<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration Nos.: 333-67943 and
333-67943-01
Prospectus Supplement to Prospectus dated May 4, 1999.
AMERICAN STANDARD INC.
L60,000,000 8.25% Senior Notes due 2009
$100,000,000 8.25% Senior Notes due 2009
E250,000,000 7.125% Senior Notes due 2006
Guaranteed as to Payment of Principal and Interest by
AMERICAN STANDARD COMPANIES INC.
----------------------
This prospectus relates to an offering of senior notes by the underwriters,
either directly or through their respective selling agents, in the United
States.
American Standard Inc. will pay interest on the senior notes on June 1 and
December 1 of each year. The first interest payment will be made on December 1,
1999. The senior notes will not be redeemable by the issuer prior to maturity
and will not be entitled to any sinking fund. Application has been made to list
the senior notes on the Luxembourg Stock Exchange.
The senior notes will be senior unsecured obligations of American Standard
Inc., a wholly-owned subsidiary of American Standard Companies Inc. The
guarantee of the senior notes will be an unconditional, senior unsecured
obligation of American Standard Companies Inc.
See "Risk Factors" on pages 3-4 of the accompanying prospectus for a
discussion of certain factors that should be considered by prospective
investors.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Total Per Total Per Total
L Note (L) $ Note ($) E Note (E)
------ -------------- ------ ----------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Initial public
offering price..... 98.335% L59,001,000.00 99.864% $99,864,000 99.700% E249,250,000.00
Underwriting
discount........... 1.375% L 811,263.75 1.375% $ 1,373,130 1.375% E 3,427,187.50
Proceeds, before
expenses, to
American Standard
Inc................ 96.960% L58,189,736.25 98.489% $98,490,870 98.325% E245,822,812.50
</TABLE>
E = Eurodollar
L = Pound Sterling
The initial public offering prices set forth above do not include accrued
interest, if any. Interest on the senior notes will accrue from May 28, 1999 and
must be paid by the purchaser if the senior notes are delivered after May 28,
1999.
----------------------
The underwriters expect to deliver the senior notes in book-entry form only
through the facilities of The Depository Trust Company, Euroclear and Cedel Bank
(in the case of the Dollar Senior Notes) or of Euroclear and Cedel Bank (in the
case of the Sterling Senior Notes and the Euro Senior Notes) against payment in
New York, New York (in the case of the Dollar Senior Notes) and London, England
(in the case of the Sterling Senior Notes and the Euro Senior Notes) on May 28,
1999.
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
BANC OF AMERICA SECURITIES LLC
SALOMON SMITH BARNEY
----------------------
Prospectus Supplement dated May 21, 1999.
<PAGE> 2
----------------------
NO ACTION HAS BEEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE ISSUER, THE
GUARANTOR OR ANY UNDERWRITER THAT WOULD PERMIT DISTRIBUTION OF A PROSPECTUS IN
ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE
UNITED STATES. ANY PERSON INTO WHOSE POSSESSION THIS PROSPECTUS SUPPLEMENT AND
ACCOMPANY PROSPECTUS COMES IS ADVISED BY THE ISSUER, THE GUARANTOR AND THE
UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND TO OBSERVE ANY RESTRICTIONS AS TO,
THE OFFERING OF THE SENIOR NOTES AND THE DISTRIBUTION OF THIS PROSPECTUS
SUPPLEMENT AND ACCOMPANYING PROSPECTUS.
----------------------
The issuer and the guarantor, having made all reasonable inquiries, confirm
that this prospectus supplement and the accompanying prospectus contain all
information with respect to the issuer, the guarantor and the senior notes which
is material in the context of the issue and offering of the senior notes, that
the information contained herein is true and accurate in all material respects
and is not misleading, that the opinions and intentions expressed herein are
honestly held and have been reached after considering all relevant circumstances
and are based on reasonable assumptions, that there are not other facts the
omission of which would, in the context of the issue and offering of the senior
notes, make this prospectus supplement and the accompanying prospectus as a
whole or any of such information or the expression of any such opinions or
intentions misleading in any material respect, that all reasonable inquiries
have been made by the issuer and the guarantor to verify the accuracy of such
information and that this prospectus supplement and the accompanying prospectus
do not contain an untrue statement of material fact or omit to state a material
fact required to be stated herein or necessary in order to make the statements
herein, in the light of the circumstances under which they were made, not
misleading. The issuer and the guarantor accept responsibility accordingly.
----------------------
This prospectus supplement and the accompanying prospectus refer to
documents incorporated by reference. For the prospectus used for purposes of
listing with the Luxembourg Stock Exchange, incorporation by reference will not
be applicable and those documents otherwise incorporated by reference as of the
date hereof will be attached to this prospectus as a supplement.
----------------------
CURRENCIES
In this prospectus supplement and the accompanying prospectus, references
to "dollars" and "$" are references to United States dollars, and references to
"U.S." mean the United States of America. In addition, references to "pounds
sterling", "sterling" and "L" are references to the United Kingdom currency and
references to "euro" and "E" are references to the currency that was introduced
at the start of the third stage of economic and monetary union pursuant to the
treaty establishing the European Economic Community, as amended by the Treaty on
European Union, signed at Maastricht, the Netherlands on February 7, 1992.
Except as otherwise stated herein, conversions of non-U.S. dollar currencies for
the senior notes to U.S. dollars have been calculated using exchange rates on
May 21, 1999. These translations should not be construed as representations that
the non-U.S. dollar currency amount actually represents such U.S. dollar amount
or could be converted into U.S. dollars at the rates indicated or at any other
rates.
THE ISSUER AND THE GUARANTOR
American Standard Inc., incorporated in the State of Delaware on March 26,
1929, is the issuer of the senior notes and is referred to herein as the issuer.
American Standard Companies Inc., incorporated in the State of Delaware on March
15, 1988, will guarantee the senior notes and is referred to herein as the
guarantor. American Standard Companies Inc. has as its only significant asset
all of the outstanding common stock of American Standard Inc.
