rockwell International (Rockwell WABCO)
and Cummins Engine Co. (WABCO Compressor Manufacturing Co.), in Japan with Sanwa
Seiki (SANWAB), in India with TVS Group (Clayton Sundaram) and in the PRC.
In January 1994 the Company acquired Perrot, a German brake manufacturer.
Through this acquisition the Company is able to offer complete brake systems for
trucks, buses and trailers, especially in the important and growing air-disc
brake business.
Medical Systems Group
In January 1997, the Company announced formation of its Medical Systems Group to
pursue initiatives in the medical diagnostics field. The Company has for several
years supported the development of two small medical diagnostic product groups
focusing on test instruments using laser technology and reagents. The Company
had invested an aggregate of approximately $40 million in the development of
these businesses through December 31, 1996.
Based upon the progress and prospects of those two businesses, the Company
decided to explore acquisition opportunities to accelerate the commercialization
of its technology and expand the number of diagnostic tests covered by its
products. Accordingly, on March 10, 1997, the Company entered into definitive
agreements to acquire the European medical diagnostic business (the "Sorin
Business") of Sorin Biomedica S.p.A., an affiliate of the Fiat Group and, by
means of a merger, all the outstanding shares of Incstar Corporation
("Incstar"), a biotechnology company based in Stillwater, Minnesota, in which
Sorin Biomedica S.p.A. indirectly owned a 52% interest.
The Sorin Business both develops and produces reagents to identify the
presence in blood of diseases and other substances that are indicative of a
medical patient's condition, and distributes equipment used to perform
diagnostic tests. The Sorin Business is headquartered in Saluggia, Italy, where
its manufacturing facility is located. The principal markets for the products of
the Sorin Business are Western Europe and the United States. Its sales in 1996
were approximately $80 million.
Incstar develops, manufactures and markets individual test reagents, test
kits and related products used by major hospitals, clinical reference
laboratories and researchers involved in diagnosing and treating immunological
conditions. Incstar also produces and markets histochemical antisera and natural
and synthetic peptides used in clinical diagnostic and medical research. Its
products focus on diagnostic tests for autoimmune, infectious disease,
endocrinology and bone and mineral metabolism product segments, utilizing a
variety of technologies. Incstar's sales in 1996 were approximately $40 million.
The Sorin Business and Incstar will be acquired in two transactions: (a)
the acquisition from Sorin of the Sorin Business and (b) the merger of a wholly
owned subsidiary of the Company with Incstar. The aggregate cost of the
acquisitions is expected to be approximately $220 million (including fees and
expenses). Definitive agreements for the acquisition of the Sorin Business and
merger with
3
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Incstar were entered into on March 10, 1997. Completion of the transactions is
subject to the customary conditions, including regulatory consents and
approvals, and in the case of Incstar, shareholder approval. The Sorin and the
Incstar transactions are each conditioned upon the closing of the other, which
closings are expected to occur in the first half of 1997.
The focus of the Company's existing medical businesses is on instruments
for obstetrical/gynecological and gastrointestinal tests. The products of its
subsidiary Sienna Biotech, Inc. are based on a core technology named Copalis(TM)
for Coupled Particle Light Scattering. Several of Sienna's products have
received clearance from the U.S. Food and Drug Administration ("FDA").
The Company's subsidiary Alimenterics, Inc. is developing certain clinical
laboratory systems for non-invasive diagnostics of gastrointestinal disorders
using an automated Laser Assisted Ratio Analyzer ("LARA(TM)") for the
measurement of stable isotopes in breath. Initial applications for regulatory
approvals of Alimenterics' products have been made in Europe and are planned to
be made to the FDA in 1997.
The Company believes that the Medical System Acquisitions will position it
to develop its medical products more quickly and effectively than would
otherwise have been possible. The Company may build this group further through
acquisitions of businesses that are complementary and would permit further
acceleration of development and distribution of its products as well as through
further research and development investments. There can be no assurance that the
Company will be successful in completing the Medical Systems Acquisitions.
The development, testing and distribution of medical products are subject
to extensive regulation, including in the United States by the FDA. Moreover,
the medical test market is competitive and many companies with such products
have substantially greater resources and experience than the Company. There is
no assurance the Company's products will be successfully developed or marketed.
4
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ITEM 2. PROPERTIES
At December 31, 1996 the Company conducted its manufacturing activities through
106 plants in 35 countries, of which the principal facilities are as follows:
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BUSINESS SEGMENT LOCATION MAJOR PRODUCTS MANUFACTURED AT LOCATION
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Air Conditioning Products Clarksville, TN Commercial unitary air conditioning
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 Unitary air conditioning systems and mini-splits
Mirecourt, France Applied 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
Manila, Philippines Vitreous china
Seoul, South Korea Brass plumbing fittings
Bangkok, Thailand Vitreous china
Automotive Products Campinas, Brazil Braking equipment
Leeds, England Braking equipment
Claye-Souilly, France Braking equipment
Hanover, Germany Braking equipment
Mannheim, Germany Foundation brakes
</TABLE>
5
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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. The Company
believes it is in substantial compliance with such laws and regulations. A
number of the Company's plants are undertaking responsive actions to address
soil and groundwater issues. In addition 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 1994, 1995 and
1996 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 itself and a class of contractors engaged in
the service and repair of commercial air conditioning equipment. The suit, 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. On May 24, 1996, the district court granted summary judgment in
favor of American Standard Inc. with respect to the only claim certified as a
class action, alleging a price fixing conspiracy. With respect to Entech's
individual claims, American Standard Inc. and Entech have reached a settlement
agreement on terms that will not have a material effect on American Standard
Inc.
The Company received letters from Tyco International Ltd. ("Tyco") on
September 30, October 17, and December 5, 1996 setting forth proposals for
possible acquisition by Tyco of all the shares of common stock of American
Standard Companies Inc., in each case for a combination of cash and Tyco common
stock. The final letter included a proposed purchase price of $50 per share. The
Company's Board of Directors reviewed the Tyco proposals, consulted with its
legal counsel and financial advisors and concluded that the Company's strategies
already in place are working and that the best way to increase the Company's
earnings and shareholder value is to focus on implementing these strategies as
an independent company. As a result, the Board of Directors concluded that the
Company would decline any interest in the proposals and Tyco was so informed.
There have been no discussions between the Company and Tyco concerning any of
the proposals and the Company contemplates none.
Two persons claiming to be shareholders of the Company and represented by
the same lawyers have filed separate class action and derivative lawsuits in the
Chancery Court of the State of Delaware against the Company, ASI Partners and
the directors of the Company alleging breaches of fiduciary duties in respect
of the rejection of the Tyco proposals and approval of the secondary offering of
Company common stock owned by Kelso ASI Partners L.P. ("ASI Partners") and the
repurchase by the Company of all shares of Company common stock owned by
ASI Partners after the secondary offering and the distribution by ASI Partners
of shares to certain of its partners (collectively, the "Stockholder
Transactions"). The lawsuits seek to cause the Company to evaluate alternatives
to maximize value for the Company's public shareholders, to enjoin the
Stockholder Transactions and to recover damages in an unspecified amount. A
person claiming to be a holder of certain public debt securities of American
Standard Inc. has filed a class action lawsuit in New York Supreme Court seeking
to enjoin the Stockholder Transactions or to require the Company to redeem such
debt securities at the election of the securityholders. The Company believes
that these lawsuits are without merit and intends to contest them vigorously.
For a discussion of German tax issues see Note 6 of Notes to Consolidated
Financial Statements (see Item 14(a) of Part IV hereof).
6
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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 1995 or
1996.
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 achieved record sales and operating income (excluding a
non-cash asset impairment charge of $235 million) for the second consecutive
year, primarily as a result of a very strong performance by the Air Conditioning
Products segment. Sales for 1996 were $5.8 billion, an increase of 11% from $5.2
billion in 1995. Operating income was $586 million, an increase of 10% from $534
million in 1995. Income before extraordinary item (excluding the asset
impairment charge) was $188.5 million, up 33% from income before extraordinary
item in 1995 of $142 million. Including the asset impairment charge, the net
loss for 1996 was $46.7 million.
Effective January 1, 1996 the Company adopted FAS 121 related to
impairment of long-lived assets, resulting in a non-cash charge of $235 million,
approximately 90% of which was the write-down of goodwill, for which there was
no tax benefit (see Note 2 of Notes to Consolidated Financial Statements).
Consolidated sales for 1996 were $5,805 million, an increase of $584
million, or 11% (12% excluding the unfavorable effects of changes in foreign
exchange rates), from $5,221 million in 1995. Sales increased 16% for Air
Conditioning Products and 14% for Plumbing Products, but declined 8% for
Automotive Products.
Consolidated sales for 1995 were $5,221 million, an increase of 17% (15%
excluding the favorable effects of foreign exchange) from $4,457 million in
1994. Sales increased for all three segments with gains of 19% for Air
Conditioning Products, 4% for Plumbing Products and 31% for Automotive Products.
Operating income for 1996 (excluding the $235 million asset impairment
charge previously mentioned) was $586 million, an increase of $52 million, or
10% (11% excluding the unfavorable effects of foreign exchange), from $534
million in 1995. Operating income increased 36% for Air Conditioning Products
but decreased 8% for Plumbing Products and 20% for Automotive Products.
Operating income for 1995 was $534 million, an increase of $179 million,
or 50% (46% excluding the favorable effects of foreign exchange), from $355
million in 1994. Excluding $40 million of special charges from 1994, operating
income in 1995 increased 35% (31% excluding favorable foreign exchange effects)
from an adjusted operating income of $395 million in 1994. Excluding such
special charges and the favorable effects of foreign exchange, operating income
increased 38% for Air Conditioning Products and 85% for Automotive Products but
declined by 11% for Plumbing Products. Operating income for 1994 included
special charges of $40 million related to employee severance, the consolidation
of production facilities, the implementation of other cost reduction actions and
a provision for loss on the early disposition of assets. Including such special
charges in 1994, operating income increased 42% for Air Conditioning Products,
8% for Plumbing Products and 150% for Automotive Products.
7
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FIVE-YEAR FINANCIAL SUMMARY
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1996 1995 1994
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Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Sales:
Air Conditioning Products $3,437 $2,953 $2,480
Plumbing Products 1,452 1,270 1,218
Automotive Products 916 998 759
------ ------ ------
$5,805 $5,221 $4,457
Operating income before asset impairment loss:
Air Conditioning Products $ 353 $ 259 $ 182
Plumbing Products 110 120 111
Automotive Products 123 155 62
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586 534 355
Asset impairment loss:
Air Conditioning Products (121)(a) -- --
Plumbing Products (114)(a) -- --
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(235) -- --
Total operating income 351 534 355
Interest expense (198) (213) (259)
Corporate items (95) (94) (111)
------ ------ ------
Income (loss) before income taxes and extraordinary item 58 227 (15)
------ ------ ------
Income taxes (105) (85) (62)
------ ------ ------
Income (loss) before extraordinary item $ (47) $ 142 $ (77)
====== ====== ======
</TABLE>
(a) Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 ("FAS 121"), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of, resulting in
a non-cash charge of $235 million. See Note 2 of Notes to Consolidated
Financial Statements.
Sales of Air Conditioning Products increased 16% (with little effect from
foreign exchange) to $3,437 million for 1996 from $2,953 million for 1995, as a
result of significant sales gains in the U.S. and expanding international sales.
Commercial markets account for approximately 75% of Air Conditioning Products'
total sales. Approximately 60% of total sales is to the replacement, renovation
and repair markets.
Operating income of Air Conditioning Products (excluding the asset
impairment charge) increased 36% to $353 million in 1996 from $259 million in
1995. The improvement was principally the result of increased operating income
in the United States due to higher sales together with cost reductions.
Sales of Plumbing Products increased 14% (15% excluding the unfavorable
effects of foreign exchange) to $1,452 million in 1996 from $1,270 million in
1995, primarily as a result of sales by Porcher (acquired in the fourth quarter
of 1995) and higher sales in North and Latin American and Middle Eastern
operations. Excluding Porcher and foreign exchange effects, 1996 sales were
flat, increasing 11% for U.S. operations, but declining 4% for international
operations. Sales in the U.S. increased as a result of higher volumes (primarily
in the retail market channel) and higher prices. Sales and market share in the
retail market channel have been growing in recent years, a trend the Company
believes will continue and lead to increased sales because of strong product and
brand-name recognition. The sales decline for international operations was
primarily attributable to a decrease in Europe, particularly in Germany, Italy
and France which continued to experience weak economic conditions and the
effects of a strike in the Philippines, partly offset by volume gains in Latin
American operations (primarily in Mexico) and Egypt.
Operating income of Plumbing Products (excluding the asset impairment
charge) was $110 million for 1996 compared with $120 million for 1995, a
decrease of 8% (7% excluding the unfavorable effects of foreign exchange),
because of lower operating income for international operations, partly offset by
a solid gain in U.S. operations. The decrease in operating income for
international operations in 1996 was principally due to the aforementioned
market weakness in Europe, particularly in Germany, Italy and France and the
effects of the Philippines strike. In addition, margins in
8
<PAGE> 11
France were lower than in the prior year due to increased costs, primarily in
the newly-acquired Porcher operations. The Company is undertaking actions to
assimilate Porcher into its European plumbing products operations and to improve
operating performance. Operating results in the U.S. improved substantially, due
to higher sales and lower-cost sourcing from expanded facilities in Mexico and
manufacturing and operating cost improvements.
Sales of Automotive Products for 1996 were $916 million, a decrease of $82
million, or 8% (6% excluding the unfavorable effects of foreign exchange), from
$998 million in 1995, primarily because of a decline in European commercial
vehicle production as a result of market weakness and order delays at several
large customers in anticipation of new truck model introductions, partly offset
by the effect of the increased number of components per truck on new models.
After a strong first quarter, unit volume of truck and bus production in Western
Europe declined, resulting in a decrease of 9% for the full year 1996 compared
with 1995. Sales volumes were lower in all markets for commercial vehicle
braking and other control systems except in the U.K. because of the growing
utility vehicle business in that country. In Brazil, demand also decreased as
truck production declined 32% from the prior year.
Operating income for Automotive Products was $123 million in 1996, a
decrease of 20% (18% excluding the unfavorable effects of foreign exchange).
This decrease reflected the lower sales and start-up costs associated with new
product introductions on 1997 truck models, offset partly by productivity
improvements from the continuing implementation of manufacturing process
improvements.
Interest expense decreased $15 million in 1996 compared with 1995 because
of reduced debt and lower overall interest rates. Corporate items for 1996
totaled $95 million, approximately the same level as in 1995, reflecting
increased spending on development of the Company's medical diagnostics group and
increased product development costs in the Alliance Compressor joint venture,
offset by lower accretion expense on postretirement benefits and a gain on the
reorganization of the Alliance Compressor venture.
The income tax provisions for 1996 and 1995 were $104 million and $85
million, respectively. The effective income tax rate in 1996 was 35.6% on pretax
income of $293 million (excluding the asset impairment charge on which there was
no tax benefit) compared with an effective rate in 1995 of 37.5% on income
before income taxes and extraordinary item of $227 million. The effective tax
rates in 1996 and 1995 are somewhat lower than the statutory rates primarily as
a result of higher levels of taxable income in the U.S. in 1996 and 1995 and
expected in 1997 (which enabled the Company to recognize previously unrecognized
tax benefits) and, in 1996, from proportionately greater pretax income earned in
the U.S. (at a lower effective rate) compared to that earned in higher-rate
jurisdictions in Europe and elsewhere. Those benefits were partly offset by the
effects of rate differences and withholding taxes related to foreign operations
and nondeductible goodwill amortization. See Note 6 of Notes to Consolidated
Financial Statements.
As a result of the redemption of debt with refinancing proceeds, 1995
included an extraordinary charge of $30 million, on which no tax benefit was
recorded. In addition, the first quarter of 1997 will include an extraordinary
charge of $10 million as a result of the repayment of debt under the 1995 Credit
Agreement with proceeds of the 1997 Credit Agreement.
9
<PAGE> 12
In January 1997 the Company entered into a new credit agreement (the "1997
Credit Agreement"). The 1997 Credit Agreement, which expires in 2002, provides
American Standard Inc. and certain subsidiaries (the "Borrowers") with senior
secured credit facilities aggregating $1.75 billion to all Borrowers as follows:
(a) a $750 million U.S. dollar revolving credit facility and a $625 million
multi-currency revolving credit facility (the "Revolving Facilities") and (b) a
$375 million multi-currency periodic access credit facility (the "Periodic
Access Facility"). Up to $500 million of the Revolving Facilities may be used
for the issuance of letters of credit. The 1997 Credit Agreement and certain
other American Standard Inc. debt instruments contain restrictive covenants and
other requirements, with which the Company believes it is currently in
compliance. See Note 9 of Notes to Consolidated Financial Statements.
The 1997 Credit Agreement provides lower interest rates, significantly
increased borrowing capacity, less restrictive covenants and no scheduled
principal payments until maturity in 2002.
In the first quarter of 1997 American Standard Companies Inc. completed a
secondary offering (the "Secondary Offering") of 12,429,548 shares of its common
stock and the repurchase (the "Share Repurchase") from Kelso ASI Partners, L.P.
("ASI Partners"), the largest stockholder at December 31, 1996, of 4,628,755
shares of common stock of American Standard Companies Inc. In conjunction with
the Secondary Offering, ASI Partners distributed to certain of its partners,
3,780,353 shares of American Standard Companies Inc. common stock that it owned.
In addition, American Standard Companies Inc. issued to ASI Partners 5-year
warrants to purchase 3,000,000 shares of American Standard Companies Inc. common
stock at $55 per share, $10 per share over the public offering price. All of the
shares sold in the Secondary Offering were previously issued and outstanding
shares, and American Standard Companies Inc. received no proceeds therefrom (see
Note 10).
10
<PAGE> 13
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S REPORT ON FINANCIAL STATEMENTS
The accompanying consolidated balance sheet at December 31, 1996 and 1995, and
related consolidated statements of operations, stockholder's deficit and cash
flows for the years ended December 31, 1996, 1995 and 1994, 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 which 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 outside
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.
February 13, 1997
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Standard Inc.
We have audited the accompanying consolidated balance sheet of American Standard
Inc. as of December 31, 1996 and 1995, and the related consolidated statements
of operations, stockholder's deficit, and cash flows for each of the three years
in the period ended December 31, 1996. 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. at December 31, 1996 and 1995, and the consolidated
results of its operations and its consolidated cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
As discussed in Note 2 to the Consolidated Financial Statements, in 1996 the
Company adopted Statement of Financial Accounting Standards No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of.
Ernst & Young LLP
New York, New York
February 13, 1997
11
<PAGE> 14
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
American Standard Inc. 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands)
<S> <C> <C> <C>
Sales $5,804,561 $ 5,221,476 $ 4,457,465
---------- ----------- -----------
Costs and expenses:
Cost of sales 4,379,765 3,887,024 3,377,271
Selling and administrative expenses 905,427 853,783 778,550
Asset impairment loss 235,234 -- --
Other expense 28,337 40,489 57,381
Interest expense 198,192 213,326 259,437
---------- ----------- -----------
5,746,955 4,994,622 4,472,639
---------- ----------- -----------
Income (loss) before income taxes and extraordinary item 57,606 226,854 (15,174)
Income taxes 104,324 85,070 62,512
---------- ----------- -----------
Income (loss) before extraordinary item (46,718) 141,784 (77,686)
Extraordinary loss on retirement of debt -- (30,129) (8,735)
---------- ----------- -----------
Net income (loss) $ (46,718) $ 111,655 $ (86,421)
========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE> 15
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
American Standard Inc. 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
At December 31, (Dollars in thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 59,699 $ 88,704
Accounts receivable, less allowance for doubtful accounts - 1996, $28,294; 1995, $27,330 799,792 771,024
Inventories 408,962 362,340
Future income tax benefits 67,125 29,645
Other current assets 50,796 43,213
---------- ----------
Total current assets 1,386,374 1,294,926
Facilities, at cost, net of accumulated depreciation 1,005,998 924,492
Other assets:
Goodwill, net of accumulated amortization - 1996, $221,105; 1995, $249,410 875,111 1,081,622
Debt issuance costs, net of accumulated amortization - 1996, $13,723; 1995, $8,638 34,451 39,267
Other 217,681 179,340
---------- ----------
$3,519,615 $3,519,647
========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Loans payable to banks $ 108,856 $ 240,040
Current maturities of long-term debt 72,645 72,908
Accounts payable 469,150 438,170
Accrued payrolls 151,707 171,378
Other accrued liabilities 398,081 328,138
Taxes on income 35,421 45,968
---------- ----------
Total current liabilities 1,235,860 1,296,602
Long-term debt 1,741,847 1,770,098
Other long-term liabilities:
Reserve for postretirement benefits 473,229 482,398
Deferred tax liabilities 68,157 44,761
Other 384,373 305,341
---------- ----------
Total liabilities 3,903,466 3,899,200
Commitments and contingencies
Stockholder's deficit:
Preferred stock, Series A, $.01 per value, 1,000 shares issued and outstanding -- --
Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding -- --
Capital surplus 560,794 519,866
Accumulated deficit (771,487) (724,769)
Foreign currency translation effects (173,158) (174,650)
---------- ----------
Total stockholder's deficit (383,851) (379,553)
---------- ----------
$3,519,615 $3,519,647
========== ==========
</TABLE>
See notes to consolidated financial statements.
13
<PAGE> 16
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
American Standard Inc. 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in thousands)
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Income (loss) before extraordinary item $ (46,718) $ 141,784 $ (77,686)
Asset impairment loss 235,234 -- --
Depreciation 117,951 109,999 122,944
Amortization of goodwill 27,580 33,396 31,472
Non-cash interest 61,794 63,930 67,837
Non-cash stock compensation 31,201 29,014 28,479
Changes in assets and liabilities:
Accounts receivable (25,479) (124,482) (69,991)
Inventories (32,499) 8,236 13,092
Accounts payable and accrued payrolls (21,356) 53,971 63,413
Postretirement benefits 19,770 33,531 21,290
Other long-term liabilities 24,455 22,419 32,795
Other, net (39,172) (24,092) 22,941
---------- ----------- -----------
Net cash provided by operating activities 352,761 347,706 256,586
Investing activities:
Purchases of property, plant and equipment (212,179) (164,193) (105,741)
Investments in affiliated companies (15,321) (42,395) (23,971)
Proceeds from disposals of property, plant and equipment 15,105 19,428 14,783
Other 6,293 4,055 (2,071)
---------- ----------- -----------
Net cash used by investing activities (206,102) (183,105) (117,000)
---------- ----------- -----------
Financing activities:
Capital contributions from parent -- 270,004 --
Loan from parent 4,069 4,823 --
Minority partners' contributions to PRC venture 18,165 26,246 --
Proceeds from issuance of long-term debt 6,912 469,776 336,160
Repayments of long-term debt, including redemption premiums (73,429) (1,020,004) (439,762)
Net change in revolving credit facilities (106,332) 124,768 30,816
Net change in other short-term debt (13,627) (18,312) (10,044)
Purchases of parent company common stock (10,000) (10,989) (16,927)
Financing costs and other (355) (13,477) (2,441)
---------- ----------- -----------
Net cash used by financing activities (174,597) (167,165) (102,198)
Effect of exchange rate changes on cash and cash equivalents (1,067) (1,481) 2,124
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (29,005) (4,045) 39,512
Cash and cash equivalents at beginning of period 88,704 92,749 53,237
---------- ----------- -----------
Cash and cash equivalents at end of period $ 59,699 $ 88,704 $ 92,749
========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
14
<PAGE> 17
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
American Standard Inc.
- ---------------------------------------------------------------------------------------------
(Dollars in thousands) Foreign
Currency
Capital Accumulated Translation
Surplus Deficit Effects
<S> <C> <C> <C>
Balance at December 31, 1993 $ 211,333 $ (750,003) $ (149,220)
----------- ----------- ----------
Net loss -- (86,421) --
American Standard Companies, Inc.
common stock repurchased (16,761) -- --
Capital contribution from parent 4,925 -- --
Excess value over cost of ESOP shares
allocated to employees 15,137 -- --
Foreign currency translation -- -- (2,501)
----------- ----------- ----------
Balance at December 31, 1994 214,634 (836,424) (151,721)
Net income -- 111,655 --
American Standard Companies, Inc.
common stock repurchased (6,877) -- --
Capital contribution of IPO
proceeds from parent 268,993 -- --
Other capital contributions from parent
principally related to ESOP 43,116 -- --
Foreign currency translation -- -- (22,929)
----------- ----------- ----------
Balance at December 31, 1995 519,866 (724,769) (174,650)
Net Loss -- (46,718) --
American Standard Companies Inc.
common stock repurchased (9,897) -- --
Capital contributions from parent
principally related to ESOP
and stock option exercises 50,825 -- --
Foreign currency translation -- -- 1,492
----------- ----------- ----------
Balance at December 31, 1996 $ 560,794 $ (771,487) $ (173,158)
=========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
15
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF THE COMPANY
American Standard Inc. (the "Company") is a Delaware corporation incorporated in
1929. All of its outstanding common stock is owned by American Standard
Companies Inc., a Delaware corporation that was formed in 1988 by Kelso
&Company, L.P. ("Kelso") to effect the acquisition of American Standard Inc.
Hereinafter, "American Standard" or "the Company" will refer to the Company,
American Standard Companies Inc., or to American Standard Inc., including its
subsidiaries, as the context requires.
American Standard is a global manufacturer of high quality, brand-name
products in three major product groups: air conditioning systems, bathroom and
kitchen fixtures and fittings; and braking and control systems for medium-sized
and heavy trucks, buses, trailers and utility vehicles. The Company has also
recently formed a medical diagnostics group (see Note 3). Information on the
Company's operations by segment and geographic area is included on pages 8, 28
and 29 of this report.
NOTE 2. ACCOUNTING POLICIES
Financial Statement Presentation -- The consolidated financial statements
include the accounts of majority-owned subsidiaries; intercompany transactions
are eliminated. Investments in unconsolidated joint ventures are included at
cost plus the Company's equity in undistributed earnings.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates. The most significant estimates included in the preparation of the
financial statements are related to postretirement benefits, income taxes,
warranties and asset lives.
Foreign Currency Translation -- Adjustments resulting from translating foreign
functional currency assets and liabilities into U.S. dollars are recorded in a
separate component of stockholder's equity. Gains or losses resulting from
transactions in other than the functional currency are reflected in the
Consolidated Statement of Operations, except for transactions which hedge net
investments in a foreign entity and intercompany transactions of a long-term
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 $2.3
million in 1996, $4.5 million in 1995 and $9.9 million in 1994.
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 principally by the use of the
last-in, first-out (LIFO) method, and 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 as incurred. Significant investment
grants are amortized into income over the period of benefit.
Goodwill -- Goodwill is being amortized over 40 years. Effective January 1,
1996, the Company adopted Statement of Financial Accounting Standards No. 121
("FAS 121"), Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. Applying the criteria established by FAS
121, the Company concluded that certain assets and related goodwill of its
Canadian, French and Mexican operating units were impaired. As a result, the
Company recorded a non-cash charge of $235 million, approximately 90% of which
was the write-down of goodwill, for which there was no tax benefit. This charge
included $121 million for Air Conditioning Products' operations in Canada and
16
<PAGE> 19
France, and $114 million for Plumbing Products' operations in Canada and Mexico.
The carrying value of goodwill for each business segment 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.
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. Revenues from the sales of extended warranty contracts are deferred and
amortized on a straight-line basis over the terms of the contracts. Warranty
obligations beyond one year are included in other long-term liabilities.
Postretirement Benefits -- Postretirement pension 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.
Depreciation -- Depreciation and amortization are computed on the straight-line
method based on the estimated useful life of the asset or asset group.
Research and Development Expenses -- Research and development costs are expensed
as incurred. The Company expended approximately $160 million in 1996, $146
million in 1995 and $140 million in 1994 for research activities and product
development and for product engineering. Expenditures for research and product
development only were $81 million, $67 million and $60 million in the respective
years. The expenditures for 1995 and 1994 have been restated to conform with the
1996 classifications of such expenditures.
Income Taxes -- Deferred income taxes are determined on the liability method,
and are recognized for all temporary differences between the tax bases of assets
and liabilities and their reported amounts in the consolidated financial
statements. No provision is made for U.S. income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely reinvested.
Advertising Expense-- The cost of advertising is expensed as incurred. The
Company incurred $88 million, $92 million and $84 million of advertising costs
in 1996, 1995 and 1994, respectively.
Financial Instruments with Off-Balance-Sheet Risk -- The Company from time to
time enters into agreements to reduce its foreign currency and interest rate
risks. 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 stockholder's
equity or included as a component of the transaction. See Note 9.
Stock Based Compensation -- American Standard Companies Inc. grants to employees
options to acquire a fixed number of shares of its common stock with an exercise
price equal to the market value of the shares at the date of grant. American
Standard Companies Inc. accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees, and intends to
continue this method in the future. Accordingly, American Standard Companies
Inc. recognizes no compensation expense for the stock option grants.
NOTE 3. SUBSEQUENT EVENTS
In January 1997 the Company entered into a new credit agreement (the "1997
Credit Agreement"), an amendment and restatement of the 1995 Credit Agreement,
which provided the Company with senior secured credit facilities aggregating
$1.75 billion and which matures in 2002. The 1997 Credit Agreement provides
lower interest costs, significantly
17
<PAGE> 20
increased borrowing capacity, less restrictive covenants and no scheduled
principal payments until maturity in 2002 (see Note 9).
In the first quarter of 1997 American Standard Companies Inc. completed a
secondary offering (the "Secondary Offering") of 12,429,548 shares of its common
stock and the repurchase (the "Share Repurchase") by American Standard Companies
Inc. from Kelso ASI Partners, L.P. ("ASI Partners"), the largest stockholder at
December 31, 1996, of 4,628,755 shares of common stock of American Standard
Companies Inc. In conjunction with the Secondary Offering, ASI Partners
distributed to certain of its partners, 3,780,353 shares of American Standard
Companies Inc. common stock that it owned. In addition, American Standard
Companies Inc. issued to ASI Partners 5-year warrants to purchase 3,000,000
shares of American Standard Companies Inc. common stock at $55 per share, $10
per share over the public offering price. All of the shares sold in the
Secondary Offering were previously issued and outstanding shares, and American
Standard Companies Inc. received no proceeds therefrom (see Note 10).
In January 1997 the Company announced formation of its Medical Systems
Group to pursue initiatives in the medical diagnostics field. For the last
several years the Company has supported the development of two small medical
diagnostic products groups focusing on test instruments using laser technology
and reagents. The Company had invested an aggregate of approximately $40 million
in the development of these businesses through December 31, 1996. Based upon the
progress and prospects of those two businesses, the Company decided to explore
acquisitions to accelerate the commercialization of its technology and expand
the number of diagnostic tests covered by its products. Accordingly, on March
10, 1997 the Company entered into definitive agreements to acquire the European
medical diagnostic business (the "Sorin Business") of Sorin Biomedica S.p.A., an
affiliate of the Fiat Group and, by means of a merger, all the outstanding
shares of INCSTAR Corporation ("Incstar"), a biotechnology company based in
Stillwater, Minnesota, in which Sorin Biomedica S.p.A. indirectly owned a 52%
interest. Sales in 1996 were approximately $80 million for the Sorin Business
and approximately $40 million for Incstar. The aggregate cost of the
acquisitions is expected to be approximately $220 million, including fees and
expenses, and will be funded with borrowings under the 1997 Credit Agreement.
NOTE 4. OTHER EXPENSE
Other income (expense) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Interest income $ 6.2 $ 8.9 $ 8.2
Royalties 3.3 4.1 3.5
Equity in net income
of unconsolidated
joint ventures 2.6 7.1 4.0
Minority interest (11.7) (12.2) (13.3)
Accretion expense (29.3) (36.5) (26.1)
Other, net .6 (11.9) (33.7)
-------- -------- --------
$ (28.3) $ (40.5) $ (57.4)
======= ======== ========
</TABLE>
NOTE 5. POSTRETIREMENT BENEFITS
The Company sponsors postretirement pension 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. The ESOP is
an individual account, defined contribution plan. Shares of common stock of the
ESOP are 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 funds basic and matching
allocations to the ESOP accounts through weekly contributions of shares of
American Standard Companies Inc. common stock based upon the closing price each
Friday quoted on the New York Stock Exchange. The Company intends to fund the
ESOP in future years through contributions of cash or shares of American
Standard Companies Inc. 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, 1996, funded plan assets related to pensions were held primarily in fixed
income and equity funds. Postretirement health and life insurance benefits are
funded as incurred.
18
<PAGE> 21
The Company's postretirement plans' funded status and amounts recognized
in the balance sheet at December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
1996 1996 1996 1995 1995 1995
- ------------------------------------------------------------------------------------------------------------------------------------
(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
Actuarial present value of benefit obligations:
<S> <C> <C> <C> <C> <C> <C>
Vested $136.8 $604.3 $ -- $124.8 $613.5 $ --
Non-vested 5.5 43.9 -- 2.6 44.2 --
------ ------ ------ ------ ------ ------
Accumulated benefit obligations 142.3 648.2 -- 127.4 657.7 --
Additional amounts related to projected pay increases 24.6 41.4 -- 25.9 39.4 --
------ ------ ------ ------ ------ ------
Total projected benefit obligations 166.9 689.6 179.1 153.3 697.1 186.9
------ ------ ------ ------ ------ ------
Assets and book reserves relating to such benefits:
Market value of funded assets 208.2 343.4 -- 184.7 325.9 --
Reserve (asset) for postretirement benefits net of
recognized overfunding (42.3) 362.6 165.7 (39.6) 361.3 161.0
Additional minimum liability -- -- -- -- 9.7 --
------ ------ ------ ------ ------ ------
165.9 706.0 165.7 145.1 696.9 161.0
------ ------ ------ ------ ------ ------
Assets and book reserves in excess of (less than)
projected benefit obligations $ (1.0) $ 16.4 $(13.4) $ (8.2) $ (.2) $(25.9)
====== ====== ====== ====== ====== ======
Consisting of:
Unrecognized prior services benefit (cost) $ (8.4) $(24.2) $ 7.2 $ (9.7) $ (5.8) $ 9.8
Unrecognized net gain (loss) from changes in
actuarial assumptions and experience 7.4 40.6 (20.6) 1.5 5.6 (35.7)
------ ------ ------ ------ ------ ------
$ (1.0) $ 16.4 $(13.4) $ (8.2) $ (.2) $(25.9)
====== ====== ====== ====== ====== ======
</TABLE>
At December 31, 1996, the projected benefit obligation related to health
and life insurance benefits for active employees was $68.0 million and for
retirees was $111.1 million.
For certain plans, the additional minimum liability recorded in 1995 by
the Company as part of its reserve for postretirement benefits was $9.7 million
at December 31, 1995, (none in 1996). 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 $9.7 million at December 31, 1995.
19
<PAGE> 22
The projected benefit obligation for postretirement benefits was
determined using the following assumptions
<TABLE>
<CAPTION>
1996 1996 1995 1995
- ------------------------------------------------------------------------------------------
Domestic Foreign Domestic Foreign
<S> <C> <C> <C> <C>
Discount rate 7.50% 4.25%-8.00% 7.00% 4.25%-8.25%
Long-term rate of inflation 2.80% .05%-3.80% 2.80% 1.55%-5.05%
Merit and promotion increase 1.70% 1.70% 1.70% 1.70%
Rate of return on plan assets 9.00% 4.50%-8.25% 9.00% 6.00%-9.50%
</TABLE>
The weighted-average annual assumed rate of increase in the health care
cost trend rate is 7% for 1997 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,
1996, by $14.4 million and the annual postretirement cost by $2.0 million.
Total postretirement costs were:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Pension benefits $ 41.7 $ 48.3 $ 35.9
Health and life
insurance benefits 17.4 15.5 16.3
Defined benefit plan cost 59.1 63.8 52.2
Defined contribution
plan cost, principally ESOP 31.2 27.4 24.7
Total postretirement cost,
including accretion expense $ 90.3 $ 91.2 $ 76.9
</TABLE>
Postretirement cost had the following components:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994 1994
- ------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in millions) 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 $ 24.5 $ 4.7 $ 24.6 $ 3.3 $ 23.6 $ 3.8
Interest cost on the projected benefit obligation 55.6 12.5 58.1 12.8 47.0 12.3
Less assumed return on plan assets:
Actual loss (return) on plan assets (64.0) -- (107.1) -- 13.0 --
Excess (shortfall) deferred 22.7 -- 69.7 -- (49.5) --
------ ----- ------- ----- ------ -----
(41.3) -- (37.4) -- (36.5) --
Other, including amortization of prior service cost 2.9 .2 3.0 (.6) 1.8 .2
------ ----- ------- ----- ------ -----
Defined benefit plan cost $ 41.7 $17.4 $ 48.3 $15.5 $ 35.9 $16.3
====== ===== ======= ===== ====== =====
Accretion expense reclassified to "other expense" $ 16.8 $12.5 $ 23.7 $12.8 $ 13.8 $12.3
====== ===== ======= ===== ====== =====
</TABLE>
20
<PAGE> 23
NOTE 6. INCOME TAXES
The Company's income (loss) before income taxes and extraordinary item, and the
applicable provision (benefit) for income taxes were:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Income (loss) before income taxes
and extraordinary item:
Domestic $ 162.6 $ -- $(157.0)
Foreign (105.0)(a) 226.9 141.8
------- ------ -------
Pre-tax income (loss) $ 57.6 $226.9 $ (15.2)
======= ====== =======
Provision (benefit) for income taxes:
Current:
Domestic $ 48.2 $ 15.7 $ 10.5
Foreign 70.2 69.6 57.7
------- ----- -------
118.4 85.3 68.2
Deferred:
Domestic (4.2) (7.3) .8
Foreign (9.9) 7.1 (6.5)
------- ------ -------
(14.1) (.2) (5.7)
------- ------ -------
Total provision $ 104.3 $ 85.1 $ 62.5
======= ====== =======
</TABLE>
(a) Includes asset impairment loss of $235 million.
A reconciliation between the actual income tax expense provided and the
income taxes computed by applying the statutory federal income tax rate of 35%
in 1996, 1995 and 1994 to the income (loss) before income taxes and
extraordinary item is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C>
Tax provision (benefit)
at statutory rate $ 20.2 $ 79.4 $(5.3)
Nondeductible asset
impairment loss 82.3 -- --
Rate differences and
withholding taxes related
to foreign operations 5.5 19.2 47.1
Nondeductible goodwill
amortization 8.3 11.9 10.0
State tax provision (benefit) 1.3 (.5) (5.3)
Nondeductible ESOP
allocations -- 3.5 6.8
Foreign exchange gain (loss) (.6) 1.2 (4.3)
Increase (decrease) in
valuation allowance (13.0) (31.3) 21.4
Other, net .3 1.7 (7.9)
------ ------ -----
Total provision $104.3 $ 85.1 $62.5
====== ====== =====
</TABLE>
The decrease in the valuation allowance in 1996 of $13 million was net of
a $10.8 million valuation allowance provided on future tax benefits on certain
foreign operations. In addition to the 1995 valuation allowance decrease of
$31.3 million and the 1994 valuation allowance increase of $21.4 million shown
above, valuation allowances of $10.5 million in 1995 and $3.2 million in 1994
were provided for the tax benefits related to the extraordinary losses on
retirement of debt (see Note 9).
The following table details the gross deferred tax liabilities and assets
and the related valuation allowances:
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
At December 31, (Dollars in millions)
<S> <C> <C>
Deferred tax liabilities:
Facilities (accelerated depreciation,
capitalized interest and purchase
accounting differences) $ 127.3 $ 138.8
Inventory (LIFO and purchase
accounting differences) 1.0 10.3
Employee benefits 8.1 3.5
Foreign investments 50.1 50.1
Other 37.9 44.8
---------- ---------
224.4 247.5
---------- ---------
Deferred tax assets:
Postretirement benefits 134.1 132.7
Warranties 61.1 53.8
Alternative minimum tax 4.7 16.7
Foreign tax credits and
net operating losses 45.2 34.4
Reserves 54.8 69.5
Other 8.5 23.3
Valuation allowances (85.0) (98.0)
---------- ---------
223.4 232.4
---------- ---------
Net deferred tax liabilities $ 1.0 $ 15.1
========== =========
</TABLE>
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.
21
<PAGE> 24
In 1995 and 1996 the valuation allowance was reduced as a result of the reversal
of existing deferred tax benefits and higher levels of taxable income in the
U.S. in 1995, 1996 and expected in 1997. Although realization is not assured,
management believes it is more likely than not that all of the resulting net
deferred tax assets will be realized. The amount of the net deferred tax assets
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced. 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.
As a result of 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 $135 million, $90 million, and $70 million in the
years 1996, 1995 and 1994, 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 (at December 31, 1996
exchange rates) of a disputed German income tax. A suit is pending to obtain a
refund of this tax. In March 1996 the Company received an assessment, which it
has appealed, for additional taxes of approximately $71 million (at December 31,
1996 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 assessment occurred in
years subsequent to 1990. Having assessed additional taxes for the 1988-1990
period, the German tax authorities might, after future tax audits, propose tax
adjustments for years 1991 to 1993 that could be as much as 50% higher. The
Company, on the basis of the opinion of legal counsel, believes the German 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 has not recorded any loss
contingency at December 31, 1996 with respect to such matters.