S-2
<PAGE> 3
RECENT DEVELOPMENTS
The following is provided with respect to the guarantor. Information with
respect to the issuer is not provided as there are no differences from the
information set forth, except per share information.
Total sales for the first quarter of 1999 were $1.7 billion, an increase of
12% from $1.5 billion in the first quarter of 1998. Net income was $47 million,
or $0.65 per diluted share, up 31% and 33%, respectively, from net income of $36
million, or $0.49 per diluted share in the first quarter of 1998. Segment income
was $145 million, an increase of 12% from $130 million in the first quarter of
1998.
The following table sets forth segment sales and income for the first
quarter of 1999 and 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
------ ------
(IN MILLIONS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Sales:
Air Conditioning Products................................. $ 942 $ 838
Plumbing Products......................................... 415 358
Automotive Products....................................... 292 272
Medical Systems........................................... 26 25
------ ------
Total sales............................................ $1,675 $1,493
====== ======
Segment income (loss):
Air Conditioning Products................................. $ 76 $ 73(a)
Plumbing Products......................................... 34 19
Automotive Products....................................... 39 42
Medical Systems........................................... (4) (4)
------ ------
Total segment income................................... 145 130
Equity in net income of unconsolidated joint ventures....... 8 6
------ ------
153 136
Interest expense............................................ (46) (51)
Corporate and other expenses................................ (27) (24)(a)
------ ------
Income before income taxes.................................. 80 61
Income taxes................................................ (33) (25)
------ ------
Net income.................................................. $ 47 $ 36
====== ======
Per common share:
Basic.................................................. $ .67 $ .50
====== ======
Diluted................................................ $ .65 $ .49
====== ======
Average outstanding common shares:
Basic.................................................. 70.2 72.1
Diluted................................................ 71.9 74.3
</TABLE>
- ---------------
(a) Financing fees of $5 million paid in 1998 by Air Conditioning Products were
reclassified to Corporate expenses upon adoption of the new segment
reporting standard as of December 31, 1998.
S-3
<PAGE> 4
Sales of Air Conditioning Products increased 12% to $942 million. Worldwide
Applied Systems sales increased 16% due to strong performance in the U.S.
commercial equipment business and sales and service operations, partly offset by
a small decline in the international applied business, primarily in Asia.
Worldwide Unitary Systems sales increased 8% with strength in both U.S.
residential and commercial operations. Sales of Plumbing Products increased 16%
to $415 million, including $54 million from the Armitage Shanks and Dolomite
businesses acquired on February 2, 1999, partly offset by a $16 million
reduction of sales related to the divestiture of Porcher distribution in the
fourth quarter of 1998. Sales in the Americas increased 11% due to strong U.S.
growth. Automotive Product's sales increased 7% to $292 million, driven by
continued high levels of European commercial vehicle production, higher product
content per vehicle from new products introduced in 1998 and increased export
sales. This increase was partly offset by a sharp decline in Brazilian sales.
Sales of anti-lock braking systems ("ABS") by the Company's U.S. braking systems
joint venture rose 34%, reflecting the continued phase-in of regulations
requiring ABS on all new commercial vehicles, which increased equity income.
Medical System's sales were $26 million in the quarter, essentially the same as
last year, reflecting increased sales of new diagnostic products offset by the
expected declines in sales of older radioimmunoassay products.
Total segment income in the first quarter of 1999 was $145 million, an
increase of 12% from $130 million in 1998 quarter. Air Conditioning Product's
segment income increased $3 million to $76 million. Worldwide Applied Systems
benefited from improved volume in the U.S., which was offset by weakness in
international markets. Worldwide Unitary Systems posted strong growth in the
U.S. from both volume and margin improvement despite the effect of a three-week
strike at the Company's Clarksville commercial facility. International unitary
results declined due to weakness in Latin America and Middle East markets.
Plumbing Product's segment income increased $15 million to $34 million, mainly
due to significant improvement from the Company's European restructuring, the
Armitage Shanks-Dolomite acquisition and strong volume increases in the
Americas. Automotive Product's segment income decreased $3 million to $39
million compared to the prior year period due mainly to the weak Brazilian
economy and increased product development spending in Europe. Medical System's
segment loss of $4 million was at the same level as the first quarter of 1998.
Development costs of new diagnostic products have continued at a high level
while progress is being made to obtain U.S. and European regulatory approvals of
new diagnostic products and tests.
Equity in net income of unconsolidated joint ventures increased to $8
million from $6 million, reflecting the continued strong growth of Automotive
Products' U.S. braking systems joint venture.
Interest expense of $46 million was $5 million lower than in the prior year
period, due to lower average interest rates achieved through 1998 debt
refinancings which more than offset the effect of increased debt arising
principally from the Armitage Shanks-Dolomite acquisition. Corporate and other
expenses of $27 million were $3 million higher than in the prior year period,
mainly due to increased minority interest in net income of subsidiaries and
corporate spending. Income taxes reflect an effective rate of 41.5% compared to
40.5% for the 1998 period.
S-4
<PAGE> 5
CAPITALIZATION
The following table sets forth the capitalization of American Standard Inc.
and its subsidiaries at March 31, 1999, and at that date as adjusted to give
effect to the offering of the senior notes in the amount of $460 million. This
table should be read in conjunction with American Standard Inc.'s consolidated
financial statements and notes thereto which have been incorporated herein by
reference.