The Company has agreed with the German tax authorities to make a partial
security deposit in respect of the additional taxes and interest assessed in
March 1996. Approximately $13 million was paid in January 1997 and, in addition,
the Company will apply approximately $7 million of tax refunds due it to the
security deposit. The tax authorities have granted a staying order for the
balance of the additional taxes and interest assessed in March 1996, under which
no further payment or other security will be required from the Company before
litigation of the matter or a final resolution. During litigation, the Company
would expect renewal of the staying order. Upon final resolution, the Company
will be obligated to pay any tax liability in excess of the security deposit or
the Company will receive a refund of any excess of security deposit (with
interest accruing on the additional tax from the date of the assessment or the
refund amount from the date of deposit, respectively).
As a result of German tax legislation, first effective in 1994, the
Company's tax provision in Germany was higher in 1994, 1995 and 1996 and will
continue to be in the future. As a result of this German tax legislation and the
related additional tax provisions, the Company believes its tax exposure to the
major issues under the audit referred to above will be reduced starting in 1994
and continuing thereafter.
22
<PAGE> 25
NOTE 7. INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------
At December 31, (Dollars in millions)
<S> <C> <C>
Finished products $235.8 $190.7
Products in process 77.7 84.7
Raw materials 95.5 86.9
------ ------
Inventories at cost $409.0 $362.3
====== ======
</TABLE>
The carrying cost of inventories approximates current cost.
NOTE 8. FACILITIES
The components of facilities, at cost, are as follows:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------
At December 31, (Dollars in millions)
<S> <C> <C>
Land $ 79.0 $ 74.3
Buildings 382.3 356.3
Machinery and Equipment 971.0 888.3
Improvements in progress 150.2 119.2
---------- ---------
Gross facilities 1,582.5 1,438.1
Less: accumulated depreciation 576.5 513.6
---------- ---------
Net facilities $ 1,006.0 $ 924.5
========= ========
</TABLE>
NOTE 9. DEBT
In January 1997, the Company entered into the 1997 Credit Agreement, an
amendment and restatement of the 1995 Credit Agreement. The 1997 Credit
Agreement, which expires in 2002, provides American Standard Inc. and certain
subsidiaries (the "Borrowers") with senior secured credit facilities aggregating
$1.75 billion to all Borrowers as follows: (a) a $750 million U.S. dollar
revolving credit facility and a $625 million multi-currency revolving credit
facility (the "Revolving Facilities") and (b) a $375 million multi-currency
periodic access credit facility (the "Periodic Access Facility").
The 1997 Credit Agreement provides lower interest rates, significantly
increased borrowing capacity, less restrictive covenants and no scheduled
principal payments until maturity in 2002. 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 1997 Credit Agreement.
Borrowings under the Revolving Facilities and the Periodic Access Facility bear
interest at the London interbank offered rate ("LIBOR") plus 0.875% which is
.375% lower than rates under the 1995 Credit Agreement. This initial rate is
subject to adjustment and may be reduced in the event the Company attains
improved financial ratios.
After giving effect to the 1997 Credit Agreement, the amounts of long-term
debt maturing in years 1997 through 2001 were: 1997-$23 million; 1998-$24
million; 1999-$164 million; 2000-$13 million; and 2001-$211 million.
As a result of the redemption of debt in 1995 and 1994, the Consolidated
Statement of Operations included extraordinary charges of $30 million and $9
million, respectively (including call premiums and the write-off of deferred
debt issuance costs, on which no tax benefit was recorded (see Note 6). In
addition, the first quarter of 1997 will include an extraordinary charge of $10
million as a result of the repayment of debt under the 1995 Credit Agreement.
Short-term -- At December 31, 1996, there were $67 million of short-term
borrowings outstanding and $56 million of letters of credit outstanding under
the 1995 Credit Agreement. Average borrowings under the revolving credit
facilities available under bank credit agreements for 1996, 1995 and 1994 were
$215 million, $278 million and $73 million, respectively.
The Revolving Facilities under the 1997 Credit Agreement provide for
aggregate borrowings of up to $1.375 billion for general corporate purposes, of
which up to $500 million may be used for the issuance of letters of credit and
$40 million of which is available for same-day short-term borrowings. The
Company pays a commitment fee of 0.20% per annum on the unused portion of the
Revolving Facilities and a fee of 0.875% per annum plus issuance fees for
letters of credit. Upon completion of the 1997 Credit Agreement in January 1997
(proceeds of which replaced outstanding borrowings under the 1995 Credit
Agreement) and the Share Repurchase for $208 million in February 1997 (see Notes
3 and 10), there were $323 million of borrowings outstanding under the
23
<PAGE> 26
Revolving Facilities and $55 million of letters of credit. Remaining
availability under the Revolving Facilities was $997 million, which is available
to provide financing for the Medical Systems Acquisitions (see Note 3), to
redeem certain outstanding public debt securities of American Standard Inc. and
for other general corporate purposes. Borrowings under the Revolving Facilities
by their terms are short-term.
Other short-term borrowings are available outside the United States under
informal credit facilities and are typically in the form of overdrafts. At
December 31, 1996, the Company had $42 million of such foreign short-term debt
outstanding at an average interest rate of 10.6% per annum. The Company also had
an additional $83 million of unused foreign facilities. These facilities may be
withdrawn by the banks at any time.
Average short-term borrowings for 1996, 1995 and 1994 were $284 million,
$334 million and $119 million, respectively, at weighted average interest rates
of 7.33%, 7.85% and 9.40%, respectively. Total short-term borrowings outstanding
at December 31, 1996, 1995 and 1994 were $109 million, $240 million, and $70
million, respectively, at weighted average interest rates of 7.5%, 7.9% and
10.7%, respectively.
Long-term -- Long-term debt was as follows:
<TABLE>
<CAPTION>
1996 1995
- -----------------------------------------------------------------
At December 31, (Dollars in millions)
<S> <C> <C>
1995 Credit Agreements $ 363.6 $ 432.1
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 $77.5 million in 1996;
$162.2 million in 1995) due in
installments from 2003 to 2005 633.1 578.5
Other long-term debt 67.7 82.4
---------- ---------
1,814.4 1,843.0
Less current maturities 72.6 72.9
---------- ---------
$ 1,741.8 $ 1,770.1
========== =========
</TABLE>
Interest costs capitalized as part of the cost of constructing facilities
for the years ended December 31, 1996, 1995, and 1994, were $3.9 million, $4.0
million and $2.9 million, respectively. Cash interest paid for those same years
on all outstanding indebtedness amounted to $140 million, $161 million and $186
million, respectively.
The U.S. Dollar equivalent of the 1995 Credit Agreement loans and the
effective weighted average interest rates were:
<TABLE>
<CAPTION>
1996 1995
- ------------------------------------------------------------
At December 31, (Dollars in millions)
<S> <C> <C>
Periodic access loans:
Deutschemark loans at 4.56%
in 1996; 5.39% in 1995 $ 263.7 $ 282.5
British sterling loans at 7.44%
in 1996; 8.23% in 1995 5.1 34.8
Dutch guilder loans at 4.31%
in 1996; 5.23% in 1995 24.8 24.8
---------- ---------
Total periodic access loans 293.6 342.1
Term loans:
U.S. dollar loans at 6.63%
in 1996; 6.91% in 1995 70.0 90.0
---------- ---------
Total 1995 Credit Agreement
long-term loans 363.6 432.1
Revolver loans at 5.6% in 1996;
6.9% in 1995 67.2 179.8
---------- ---------
Total 1995 Credit Agreement loans $ 430.8 $ 611.9
========== =========
</TABLE>
The 9 1/4% Sinking Fund Debentures are redeemable at the Company's option,
in whole or in part, at redemption prices declining from 104.163% in 1997 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.
24
<PAGE> 27
The 9 7/8% Senior Subordinated Notes may be redeemed at the Company's
option, in whole or in part, on or 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 or 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").
At December 31, 1996, the Company held swap agreements to hedge the
redemption value of a portion of its 10 1/2% Senior Subordinated Discount
Debenture and effectively converted such debt to an average fixed interest rate
of approximately 7%. The redemption value hedged by the swaps is the fair value
of the debt at the commencement of the swaps. The swaps mature in June 1998 and
have a notional debt value of $147 million, which approximates their fair value
as of December 31, 1996. The swap providers are major financial institutions and
the Company does not anticipate non-performance by such providers.
Obligations under the 1997 Credit Agreement are guaranteed by the Company,
American Standard Inc. and significant domestic subsidiaries of American
Standard Inc. (with foreign borrowings also guaranteed by certain foreign
subsidiaries) and are secured by a pledge of the stock of American Standard Inc.
and its subsidiaries.
The 1997 Credit Agreement contains various covenants that limit, among
other things, mergers and asset sales, indebtedness, dividends on and redemption
of capital stock of the Company, voluntary prepayment of certain other
indebtedness of the Company (including its outstanding debentures and notes),
rental expense, liens, capital expenditures, investments or acquisitions, the
use of proceeds from asset sales, intercompany transactions and transactions
with affiliates and certain other business activities. The covenants also
require the Company to meet certain financial tests. The Company believes it is
currently in compliance with the covenants contained in the 1997 Credit
Agreement.
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. The Company believes it is currently in compliance
with the covenants of those indentures.
NOTE 10. CAPITAL STOCK TRANSACTIONS AND STOCK OPTION PLAN OF AMERICAN STANDARD
COMPANIES INC.
In the first quarter of 1995 American Standard Companies Inc. sold 15,112,300
shares of its common stock at $20 per share in its initial public offering (the
"IPO"), which yielded net proceeds of $281 million (including proceeds from the
exercised portion of the underwriters' over-allotment option and after deducting
underwriting discounts and expenses) which were used to reduce indebtedness.
The Company, Kelso & Company, L.P. ("Kelso") and ASI Partners entered into
an agreement (the "Stock Disposition Agreement") providing for: (i) the sale by
ASI Partners of 12,429,548 shares of American Standard Companies Inc. common
stock (including 1,621,245 shares sold pursuant to the underwriters'
over-allotment option) in the Secondary Offering completed in the first quarter
of 1997; and (ii) the repurchase by the Company from ASI Partners of all shares
of American Standard Companies Inc. common stock to be owned by ASI Partners
after the distribution (the "Share Distribution") by ASI Partners of 3,780,353
shares of such stock to certain of its partners at their election. Accordingly,
in conjunction with the Secondary Offering, American Standard Companies Inc.
repurchased 4,628,755 shares of its common stock from ASI partners for $208
million (the "Share Repurchase"). The Company financed the Share Repurchase with
borrowings under the 1997 Credit Agreement. American Standard Companies Inc. had
previously completed a
25
<PAGE> 28
secondary offering in September 1995 (together with the Secondary Offering, the
"Secondary Offerings") for 22,500,000 shares of its common stock, substantially
all of which were owned by ASI Partners. After the Secondary Offerings, the
Share Distribution and the Share Repurchase, ASI Partners will own no common
stock of American Standard Companies Inc. and will not be entitled to designate
any of the Company's directors. All of the shares sold in the Secondary
Offerings were previously issued and outstanding shares, and the Company
received no proceeds therefrom.
In accordance with the Stock Disposition Agreement, American Standard
Companies Inc. also issued to ASI Partners 5-year warrants to purchase 3,000,000
shares of common stock of American Standard Companies Inc. at $55 per share (the
"Exercise Price"), $10 per share over the public offering price. The warrants
entitle holders to receive cash or shares, at the Company's option, based on the
difference between the then market value of American Standard Companies Inc.
common stock and the Exercise Price. The warrants will be exercisable between
January 31, 1998 (or October 31, 1998 in certain cases) and February 11, 2002.
In the event that a Transaction (as defined in the Stock Disposition Agreement)
constituting a change in control of the Company occurs prior to January 31, 1998
(or October 31, 1998 for a Transaction proposed prior to January 31, 1998 but
not consummated or withdrawn as of January 31, 1998), the Company would be
required to make a cash payment to ASI Partners based upon the excess, if any,
of the consideration per share received by holders of American Standard
Companies Inc. common stock in the Transaction over the cash price per share
received by ASI Partners in respect of all shares sold in the Secondary Offering
and the Share Repurchase. If a Transaction occurs entitling ASI Partners to such
a payment, the warrants would not be exercisable and would expire upon the
consummation of such Transaction. The estimated fair value of these warrants at
the date issued was $9.34 per share using a Black-Scholes option pricing model
and assumptions similar to those used for valuing American Standard Companies
Inc. stock options as described below.
In January 1995 American Standard Companies Inc. established the Stock
Incentive Plan (the "Stock Plan") under which awards 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 in shares of common
stock of American Standard Companies Inc. The maximum number of shares or units
that may be issued under the Stock Plan is 7,604,475. The awards vest ratably
over three years on the anniversary date of the awards and are exercisable over
a period of ten years.
26
<PAGE> 29
A summary of stock option activity and related information for 1996 and
1995 follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price
<S> <C> <C> <C> <C>
Outstanding-beginning of year 4,974,000 $20.01 -- --
Granted 18,000 32.66 5,006,000 $20.01
Exercised (230,483) 20.00 -- --
Forfeited (60,343) 20.00 (32,000) 20.00
---------- ------ ---------- ------
Outstanding-end of year 4,701,174 $20.06 4,974,000 $20.01
========== ====== ========== ======
Exercisable at end of year 1,422,539 $20.01 -- --
Weighted average fair value of options granted during the year $ 12.26 $ 7.51
</TABLE>
Exercise prices for options outstanding as of December 31, 1996, ranged
from $20 to $37.94. The weighted-average remaining contractual life of those
options is 8.4 years. As of December 31, 1996, there were 2,672,818 shares
available for grant under the plan.
The Company has elected to follow APB 25 and related interpretations in
accounting for stock options and accordingly has recognized no compensation
expense. Had compensation cost been determined based upon the fair value at the
grant date for awards consistent with the methodology prescribed by Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation,
the Company's net loss would have increased by $8.2 million in 1996 and its net
income would have decreased by $7.4 million in 1995. The fair value of these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following assumptions for both 1996 and 1995: risk-free interest
rate of 6.3%; volatility of 23%; an expected life of 6 years; and a dividend
yield of zero. These estimated expense amounts are not necessarily indicative of
amounts in years beyond 1997 because they are heavily influenced by the large
number of options granted in 1995 in connection with the IPO which fully vest at
the beginning of 1998.
NOTE 11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at December 31, 1996,
approximates carrying amounts except as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------
(Dollars in millions) Carrying Fair
Amount Value
<S> <C> <C>
10 7/8% senior notes $150 $161
11 3/8% senior debentures 250 268
9 7/8% senior subordinated notes 200 211
10 1/2% senior subordinated
discount debentures 633 694
9 1/4% sinking fund debentures 150 156
</TABLE>
The fair values presented above are estimates as of December 31, 1996, and
are not necessarily indicative of amounts for which the Company could settle
currently or indicative of the intent or ability of the Company to dispose of or
liquidate such instruments.
27
<PAGE> 30
The fair values of the Company's 1995 Credit Agreement loans, which
approximate their carrying values, 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.
NOTE 12. RELATED PARTY TRANSACTIONS
In 1994 the Company paid Kelso, an affiliate of ASI Partners, the largest
shareholder of American Standard Companies Inc., 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 IPO, including
an amendment eliminating future payments of the $2.75 million annual fee but
providing for the continuation of such services. See Notes 3 and 10.
NOTE 13. COMMITMENTS AND CONTINGENCIES
Future minimum rental commitments under the terms of all noncancellable
operating leases in effect at December 31, 1996, were: 1997 - $62 million; 1998
- - $55 million; 1999- $38 million; 2000 - $28 million; 2001 - $23 million and
thereafter - $44 million. Net rental expenses for operating leases were $70
million, $59 million and $45 million for the years ended December 31, 1996,
1995, and 1994, 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 as a result of such proceedings that the
Company will incur costs 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 6).
NOTE 14. SEGMENT DATA
Identifiable assets as of December 31, 1996, 1995 and 1994 and sales and
operating income by geographic location for the years then ended are shown in
the following tables. Sales and operating income by segment are shown in
Management's Discussion and Analysis of Financial Condition and Results of
Operations on page 7.
28
<PAGE> 31
<TABLE>
<CAPTION>
Segment Data 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
Year Ended December 31, (Dollars in millions)
<S> <C> <C> <C> <C> <C>
Sales-Geographic distribution:
United States $ 2,856 $ 2,526 $ 2,238 $ 1,914 $ 1,722
Europe 2,050 1,951 1,600 1,371 1,622
Other 1,041 860 714 617 519
ELIMINATIONS (142) (116) (95) (72) (71)
------- ------- ------- ------- -------
Total sales (c) $ 5,805 $ 5,221 $ 4,457 $ 3,830 $ 3,792
======= ======= ======= ======= =======
Operating income-Geographic distribution:
United States $ 336 $ 223 $ 151 $ 104 $ 82
Europe 102 242 147 130 185
Other (87) 69 57 48 33
------- ------- ------- ------- -------
Total operating income (c) $ 351 (a) $ 534 $ 355 $ 282 $ 300
======= ======= ======= ======= =======
Assets
Air Conditioning Products $ 1,480 $ 1,432 $ 1,223 $ 1,167 $ 1,156
Plumbing Products 775 1,088 957 960 1,002
Automotive Products 1,066 805 755 652 722
------- ------- ------- ------- -------
Total identifiable assets $ 3,321 $ 3,325 $ 2,935 $ 2,779 $ 2,880
======= ======= ======= ======= =======
Geographic distribution:
United States $ 1,180 $ 1,075 $ 1,025 $ 1,013 $ 1,016
Europe 1,460 1,557 1,343 1,196 1,370
Other 681 693 567 570 494
------- ------- ------- ------- -------
Total identifiable assets 3,321 3,325 2,935 2,779 2,880
Prepaid charges 34 39 64 78 51
Future income tax benefits 67 30 22 25 33
Cash and cash equivalents 60 89 93 53 113
Corporate assets 38 37 42 52 49
------- ------- ------- ------- -------
Total assets $ 3,520 $ 3,520 $ 3,156 $ 2,987 $ 3,126
======= ======= ======= ======= =======
Goodwill included in assets:
Air Conditioning Products $ 203 $ 334 $ 331 $ 337 $ 351
Plumbing Products 247 302 295 296 320
Automotive Products 419 446 427 393 431
------- ------- ------- ------- -------
Total goodwill $ 869 $ 1,082 $ 1,053 $ 1,026 $ 1,102
======= ======= ======= ======= =======
Capital expenditures:
Air Conditioning Products $ 93 $ 70 $ 45 $ 38 $ 33
Plumbing Products 88 93 55 46 48
Automotive Products 46 44 30 14 27
------- ------- ------- ------- -------
Total capital expenditures $ 227 $ 207 $ 130 $ 98 $ 108
======= ======= ======= ======= =======
Depreciation and amortization:
Air Conditioning Products $ 51 $ 51 $ 51 $ 53 $ 55
Plumbing Products 50 50 64 (b) 49 49
AUTOMOTIVE PRODUCTS 43 42 39 35 37
------- ------- ------- ------- -------
Total depreciation and amortization $ 144 $ 143 $ 154 $ 137 $ 141
======= ======= ======= ======= =======
</TABLE>
(a) Includes asset impairment charge of $235 million, of which $166 million is
included in Other and $69 million in Europe (see Note 2).
(b) Includes an asset loss provision of $14 million.
(c) U.S. export sales and operating income have been reclassified to Europe and
Other for 1995, 1994, 1993 and 1992 to conform with the 1996
classification.
29
<PAGE> 32
<TABLE>
<CAPTION>
Quarterly Data (Unaudited)
1996
- --------------------------------------------------------------------------------------------------
(Dollars in millions) First(a) Second Third Fourth
<S> <C> <C> <C> <C>
Sales $1,364.3 $1,518.3 $1,485.1 $1,436.9
Cost of sales 1,031.0 1,135.9 1,115.1 1,097.8
Income before income taxes and extraordinary item (188.3) 91.9 84.1 69.9
Income taxes 17.0 33.3 29.1 24.9
-------- -------- -------- --------
Net income (loss) $ (205.3) $ 58.6 $ 55.0 $ 45.0
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1995
- --------------------------------------------------------------------------------------------------
(Dollars in millions) First Second Third Fourth
<S> <C> <C> <C> <C>
Sales $1,223.2 $1,370.8 $1,316.3 $1,311.2
Cost of sales 909.1 1,008.5 975.1 994.3
Income before income taxes and extraordinary item 45.4 85.0 67.0 29.5
Income taxes 18.9 35.5 23.6 7.1
-------- -------- -------- --------
Income before extraordinary item 26.5 49.5 43.4 22.4
Extraordinary loss on retirement of debt (30.1) -- -- --
-------- -------- -------- --------
Net income (loss) $ (3.6) $ 49.5 $ 43.4 $ 22.4
======== ======== ======== ========
</TABLE>
(a) The first quarter of 1996 included a non-cash asset impairment charge of
$235 million, on which there was no tax benefit.
(b) The first three quarters of 1996 have been restated to properly record
costs and expenses for Porcher S.A., the French plumbing products
manufacturer acquired in the fourth quarter of 1995. The restatement had
the effect of increasing the net loss in the first quarter by $3 million
and decreasing net income in the second and third quarters by $4 million
and $2 million, respectively.
30
<PAGE> 33
ITEM 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 34 of this annual
report on Form 10-K. The financial statements indicated on the index
appearing on page 34 hereof are incorporated herein by reference.
3. Exhibits
The exhibits to this Report 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, 1996.
The Company filed no current reports on Form 8-K during the fourth quarter
ended December 31, 1996.
31
<PAGE> 34
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, 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 Financial Officer
MARCH 26, 1997
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 26, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/S/ EMMANUEL A. KAMPOURIS Chairman, President and Chief
- -------------------------------------
(EMMANUEL A. KAMPOURIS) Executive Officer; Director
(Principal Executive Officer)
/S/ FRED A. ALLARDYCE Vice President and Chief Financial Officer
- -------------------------------------
(Fred A. Allardyce) (Principal Financial Officer)
/S/ G. RONALD SIMON Vice President and Controller
- -------------------------------------
(G. RONALD SIMON) (Principal Accounting Officer)
/S/ STEVEN E. ANDERSON Director
- -------------------------------------
(STEVEN E. ANDERSON)
/S/ HORST HINRICHS Director
- -------------------------------------
(HORST HINRICHS)
/S/ GEORGE H. KERCKHOVE Director
- -------------------------------------
(GEORGE H. KERCKHOVE)
/S/ SHIGERU MIZUSHIMA Director
- -------------------------------------
(SHIGERU MIZUSHIMA)
/S/ FRANK T. NICKELL Director
- -------------------------------------
(FRANK T. NICKELL)
/S/ ROGER W. PARSONS Director
- -------------------------------------
(ROGER W. PARSONS)
/S/ J. DANFORTH QUAYLE Director
- -------------------------------------
(J. DANFORTH QUAYLE)
</TABLE>
32
<PAGE> 35
SIGNATURES- (CONTINUED)
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/S/ DAVID M. RODERICK Director
- ------------------------------
(DAVID M. RODERICK)
/S/ JOHN RUTLEDGE Director
- ------------------------------
(JOHN RUTLEDGE)
/S/ JOSEPH S. SCHUCHERT Director
- ------------------------------
(JOSEPH S. SCHUCHERT)
</TABLE>
33
<PAGE> 36
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES COVERED BY
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
1. Financial Statements
Consolidated Balance Sheet at December 31, 1996, and 1995 13
Years ended December 31, 1996, 1995, and 1994:
Consolidated Statement of Operations 12
Consolidated Statement of Cash Flows 14
Consolidated Statement of Stockholder's Deficit 15
Notes to Financial Statements 16-28
Segment Data 8 and 29
Quarterly Data (Unaudited) 30
Report of Independent Auditors 11
2. Financial statement schedule, years ended December 31, 1996, 1995, and 1994
II Valuation and Qualifying Accounts 36
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.
34
<PAGE> 37
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of American Standard Inc.
as of December 31, 1996 and 1995, and for each of the three years in the period
ended December 31, 1996, and have issued our report thereon dated February 13,
1997 (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,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
New York, New York
February 13, 1997
35
<PAGE> 38
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Years ended December 31, 1996, 1995, and 1994
(Dollars in thousands)
Foreign
Balance Additions Currency Balance
Beginning Charged to Other Translation End of
Description of Period Income Deductions Changes Effects Period
<S> <C> <C> <C> <C> <C> <C>
1996:
Reserve deducted from assets:
Allowance for doubtful accounts receivable $ 27,330 $11,225 $(10,158)(A) $ 304 $ (407) $ 28,294
- --------------------------------------------------------------------------------------------------------------------------------
Reserve for post-retirement benefits $482,398 $60,730 $(40,960)(B) $(10,204)(C) $(18,735) $473,229
1995:
Reserve deducted from assets:
Allowance for doubtful accounts receivable $ 19,569 $10,811 $ (6,064)(A) $ 2,662 $ 352 $ 27,330
- --------------------------------------------------------------------------------------------------------------------------------
Reserve for post-retirement benefits $437,708 $52,190 $(21,808)(B) $(5,761)(D) $ 20,069 $482,398
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 benefits $387,038 $44,352 $(23,062)(B) $ 3,188(E) $ 26,192 $437,708
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 $10 million reduction in minimum pension liability primarily.
(D) Includes $6 million reduction in minimum pension liability.
(E) Includes $5 million from acquisition of new business offset by $3 million
reduction in minimum pension liability.
36
<PAGE> 39
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 33-64450, except those Exhibits incorporated by reference in
filings made by American Standard Companies Inc. (formerly named ASI Holding
Corporation) ( "Holding") the Commission File Number of which 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-Q for the quarter ended June 30, 1995,
and herein incorporated by reference.
(ii) Amended By-laws of the Company, as amended February 24, 1997,
effective May 1, 1997.
(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) to the Company's Form 10-K for the fiscal year ended
December 31, 1986, and herein incorporated by reference.
(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) to 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) to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 1992, and herein incorporated by
reference.
(iv) Form of 10-7/8% Senior Note due 1999 included as Exhibit A to
the Indenture described in (4)(iii) above.
<PAGE> 40
(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) to the Company's quarterly report on 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) to
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) to 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) Amended and Restated Credit Agreement, dated as of January 31,
1997, among Holding, the Company, certain subsidiaries of the
Company and the financial institutions listed therein, The
Chase Manhattan Bank, as Administrative Agent; Citibank, N.
A., as Documentation Agent; The Bank of Nova Scotia and
NationsBank, N. A., as Co Syndication Agents; Bankers Trust
Company, Deutsche Bank AG, The Industrial Bank of Japan Trust
Company, The Sanwa Bank Limited, New York Branch and The
Sumitomo Bank, Ltd., as Senior Managing Agents; and The Bank
of New York, Banque Paribas, CIBC Inc., CIBC Wood Gundy plc,
Compagnie Financiere de CIC et de L'Union Europeenne, Credit
Lyonnais, New York Branch, Fleet National Bank, The Long Tem
Credit Bank of Japan, Limited and The Toronto-Dominion Bank,
as Managing Agents; previously filed as Exhibit (4)(xviii) to
Amendment No. 2 to Registration Statement No. 333-18015 of
Holding under the Securities Act of 1933, as amended, filed
February 5, 1997, and herein incorporated by reference.
(xii) Rights Agreement, dated as of January 5, 1995, between Holding
and Citibank, N.A. as Rights Agent; previously filed as
Exhibit (4)(xxv) to Holding's Form 10-K for the fiscal year
ended December 31, 1994, and herein incorporated by reference.
<PAGE> 41
(10) * (i) American Standard Inc. Long-Term Incentive Compensation Plan,
as amended and restated on December 5, 1996.
(ii) Trust Agreement for American Standard Inc. Long-Term Incentive
Compensation Plan and American Standard Companies Inc.
Supplemental Incentive Plan, as amended and restated on
December 5, 1996.
(iii) American Standard Inc. Annual Incentive Plan, as amended and
restated on December 5, 1996.
(iv) American Standard Inc. Executive Supplemental Retirement
Benefit Program, as restated to include all amendments through
July 6, 1995; previously filed as Exhibit (10)(iv) to the
Company's Form 10-K for the fiscal year ended December 31,
1995, and herein incorporated by reference.
(v) American Standard Inc. Supplemental Compensation Plan for
Outside Directors, as amended through February 3, 1995;
previously filed as Exhibit (10)(xii) to the Company's Form
10-K for the fiscal year ended December 31, 1994, and herein
incorporated by reference.
(vi) ASI Holding Corporation 1989 Stock Purchase Loan Program;
previously filed as Exhibit (10)(i) to Holding's Form 10-Q
for the quarter ended September 30, 1989, and herein
Incorporated by reference.
(vii) American Standard Companies Inc. Corporate Officer Severance
Plan, as amended and restated on December 5, 1996;
incorporated herein by reference to Exhibit (10)(vii) to
Holding's Form 10-K for the fiscal year ended December 31,
1996.
(viii) Estate Preservation Plan adopted in December, 1990; previously
filed as Exhibit (10)(xx) to the Company's Form 10-K for the
fiscal year ended December 31, 1990, and herein incorporated
by reference.
(ix) Amendment adopted in March 1993 to Estate Preservation Plan
referred to in (10)(viii) above; previously filed as Exhibit
(10)(xvii) to the Company's Form 10-K for the fiscal year
ended December 31, 1993, and herein incorporated by reference.
(x) Summary of terms of Unfunded Deferred Compensation Plan,
adopted December 2, 1993; previously filed as Exhibit
(10)(xviii) to the Company's Form 10-K for the fiscal year
ended December 31, 1993, and herein incorporated by reference.
* Items in this series 10 consist of management contracts or compensatory plans
or arrangements with exception of (10)(xiii) and (xiv).
<PAGE> 42
(xi) American Standard Companies Inc. Stock Incentive Plan, as
amended and restated on December 5, 1996, incorporated herein
by reference to Exhibit (10)(xi) to Holding's Form 10-K for
the fiscal year ended December 31, 1996.
(xii) American Standard Companies Inc. and Subsidiaries 1996-1998
Supplemental Incentive Compensation Plan, as amended and
restated on December 5, 1996; incorporated herein by reference
to Exhibit (10)(xii) of Holding's Form 10-K for the fiscal
year ended December 31, 1996.
(xiii) Stock Disposition Agreement, dated as of December 16, 1996,
among Holding, Kelso & Company, L. P. and Kelso ASI Partners,
L. P.; previously filed as Exhibit (10)(i) to Holding's
Registration Statement No. 333-18015 under the Securities Act
of 1933, as amended, filed December 17, 1996, and herein
incorporated by reference.
(xiv) Form of Warrant Agreement between Holding and Citibank, N. A.
as Warrant Agent, included as Annex A to the Stock Disposition
Agreement described in (10)(xiii) above; previously filed as
Exhibit (10)(ii) to Holding's Registration Statement No.
333-18015 under the Securities Act of 1933, as amended, filed
December 17, 1996, and herein incorporated by reference.
(21) List of Company's subsidiaries.
(27) Financial Data Schedule.
<PAGE> 1
EXHIBIT 3(ii)
AMERICAN STANDARD INC.
AMENDED BY-LAWS
As Adopted on May 4, 1995
and Amended on December 5, 1996
and February 24, 1997,
effective May 1, 1997
<PAGE> 2
AMERICAN STANDARD INC.
AMENDED BY-LAWS
TABLE OF CONTENTS
PAGE
ARTICLE I
STOCKHOLDERS .......................... 1
Section 1.1. Annual Meetings ............................................. 1
Section 1.2. Special Meetings ............................................ 1
Section 1.3. Notice of Meetings; Waiver .................................. 2
Section 1.4. Quorum ...................................................... 2
Section 1.5. Voting ...................................................... 2
Section 1.6. Voting by Ballot ............................................ 3
Section 1.7. Adjournment ................................................. 3
Section 1.8. Proxies ..................................................... 4
Section 1.9. Organization; Procedure ..................................... 5
Section 1.10. Stockholder Proposals and Nominations of Directors ......... 5
Section 1.11. [Reserved] ................................................. 5
Section 1.12. [Reserved] ................................................. 5
Section 1.13. Consent of Stockholders in Lieu of Meeting ................ 5
ARTICLE II
BOARD OF DIRECTORS ........................ 6
Section 2.1. General Powers .............................................. 6
Section 2.2. Number and Term of Office ................................... 6
Section 2.3. Election of Directors ....................................... 7
Section 2.4. Annual and Regular Meetings ................................. 7
Section 2.5. Special Meetings; Notice .................................... 8
Section 2.6. Quorum; Voting .............................................. 9
Section 2.7. Adjournment ................................................. 9
Section 2.8. Action Without a Meeting .................................... 9
Section 2.9. Organization ................................................ 9
Section 2.10. Regulations; Manner of Acting .............................. 9
Section 2.11. Action by Telephonic Communications ........................ 10
Section 2.12. Resignations ............................................... 10
Section 2.13. Removal of Directors ....................................... 10
Section 2.14. Vacancies and Newly Created
Directorships ................................ 10
Section 2.15. Compensation ............................................... 11
Section 2.16. Reliance on Accounts and Reports, etc. ..................... 11
<PAGE> 3
PAGE
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES .............. 11
Section 3.1. How Constituted ............................................. 11
Section 3.2. Powers ...................................................... 12
Section 3.3. Proceedings ................................................. 13
Section 3.4. Quorum and Manner of Acting ................................. 13
Section 3.5. Action by Telephonic Communications ......................... 14
Section 3.6. Absent or Disqualified Members .............................. 14
Section 3.7. Resignations ................................................ 14
Section 3.8. Removal ..................................................... 14
Section 3.9. Vacancies ................................................... 14
ARTICLE IV
OFFICERS ............................. 15
Section 4.1. Number ...................................................... 15
Section 4.2. Election .................................................... 15
Section 4.3. Salaries .................................................... 15
Section 4.4. Removal and Resignation; Vacancies .......................... 16
Section 4.5. Authority and Duties of Officers ............................ 16
Section 4.6. The President ............................................... 16
Section 4.7. Vice Presidents ............................................. 17
Section 4.8. The Secretary ............................................... 17
Section 4.9. The Treasurer ............................................... 18
Section 4.10. Additional Officers ........................................ 19
Section 4.11. Security ................................................... 20
ARTICLE V
CAPITAL STOCK .......................... 20
Section 5.1. Certificates of Stock, Uncertificated
Shares ........................................ 20
Section 5.2. Signatures; Facsimile ....................................... 21
Section 5.3. Lost, Stolen or Destroyed Certificates ...................... 21
Section 5.5. Record Date ................................................. 22
Section 5.6. Registered Stockholders ..................................... 23
Section 5.7. Transfer Agent and Registrar ................................ 24
ii
<PAGE> 4
PAGE
ARTICLE VI
INDEMNIFICATION .......................... 24
Section 6.1. Nature of Indemnity ......................................... 24
Section 6.2. Successful Defense .......................................... 25
Section 6.3. Determination That Indemnification
is Proper ..................................... 25
Section 6.4. Advance Payment of Expenses ................................. 26
Section 6.5. Procedure for Indemnification of
Directors and Officers ........................ 26
Section 6.6. Survival; Preservation of Other Rights ...................... 27
Section 6.7. Insurance ................................................... 28
Section 6.8. Severability ................................................ 28
ARTICLE VII
OFFICES ............................. 29
Section 7.1. Registered Office ........................................... 29
Section 7.2. Other Offices ............................................... 29
ARTICLE VIII
GENERAL PROVISIONS ........................ 29
Section 8.1. Dividends ................................................... 29
Section 8.2. Reserves .................................................... 30
Section 8.3. Execution of Instruments .................................... 30
Section 8.4. Corporate Indebtedness ...................................... 30
Section 8.5. Deposits .................................................... 31
Section 8.6. Checks ...................................................... 31
Section 8.7. Sale, Transfer, etc. of Securities .......................... 31
Section 8.8. Voting as Stockholder ....................................... 31
Section 8.9. Fiscal Year ................................................. 32
Section 8.10. Seal ....................................................... 32
Section 8.11. Books and Records; Inspection .............................. 32
ARTICLE IX
AMENDMENT OF AMENDED BY-LAWS ................... 32
Section 9.1. Amendment ................................................... 32
iii
<PAGE> 5
PAGE
ARTICLE X
CONSTRUCTION........................... 33
Section 10.1. Construction............................................... 33
iv
<PAGE> 6
AMERICAN STANDARD INC.
AMENDED BY-LAWS
As adopted on May 4, 1995
ARTICLE I
STOCKHOLDERS
Section 1.1. Annual Meetings. The annual meeting of the
stockholders of the Corporation for the election of Directors and for the
transaction of such other business as properly may come before such meeting
shall be held at such place, either within or without the State of Delaware on
the first Thursday in May (or, if such day is a legal holiday, then on the next
succeeding business day), following the annual meeting of stockholders of
American Standard Companies Inc., or at such other date and time as may be fixed
from time to time by resolution of the Board of Directors and set forth in the
notice or waiver of notice of the meeting. [Sections 211(a), (b).](1)
Section 1.2. Special Meetings. Special meetings of the
stockholders may be called at any time by the (i) Chief Executive Officer or
(ii) by the Board of Directors pursuant to a resolution adopted by a majority of
the total number of authorized Directors or (iii) [by a majority of the holders
of the shares of stock of the Corporation then outstanding and entitled to
vote]. Special meetings of the stockholders shall be held at such places, within
or without the State of Delaware, as shall be specified in the respective
notices or waivers of notice thereof. [Section 211(d).]
Section 1.3. Notice of Meetings; Waiver. The Secretary, Acting
Secretary or any Assistant Secretary shall cause written notice of the place,
date and hour of each meeting of the stockholders, and, in the case of a special
meeting, the purpose or purposes for which such meeting is called, to be given
personally or by mail, not less than ten nor more than sixty days prior to the
meeting, to each stockholder of record entitled to vote at such meeting. If such
notice is mailed, it shall be deemed to have been given to a stockholder when
deposited in the United States mail,
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(1.) Citations are to the General Corporation Law of the State of Delaware
as in effect on May 4, 1995 (the "GCL"), and are inserted for reference
only, and do not constitute a part of the Amended By-Laws.
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postage prepaid, directed to the stockholder at his address as it appears on the
record of stockholders of the Corporation, or, if he shall have filed with the
Secretary or Acting or Assistant Secretary of the Corporation a written request
that notices to him be mailed to some other address, then directed to him at
such other address. Such further notice shall be given as may be required by
law.
No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any regu-
lar or special meeting of the stockholders need be specified in a written waiver
of notice. The attendance of any stockholder at a meeting of stockholders shall
constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened. [Sections 222, 229.]
Section 1.4. Quorum. Except as otherwise required by law or
by the Restated Certificate of Incorporation, the presence in person or by proxy
of the holders of record of a majority of the shares entitled to vote at a
meeting of stockholders shall constitute a quorum for the transaction of
business at such meeting. [Section 216.]
Section 1.5. Voting. If, pursuant to Section 5.5 of these
Amended By-Laws, a record date has been fixed, every holder of record of shares
entitled to vote at a meeting of stockholders shall be entitled to one vote for
each share outstanding in his name on the books of the Corporation at the close
of business on such record date, provided, however, that the certificate of
designation pertaining to any series of the Corporation's preferred stock may
provide for a greater number of votes per share of such series. If no record
date has been fixed, then every holder of record of shares entitled to vote at a
meeting of stockholders shall be entitled to one vote (subject to the same
proviso as set forth in the immediately preceding sentence) for each share of
stock standing in his name on the books of the Corporation at the close of
business on the day next preceding the day on which notice of the meeting is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. Except as otherwise required by
law, by the Restated Certificate of Incorporation or by these Amended By-Laws,
the vote of a majority of the shares represented in person or by proxy at any
meeting at which a quorum is present shall be sufficient for the transaction of
any business at
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such meeting. [Sections 212(a), 216.]
Section 1.6. Voting by Ballot. No vote of the stockholders
need be taken by written ballot unless otherwise required by law. Any vote which
need not be taken by ballot may be conducted in any manner approved by the
meeting.
Section 1.7. Adjournment. If a quorum is not present at any
meeting of the stockholders, the stockholders present in person or by proxy
shall have the power to adjourn any such meeting from time to time until a
quorum is present. Notice of any adjourned meeting of the stockholders of the
Corporation need not be given if the place, date and hour thereof are announced
at the meeting at which the adjournment is taken, provided, however, that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.5 of these
Amended By-Laws, a notice of the adjourned meeting, conforming to the
requirements of Section 1.3 hereof, shall be given to each stockholder of record
entitled to vote at such meeting. At any adjourned meeting at which a quorum is
present, any business may be transacted that might have been transacted on the
original date of the meeting. [Section 222(c).]