<TABLE>
<CAPTION>
MARCH 31, 1999
--------------------------------
ACTUAL ADJUSTED
----------- ---------------
(IN MILLIONS)
<S> <C> <C>
Short-term debt:
Loans payable to banks........................ $ 1,213 $ 903(a)
Current maturities of long-term debt.......... 164 14(a)
----------- -----------
Total short-term debt.................... 1,377 917
Long-term debt:
Credit agreement.............................. 354 354
Other debt obligations........................ 1,293 1,603(a)
----------- -----------
1,647 1,957
Less current maturities....................... (164) (14)(a)
----------- -----------
Total long-term debt..................... 1,483 1,943
----------- -----------
Stockholder's deficit(b)
Preferred Stock, Series A, 1,000 shares issued
and outstanding, $.01 par value............. -- --
Common Stock, 1,000 shares issued and
outstanding, $.01 par value................. -- --
Capital surplus............................... 577 577
Accumulated deficit........................... (645) (645)
Foreign currency translation effects.......... (206) (206)
----------- -----------
Total stockholder's deficit.............. (274) (274)
----------- -----------
Total capitalization.......................... $ 2,586 $ 2,586
=========== ===========
</TABLE>
- ---------------
(a) Reflects the issuance of $460 million of senior notes and the application of
$150 million of the proceeds to repay the 10 7/8% Senior Notes due on May
15, 1999, and $310 million to reduce loans payable to banks (which amounts
may be reborrowed under those facilities). The acquisition of the Bathrooms
Division of Blue Circle Industries plc on February 2, 1999 for approximately
$430 million, including fees and expenses and net of cash acquired, was
financed with borrowings under the revolving bank facilities. For a
discussion of the revolving bank facilities and the acquisition of the
Bathrooms Division of Blue Circle Industries plc, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in the American Standard Inc. Annual Report on Form 10-K for the
year ended December 31, 1998 and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, each incorporated herein by reference.
S-5
<PAGE> 6
(b) Stockholder's deficit at March 31, 1999 for the guarantor is set forth
below:
<TABLE>
<S> <C>
Stockholder's deficit
Preferred Stock, 2,000,000 shares authorized, none
issued and outstanding................................ --
Common Stock, $.01 par value, 200,000,000 shares
authorized, 70,273,745 shares issued and
outstanding........................................... 1
Capital surplus and other.............................. 589
Treasury Stock......................................... (372)
Accumulated deficit.................................... (645)
Foreign currency translation effects................... (206)
-----------
Total stockholder's deficit....................... (633)
===========
</TABLE>
Capitalization of the guarantor is not provided as the only difference is
additional stockholders' deficit of $359 million principally attributable to the
repurchase by the guarantor of shares of its common stock. There has been no
material change in the capitalization of the issuer or the guarantor since March
31, 1999.
S-6
<PAGE> 7
USE OF PROCEEDS
The net proceeds from the sale of the senior notes offered hereby are
estimated to be approximately $453 million. We will use $150 million of such net
proceeds to refinance borrowings incurred to pay at maturity our 10 7/8% Senior
Notes due May 15, 1999. The balance of such net proceeds will be applied to
refinance a portion of borrowings incurred to pay the $430 million purchase
price of our February 1999 acquisition of the Bathrooms Division of Blue Circle
Industries plc, financed initially under our 1997 credit agreement, currently
bearing interest at 5.69%, and including $60 million that was temporarily
refinanced under a short term facility currently bearing interest at 7.925%.
DESCRIPTION OF THE SENIOR NOTES
Information in this section should be read together with the information
under the caption "Description of Debt Securities" in the accompanying
prospectus. The following description of the particular terms of the senior
notes offered hereby supplements and, to the extent inconsistent, replaces the
description of the general terms and provisions of the senior notes set forth in
the accompanying prospectus. Certain terms are defined in the prospectus and
other terms are defined below under "-- Certain Definitions."
The senior notes will be issued under an indenture among the issuer, the
guarantor and The Bank of New York, as trustee, dated as of January 15, 1998, as
supplemented by indenture supplements dated as of January 15, 1998, February 13,
1998 and April 13, 1998. In addition, an indenture supplement to be dated as of
May 28, 1999 will be executed in connection with each series of senior notes
offered hereby. In addition, the issuer will enter into a paying agency
agreement on May 28, 1999 with Banque Generale du Luxembourg.
GENERAL
We are offering three series of senior notes by this prospectus supplement.
The maximum aggregate principal amount of senior notes will be limited, in the
case of the senior notes denominated in sterling, to L60 million aggregate
principal amount, in the case of the senior notes denominated in dollars, to
$200 million aggregate principal amount and, in the case of the senior notes
denominated in euros, to E350 million aggregate principal amount. We will issue
in this offering, L60 million 8.25% senior notes due 2009 (the "Sterling Senior
Notes"), $100 million 8.25% Senior Notes due 2009 (the "Dollar Senior Notes")
and E250 million 7.125% senior notes due 2006 (the "Euro Senior Notes").
The issuer may from time to time without the consent of the holders of
senior notes create and issue further securities either having the same terms
and conditions as the Dollar Senior Notes or the Euro Senior Notes in all
respects (or in all respects except for the first payment of interest on them)
and so that such further issue shall be consolidated and form a single series
with the outstanding securities of any series (including the Dollar Senior Notes
or the Euro Senior Notes) or upon such terms and conditions as the issuer may
determine at the time of their issue.
The Sterling Senior Notes will mature on June 1, 2009, the Dollar Senior
Notes will mature on June 1, 2009, and the Euro Senior Notes will mature on June
1, 2006. The senior notes will be payable in each case at maturity at par, plus
accrued and unpaid interest, if any.
Interest on the senior notes will accrue at the rates shown on the front
cover of this prospectus supplement from May 28, 1999 and be payable
semi-annually in arrears on each June 1 and December 1 (each an "interest
payment date") commencing December 1, 1999, to the registered holder on May 15
or November 15, as the case may be, immediately preceding the interest payment
date. The senior notes will bear interest on overdue principal and premium, if
any, and to the extent permitted by law, overdue interest at the relevant rate
per annum shown on the front cover of this prospectus supplement.
S-7
<PAGE> 8
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. For additional information concerning payments on the senior notes, see
"-- Form of the Senior Notes" and "-- Description of Book-Entry System --
Payments on the Global Notes." On December 1, 1999, the first interest payment
date, holders will receive an interest payment of (Pound Sterling)41.9375 per
(Pound Sterling)1,000 principal amount of Sterling Senior Notes, $41.9375 per
$1,000 principal amount of Dollar Senior Notes and (Eurodollar)36.21875 per
(Eurodollar)1,000 principal amount of Euro Senior Notes.
The senior notes are not redeemable by the issuer prior to maturity. The
issuer is not required to make any mandatory redemption or sinking fund payments
in respect of the senior notes. The issuer may acquire senior notes on the open
market. Any senior notes so acquired may be resold by the issuer. In addition,
the issuer may at any time deliver senior notes to the trustee for cancellation.
Subject to the terms of the indenture, the issuer may not issue new senior notes
to replace senior notes that it has paid or delivered to the trustee for
cancellation.
LISTING
Application has been made to list the senior notes on the Luxembourg Stock
Exchange. The legal notice relating to the issue of the senior notes and the
Certificate of Incorporation of the issuer will be registered prior to the
listing with the Chief Registrar of the District Court in Luxembourg, where such
documents are available for inspection and where copies thereof can be obtained
upon request. As long as any senior notes are listed on the Luxembourg Stock
Exchange and as long as the rules of such exchange so require, an agent for
making payments on, and transfer of, senior notes will be maintained in
Luxembourg. The issuer has initially designated Banque Generale du Luxembourg as
its agent for such purposes.
FORM OF THE SENIOR NOTES
The Sterling Senior Notes, the Euro Senior Notes and the Dollar Senior
Notes will each be represented by one or more global securities in registered
form, without coupons (respectively, the "Sterling Global Notes," the "Euro
Global Notes" and the "Dollar Global Notes" and collectively, the "Global
Notes"), which have been issued in each case in a denomination equal to the
outstanding principal amount of senior notes represented thereby. The Global
Notes will be deposited with the trustee, as described below under
"-- Description of Book-Entry System."
Each owner of a beneficial interest in a Global Note ("Book-Entry
Interests") will receive a definitive registered note (i) if, in the case of the
Dollar Senior Notes, The Depository Trust Company ("DTC") notifies the Issuer
that it is unwilling or unable to act as depositary or ceases to be a clearing
agency registered under the Securities Exchange Act of 1934 and, in either case,
a successor depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by the issuer within 90
days, (ii) if, in the case of the Sterling Senior Notes or the Euro Senior
Notes, the Euroclear System ("Euroclear") and Cedel Bank, societe anonyme
("Cedel Bank") notify the Issuer that they are unwilling or unable to act as
clearing agency and a successor is not appointed by the issuer within 90 days or
(iii) in the event of an Event of Default under the indenture upon request of
the holders of a majority of the applicable series of senior notes.
Any definitive registered note will be issued in registered form in
denominations of (Pound Sterling)1,000, (Eurodollar)1,000 or $1,000 (as the
case may be) principal amount or multiple thereof. Any definitive registered
note will be registered in such name or names as the Trustee shall be instructed
based on the instructions of DTC, in the case of the Dollar Senior Notes, or
based on the instructions of Euroclear or Cedel Bank in the case of the Sterling
Senior Notes or the Euro Senior Notes. It is expected that such instructions
will be based upon directions received by DTC, Euroclear or Cedel Bank, from
their participants with respect to ownership of Book-Entry Interests. To the
extent permitted by law, the issuer, the trustee and any paying agent shall be
entitled to treat the person in whose name any definitive registered note is
registered as the absolute owner thereof. The amount of the
S-8
<PAGE> 9
relevant Global Notes, and the Book-Entry Interests, will be increased or
decreased to reflect exchanges or issues of definitive registered notes. The
trustee will make the appropriate adjustments to the Global Note or Notes
underlying the Book-Entry Interests to reflect any such issues or adjustments.
The indenture contains provisions relating to the maintenance by a registrar of
a register reflecting ownership of definitive registered notes, if any, and
other provisions customary for a registered debt security. Payment of principal
and interest on, and all other amounts payable under, each definitive registered
note will be made to the holder appearing on the register at the close of
business on the record date at his address shown on the register on the record
date.
The cost of preparing, printing, packaging and delivering a definitive
registered note will be solely the responsibility of the issuer.
Principal of and interest on, and all other amounts payable under, any
definitive registered notes will be payable at the corporate trust office or
agency of the trustee in The City of New York and at the office of the paying
and transfer agent in Luxembourg maintained for such purposes. The relevant
definitive registered note must be surrendered at the office of the trustee in
New York City or at the office of the paying and transfer agent in Luxembourg to
receive payments of principal. In addition, interest on definitive registered
notes may be paid by check mailed to the person entitled thereto as shown on the
register on the record date for the definitive registered notes. If a payment
date is not a business day at a place of payment, payment may be made at that
place on the next succeeding business day and no interest shall accrue for the
intervening period.
Transfers of any definitive registered note may be made, by presenting and
surrendering such note at the office of any transfer agent. Transfers of a
portion of a definitive registered note may be made in authorized denominations
of (Pound Sterling)1,000, (Eurodollar)1,000 or $1,000, respectively, at the
office of any transfer agent, and new definitive registered notes in appropriate
denominations will be made available by the issuer at such office. No service
charge will be made for any registration of transfer or exchange of any
definitive registered notes but the trustee may require payment of a sum
sufficient to cover any tax or other governmental change payable in connection
therewith.
PAYMENT ON STERLING SENIOR NOTES; SUBSTITUTION OF CURRENCY
The Euro, the currency introduced at the start of the third stage of
economic and monetary union pursuant to the treaty establishing the European
Economic Community, as amended by the Treaty on European Union, was introduced
on January 1, 1999. The United Kingdom was not a participant at that date;
however, the United Kingdom Government stated that the United Kingdom might wish
to join the single currency at a later date. If the United Kingdom adopts the
Euro, it will replace pounds sterling as the legal tender in the United Kingdom
and result in the effective re-denomination of the Sterling Senior Notes into
Euro and the regulations of the European Commission relating to the Euro shall
apply to the Sterling Senior Notes. The circumstances and consequences described
in this paragraph entitle neither the issuer, the guarantor nor any holder of
Sterling Senior Notes to early redemption, rescission, notice or repudiation of
the terms and conditions of the Sterling Senior Notes or the indenture or to
raise other defenses or to request any compensation claim, nor will they affect
any of the other obligations of the issuer or the guarantor under the Sterling
Senior Notes and the indenture.