Section 1.8. Proxies. Any stockholder entitled to vote at any
meeting of the stockholders or to express consent to or dissent from corporate
action without a meeting may authorize another person or persons to vote at any
such meeting and express such consent or dissent for him by proxy. A stockholder
may authorize a valid proxy by executing a written instrument signed by such
stockholder, or by causing his or her signature to be affixed to such writing by
any reasonable means including, but not limited to, by facsimile signature, or
by transmitting or authorizing the transmission of a telegram, cablegram or
other means of electronic transmission to the person designated as the holder of
the proxy, a proxy solicitation firm or a like authorized agent. No such proxy
shall be voted or acted upon after the expiration of three years from the date
of such proxy, unless such proxy provides for a longer period. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except in those
cases where applicable law provides that a proxy shall be irrevocable. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or by filing another duly executed proxy bearing a later date with the
Secretary. Proxies by telegram, cablegram or other electronic transmission must
either set forth or be submitted with information from which it can be
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determined that the telegram, cablegram or other electronic transmission was
authorized by the stockholder. Any copy, facsimile telecommunication or other
reliable reproduction of a writing or transmission created pursuant to this
section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile telecommunication
or other reproduction shall be a complete reproduction of the entire original
writing or transmission. [Sections 212(b), (c), (d), (e).]
Section 1.9. Organization; Procedure. At every meeting of
stockholders the presiding officer shall be the President or, in the event of
his absence or disability, any Vice President or a presiding officer chosen by a
majority of the stockholders present in person or by proxy. The Secretary or
Acting Secretary, or in the event of his absence or disability, the Assistant
Secretary, if any, or if there be no Assistant Secretary, in the absence of the
Secretary or Acting Secretary, an appointee of the presiding officer, shall act
as Secretary of the meeting. The order of business and all other matters of
procedure at every meeting of stockholders may be determined by such presiding
officer.
Section 1.10. Stockholder Proposals and Nominations of
Directors. Nominations for election to the Board of Directors of the Corporation
at a meeting of the stockholders may be made by the Board of Directors, or on
behalf of the Board of Directors by a Nominating Committee appointed by the
Board of Directors, or by any stockholder of the Corporation entitled to vote
for the election of Directors at such meeting.
Section 1.11. [Reserved] Inspectors of Elections. [Sections
231(a), (b), (d).]
Section 1.12. [Reserved] Opening and Closing of Polls.
[Section 231(c).]
Section 1.13. Consent of Stockholders in Lieu of Meeting. Any
action required or permitted to be taken by the stockholders of the Corporation
may be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the Corporation by delivery to its registered office in
the State of Delaware,
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its principal place of business, or to an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested.
Every written consent permitted by this section shall bear the
date of signature of each stockholder who signs the consent and no written
consent shall be effective to take the corporate action referred to therein
unless, within sixty days of the earliest dated consent delivered in the manner
required by law to the Corporation, written consents signed by a sufficient
number of holders to take action are delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of business,
or an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not so consented in writing. [Section 228(a),
(c), (d).]
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. General Powers. Except as may otherwise be
provided by law, by the Restated Certificate of Incorporation or by these
Amended By-Laws, the business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors which may exercise all such
powers of the Corporation. [Section 141(a).]
Section 2.2. Number and Term of Office. The number of
Directors constituting the entire Board of Directors shall be nine (9), which
number may be modified from time to time by resolution of the Board of
Directors, but in no event shall the number of Directors be less than three (3)
or greater than twenty-one (21). Each Director (whenever elected) shall hold
office until his successor has been duly elected and qualified, or until his
earlier death, resignation or removal. If the number of Directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain or attain a number of Directors in each class as nearly equal as
reasonably possible, but no decrease in the number of Directors may shorten the
term of any incumbent Director.
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Section 2.3. Election of Directors. The members of the Board
of Directors elected by the holders of the Common Stock of the Corporation shall
be divided at the annual meeting of stockholders to be held in 1995 into three
classes, designated Classes I, II and III, which shall be as nearly equal in
number as possible. At the annual meeting of stockholders in 1995, Directors of
Class I shall be elected to hold office for a term expiring at the annual
meeting of stockholders to be held in 1996, Directors of Class II shall be
elected to hold office for a term expiring at the annual meeting of stockholders
to be held in 1997 and Directors of Class III shall be elected to hold office
for a term expiring at the annual meeting of stockholders to be held in 1998. At
each succeeding annual meeting of stockholders following such initial
classification and election, the respective successors of Directors whose terms
are expiring shall be elected for terms expiring at the annual meeting of
stockholders held in the third succeeding year. If the annual meeting of
stockholders for the election of Directors is not held on the date designated
therefor, the Directors shall cause the meeting to be held as soon thereafter
as convenient. At each meeting of the stockholders for the election of
Directors, provided a quorum is present, the Directors shall be elected by a
plurality of the votes validly cast in such election. Notwithstanding the
foregoing, the election, term, removal and filling of vacancies with respect to
Directors elected separately by the holders of one or more series of Preferred
Stock of the Corporation shall not be governed by this Article II, but rather
shall be as provided for in the resolutions adopted by the Board of Directors
creating and establishing such series of Preferred Stock. [Sections 141(d),
211(b), (c), 216.]
Section 2.4. Annual and Regular Meetings. The annual meeting
of the Board of Directors for the purpose of electing officers and for the
transaction of such other business as may come before the meeting shall be held
as soon as possible following adjournment of the annual meeting of the
stockholders at the place of such annual meeting of the stockholders. Notice of
such annual meeting of the Board of Directors need not be given. The Board of
Directors from time to time may by resolution provide for the holding of
regular meetings and fix the place (which may be within or without the State of
Delaware) and the date and hour of such meetings. Notice of regular meetings
need not be given, provided, however, that if the Board of Directors shall fix
or change the time or place of any regular meeting, notice of such action shall
be mailed promptly, or sent by facsimile transmission or telegram, to each
Director who shall not have been present at the meeting at which such action was
taken, addressed to him at his usual place of
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business, or shall be delivered to him personally. Notice of such action need
not be given to any Director who attends the first regular meeting after such
action is taken without protesting the lack of notice to him, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting. [Section 141(g).]
Section 2.5. Special Meetings; Notice. Special meetings of the
Board of Directors shall be held whenever called by a majority of the total
authorized number of Directors, the Chairman or by the President or, in the
event of his absence or disability, by any Vice President or by the Secretary or
Acting Secretary, at such place (within or without the State of Delaware), date
and hour as may be specified in the respective notices or waivers of notice of
such meetings. Special meetings of the Board of Directors may be called on 24
hours' notice, if notice is given to each Director personally or by telephone,
telegram, facsimile or other electronic means of transmission, or on five days'
notice, if notice is mailed to each Director, addressed to him at his usual
place of business. Notice of any special meeting need not be given to any
Director who attends such meeting without protesting the lack of notice to him,
prior to or at the commencement of such meeting, or to any Director who submits
a signed waiver of notice, whether before or after such meeting, and any
business may be transacted thereat. [Sections 141(g), 229.]
Section 2.6. Quorum; Voting. At all meetings of the Board of
Directors, the presence of a majority of the total authorized number of
Directors shall constitute a quorum for the transaction of business. Except as
otherwise required by law, the Restated Certificate of Incorporation or these
Amended By-Laws, the vote of a majority of the Directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors.
[Section 141(b).]
Section 2.7. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any adjourned
meeting unless the time and place of the adjourned meeting are not announced at
the time of adjournment, in which case notice conforming to the requirements of
Section 2.5 shall be given to each Director.
Section 2.8. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all members of the Board of Directors consent thereto in
writ-
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ing, and such writing or writings are filed with the minutes of proceedings of
the Board of Directors. [Section 141(f).]
Section 2.9. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board or, in his absence or if
such office is vacant, by the President, or in their absence by a chairman
chosen at the meeting. The Secretary or Acting Secretary shall act as secretary
of the meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 2.10. Regulations; Manner of Acting. To the extent
consistent with applicable law, the Restated Certificate of Incorporation and
these Amended By-Laws, the Board of Directors may adopt such rules and
regulations for the conduct of meetings of the Board of Directors and for the
management of the property, affairs and business of the Corporation as the Board
of Directors may deem appropriate. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.11. Action by Telephonic Communications. Members of
the Board of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute presence
in person at such meeting. [Section 141(i).]
Section 2.12. Resignations. Any Director may resign at any
time by delivering a written notice of resignation, signed by such Director, to
the President or the Secretary or Acting Secretary. Unless otherwise specified
therein, such resignation shall take effect upon delivery. [Section 141(b).]
Section 2.13. Removal of Directors. A Director may be removed
for or without cause, upon the affirmative vote of the holders of a majority of
the outstanding shares of stock of the Corporation then entitled to vote at an
election of Directors, cast at a special meeting of stockholders called for the
purpose or at an annual meeting. Notwithstanding the foregoing, the election,
term, removal and filling of vacancies with respect to Directors elected
separately by the holders of one or more series of Preferred Stock of the
Corporation shall not be governed by this Article II, but rather shall be as
provided for either in the Restated Certificate of Incorporation or in the
Preferred Stock Certificate of Designations pursuant to which such series of
Preferred Stock was created and
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established. [Section 141(k).]
Section 2.14. Vacancies and Newly Created Directorships. If
any vacancies shall occur in the Board of Directors, by reason of death,
resignation, removal (and the stockholders shall not have filled such vacancy as
provided in Section 2.13 above) or otherwise, or if the authorized number of
Directors shall be increased, the Directors then in office shall continue to
act, and such vacancies or newly created directorships, as the case may be, may
be filled by a majority of Directors then in office, although less than a
quorum. A Director elected by the Directors pursuant to this Section 2.14 to
fill a vacancy or a newly created directorship shall hold office until his
successor has been elected and qualified or until his earlier death, resignation
or removal. [Section 223.]
Section 2.15. Compensation. The amount, if any, which each
Director shall be entitled to receive as compensation for his services as such
shall be fixed from time to time by resolution of the Board of Directors.
[Section 141(h).]
Section 2.16. Reliance on Accounts and Reports, etc. A
Director, or a member of any Committee designated by the Board of Directors
shall, in the performance of his duties, be fully protected in relying in good
faith upon the records of the Corporation and upon information, opinions,
reports or statements presented to the Corporation by any of the Corporation's
officers or employees, or Committees designated by the Board of Directors, or by
any other person as to the matters the member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation. [Section 141(e).]
ARTICLE III
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 3.1. How Constituted. The Board of Directors may, by
resolution adopted by a majority of the whole Board, designate one or more
Committees, including an Executive Committee, each such Committee to consist of
such number of Directors as from time to time may be fixed by the Board of
Directors. The Board of Directors may designate one or more Directors as
alternate members of any such Committee, who may replace any absent or
disqualified member or members at any meeting of such Committee. Thereafter,
members (and alternate members, if any) of each such Committee may be designated
at the annual meeting of the Board of
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Directors. Any such Committee may be abolished or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such Committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his
successor shall have been designated or until he shall cease to be a Director,
or until his earlier death, resignation or removal. [Section 141(c).]
Section 3.2. Powers. During the intervals between the
meetings of the Board of Directors, the Executive Committee, except as otherwise
provided in this section, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the property, affairs
and business of the Corporation, including the power to declare dividends and to
authorize the issuance of stock. Each such other Committee, except as otherwise
provided in this section, shall have and may exercise such powers of the Board
of Directors as may be provided by resolution or resolutions of the Board of
Directors. Neither the Executive Committee nor any such other Committee shall
have the power or authority:
(a) to amend the Restated Certificate of Incorporation (except
that a Committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by
the Board of Directors as provided in Section 151(a) of the Delaware
General Corporation Law, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the
conversion into, or the exchange of such shares for, shares of any
other class or classes or any other series of the same or any other
class or classes of stock of the Corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of
the shares of any series),
(b) to adopt an agreement of merger or consolidation,
(c) to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and
assets,
(d) to recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or
(e) to amend the Amended By-Laws of the Corporation.
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The Executive Committee shall have, and any such other Committee may be granted
by the Board of Directors, power to authorize the seal of the Corporation to be
affixed to any or all papers which may require it. [Section 141(c).]
Section 3.3. Proceedings. Each such Committee may fix its own
rules of procedure and may meet at such place (within or without the State of
Delaware), at such time and upon such notice, if any, as it shall determine from
time to time. Each such Committee shall keep minutes of its proceedings and
shall report such proceedings to the Board of Directors at the meeting of the
Board of Directors next following any such proceedings.
Section 3.4. Quorum and Manner of Acting. Except as may be
otherwise provided in the resolution creating such Committee, at all meetings of
any Committee the presence of members (or alternate members) constituting a
majority of the total authorized membership of such Committee shall constitute a
quorum for the transaction of business. The act of the majority of the members
present at any meeting at which a quorum is present shall be the act of such
Committee. Any action required or permitted to be taken at any meeting of any
such Committee may be taken without a meeting, if all members of such Committee
shall consent to such action in writing and such writing or writings are filed
with the minutes of the proceedings of the Committee. The members of any such
Committee shall act only as a Committee, and the individual members of such
Committee shall have no power as such. [Section 141(c), (f).]
Section 3.5. Action by Telephonic Communications. Members of
any Committee designated by the Board of Directors may participate in a meeting
of such Committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting. [Section 141(i).]
Section 3.6. Absent or Disqualified Members. In the absence or
disqualification of a member of any Committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. [Section 141(c).]
Section 3.7. Resignations. Any member (and any alternate
member) of any Committee may resign at any time by delivering a written notice
of resignation, signed by such
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member, to the Chairman or the President. Unless otherwise specified therein,
such resignation shall take effect upon delivery.
Section 3.8. Removal. Any member (and any alternate member)
of any Committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the whole Board of Directors.
Section 3.9. Vacancies. If any vacancy shall occur in any
Committee, by reason of disqualification, death, resignation, removal or
otherwise, the remaining members (and any alternate members) shall continue to
act, and any such vacancy may be filled by the Board of Directors.
ARTICLE IV
OFFICERS
Section 4.1. Number. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a President, one or more Vice
Presidents, a Secretary, a Controller, a General Auditor and a Treasurer, and it
may, if it so determines, elect a Chairman of the Board of Directors from among
its members. The Board of Directors also may elect a Vice Chairman and one or
more Acting or Assistant Secretaries, Assistant Controllers and Assistant
Treasurers in such numbers as the Board of Directors may determine. Any number
of offices may be held by the same person, except that neither the Chairman of
the Board of Directors nor the President shall also hold the office of
Secretary. No officer, other than the Chairman or Vice Chairman, need be a
Director of the Corporation. [Section 142(a), (b).]
Section 4.2. Election. Unless otherwise determined by the
Board of Directors, the officers of the Corporation shall be elected by the
Board of Directors at the annual meeting of the Board of Directors, and shall be
elected to hold office until the next succeeding annual meeting of the Board of
Directors. In the event of the failure to elect officers at such annual meeting,
officers may be elected at any regular or special meeting of the Board of
Directors. Each officer shall hold office until his successor has been elected
and qualified, or until his earlier death, resignation or removal. [Section
142(b).]
Section 4.3. Salaries. The salaries of all officers and
agents of the Corporation shall be fixed by the Board of Directors.
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Section 4.4. Removal and Resignation; Vacancies. Any officer
may be removed for or without cause at any time by the Board of Directors. Any
officer may resign at any time by delivering a written notice of resignation,
signed by such officer, to the Board of Directors or the President or the
Secretary or Acting Secretary. Unless otherwise specified therein, such
resignation shall take effect upon delivery. Any vacancy occurring in any office
of the Corporation, by death, resignation, removal or otherwise, shall be filled
by the Board of Directors. [Section 142(b), (e).]
Section 4.5. Authority and Duties of Officers. The officers of
the Corporation shall have such authority and shall exercise such powers and
perform such duties as may be specified in these Amended By-Laws, except that in
any event each officer shall exercise such powers and perform such duties as may
be required by law. [Section 142(a).]
Section 4.6. The President. The President shall preside at all
meetings of the stockholders and Directors at which he is present in the absence
of the Chairman or Vice Chairman, shall be the chief executive officer and the
chief operating officer of the Corporation, shall have general control and
supervision of the policies and operations of the Corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall manage and administer the Corporation's business and affairs and shall
also perform all duties and exercise all powers usually pertaining to the office
of a chief executive officer and a chief operating officer of a corporation. He
shall have the authority to sign, in the name and on behalf of the Corporation,
checks, orders, contracts, leases, notes, drafts and other documents and in-
struments in connection with the business of the Corporation, and together with
the Secretary or an Acting or Assistant Secretary, conveyances of real estate
and other documents and instruments to which the seal of the Corporation is
affixed. He shall have the authority to cause the employment or appointment of
such employees and agents of the Corporation as the conduct of the business of
the Corporation may require, to fix their compensation, and to remove or suspend
any employee or agent elected or appointed by the President or the Board of
Directors. The President shall perform such other duties and have such other
powers as the Board of Directors or the Chairman may from time to time
prescribe.
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Section 4.7. Vice Presidents. Each Vice President shall
perform such duties and exercise such powers as may be assigned to him from time
to time by the President. In the absence of the President, the duties of the
President shall be performed and his powers may be exercised by such Vice
President as shall be designated by the President, or failing such designation,
such duties shall be performed and such powers may be exercised by each Vice
President in the order of their earliest election to that office, subject in any
case to review and superseding action by the President.
Section 4.8. The Secretary. The Secretary shall have the
following powers and duties:
(a) He shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of
Directors in books provided for that purpose.
(b) He shall cause all notices to be duly given in accordance
with the provisions of these Amended By-Laws and as required by law.
(c) Whenever any Committee shall be appointed pursuant to a
resolution of the Board of Directors, he shall furnish a copy of such
resolution to the members of such Committee.
(d) He shall be the custodian of the records and of the seal
of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation
prior to the issuance thereof and to all instruments the execution of
which on behalf of the Corporation under its seal shall have been duly
authorized in accordance with these Amended By-Laws, and when so
affixed he may attest the same.
(e) He shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required
by law, the Restated Certificate of Incorporation or these Amended
By-Laws.
(f) He shall have charge of the stock books and ledgers of the
Corporation and shall cause the stock and transfer books to be kept in
such manner as to show at any time the number of shares of stock of the
Corporation of each class issued and outstanding, the names (arranged
alphabetically or chronologically) and the addresses of the holders of
record of such shares, the number of shares held by each holder and the
date as of which each became such holder of record.
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(g) He shall sign (unless the Treasurer, an Assistant
Treasurer or Acting or Assistant Secretary shall have signed)
certificates representing shares of the Corporation the issuance of
which shall have been authorized by the Board of Directors.
(h) He shall perform, in general, all duties incident to the
office of Secretary and such other duties as may be specified in these
Amended By-Laws or as may be assigned to him from time to time by the
Board of Directors, or the President.
Section 4.9. The Treasurer. The Treasurer shall have the
following powers and duties:
(a) He shall have charge and supervision over and be
responsible for the moneys, securities, receipts and disbursements of
the Corporation, and shall keep or cause to be kept full and accurate
records of all receipts of the Corporation.
(b) He shall cause the moneys and other valuable effects of
the Corporation to be deposited in the name and to the credit of the
Corporation in such banks or trust companies or with such bankers or
other depositaries as shall be selected in accordance with Section
8.5 of these Amended By-Laws.
(c) He shall cause the moneys of the Corporation to be
disbursed by checks or drafts (signed as provided in Section 8.6 of
these Amended By-Laws) upon the authorized depositories of the
Corporation and cause to be taken and preserved proper vouchers for all
moneys disbursed.
(d) He shall render to the Board of Directors or the
President, whenever requested, a statement of the financial condition
of the Corporation and of all his transactions as Treasurer, and render
a full financial report at the annual meeting of the stockholders, if
called upon to do so.
(e) He shall be empowered from time to time to require from
all officers or agents of the Corporation reports or statements giving
such information as he may desire with respect to any and all financial
transactions of the Corporation.
(f) He may sign (unless an Assistant Treasurer or the
Secretary or an Acting or Assistant Secretary shall have signed)
certificates representing stock of the Corporation the issuance of
which shall have been
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authorized by the Board of Directors.
(g) He shall perform, in general, all duties incident to the
office of treasurer and such other duties as may be specified in these
Amended By-Laws or as may be assigned to him from time to time by the
Board of Directors, or the President.
Section 4.10. Additional Officers. The Board of Directors may
appoint such other officers and agents as it may deem appropriate, and such
other officers and agents and the officers specified in Section 4.1 hereof not
covered in Sections 4.6 through 4.9 hereof shall hold their offices for such
terms and shall exercise such powers and perform such duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be authorized or prescribed by the Board of Directors. The
Board of Directors from time to time may delegate to any officer or agent the
power to appoint subordinate officers or agents and to prescribe their
respective rights, terms of office, authorities and duties. Any such officer or
agent may remove any such subordinate officer or agent appointed by him, for or
without cause. [Section 142(a), (b).]