COVENANTS
The covenants described in the accompanying prospectus under "Description
of Debt Securities -- Certain Covenants" including "-- Existence,"
"-- Maintenance of Properties," "-- Insurance," and "-- Payment of Taxes and
Other Claims" as well as the provisions described under "Description of Debt
Securities -- Merger, Consolidation or Sale of Assets" will be applicable to the
senior notes.
S-9
<PAGE> 10
LIMITATION ON LIENS. The issuer and the guarantor will not, nor will
either permit any of their Subsidiaries to, create, incur, or permit to exist,
any Lien on any of their respective properties or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, in order to secure
any Indebtedness of either of the issuer or the guarantor, without effectively
providing that the senior notes shall be equally and ratably secured until such
time as such Indebtedness is no longer secured by such Lien, except:
(a) Liens existing as of the closing date of the offering;
(b) Liens granted after the closing date on any assets or properties of the
issuer or the guarantor or any of their Subsidiaries securing
Indebtedness of the issuer or the guarantor created in favor of the
holders of such series;
(c) Liens securing Indebtedness of the issuer or the guarantor which is
incurred to extend, renew or refinance Indebtedness which is secured by
Liens permitted to be incurred under the Indentures, provided that such
Liens do not extend to or cover any property or assets of the issuer or
the guarantor or any of their Subsidiaries other than the property or
assets securing the Indebtedness being refinanced and that the
principal amount of such Indebtedness does not exceed the principal
amount of the Indebtedness being refinanced;
(d) Permitted Liens; and
(e) Liens created in substitution of or as replacements for any Liens
permitted by the preceding clauses (a) through (d), provided that,
based on a good faith determination of an officer of each of the issuer
and the guarantor, the property or asset encumbered under any such
substitute or replacement Lien is substantially similar in nature to
the property or asset encumbered by the otherwise permitted Lien which
is being replaced.
Notwithstanding the foregoing, the issuer and the guarantor and any
Subsidiary may, without securing any series of senior notes, create, incur or
permit to exist Liens which would otherwise be subject to the restrictions set
forth in the preceding paragraph, if after giving effect thereto and at the time
of determination, Exempted Debt does not exceed the greater of (1) 10% of
Consolidated Net Assets or (2) $250,000,000.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS. The issuer and the
guarantor will not, nor will either permit any of their Subsidiaries to, enter
into any sale and lease-back transaction for the sale and leasing back of any
property or asset, whether now owned or hereafter acquired, of the issuer or
guarantor or any of their Subsidiaries unless
(a) the issuer or guarantor or such Subsidiary would be entitled under the
Limitation on Liens covenant above to create, incur or permit to exist
a Lien on the assets to be leased in an amount at least equal to the
Attributable Liens in respect of such transaction without equally and
ratably securing the senior notes, or
(b) the proceeds of the sale of the assets to be leased are at least equal
to their fair market value and the proceeds are applied to the purchase
or acquisition (or in the case of real property, the construction) of
assets or to the repayment of Indebtedness of the issuer or guarantor
or a Subsidiary of the issuer or guarantor which by its terms matures
not earlier than one year after the date of such repayment.
Notwithstanding the foregoing, the issuer, the guarantor and their
Subsidiaries are permitted to enter into sale and leaseback transactions:
(1) entered into prior to the closing date, or
S-10
<PAGE> 11
(2) for the sale and leasing back of any property or asset by a Subsidiary
of the issuer or guarantor to the issuer or guarantor, or
(3) involving leases for less than three years, or
(4) in which the lease for the property or asset is entered into within 120
days after the later of the date of acquisition, completion of
construction or commencement or full operations of such property or
asset.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The issuer or the guarantor may, without the consent of the holders of any
outstanding senior notes, consolidate with or sell, lease or convey all or
substantially all of their assets to, or merge with or into, any other entity
provided that:
(a) either the issuer or the guarantor, as the case may be, shall be the
continuing entity, or the successor entity formed by or resulting from
any such consolidation or merger or which shall have received the
transfer of such assets is organized under the laws of any domestic
jurisdiction and expressly assumes the guarantor's and/or the issuer's
obligations to pay principal of (and premium, if any) and interest on
all of the senior notes and the due and punctual performance and
observance of all of the covenants and conditions contained in the
indenture;
(b) immediately after giving effect to such transaction, no Event of
Default under the indentures and no event which, after notice or the
lapse of time, or both, would become such an Event of Default shall
have occurred and be continuing; and
(c) an officers' certificate and legal opinion covering certain of such
conditions shall be delivered to each trustee.
DEFEASANCE
The senior notes are subject to defeasance under the conditions described
in the accompanying prospectus and the indenture.
CERTAIN DEFINITIONS
"Attributable Liens" means in connection with a sale and lease-back
transaction, the lesser of (a) the fair market value of the assets subject to
such transaction and (b) the present value (discounted at a rate per annum equal
to the average interest borne by all outstanding securities issued under the
indenture (which may include securities in addition to the senior notes)
determined on a weighted average basis and compounded semiannually) of the
obligations of the lessee for rental payments during the term of the related
lease.
"Capital Lease" means any Indebtedness represented by a lease obligation of
a person incurred with respect to real property or equipment acquired or leased
by such person and used in its business that is required to be recorded as a
capital lease in accordance with U.S. generally accepted accounting principles
("GAAP").
"Capital Stock" of any person means any and all shares, interests,
participations, rights to purchase, warrants, options or other equivalents
(however designated) of corporate stock or other equity of such person.
"Consolidated Net Assets" means as of any particular time the aggregate
amount of assets after deducting therefrom all current liabilities except for
(a) notes and loans payable, (b) current maturities of long-term debt and (c)
current maturities of obligations under capital leases, all as set forth on the
most recent consolidated balance sheet of the guarantor and its consolidated
Subsidiaries and computed in accordance with GAAP.
"Exempted Debt" means the sum of the following as of the date of
determination: (i) Indebtedness of the issuer or the guarantor incurred after
the closing date and secured by Liens not otherwise permitted by the first
sentence under "Limitation on Liens"
S-11
<PAGE> 12
above, and (ii) Attributable Liens of the issuer and guarantor and their
Subsidiaries in respect of sale and lease-back transactions entered into after
the closing date, other than sale and lease-back transactions permitted by the
limitation on sale and lease-back transactions set forth under "Limitation on
Sale and Lease-Back Transactions" above. For purposes of determining whether or
not a sale and lease-back transaction is "permitted" by "Limitation on Sale and
Lease-Back Transactions," the last paragraph under "Limitation on Liens" above
(creating an exception for Exempted Debt) will be disregarded.
"Facility" means the Amended and Restated Credit Agreement dated as of
January 31, 1997 among American Standard Companies Inc., American Standard Inc.,
certain Subsidiaries of American Standard Inc., the lenders named therein and
The Chase Manhattan Bank as Administrative Agent, as such agreement may be
amended (including any amendment, restatement and successors thereof),
supplemented or otherwise modified from time to time, including any increase in
the principal amount of the obligations thereunder.
"Indebtedness" means, with respect to any person, without duplication,
(1) any Obligation of such person relating to any indebtedness of such
person (A) for borrowed money (whether or not the recourse of the
lender is to the whole of the assets, of such person or only to a
portion thereof), (B) evidenced by notes, debentures or similar
instruments (including purchase money obligations) given in connection
with the acquisition of any property or assets (other than trade
accounts payable for inventory or similar property acquired in the
ordinary course of business), including securities, for the payment of
which such person is liable, directly or indirectly, or the payment of
which is secured by a lien, charge or encumbrance on property or assets
of such person, (C) for goods, materials or services purchased in the
ordinary course of business (other than trade accounts payable arising
in the ordinary course of business), (D) with respect to letters of
credit or bankers acceptances issued for the account of such person or
performance, surety or similar bonds, (E) for the payment of money
relating to a Capital Lease obligation or (F) under interest rate
swaps, caps or similar agreements and foreign exchange contracts,
currency swaps or similar agreements;
(2) any liability of others of the kind described in the preceding clause
(1), which such person has guaranteed or which is otherwise its legal
liability; and
(3) any and all deferrals, renewals, extensions and refunding of, or
amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (1) or (2).
"Lien" means any lien, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, and any agreement to give any security interest).
"Obligation" of any person with respect to any specified Indebtedness means
any obligation of such person to pay principal, premium, interest (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such
post-petition interest is allowed in such proceeding), penalties, reimbursement
or indemnification amounts, fees, expense or other amounts relating to such
Indebtedness.
"Permitted Liens" means (i) Liens securing Indebtedness arising under the
Facility and any initial or subsequent renewal, extension, refinancing,
replacement or refunding thereof; (ii) Liens on accounts receivable,
merchandise, inventory, equipment, and patents, trademarks, trade
S-12
<PAGE> 13
names and other intangibles, securing Indebtedness; (iii) Liens on any asset of
the issuer and the guarantor, any Subsidiary, or any joint venture to which the
issuer or the guarantor or any of their Subsidiaries is a party, created solely
to secure obligations incurred to finance the refurbishment, improvement or
construction of such asset, which obligations are incurred no later than 24
months after completion of such refurbishment, improvement or construction, and
all renewals, extensions, refinancings, replacements or refundings of such
obligations; (iv)(a) Liens given to secure the payment of the purchase price
incurred in connection with the acquisition (including acquisition through
merger or consolidation) of property (including shares of stock), including
Capital Lease transactions in connection with any such acquisition, and (b)
Liens existing on property at the time of acquisition thereof or at the time of
acquisition by the issuer, the guarantor or a Subsidiary or any person then
owning such property whether or not such existing Liens were given to secure the
payment of the purchase price of the property to which they attach; provided
that, with respect to clause (a), the Liens shall be given within 24 months
after such acquisition and shall attach solely to the property acquired or
purchased and any improvements then or thereafter placed thereon; (v) Liens in
favor of customs and revenue authorities arising as a matter of law to secure
payment of customs duties in connection with the importation of goods; (vi)
Liens upon specific items of inventory or other goods and proceeds of any person
securing such person's obligations in respect of bankers' acceptances issued or
created for the account of such person to facilitate the purchase, shipment or
storage of such inventory or other goods; (vii) Liens securing reimbursement
obligations with respect to letters of credit that encumber documents and other
property relating to such letters of credit and the products and proceeds
thereof; (viii) Liens on key-man life insurance policies granted to secure
Indebtedness of the issuer and guarantor against the cash surrender value
thereof; (ix) Liens encumbering customary initial deposits and margin deposits
and other Liens in the ordinary course of business, in each case securing
Indebtedness of the issuer or the guarantor under interest swap obligations and
currency agreements and forward contract, option, futures contracts, futures
options or similar agreements or arrangements designed to protect the issuer or
the guarantor or any of their Subsidiaries from fluctuations in interest rates,
currencies or the price of commodities; (x) Liens arising out of conditional
sale, title retention, consignment or similar arrangements for the sale of goods
entered into by the issuer or the guarantor or any of their Subsidiaries in the
ordinary course of business; and (xi) Liens in favor of the issuer or the
guarantor or any Subsidiary.
"Subsidiary" means a person (other than an individual), a majority of the
outstanding voting stock, partnership interests, membership interests or other
equity interest, as the case may be, of which is owned or controlled, directly
or indirectly, by the issuer or by one or more other Subsidiaries of the issuer.
For the purposes of this definition, "voting stock" means stock having voting
power for the election of directors, trustees or managers, as the case may be,
whether at all times or only so long as no senior class of stock has such voting
power by reason of any contingency.
GOVERNING LAW
The indenture is and the senior notes will be governed by, and construed in
accordance with, the laws of the State of New York but without giving effect to
applicable principles of conflicts of law. Under the Judiciary Law of the State
of New York, a judgment or decree in an action based upon an obligation
denominated in a currency other than U.S. dollars will be rendered in the
foreign currency of the underlying obligation and converted into U.S. dollars at
a rate of exchange prevailing on the date of entry of the judgment or decree.