Section 4.11. Security. The Board of Directors may require any
officer, agent or employee of the Corporation to provide security for the
faithful performance of his duties, in such amount and of such character as may
be determined from time to time by the Board of Directors. [Section 142(c).]
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificates of Stock, Uncertificated Shares.
The shares of the Corporation shall be represented by certificates, provided
that the Board of Directors may provide by resolution or resolutions that some
or all of any or all classes or series of the stock of the Corporation, or
rights associated therewith shall be uncertificated shares. Any such resolution
shall not apply to shares represented by a certificate until each certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock in the Corporation
represented by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
Corporation, by the Chairman, President or a Vice President, and by the
16
<PAGE> 22
Treasurer or an Assistant Treasurer, or the Secretary or an Acting or Assistant
Secretary, representing the number of shares registered in certificate form.
Such certificate shall be in such form as the Board of Directors may determine,
to the extent consistent with applicable law, the Restated Certificate of
Incorporation and these Amended By-Laws. [Section 158.]
Section 5.2. Signatures; Facsimile. All of such signatures on
the certificate may be a facsimile, engraved or printed, to the extent permitted
by law. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue. [Section 158.]
Section 5.3. Lost, Stolen or Destroyed Certificates. The
Board of Directors may direct that a new certificate be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon delivery to the Board of Directors of an affidavit of
the owner or owners of such certificate, setting forth such allegation. The
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of any such new certificate. [Section 167.]
Section 5.4. Transfer of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares, duly endorsed or accompanied by appropriate evidence of succession,
assignment or authority to transfer, the Corporation shall issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books. Within a reasonable time after the
transfer of uncertificated stock, the Corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a)
of the General Corporation Law of the State of Delaware. Subject to the
provisions of the Restated Certificate of Incorporation and these Amended
By-Laws, the Board of Directors may prescribe such additional rules and
regulations as it may deem appropriate relating to the issue, transfer and
registration of shares of the Corporation. [Section 151(f).]
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Section 5.5. Record Date. In order to determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted by the Board of Directors, and
which shall not be more than sixty nor less than ten days before the date of
such meeting. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled pursuant to these Amended By-Laws to consent to corporate action in
writing without a meeting, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which date shall not be
more than ten days after the date upon which the resolution fixing the record
date is adopted by the Board of Directors. If no record date has been fixed by
the Board of Directors, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights of the stockholders entitled to exercise any rights in respect of
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any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto. [Section 213.]
Section 5.6. Registered Stockholders. Prior to due surrender
of a certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so. [Section 159.]
Section 5.7. Transfer Agent and Registrar. The Board of
Directors may appoint one or more transfer agents and one or more registrars,
and may require all certificates representing shares to bear the signature of
any such transfer agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Nature of Indemnity. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was or has agreed to become a Director or officer of the Corporation, or
is or was serving or has agreed to serve at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party
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or is threatened to be made a party to such an action, suit or proceeding by
reason of the fact that he is or was or has agreed to become an employee or
agent of the Corporation, or is or was serving or has agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding had no reasonable cause to believe his conduct was unlawful; except
that in the case of an action or suit by or in the right of the Corporation to
procure a judgment in its favor (1) such indemnification shall be limited to
expenses (including attorneys' fees) actually and reasonably incurred by such
person in the defense or settlement of such action or suit, and (2) no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper.
The termination of any action, suit or proceeding by judgment,
order settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
Section 6.2. Successful Defense. To the extent that a
Director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 6.1 hereof or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith.
Section 6.3. Determination That Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.1
hereof (unless ordered by a court) shall be made by the Corporation unless a
deter-
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mination is made that indemnification of the Director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.1 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.1 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the appli-
cable standard of conduct set forth in Section 6.1 hereof. Any such
determination shall be made (1) by a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such Directors, or if such Directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 6.4. Advance Payment of Expenses. Expenses (including
attorneys' fees) incurred by a Director or officer in defending any civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate. The Board of Directors may authorize the Corporation's
counsel to represent such Director, officer, employee or agent in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.
Section 6.5. Procedure for Indemnification of Directors and
Officers. Any indemnification of a Director or officer of the Corporation under
Sections 6.1 and 6.2, or advance of costs, charges and expenses to a Director or
officer under Section 6.4 of this Article, shall be made promptly, and in any
event within 30 days, upon the written request of the Director or officer. If a
determination by the Corporation that the Director or officer is entitled to
indemnification pursuant to this Article is required, and the Corporation fails
to respond within sixty days to a written request for indemnity, the Corporation
shall be deemed to have approved such request. If the Corporation denies a
written request for indemnity or advancement of expenses, in whole or in part,
or if payment in full pursuant to such request is not made within 30 days, the
right to indemnification or advances as granted by this Article shall be
enforceable by the Director or officer in any court of competent jurisdiction.
Such person's costs and expenses
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incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 6.4 of this Article where the required undertaking, if
any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Section 6.1 of this Article, but the burden of
proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) to have made a determination prior to the commencement
of such action that indemnification of the claimant is proper in the
circumstances because he has met the applicable standard of conduct set forth
in Section 6.1 of this Article, nor the fact that there has been an actual
determination by the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) that the claimant has not met
such applicable standard of con duct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
Section 6.6. Survival; Preservation of Other Rights. The
foregoing indemnification provisions shall be deemed to be a contract between
the Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the General Corporation Law of the State of Delaware are in
effect. Any repeal or modification of these indemnification provisions shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in whole or in part upon any such state
of facts. Such a "contract right" may not be modified retroactively without the
consent of such Director, officer, employee or agent.
The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
under any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
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Section 6.7. Insurance. The Corporation shall purchase and
maintain insurance on behalf of any person who is or was or has agreed to become
a Director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
Section 6.8. Severability. If this Article VI or any portion
hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify each Director or
officer and may indemnify each employee or agent of the Corporation as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any action, suit or proceeding, whether
civil, criminal, administrative or investigative, including an action by or in
the right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ARTICLE VII
OFFICES
Section 7.1. Registered Office. The registered office of the
Corporation in the State of Delaware shall be located at Corporation Trust
Center, 1209 Orange Street in the City of Wilmington, County of New Castle.
Section 7.2. Other Offices. The Corporation may maintain
offices or places of business at such other locations within or without the
State of Delaware as the Board of Directors may from time to time determine or
as the business of the Corporation may require.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Dividends. Subject to any applicable provisions
of law and the Restated Certificate of Incorporation, dividends upon the shares
of the Corporation may be declared by the Board of Directors at any regular or
special meeting of the Board of Directors and any such dividend may be paid in
cash, property, shares of the Corporation's capital stock or rights to acquire
the same.
A member of the Board of Directors, or a member of any
Committee designated by the Board of Directors shall be fully protected in
relying in good faith upon the records of the Corporation and upon such
information, opinions, reports or statements presented to the Corporation by any
of its officers or employees, or Committees of the Board of Directors, or by any
other person as to matters the Director reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation, as to the value and amount
of the assets, liabilities and/or net profits of the Corporation, or any other
facts pertinent to the existence and amount of surplus or other funds from which
dividends might properly be declared and paid.
[Sections 172, 173.]
Section 8.2. Reserves. There may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, thinks proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall think conducive to the interest of the
Corporation, and the Board of Directors may similarly modify or abolish any
such reserve.
Section 8.3. Execution of Instruments. The President, any
Vice President, the Secretary or Acting Secretary or the Treasurer may enter
into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. The Board of Directors or the President may authorize
any other officer or agent to enter into any contract or execute and deliver
any instrument in the name and on behalf of the Corporation. Any such
authorization may be general or limited to specific contracts or instruments.
Section 8.4. Corporate Indebtedness. No loan shall be
contracted on behalf of the Corporation, and no evidence of indebtedness shall
be issued in its name, unless
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authorized by the Board of Directors or the President or any Vice President.
Such authorization may be general or confined to specific instances. Loans so
authorized may be effected at any time for the Corporation from any bank, trust
company or other institution, or from any firm, corporation or individual. All
bonds, debentures, notes and other obligations or evidences of indebtedness of
the Corporation issued for such loans shall be made, executed and delivered as
the Board of Directors or the President or any Vice President shall authorize.
When so authorized by the Board of Directors or the President or any Vice
President, any part of or all the properties, including contract rights, assets,
business or good will of the Corporation, whether then owned or thereafter
acquired, may be mortgaged, pledged, hypothecated or conveyed or assigned in
trust as security for the payment of such bonds, debentures, notes and other
obligations or evidences of indebtedness of the Corporation, and of the interest
thereon, by instruments executed and delivered in the name of the Corporation.
Section 8.5. Deposits. Any funds of the Corporation may be
deposited from time to time in such banks, trust companies or other depositories
as may be determined by the Board of Directors or the President, or by such
officers or agents as may be authorized by the Board of Directors or the
President or any Vice President to make such determination.
Section 8.6. Checks. All checks or demands for money and notes
of the Corporation shall be signed by such officer or officers or such agent or
agents of the Corporation, and in such manner, as the Board of Directors or the
President or any Vice President from time to time may determine.
Section 8.7. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or Acting Secretary or the Treasurer or any other officers
designated by the Board of Directors or the President may sell, transfer,
endorse, and assign any shares of stock, bonds or other securities owned by or
held in the name of the Corporation, and may make, execute and deliver in the
name of the Corporation, under its corporate seal, any instruments that may be
appropriate to effect any such sale, transfer, endorsement or assignment.
Section 8.8. Voting as Stockholder. Unless otherwise
determined by resolution of the Board of Directors, the President or any Vice
President or the Secretary or Acting Secretary shall have full power and
authority on behalf of the Corporation to attend any meeting of
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stockholders of any corporation in which the Corporation may hold stock, and to
act, vote (or execute proxies to vote) and exercise in person or by proxy all
other rights, powers and privileges incident to the ownership of such stock.
Such officers acting on behalf of the Corporation shall have full power and
authority to execute any instrument expressing consent to or dissent from any
action of any such corporation without a meeting. The Board of Directors may by
resolution from time to time confer such power and authority upon any other
person or persons.
Section 8.9. Fiscal Year. The fiscal year of the Corporation
shall commence on the first day of January of each year and shall terminate in
each case on December 31.
Section 8.10. Seal. The seal of the Corporation shall be
circular in form and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware". The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.11. Books and Records; Inspection. Except to the
extent otherwise required by law, the books and records of the Corporation shall
be kept at such place or places within or without the State of Delaware as may
be determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF AMENDED BY-LAWS
Section 9.1. Amendment. These Amended By-Laws may be amended,
altered or repealed
(a) by resolution adopted by a majority of the Board of
Directors at any special or regular meeting of the Board if, in the
case of such special meeting only, notice of such amendment, alteration
or repeal is contained in the notice or waiver of notice of such
meeting; or
(b) at any regular or special meeting of the stockholders upon
the affirmative vote of a majority of the combined voting power of the
then outstanding stock of the Corporation entitled to vote generally in
the election of Directors. In the case of such special meeting only,
notice of such amendment, alteration or
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repeal must be contained in the notice or waiver of notice of such
meeting. [Section 109(a).]
ARTICLE X
CONSTRUCTION
Section 10.1. Construction. In the event of any conflict
between the provisions of these Amended By-Laws as in effect from time to time
and the provisions of the Restated Certificate of Incorporation of the
Corporation as in effect from time to time, the provisions of such Restated
Certificate of Incorporation shall be controlling.
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EXHIBIT 10 (i)
AMERICAN STANDARD INC.
LONG-TERM INCENTIVE COMPENSATION PLAN
(As Amended and Restated as of December 5, 1996)
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. ASCI Board means the Board of Directors of ASCI.
C. ASCI Committee means the Management Development and Nominating
Committee, or such other committee appointed by the ASCI Board,
consisting of three or more persons who may or may not be directors or
officers of the Company or ASCI.
D. ASI Board means the Board of Directors of the Company.
E. ASI Committee means the Management Development and Nominating
Committee, or such other committee appointed by the ASI 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.
F. 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;
<PAGE> 2
(ii) with respect to any Performance Period beginning before
January 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.
G. Beneficiary means any one person or trust appointed by a Participant in
an unrevoked writing filed with the ASI 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 ASI Committee, or if the Beneficiary
appointed by a Participant fails to survive him.
H. Change of Control means the occurrence of any of the following events:
(i) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of ASCI representing 15% or more of
the combined voting power of ASCI's then-outstanding
securities (a "15% Beneficial Owner"); provided, however, that
(a) the term "15% Beneficial Owner" shall not include (1)
Kelso ASI Partners, L.P. and Kelso American Standard Partners,
L.P. ("Kelso") and their affiliates or their immediate
transferees provided that any such transferee holding 15% or
more of the combined voting power of ASCI's outstanding
securities following any such transfer does not following or
concurrently with such transfer acquire any additional shares
of such securities except from Kelso or any of their
affiliates or (2) any Beneficial Owner who has crossed such
15% threshold solely as a result of an acquisition of
securities directly from ASCI, or solely as a result of an
acquisition by ASCI of ASCI's securities, until such time
thereafter as such person acquires additional voting
securities other than directly from ASCI and, after giving
effect to such acquisition, such person would constitute a 15%
Beneficial Owner; and (b) with respect to any person eligible
to file a Schedule 13G pursuant to Rule 13d-1(b)(1) under the
Act with respect to ASCI securities (an "Institutional
Investor"), there shall be excluded from the number of
securities deemed to be beneficially owned by such person a
number of securities representing not more than 10% of the
combined voting power of ASCI's then-outstanding securities;
(ii) during any period of two consecutive years beginning after
December 1, 1996, individuals who at the beginning of such
period constitute the ASCI Board together with those
individuals who first become directors during such period
(other than by reason of an agreement with ASCI or the ASCI
Board in
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<PAGE> 3
settlement of a proxy contest for the election of directors)
and whose election or nomination for election to the ASCI
Board was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of
the ASCI Board;
(iii) the shareholders of ASCI approve a merger, consolidation,
recapitalization or reorganization of ASCI, or a reverse stock
split of any class of voting securities of ASCI, or the
consummation of any such transaction if shareholder approval
is not obtained, other than such transaction which would
result in at least 75% of the total voting power represented
by the voting securities of ASCI or the surviving entity
outstanding immediately after such transaction being
beneficially owned by persons who together owned at least 75%
of the combined voting power of the voting securities of ASCI
outstanding immediately prior to such transaction, with the
relative voting power of each such continuing holder compared
to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this paragraph (iii), (a) such
continuity of ownership (and preservation of relative voting
power) shall be deemed to be satisfied if the failure to meet
such 75% threshold (or to preserve such relative voting power)
is due solely to the acquisition of voting securities by an
employee benefit plan of ASCI or of such surviving entity or
of any Subsidiary of ASCI or such surviving entity and (b)
voting securities beneficially owned by such persons who
receive them other than as holders of voting securities of
ASCI outstanding immediately prior to such transaction shall
not be taken into account for purposes of determining whether
such 75% threshold (or such relative voting power) is
satisfied;
(iv) the shareholders of ASCI approve a plan of complete
liquidation or dissolution of ASCI or an agreement for the
sale or disposition of all or substantially all the assets of
ASCI unless following the completion of such liquidation or
dissolution, or such sale or disposition, the 75% threshold
(and relative voting power) requirements set forth in
sub-paragraph (iii) above are satisfied; or
(v) any other event which the ASCI Committee determines shall
constitute a Change of Control for purposes of this Plan;
provided, however, that a Change of Control shall not be deemed to have
occurred if one of the following exceptions applies:
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<PAGE> 4
(1) Unless a majority of the Continuing Directors and of the ASCI
Committee determine that the exception set forth in this
paragraph (1) shall not apply, none of the foregoing
conditions would have been satisfied but for one or more of
the following persons acquiring or otherwise becoming the
Beneficial Owner of securities of ASCI: (A) any person who has
entered into a binding agreement with ASCI, which agreement
has been approved by two-thirds of the Continuing Directors,
limiting the acquisition of additional voting securities by
such person, the solicitation of proxies by such person or
proposals by such person concerning a business combination
with ASCI (a "Standstill Agreement"); (B) any employee benefit
plan, or trustee or other fiduciary thereof, maintained by
ASCI or any Subsidiary of ASCI; (C) any Subsidiary of ASCI; or
(D) ASCI.
(2) Unless a majority of the Continuing Directors and the ASCI
Committee determine that the exception set forth in this
paragraph (2) shall not apply, none of the foregoing
conditions would have been satisfied but for the acquisition
by or of ASCI of or by another entity (whether by the merger
or consolidation, the acquisition of stock or assets, or
otherwise) in exchange, in whole or in part, for securities of
ASCI, provided that, immediately following such acquisition,
the Continuing Directors constitute a majority of the ASCI
Board, or a majority of the board of directors of any other
surviving entity, and, in either case, no agreement,
arrangement or understanding exists at that time which would
cause such Continuing Directors to cease thereafter to
constitute a majority of the ASCI Board or of such other board
of directors.
Notwithstanding the foregoing, unless otherwise determined by a
majority of the Continuing Directors, no Change of Control shall be deemed to
have occurred with respect to a particular Participant if the Change of Control
results from actions or events in which such Participant is involved in a
capacity other than solely as an officer, employee or director of ASCI.
For purposes of the foregoing definition of Change of Control, the term
"Beneficial Owner," with respect to any securities, shall mean any person who,
directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities (within
the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on
December 1, 1996) under the Act), including pursuant to any agreement,
arrangement or understanding (whether or not in writing);
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<PAGE> 5
provided, however, that (i) a person shall not be deemed the Beneficial
Owner of any security as a result of any agreement, arrangement or
understanding to vote such security (A) arising solely from a revocable
proxy or consent solicited pursuant to, and in accordance with, the
applicable provisions of the Act and the rules and regulations
thereunder or (B) made in connection with, or otherwise to participate
in, a proxy or consent solicitation made, or to be made, pursuant to,
and in accordance with, the applicable provisions of the Act and the
rules and regulations thereunder, in either case described in clause
(A) or clause (B) above whether or not such agreement, arrangement or
understanding is also then reportable by such person on Schedule 13D
under the Act (or any comparable or successor report), and (ii) a
person engaged in business as an underwriter of securities shall not be
deemed to be the Beneficial Owner of any securities acquired through
such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
I. Company means American Standard Inc., a Delaware corporation.
J. 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.
K. Employee means any person who is employed by ASCI, the Company or a
Subsidiary of ASCI or the Company on a full-time basis.
L. 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 ASI
Committee shall select.
M. Maximum Payout means the percentage of the Award Opportunities for a
Performance Period specified by the ASI Committee pursuant to Section
4(a) as the value of such Award opportunities in the event of
attainment of the Maximum Goal for such Period.
N. 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 ASI
Committee shall select.
O. Minimum Payout means the percentage of the Award Opportunities for a
Performance Period specified by the ASI 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.
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<PAGE> 6
P. Participant means a duly elected officer of ASCI or the Company who is
also an Employee and any officer of any Subsidiary of ASCI or the
Company who is designated by the ASI Committee as eligible to
participate in the Plan.
Q. 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 ASI
Committee pursuant to Section 4(a).
R. 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
Performance Period by (y) the number of whole and partial months of
such Participant's participation in such Performance Period.
S. Plan means this American Standard Inc. Long-Term Incentive Compensation
Plan.
T. Prior Participant means a former Participant who was not an Employee
after December 31, 1991.
U. 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.
V. Share means a share of the Common Stock, par value $0.01, of ASCI.
W. Subsidiary means any corporation a majority of the outstanding voting
stock or voting power of which is beneficially owned directly or
indirectly by the corporation in question.
X. 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 ASI Committee shall select.
Y. 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
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<PAGE> 7
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 consistent with
compensation opportunities made available to similarly situated executives in
similar-sized organizations.
Section 3. Administration
The Plan shall be administered by the ASI Committee. In
addition to such functions and responsibilities specifically assigned to the ASI
Committee under the Plan, the ASI 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 Plan as it may deem
necessary or desirable for the administration of the Plan. Determinations,
interpretations or other actions made or taken by the ASI Committee shall, prior
to a Change of Control, be final, binding and conclusive for all purposes and
upon all persons.
Section 4. Establishment of Performance Periods, Goals and Long-Term
Award Opportunities
(a) Performance Periods and Goals. The ASI 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 ASI Committee may establish either or both of a
Minimum Goal and a Maximum Goal for such Period. If a Minimum Goal is
established, the ASI 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 ASI Committee shall assign to each Participant an Award
Opportunity with respect to such Period.