NOTICES
All notices shall be deemed to have been given upon (i) the mailing by
first class mail, postage prepaid, of such notices to holders of the senior
notes at their registered addresses
S-13
<PAGE> 14
as recorded in the Register; and (ii) so long as the senior notes are listed on
the Luxembourg Stock Exchange and it is required by the rules of the Luxembourg
Stock Exchange, publication of such notice to the holders of the senior notes in
English in a leading newspaper having general circulation in Luxembourg (which
is expected to be the Luxemburger Wort) or, if such publication is not
practicable, in one other leading English language daily newspaper with general
circulation in Europe, such newspaper being published on each business day in
morning editions, whether or not it shall be published on Saturday, Sunday or
holiday editions.
DESCRIPTION OF BOOK-ENTRY SYSTEM
GENERAL
The Dollar Global Notes will be deposited with the trustee as custodian for
DTC and registered in the name of Cede & Co. as nominee of DTC, for credit to
the accounts of DTC participants and indirect participants, including the
Euroclear and Cedel Bank. The Sterling Global Notes and the Euro Global Notes
will be deposited with the trustee as common depositary (in such capacity, the
"Common Depositary") for Euroclear and Cedel Bank. Upon issuance of the senior
notes, DTC, Euroclear or Cedel Bank, as the case may be, will credit on its
book-entry registration and transfer system the participants' accounts with the
respective interests owned by such participants. Ownership of Book-Entry
Interests is shown on, and the transfer of such interests will be effected only
through, records maintained by DTC, Euroclear or Cedel Bank and, with respect to
interests of indirect participants, their respective participants. The laws of
some countries and some states in the United States may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. Such limits and such laws may impair the ability to own, transfer or
pledge the Book-Entry Interests.
All interests in the Dollar Senior Notes, including those held through
Euroclear or Cedel Bank, will be subject to the procedures and requirements of
DTC. Those interests, if held through Euroclear or Cedel Bank, will also be
subject to the procedures and requirements of such system. All interests in the
Sterling Senior Notes and the Euro Senior Notes will be subject to the
procedures and requirements of Euroclear or Cedel Bank, as the case may be.
So long as DTC, or its nominee, or the Common Depository, as the case may
be, is the registered holder of the Global Notes, such party will be considered
the sole holder of such Global Notes for all purposes under the indenture.
Except as set forth above under "-- Form of the Senior Notes," participants or
indirect participants are not entitled to have senior notes or Book-Entry
Interests registered in their names, will not receive or be entitled to receive
physical delivery of senior notes or Book-Entry Interests in definitive form and
will not be considered the owners or holders thereof under the indenture.
Accordingly, each person owning a Book-Entry Interest must rely on the
procedures of DTC, Euroclear or Cedel Bank, as the case may be, and, if such
person is not a participant in DTC, Euroclear or Cedel Bank, as the case may be,
on the procedures of the participant in DTC, Euroclear or Cedel Bank, as the
case may be, through which such person owns its interest, to exercise any rights
and remedies of a holder under the indenture. See "-- Action by Owners of
Book-Entry Interests" below. If any definitive senior notes are issued to
participants or indirect participants, they will be issued in registered form
("definitive registered notes"), as described under "-- Form of the Senior
Notes." Unless and until Book-Entry Interests are exchanged for definitive
registered notes (as described under "-- Form of the Senior Notes"), the
certificated depositary interest held by DTC may not be transferred except as a
whole by DTC to its nominee or by its nominee to DTC or another nominee of DTC
or by DTC or any such nominee to a successor of DTC or a nominee of such
successor, and the certificated depositary interests held by the Common
Depositary may not be transferred except as a whole by Euroclear or Cedel Bank
to the Common Depositary or by the Common Depositary to Euroclear or Cedel Bank,
respectively, or another nominee of
S-14
<PAGE> 15
Euroclear and Cedel Bank or by Euroclear and Cedel Bank or any such nominee to a
successor of Euroclear or Cedel Bank or a nominee of such successor.
PAYMENTS ON THE GLOBAL NOTES
Payments of any amounts owing in respect of the Global Notes will be made
through one or more paying agents (the "Paying Agents") appointed under the
indenture (which initially will include the trustee) to DTC, Euroclear or Cedel
Bank, as the holder of the Global Notes. Payment to or to the order of the
holder of the Global Notes shall discharge the issuer's payment obligations in
respect of the senior notes represented thereby. Upon receipt of any such
amounts, DTC, Euroclear or Cedel Bank, as the case may be, should distribute
such payments to its respective participants. Payments of all such amounts will
be made without deduction or withholding for or on account of any present or
future taxes, duties, assessments or governmental charges of whatever nature
except as may be required by law. If withholding for taxes is required by law,
such withholding will occur in accordance with applicable law.
Under the provisions of the indenture, the holder of the Global Notes is
treated as the owner of the senior notes represented thereby, and the issuer has
no responsibility or liability for the payment of amounts owing in respect of
the depositary interests held by DTC or by the Common Depositary for Euroclear
and Cedel Bank to owners of Book-Entry Interests represent interests in the
Global Notes. Payments by DTC participants or by Euroclear or Cedel Bank
participants to owners of Book-Entry Interests held through such participants
are the responsibility of such participants as is the case with securities held
for the account of customers in bearer form or registered in "street name".
None of the issuer, the guarantor, the trustee or any agent of the issuer,
the guarantor or the trustee have any responsibility or liability for any aspect
of the records relating to or payments made on account of Book-Entry Interests
or for maintaining, supervising or reviewing any records relating to such
Book-Entry Interests.