(c) Adjustments. After the beginning of any Performance
Period, the ASI Committee may, in its discretion, modify the Target Goal for
such Period and, if established, the Minimum and Maximum Goals for such Period
and the Minimum and Maximum Payouts
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<PAGE> 8
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 ASI 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 ASI 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 ASI
Committee, in its discretion, before the end of such Performance Period if the
ASI Committee determines that any such Goal has been attained before the end of
such Period. Based on such determination of actual performance level, the ASI
Committee shall then value the Award Opportunities for such Performance Period,
which value shall be:
A. 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;
B. 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 Subsidiaries falling short of the
Target Goal but achieving or exceeding such Minimum Goal;
C. 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;
D. 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
E. if the Maximum Goal established for such Performance Period is
achieved, the Maximum Payout with respect to such Maximum
Goal;
provided, however, notwithstanding any other provision of this Plan or any Award
Opportunity,
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<PAGE> 9
in the event of a Change of Control, all Performance Periods shall end, each
Participant's Target Goal for each such Performance Period shall be deemed to
have been achieved and each Participant shall receive a payment equal to 100% of
such Participant's Award Opportunity with respect to each such Performance
Period.
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
ASI 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 ASI Committee may establish.
Section 6. Prorations and Forfeitures
(a) Death, Disability, Good Reason and Retirement. Except as
otherwise provided in Section 6(c),
(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 of
ASCI or the Company, 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 ASI 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. 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 of ASCI or the
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<PAGE> 10
Company, 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, except
as otherwise provided in Section 6(c), the ASI 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, notwithstanding that
such Participant may be eligible to retire under a retirement plan of ASCI, the
Company or a Subsidiary of ASCI or the Company.
(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 ASI
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 ASI Board on the ASI Committee's
recommendation.
Section 8. Payments upon a Change of Control
Notwithstanding any other provision of this Plan or any Award
Opportunity, in the event of a Change of Control, (x) the Company shall make all
payments hereunder in a single lump sum payment, in cash, Shares or a
combination of such Shares and cash, to each Participant within ten (10) days of
such Change of Control, and (y) Participant may elect to receive any or all
payments hereunder in cash.
Section 9. 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.
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<PAGE> 11
Section 10. 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 ASI Committee.
Section 11. Rights of Employment
Participation in the Plan shall not confer upon any
Participant any right to continue to be an officer of ASCI, the Company or any
Subsidiary of ASCI or the Company 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 of ASCI or the Company at any time to terminate a
Participant's employment.
Section 12. 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 13. 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 of ASCI or the Company.
Section 14. Effective Date; Amendments and Termination; Governing Law
(a) The Plan shall become effective upon its adoption by the
ASI Board.
(b) The ASI Board, upon recommendation of the ASI Committee,
shall have the right to amend, suspend, or terminate the Plan at any time;
however, no such action of the ASI Board shall diminish, reduce, alter, or
impair a Participant's rights with respect to any Award Opportunities assigned
to him before the date of such amendment, suspension, or
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<PAGE> 12
termination 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.
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<PAGE> 13
ANNEX A
LONG-TERM INCENTIVE COMPENSATION PLAN
"Cause" means a Participant's (A) willful and continued failure
substantially to perform his duties with the Company or any Subsidiary of the
Company (other than any such failure resulting from incapacity due to reasonably
documented physical or mental illness), after a demand for substantial
performance is delivered to such Participant by the Chairman of the ASI Board or
officer of equivalent authority which specifically identifies the manner in
which it is believed that such Participant has not substantially performed his
duties, or (B) the willful engaging by such Participant in illegal misconduct
materially and demonstrably injurious to the Company or any Subsidiary of the
Company or to the trustworthiness or effectiveness of the Participant in the
performance of his duties. For purposes hereof, no act, or failure to act, on
such Participant's part shall be considered "willful" unless done, or omitted to
be done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company or a Subsidiary of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the ASI Board or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be done, by
such Participant in good faith and in the best interest of the Company or such
Subsidiary of the Company.
"Good Reason" means any of the following:
(A) an adverse change in a Participant's status or position(s)
as an executive of the Company or of a Subsidiary of the Company, any
adverse change in a Participant's status or position as an executive of
the Company or of a Subsidiary of the Company as a result of a material
diminution in his duties or responsibilities or a relocation of a
Participant's principal place of employment to a location which is at
least 50 miles further from such Participant's principal residence than
his or her current location or the assignment to him of any duties or
responsibilities which are inconsistent with such status or
position(s), or any removal of him from or any failure to reappoint or
reelect him to such position(s) (except in connection with the
termination of his employment for Cause, Disability or retirement or as
a result of his death or by him other than for Good Reason);
(B) a reduction by the Company or such Subsidiary of the
Company in such Participant's base salary;
A-1
<PAGE> 14
(C) the taking of any action by the Company or such Subsidiary
of the Company (including the elimination of a plan without providing
substitutes therefor or the reduction of his awards thereunder) that
would substantially diminish the aggregate projected value of such
Participant's awards under the Company's or such Subsidiary of the
Company's bonus and benefit plans in which he was participating at the
time of the taking of such action;
(D) the taking of any action by the Company or such Subsidiary
of the Company that would substantially diminish the aggregate value of
the benefits provided him under the Company's or such Subsidiary of the
Company's medical, health, accident, disability, life insurance, thrift
and retirement plans in which he was participating at the time of the
taking of such action; or
(E) any purported termination by the Company or such
Subsidiary of the Company of his employment that is not effected for
Cause.
Notwithstanding the foregoing, a termination for Good Reason shall not have
occurred
(i) if the Participant consented in writing to the event giving rise to
the "Good Reason", or
(ii) with regard to the occurrence of the events described in
paragraphs (B), (C) or (D) above prior to a Change of Control, if such
reductions or actions are proportionate to the reductions or actions
applicable to other employees in similar positions pursuant to a cost
savings plan.
"Disability" means a Participant's inability, due to reasonably
documented physical or mental illness, for more than six months to perform his
duties with the Company or a Subsidiary of the Company on a full time basis if,
within 30 days after written notice of termination has been given to such
Participant, he shall not have returned to the full time performance of his
duties.
A-2
<PAGE> 1
EXHIBIT 10(ii)
TRUST AGREEMENT FOR AMERICAN STANDARD INC.
LONG-TERM INCENTIVE COMPENSATION PLAN AND
AMERICAN STANDARD COMPANIES INC.
SUPPLEMENTAL INCENTIVE COMPENSATION PLAN
(As Amended and Restated in its Entirety As of December 5, 1996)
This Trust Agreement dated as of January 1, 1993, and amended and
restated in its entirety as of December 5, 1996, 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 American Standard Companies
Inc. Supplemental Incentive Compensation Plan.
1. Definitions.
For purposes of this Trust Agreement, the following definitions shall
apply:
1.1. ASCI means American Standard Companies Inc., a Delaware
corporation, which is the successor in interest to ASI Holding Corporation.
1.2. ASCI Board means the Board of Directors of ASCI.
1.3. ASCI Committee means the Management Development and Nominating
Committee, or such other committee appointed by the ASCI Board, consisting of
three or more persons who may or may not be directors or officers of the Company
or ASCI.
1.4. ASI Board means the Board of Directors of the Company.
1.5. ASI Committee means the Management Development and Nominating
Committee, or such other committee appointed by the ASI 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.
1.6. 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
<PAGE> 2
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.
1.7. 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 Award 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.
1.8. Change of Control means the occurrence of any of the following
events:
(i) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of ASCI representing 15% or more of the
combined voting power of ASCI's then-outstanding securities (a "15%
Beneficial Owner"); provided, however, that (a) the term "15%
Beneficial Owner" shall not include (1) Kelso ASI Partners, L.P. and
Kelso American Standard Partners, L.P. ("Kelso") and their affiliates
or their immediate transferees provided that any such transferee
holding 15% or more of the combined voting power of ASCI's outstanding
securities following any such transfer does not following or
concurrently with such transfer acquire any additional shares of such
securities except from Kelso or any of their affiliates or (2) any
Beneficial Owner who has crossed such 15% threshold solely as a result
of an acquisition of securities directly from ASCI, or solely as a
result of an acquisition by ASCI of ASCI's securities, until such time
thereafter as such person acquires additional voting securities other
than directly from ASCI and, after giving effect to such acquisition,
such person would constitute a 15% Beneficial Owner; and (b) with
respect to any person eligible to file a Schedule 13G pursuant to Rule
13d-1(b)(1) under the Act with respect to ASCI securities (an
"Institutional Investor"), there shall be excluded from the number of
securities deemed to be beneficially owned by such person a number of
securities representing not more than 10% of the combined voting power
of ASCI's then-outstanding securities;
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<PAGE> 3
(ii) during any period of two consecutive years beginning
after December 1, 1996, individuals who at the beginning of such period
constitute the ASCI Board together with those individuals who first
become directors during such period (other than by reason of an
agreement with ASCI or the ASCI Board in settlement of a proxy contest
for the election of directors) and whose election or nomination for
election to the ASCI Board was approved by a vote of at least
two-thirds of the directors then still in office who either were
directors at the beginning of the period or whose election or
nomination for election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of the ASCI
Board;
(iii) the shareholders of ASCI approve a merger,
consolidation, recapitalization or reorganization of ASCI, or a reverse
stock split of any class of voting securities of ASCI, or the
consummation of any such transaction if shareholder approval is not
obtained, other than such transaction which would result in at least
75% of the total voting power represented by the voting securities of
ASCI or the surviving entity outstanding immediately after such
transaction being beneficially owned by persons who together owned at
least 75% of the combined voting power of the voting securities of ASCI
outstanding immediately prior to such transaction, with the relative
voting power of each such continuing holder compared to the voting
power of each other continuing holder not substantially altered as a
result of the transaction; provided that, for purposes of this
paragraph (iii), (a) such continuity of ownership (and preservation of
relative voting power) shall be deemed to be satisfied if the failure
to meet such 75% threshold (or to preserve such relative voting power)
is due solely to the acquisition of voting securities by an employee
benefit plan of ASCI or of such surviving entity or of any subsidiary
of ASCI or such surviving entity and (b) voting securities beneficially
owned by such persons who receive them other than as holders of voting
securities of ASCI outstanding immediately prior to such transaction
shall not be taken into account for purposes of determining whether
such 75% threshold (or such relative voting power) is satisfied;
(iv) the shareholders of ASCI approve a plan of complete
liquidation or dissolution of ASCI or an agreement for the sale or
disposition of all or substantially all the assets of ASCI unless
following the completion of such liquidation or dissolution, or such
sale or disposition, the 75% threshold (and relative voting power)
requirements set forth in sub-paragraph (iii) above are satisfied; or
(v) any other event which the ASCI Committee determines shall
constitute a Change of Control for purposes of this Plan;
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<PAGE> 4
provided, however, that a Change of Control shall not be deemed to have occurred
if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors and of the ASCI
Committee determine that the exception set forth in this paragraph (1)
shall not apply, none of the foregoing conditions would have been
satisfied but for one or more of the following persons acquiring or
otherwise becoming the Beneficial Owner of securities of ASCI: (A) any
person who has entered into a binding agreement with ASCI, which
agreement has been approved by two-thirds of the Continuing Directors,
limiting the acquisition of additional voting securities by such
person, the solicitation of proxies by such person or proposals by such
person concerning a business combination with ASCI (a "Standstill
Agreement"); (B) any employee benefit plan, or trustee or other
fiduciary thereof, maintained by ASCI or any subsidiary of ASCI; (C)
any subsidiary of ASCI; or (D) ASCI.
(2) Unless a majority of the Continuing Directors and the ASCI
Committee determine that the exception set forth in this paragraph (2)
shall not apply, none of the foregoing conditions would have been
satisfied but for the acquisition by or of ASCI of or by another entity
(whether by the merger or consolidation, the acquisition of stock or
assets, or otherwise) in exchange, in whole or in part, for securities
of ASCI, provided that, immediately following such acquisition, the
Continuing Directors constitute a majority of the ASCI Board, or a
majority of the board of directors of any other surviving entity, and,
in either case, no agreement, arrangement or understanding exists at
that time which would cause such Continuing Directors to cease
thereafter to constitute a majority of the ASCI Board or of such other
board of directors.
Notwithstanding the foregoing, unless otherwise determined by a
majority of the Continuing Directors, no Change of Control shall be deemed to
have occurred with respect to a particular Participant if the Change of Control
results from actions or events in which such Participant is involved in a
capacity other than solely as an officer, employee or director of ASCI.
For purposes of the foregoing definition of Change of Control, the term
"Beneficial Owner," with respect to any securities, shall mean any person who,
directly or indirectly, has or shares the right to vote or dispose of such
securities or otherwise has "beneficial ownership" of such securities (within
the meaning of Rule 13d-3 and Rule 13d-5 (as such Rules are in effect on
December 1, 1996) under the Act), including pursuant to any agreement,
arrangement or understanding (whether or not in writing); provided, however,
that (i) a person shall not be deemed the Beneficial Owner of any security as a
result of any agreement, arrangement or understanding to vote such security (A)
arising solely from a revocable proxy or consent
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<PAGE> 5
solicited pursuant to, and in accordance with, the applicable provisions of the
Act and the rules and regulations thereunder or (B) made in connection with, or
otherwise to participate in, a proxy or consent solicitation made, or to be
made, pursuant to, and in accordance with, the applicable provisions of the Act
and the rules and regulations thereunder, in either case described in clause (A)
or clause (B) above whether or not such agreement, arrangement or understanding
is also then reportable by such person on Schedule 13D under the Act (or any
comparable or successor report), and (ii) a person engaged in business as an
underwriter of securities shall not be deemed to be the Beneficial Owner of any
securities acquired through such person's participation in good faith in a firm
commitment underwriting until the expiration of forty days after the date of
such acquisition.
1.9. Change of Control Stock Value means the value of a share of Common
Stock determined as follows:
(i) if the Change of Control results from an event described
in clause (iii) of the Change of Control definition, the highest per
share price paid for shares of Common Stock of ASCI in the transaction
resulting in the Change of Control;
(ii) if the Change of Control results from an event described
in clauses (i), (ii) or (v) of the Change of Control definition and no
event described in clauses (iii) or (iv) of the Change of Control
definition has occurred in connection with such Change of Control, the
highest sale price of a share of Common Stock of ASCI on any trading
day during the 60 consecutive trading days immediately preceding and
following the date of such Change of Control as reported on the New
York Stock Exchange Composite Tape, or other national securities
exchange on which the Common Stock is traded, and published in The Wall
Street Journal; or
(iii) if the Change of Control results from an event described
in clause (iv) of the Change of Control definition, the price per share
at which shares of Common Stock are redeemed or exchanged by their
holders in the transaction described in such clause (iv) or, if there
has been no such redemption or exchange, the higher of the amounts
determined in accordance with clause (i) or clause (ii) of this Change
of Control Stock Value definition.
1.10. Common Stock means the common stock, par value $0.01 per share,
of ASCI.
1.11. Company means American Standard Inc., a Delaware corporation.
1.12. 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
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<PAGE> 6
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.
1.13. 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.
1.14. 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.
1.15. Participant means an employee of ASCI, the Company or one of its
Subsidiaries who participates in the Plan.
1.16. Plan means either the American Standard Inc. Long-Term Incentive
Compensation Plan or the American Standard Companies Inc. Supplemental Incentive
Plan, as either is in effect from time to time.
1.17. Plan Payout means a payment made pursuant to Section 5(a) of the
American Standard Inc. Long-Term Incentive Compensation Plan or pursuant to the
payout provisions of the American Standard Companies Inc. Supplemental Incentive
Compensation Plan.
1.18. Prime Rate means the rate of interest publicly announced from
time to time by the New York City office of Citibank N.A. as its prime or
reference rate, adjusted as of the first business day of each calendar quarter.
1.19. Share means a share of Common Stock.
1.20. Share Award Account means a separate account established under
the Trust with respect to which the Participant's interests under the Plan are
credited.
1.21. 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.
1.22. Restatement Date means February 3, 1995.
1.23. 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.
1.24. Trust means the trust fund established under this Trust
Agreement.
1.25. Trustee means Robert M. Kennedy or such successor trustee as
shall be
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<PAGE> 7
appointed by the ASI Committee pursuant to Section 19 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. ASCI, the Company and the Subsidiaries shall remain primarily
responsible to fulfill payment obligations under the Plans, and may make
payments directly to Participants as they become due. Such employers shall
notify the Trustee of any decisions to pay benefits directly. To the extent
payments are made from the Trust, the employer's liability to make payments
shall be reduced correspondingly. The Trust shall continue in effect until
terminated by action of the ASI Board; provided that the Trust shall in any
event terminate when all amounts owed to Participants have been paid or the
Trust has been exhausted. The Trust is intended to be a grantor trust within the
meaning of Sections 671 through 679 of the Internal Revenue Code of 1986, as
needed (the "Code").
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 ASI Committee in accordance
with the terms of the Incentive Plan. The ASI 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 ASI Committee may direct the Trustee to maintain separate
investment funds, allocate contributions among such funds, and make transfers
among such funds.
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
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<PAGE> 8
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.
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<PAGE> 9
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.
5. Voting Rights.
Shares credited to each Participant's Share Award Account shall be
voted by the Trustee as recommended by the ASI Board on its proxy voting card.
6. Distributions from Trust.
The Committee may at any time prior to a Change of Control direct that
the Shares and any other property ("Non-Share Interests") 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 prior to a Change of Control, such Participant (or, in
the event of his death, his Beneficiary) shall be entitled to a distribution
from the Trust of all Shares and Non-Share Interests 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 Non-Share Interests 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. Change of Control.
Upon a Change of Control, each Participant shall be entitled to receive
a lump sum cash payment equal to the sum of (i) the Change of Control Stock
Value of all Shares credited to his Share Award Account and (ii) the value of
any Non-Share Interests credited to his Share Award Account (unless within one
(1) business day following such a Change of Control, such Participant has
delivered written notice to the Trustee pursuant to Section 10 hereof requesting
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<PAGE> 10
a distribution from the Trust of all Shares and/or Non-Share Interests credited
to such Participant's Share Award Account in the event of a Change of Control,
in lieu of a cash payment equal to the Change of Control Stock Value of such
Shares and/or the value of Non-Share Interests, in which case such Participant
shall be entitled to receive a distribution of all Shares and/or Non-Share
Interests credited to such Participant's Share Award Account) as soon as
practicable. Upon a Change of Control, the Trustee shall determine as promptly
as practicable the Change of Control Stock Value of the Shares in the Trust and
shall promptly thereafter deliver a written notice (the "Trustee Notice") to the
Company setting forth such Change of Control Stock Value and the manner of its
determination and requesting that the Company purchase all Shares in the Trust
(except for Shares credited to Participants' Share Award Accounts as to which
Participants have requested a distribution in the event of a Change of Control
in lieu of a cash payment equal to the Change of Control Value therefor). A copy
of such Trustee Notice shall be sent to each Participant. Following the receipt
of the Trustee Notice, the Company shall, within three (3) business days
following the Company's receipt of such Trustee Notice, make a cash payment to
the Trustee equal to the Change of Control Stock Value of such Shares against
delivery of such Shares by the Trustee to the Company. In the event that the
Company shall not have made such cash payment to the Trustee within such (3)
business day period, interest on the amount owing to the Trustee will accrue at
a rate per annum equal to the Prime Rate plus 4% and shall be compounded monthly
until paid. Upon a Change of Control, the Trustee shall sell as promptly as
practicable the Non-Share Interests (other than cash) of the Trust (except for
such Non-Share Interests credited to Participants' Share Award Accounts as to
which Participants have requested a distribution in-kind in the event of a
Change of Control in lieu of a cash payment equal to the value therefor). Upon
receipt by the Trustee of (i) the cash payment from the Company for the Shares
and (ii) the proceeds from the sale of the Non-Share Interests (other than
cash), the Trustee shall make to each Participant the lump-sum cash payment
contemplated by the first sentence of this Section 7 with interest, if any,
accrued pursuant to this Section 7, plus a cash payment equal to the cash, if
any, credited to such Participant's Share Award Account. For purposes of this
Section 7, the Trustee's determination of the Change of Control Stock Value of a
Participant in the Trust shall be binding and conclusive.
8. 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 or 7, 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 or
a
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<PAGE> 11
Change of Control, as the case may be.
9. 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.
10. Administration.
This Trust Agreement shall be administered by the ASI 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) prior to a Change of
Control 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 ASI 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.
All forms required to be filed hereunder and all other communications
with respect hereto shall be addressed to the ASI 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, 088556820, or to such other
address as the ASI Committee, ASCI, the Company or the Trustee, as the case may
be, may designate from time to time.
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<PAGE> 12
11. 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 12 and 13 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. The Chief Executive Officer or Chief Financial
Officer of ASCI, the Company or each Subsidiary shall have the duty to inform
the Trustee in writing of the Insolvency of ASCI, the Company or any such
Subsidiary, as the case may be.
12. Effects of Insolvency.
Upon receipt prior to a Change of Control 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 cease making distributions hereunder and 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 ASCI Board, the ASI 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, until such time as the Trustee
determines that ASCI, the Company or the relevant Subsidiary, as the case may
be, is not Insolvent.
13. Judgment Creditor Claims.
In addition to the rights of Creditors set forth in Section 12 hereof,
and notwithstanding any other provision of this Trust Agreement, the assets of
the Trust shall at all times prior to a Change of Control be available to
satisfy claims of Judgment Creditors. Upon receipt by the
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<PAGE> 13
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.
14. Distributions Due to Certain Tax Consequences.
Notwithstanding any provision of this Trust Agreement other than
Sections 12 and 13 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 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.
15. Reports and Records.
The Trustee shall:
15.1. 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;
15.2. make such periodic reports to the Company or ASCI as it shall
reasonably request;
15.3. 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.
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<PAGE> 14
16. 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.
17. For the Benefit of the Trustee.
17.1. 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.
17.2. 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.
18. Resignation and Removal of Trustee.
The Trustee may be removed by the Committee at any time with the
approval of Participants whose Share Award Accounts comprise 75% or more of the
Shares held by the
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<PAGE> 15
Trust. The Trustee may resign at any time upon notice in writing to the Company
and ASCI.
19. 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.
20. Amendment of Trust.
All contributions made by ASCI, the Company or any Subsidiary shall be
irrevocable unless the benefits payable hereunder have been otherwise paid to
the Participants by ASCI, the Company or a Subsidiary; 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 (a) permit any part of the corpus
or income of the Trust to be returned or diverted to the Company or ASCI or (b)
diminish, reduce, alter, or impair any Participant's Share Award Account without
such Participant's consent.
21. No Right of Alienation or Employment.
Except as required in Sections 11 through 13 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.
22. Headings.
Section headings in this Trust Agreement are for reference only. In the
event of a
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<PAGE> 16
conflict between a heading and the content of a Section, the content of the
Section shall control.
23. 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.
24. Successors.
This Trust Agreement shall be binding upon, and the powers herein
granted to the ASI Committee, the Company, ASCI and the Trustee, respectively,
shall be exercisable by, the respective successors and assigns of the ASI
Committee, the Company, ASCI and the Trustee.
25. 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.
26. 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.
27. Assignment.
The benefits payable under this Trust Agreement may not be assigned,
alienated, pledged, attached or garnished.
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<PAGE> 17
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
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<PAGE> 1
EXHIBIT 10(iii)
ANNUAL INCENTIVE PLAN
(As Amended and Restated as of December 5, 1996)
ARTICLE I. PURPOSE
The purpose of the Annual Incentive Plan (hereinafter referred to as
the "Plan") is to further the achievement of the corporate financial goals of
American Standard Inc. (sometimes hereinafter referred to as the "Corporation")
by providing bonus awards to key executives which reward the executive in
relation to the performance of the Corporation and its operating units and to
his individual contribution thereto.
ARTICLE II. CHANGE OF CONTROL DEFINITION
"Change of Control" shall mean the occurrence of any of the following
events:
(i) any person is or becomes the Beneficial Owner, directly or
indirectly, of securities of American Standard Companies Inc.
("ASCI") representing 15% or more of the combined voting power
of ASCI's then-outstanding securities (a "15% Beneficial
Owner"); provided, however, that (a) the term "15% Beneficial
Owner" shall not include (1) Kelso ASI Partners, L.P. and
Kelso American Standard Partners, L.P. ("Kelso") and their
affiliates or their immediate transferees provided that any
such transferee holding 15% or more of the combined voting
power of ASCI's outstanding securities following any such
transfer does not following or concurrently with such transfer
acquire any additional shares of such securities except from
Kelso or any of their affiliates or (2) any Beneficial Owner
who has crossed such 15% threshold solely as a result of an
acquisition of securities directly from
<PAGE> 2
ASCI, or solely as a result of an acquisition by ASCI of
ASCI's securities, until such time thereafter as such person
acquires additional voting securities other than directly from
ASCI and, after giving effect to such acquisition, such person
would constitute a 15% Beneficial Owner; and (b) with respect
to any person eligible to file a Schedule 13G pursuant to Rule
13d-1(b)(1) under the Act with respect to ASCI's securities
(an "Institutional Investor"), there shall be excluded from
the number of securities deemed to be beneficially owned by
such person a number of securities representing not more than
10% of the combined voting power of ASCI's then-outstanding
securities;
(ii) during any period of two consecutive years beginning
after December 1, 1996, individuals who at the beginning of
such period constitute the Board of Directors of ASCI together
with those individuals who first become directors during such
period (other than by reason of an agreement with ASCI or the
Board of Directors of ASCI in settlement of a proxy contest
for the election of directors) and whose election or
nomination for election to the Board of Directors of ASCI was
approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved (the "Continuing
Directors"), cease for any reason to constitute a majority of
the Board of Directors of ASCI;
(iii) the shareholders of ASCI approve a merger,
consolidation, recapitalization or reorganization of ASCI, or
a reverse stock split of any class of voting securities of
ASCI, or the consummation of any such transaction if
shareholder approval is not obtained,
- 2 -
<PAGE> 3
other than such transaction which would result in at least 75%
of the total voting power represented by the voting securities
of ASCI or the surviving entity outstanding immediately after
such transaction being beneficially owned by persons who
together owned at least 75% of the combined voting power of
the voting securities of ASCI outstanding immediately prior to
such transaction, with the relative voting power of each such
continuing holder compared to the voting power of each other
continuing holder not substantially altered as a result of the
transaction; provided that, for purposes of this paragraph
(iii), (a) such continuity of ownership (and preservation of
relative voting power) shall be deemed to be satisfied if the
failure to meet such 75% threshold (or to preserve such
relative voting power) is due solely to the acquisition of
voting securities by an employee benefit plan of ASCI or of
such surviving entity or of any subsidiary of ASCI or such
surviving entity and (b) voting securities beneficially owned
by such persons who receive them other than as holders of
voting securities of ASCI outstanding immediately prior to
such transaction shall not be taken into account for purposes
of determining whether such 75% threshold (or such relative
voting power) is satisfied;
(iv) the shareholders of ASCI approve a plan of complete
liquidation or dissolution of ASCI or an agreement for the
sale or disposition of all or substantially all the assets of
ASCI unless following the completion of such liquidation or
dissolution, or such sale or disposition, the 75% threshold
(and relative voting power) requirements set forth in
sub-paragraph (iii) above are satisfied; or
(v) any other event which the Management Development and
Nominating Committee of ASCI (the "ASCI Committee")
- 3 -
<PAGE> 4
determines shall constitute a Change of Control for purposes
of this Plan;
provided, however, that a Change of Control shall not be deemed to have
occurred if one of the following exceptions applies:
(1) Unless a majority of the Continuing Directors and of
the ASCI Committee determine that the exception set
forth in this paragraph (1) shall not apply, none of
the foregoing conditions would have been satisfied
but for one or more of the following persons
acquiring or otherwise becoming the Beneficial Owner
of securities of ASCI: (A) any person who has entered
into a binding agreement with ASCI, which agreement
has been approved by two-thirds of the Continuing
Directors, limiting the acquisition of additional
voting securities by such person, the solicitation of
proxies by such person or proposals by such person
concerning a business combination with ASCI (a
"Standstill Agreement"); (B) any employee benefit
plan, or trustee or other fiduciary thereof,
maintained by ASCI or any subsidiary of ASCI; (C) any
subsidiary of ASCI; or (D) ASCI.
(2) Unless a majority of the Continuing Directors and of
the ASCI Committee determine that the exception set
forth in this paragraph (2) shall not apply, none of
the foregoing conditions would have been satisfied
but for the acquisition by or of ASCI of or by
another entity (whether by the merger or
consolidation, the acquisition of stock or assets, or
otherwise) in exchange, in whole or in part, for
securities of ASCI, provided that, immediately
following such acquisition, the Continuing Directors
constitute a majority of the Board of
- 4 -
<PAGE> 5
Directors of ASCI, or a majority of the board of
directors of any other surviving entity, and, in
either case, no agreement, arrangement or
understanding exists at that time which would cause
such Continuing Directors to cease thereafter to
constitute a majority of the Board of Directors of
ASCI or of such other board of directors.
Notwithstanding the foregoing, unless otherwise determined by
a majority of the Continuing Directors, no Change of Control shall be
deemed to have occurred with respect to a particular participating
employee (a "Participant") if the Change of Control results from
actions or events in which such Participant is involved in a capacity
other than solely as an officer, employee or director of ASCI.
For purposes of the foregoing definition of Change of Control,
the term "Beneficial Owner," with respect to any securities, shall mean
any person who, directly or indirectly, has or shares the right to vote
or dispose of such securities or otherwise has "beneficial ownership"
of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as
such Rules are in effect on December 1, 1996) under the Act), including
pursuant to any agreement, arrangement or understanding (whether or not
in writing); provided, however, that (i) a person shall not be deemed
the Beneficial Owner of any security as a result of any agreement,
arrangement or understanding to vote such security (A) arising solely
from a revocable proxy or consent solicited pursuant to, and in
accordance with, the applicable provisions of the Act and the rules and
regulations thereunder or (B) made in connection with, or otherwise to
participate in, a proxy or consent solicitation made, or to be made,
pursuant to, and in accordance with, the applicable provisions of the
Act and the rules and
- 5 -
<PAGE> 6
regulations thereunder, in either case described in clause (A) or
clause (B) above whether or not such agreement, arrangement or
understanding is also then reportable by such person on Schedule 13D
under the Act (or any comparable or successor report), and (ii) a
person engaged in business as an underwriter of securities shall not be
deemed to be the Beneficial Owner of any securities acquired through
such person's participation in good faith in a firm commitment
underwriting until the expiration of forty days after the date of such
acquisition.
ARTICLE III. ADMINISTRATION
The Plan shall be administered by a Committee of the Board of Directors
of the Corporation (hereinafter referred to as the "ASI Committee") appointed by
the Board, no member of which ASI Committee shall be eligible to participate in
the Plan. The ASI Committee shall interpret the Plan, establish administrative
rules and take any other action necessary to the proper operation of the Plan,
which action shall, prior to a Change of Control, be final and binding upon all
Participants.
ARTICLE IV. ELIGIBILITY FOR PARTICIPATION
Any key employee of the Corporation or a subsidiary or affiliated
company acting in a managerial, administrative or professional capacity shall be
eligible to participate in the Plan.
ARTICLE V. OPERATION
(1) Management shall select from eligible employees those who
participate in the Plan each year ("plan year") and assign a tentative "target
award" to each Participant. For all years after 1988, designation of
Participants and the assignment of
- 6 -
<PAGE> 7
target awards shall be made before the beginning of a plan year or as soon
thereafter as practicable, but Management shall have the right to designate
additional Participants and assign them target awards at any time. Target awards
assigned to Participants in 1988 under the "Predecessor Plan" (as hereinafter
defined) shall be deemed to constitute the target awards under the Plan for 1988
and are adopted for such purpose.
(2) Following the end of a plan year, the aggregate of the target
awards for such plan year will be modified by the ASI Committee based on the
Corporation's overall performance. Each target award will then be adjusted based
on the performance of the group or other unit in which the individual worked and
the extent to which the individual met the personal objectives set for him. The
final payments shall be as approved by the ASI Committee or the Board of
Directors of the Corporation. As adjusted, a final cash payment may be more or
less than the original target award.
(3) A Participant will forfeit his right to any cash payment if his
employment with the Corporation is terminated for any reason prior to the end of
a plan year; provided, however, that if such employee dies or retires (within
the meaning of the retirement plan of the Participant's employer), or if the ASI
Committee decides it is not in the best interest of the Corporation to have a
terminating employee forfeit such payment, such employee, or in the case of the
employee's death his designated beneficiary, legal representatives or
distributees, shall receive after the end of the plan year a pro rata portion of
any cash payment that would otherwise have been paid to him had he remained an
employee for the full year, based on the length of his actual service with the
Corporation during such plan year.
(4) Notwithstanding any other provision of this Plan, in the event of
a Change of Control, the plan year shall terminate, all targets used in
determining each Participant's target award
- 7 -
<PAGE> 8
shall be deemed to have been achieved and each Participant shall receive, within
ten (10) days of such Change of Control, his entire target award.
(5) In the event the total amount authorized by the Board of Directors
of the Corporation to be distributed to Participants for any year is
insufficient to fully satisfy cash awards otherwise payable under the Plan, such
awards shall be equitably reduced by the ASI Committee to reflect such
insufficiency.
ARTICLE VI. NON-ASSIGNABILITY OF PLAN RIGHTS
Any assignment or transfer by any Participant of any right or interest
or entitlement under this Plan, without the written consent of the Corporation,
shall be null and void.
ARTICLE VII. GENERAL PROVISIONS
(1) Nothing contained herein shall require the Corporation to segregate
any money from its general funds, or to create any trusts, or to make any
special deposits in connection with any awards granted or payments to be made to
any Participant for any year.
(2) Participation in the Plan shall not affect the Corporation's right
to discharge a Participant.
(3) Payments under the Plan shall be included as compensation for the
purposes of computing employee benefits.
(4) The Board of Directors of the Corporation may suspend, terminate or
amend the Plan at any time; however, no such action of the Board of Directors of
the Corporation shall diminish, reduce, alter, or impair a Participant's rights
with respect to any target award assigned to him before the date of such
suspension, termination or amendment of the Plan without the consent of such
Participant.
- 8 -
<PAGE> 9
(5) The Plan supersedes all previous Annual Incentive Plans of the
Corporation, including the Annual Plan of the American Standard Incentive
Program adopted in 1975, as thereafter amended (the "Predecessor Plan").
-9-
<PAGE> 1
EXHIBIT 21
PARENTS AND SUBSIDIARIES
AMERICAN STANDARD INC. (DELAWARE) - REGISTRANT
Subsid-
iaries*
U.S. SUBSIDIARIES:
The American Chinaware Company (Delaware)
Alimenterics Inc.
American Standard Credit Inc. (Delaware)
American Standard Financial Corporation
American Standard International Inc. (Delaware)
American Standard Medical Systems, Inc.
Amstan Trucking Inc. (Delaware)
A-S Energy, Inc. (Texas)
A-S Thai Holdings Ltd. (Delaware)
It Holdings Inc. (Delaware)
Sienna Biotech Inc.
Standard Compressors Inc. (Delaware)
Standard Sanitary Manufacturing Company (Delaware)
The Trane Company (Delaware)
Trane Export, Inc. (Delaware)
WABCO Automotive Control Systems Inc. (Delaware)
WABCO Company (Pennsylvania)
World Standard Ltd. (Delaware)
(American Standard Inc., American Standard International, Inc.,
WABCO Company and Standard Sanitary Manufacturing Company - Immediate
Parents)
WABCO Standard Trane Holdings Inc. (Delaware)
FOREIGN SUBSIDIARIES:
Air Conditioning Products
(Wabco Standard French Holdings SNC - Immediate Parent)
Societe Trane (France)
(The Trane Company - Immediate Parent)
Trane S.A. (Switzerland)
(American Standard (U.K.) Limited - Immediate Parent)
Trane Limited (U.K.)
Trane (United Kingdom) Limited
Transportation Products
(WABCO Standard GmbH, WABCO Standard Trane Holdings Inc.,
and Ideal Standard S.p.A. - Immediate Parents)
WABCO Standard TRANE B.V. (Netherlands)
WABCO Standard French Holdings SNC (France)
WABCO Westinghouse S.A. (France)
WABCO France SNC (France)
WABCO Automotive AB (Sweden)
WABCO Schweiz AG (Switzerland)
WABCO Austria G.m.b.H. (Austria)
WABCO Belgium S.A.-N.V. (Belgium)
WABCO Automotive B.V. (Netherlands)
<PAGE> 2
PARENTS AND SUBSIDIARIES - (Continued) Subsid-
iaries*
Transportation Products (Continued)
(Ideal Standard S.p.A. and WABCO Standard Trane Holdings Inc.
- Immediate Parents)
American Standard (U.K.) Limited (England)
Clayton Dewandre Holdings Limited (England)
WABCO Automotive UK Limited (England)
The Bridge Foundry Company Limited (England)
(Ideal Standard S.p.A. - Immediate Parent)
WABCO Automotive Italia S.p.A. (Italy)
(Wabco Standard Trane Inc. - Immediate Parent)
Westinghouse Air Brake Brasil S.A. (Brazil)
(WABCO Standard Trane Holdings Inc., American Standard
International Inc., Standard Sanitary Manufacturing
Company - Immediate Parents)
WABCO-Standard GmbH (Germany)
WABCO GmbH (Germany)
Perrot Bremsen GmbH (Germany)
Building Products
(American Standard Inc. - Immediate Parent)
American Standard Sanitaryware (Thailand) Public Company
Limited (Thailand)
EBS Eczacibasi Banyo Kuvetleri Sanayi Ve Ticaret A.S. (Turkey)
Egyptian American Sanitary Wares Co. S.A.E. (Egypt)
American Standard Philippine Holdings Inc. (Philippines)
Sanitary Wares Manufacturing Corporation (Philippines)
(Wabco Standard French Holdings SNC - Immediate Parent)
Ideal-Standard S.A. (France)
(Wabco Standard French Holdings SNC and Sanifrance, SNC -
Immediate Parents)
Ets. Porcher, S.A. (France)
P. Piel S.A. (France)
Porcher Distribution SNC (France)
(WABCO Westinghouse S.A. & Ideal Standard S.A. - Immediate
Parents)
Sanifrance, SNC
(Westinghouse Air Brake Brasil S.A. - Immediate Parent)
Ideal Standard Wabco Industria e Comercio Ltda. (Brazil)(a)
(American Standard (U.K.) Limited - Immediate Parent)
Ideal-Standard Limited (England)
(WABCO Standard Trane Holdings Inc. & WABCO Standard Trane B.V.
- Immediate Parents)
WABCO Standard Trane Inc. (Canada)(b)
<PAGE> 3
PARENTS AND SUBSIDIARIES - (Continued)
Building Products (Continued)
(WABCO Standard Trane Inc. & WABCO Standard Trane B.V. -
Immediate Parents)
Ideal-Standard, S.A. de C.V. (Mexico)
(WABCO Standard Trane Holdings Inc., WABCO Standard Trane B.V. -
Immediate Parents)
Ideal Standard S.p.A. (Italy)
Ideal Standard S.A. (Greece)
Sanistan B.V. (Netherlands)
(WABCO Standard Trane Holdings Inc., American Standard
International Inc. and Standard Sanitary Manufacturing
Company - Immediate Parents)
WABCO-Standard GmbH (Germany)
Ideal-Standard GmbH (Germany)
American Standard Korea, Inc. (Korea)
Miscellaneous
Standard Europe (EEIG)(France)(c)
All of the companies listed above operate under their company names and
use one or more of the trademarks listed under "Patents and Trademarks" of Item
1 of this annual report on Form 10-K.
* The number shown under this heading indicates other
subsidiaries, not listed by name herein, which are in the same line of
business. The name of the immediate parent of such subsidiary or subsidiaries
appears opposite the number.
(a) This subsidiary participates in Building Products and
Transportation Products.
(b) This subsidiary participates in Building Products and Air
Conditioning Products.
(c) A European Economic Interest Grouping organized by certain
French and Italian subsidiaries of the Company.
There are omitted from the table a number of minor or inactive or
name-saving subsidiaries, all of which together would not constitute a
significant subsidiary.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 58,038
<SECURITIES> 1,661
<RECEIVABLES> 828,086
<ALLOWANCES> 28,294
<INVENTORY> 408,962
<CURRENT-ASSETS> 1,386,374
<PP&E> 1,582,498
<DEPRECIATION> 576,500
<TOTAL-ASSETS> 3,519,615
<CURRENT-LIABILITIES> 1,235,860
<BONDS> 1,741,847
0
0
<COMMON> 0
<OTHER-SE> (383,851)
<TOTAL-LIABILITY-AND-EQUITY> 3,519,615
<SALES> 5,804,561
<TOTAL-REVENUES> 5,804,561
<CGS> 4,379,765
<TOTAL-COSTS> 4,379,765
<OTHER-EXPENSES> 1,168,998
<LOSS-PROVISION> 11,225
<INTEREST-EXPENSE> 198,192
<INCOME-PRETAX> 57,606
<INCOME-TAX> 104,324
<INCOME-CONTINUING> (46,718)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,718)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