INFORMATION CONCERNING DTC, EUROCLEAR AND CEDEL BANK
The issuer and guarantor understand as follows with respect to DTC: DTC is
a limited purpose trust issuer organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934. DTC was created to hold securities of its participants and to facilitate
the clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC participants include securities brokers and dealers, including
the Underwriters, banks, trust companies, clearing corporations and certain
other organizations, some of whom (and/or their representatives) own DTC. Access
to the DTC book-entry system is also available to others, such as banks,
broker-dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
The issuer and guarantor understand as follows with respect to Euroclear
and Cedel Bank: Euroclear and Cedel Bank each hold securities for their account
holders and facilitate the clearance and settlement of securities transactions
by electronic book-entry transfer between their respective account holders,
thereby eliminating the need for physical movements of certificates and any risk
from lack of simultaneous transfers of securities.
Euroclear and Cedel Bank each provide various services including
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Euroclear and Cedel Bank each
also deal with domestic securities markets in several countries through
S-15
<PAGE> 16
established depository and custodial relationships. The respective systems of
Euroclear and Cedel Bank have established an electronic bridge between their two
systems across which their respective account holders may settle trades with
each other.
Account holders in both DTC, Euroclear and Cedel Bank are world-wide
financial institutions including underwriters, securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to both
Euroclear and Cedel Bank is available to other institutions that clear through
or maintain a custodial relationship with an account holder of either system.
An account holder's overall contractual relations with either Euroclear or
Cedel Bank are governed by the respective rules and operating procedures of
Euroclear or Cedel Bank and any applicable laws. Both Euroclear and Cedel Bank
act under such rules and operating procedures only on behalf of their respective
account holders, and have no record of or relationship with persons holding
through their respective account holders.
Because DTC, Euroclear and Cedel Bank can only act on behalf of
participants, who in turn act on behalf of indirect participants and certain
banks, the ability of an owner of a Book-Entry Interest to pledge such interest
to persons or entities that do not participate in the DTC, Euroclear or Cedel
Bank systems, or otherwise take actions in respect of such interest, may be
limited by the lack of a definitive certificate for such interest. The laws of
some countries and some states in the United States require that certain persons
take physical delivery of securities in definitive form. Consequently, the
ability to transfer Book-Entry Interests to such persons may be limited. In
addition, beneficial owners of Book-Entry Interests through DTC, Euroclear or
Cedel Bank will receive distributions attributable to the Global Notes only
through DTC, Euroclear or Cedel Bank participants.
The issuer understands that under existing industry practices, if either
the issuer or trustee requests any action of holders of senior notes or if an
owner of a Book-Entry Interest desires to give instructions or take any action
that a holder is entitled to give or take under the indenture, DTC, Euroclear or
Cedel Bank, as the case may be, would authorize their respective participants
owning the relevant Book-Entry Interests to give instructions or take such
action, and such participants would authorize indirect participants to give
instructions or take such action or would otherwise act upon the instructions of
such indirect participants.
TRANSFERS
All transfers of Book-Entry Interests are recorded in accordance with the
book-entry system maintained by DTC, Euroclear or Cedel Bank, as applicable,
pursuant to customary procedures established by each respective system and its
participants. While a Global Note is outstanding, holders of definitive
registered notes may exchange their definitive registered notes for Book-Entry
Interests in the applicable Global Notes by surrendering their definitive
registered notes to the trustee or to the paying and transfer agent in
Luxembourg. The amount of the Book-Entry Interests will be increased or
decreased to reflect such transfers or exchanges. The trustee or the paying and
transfer agent in Luxembourg, as applicable, will make the appropriate
adjustments to the applicable Global Note or exchange such Global Note for a new
Global Note in an appropriate principal amount to reflect any such transfers or
exchanges.
ACTION BY OWNERS OF BOOK-ENTRY INTERESTS
As soon as practicable after receipt by the trustee of notice of any
solicitation of consents or request for a waiver or other action by the holders
of senior notes, the trustee will send to DTC, Euroclear and Cedel Bank a notice
containing (a) such information as is contained in such notice received by the
trustee, (b) a statement that at the close of business on a specified record
date DTC, Euroclear and Cedel Bank will be entitled to instruct the trustee as
to the consent, waiver or other action, if any, pertaining to such senior notes
and (c) a statement as to the manner in which such instructions may be given. In
addition, the trustee will forward to DTC, Euroclear and Cedel Bank, or, based
upon instructions
S-16
<PAGE> 17
received from DTC, Euroclear and Cedel Bank, to owners of Book-Entry Interests,
all materials pertaining to any such solicitation, request, offer or other
action. Upon the written request of DTC, Euroclear and Cedel Bank, as
applicable, the trustee shall endeavor insofar as practicable to take such
action regarding the requested consent, waiver, offer or other action in respect
of such senior notes in accordance with any instructions set forth in such
request. DTC, Euroclear and Cedel Bank may grant proxies or otherwise authorize
their respective participants, or persons owning Book-Entry Interests through
their respective participants, to provide such instructions to the trustee so
that it may exercise any rights of a holder or take any other actions which a
holder is entitled to take under the indenture. The trustee will not exercise
any discretion in the granting of consents or waivers or the taking of any other
action relating to the indenture.
REPORTS
The trustee will immediately send to DTC, Euroclear and Cedel Bank a copy
of any notices, reports and other communications received relating to the
issuer, the senior notes or the Book-Entry Interests.
SETTLEMENT
Any secondary market trading activity in the Book-Entry Interests is
expected to occur through the Participants of DTC, Euroclear and Cedel Bank, and
the securities custody accounts of investors will be credited with their
holdings against payment in same-day funds on the settlement date.
CLEARANCE THROUGH CEDEL BANK AND EUROCLEAR
The Euro Senior Notes have been accepted for clearance by Cedel Bank and
Euroclear under the common code 009793712. The ISIN for the Euro Senior Notes is
XS0097937121.
The Sterling Senior Notes have been accepted for clearance by Cedel Bank
and Euroclear under the common code 009793747. The ISIN for the Sterling Senior
Notes is XS0097937477.
The Dollar Senior Notes have been accepted for clearance by Cedel Bank and
Euroclear under the common code 009793704. The ISIN for the Dollar Senior Notes
is US029712AA48. The CUSIP number for the Dollar Senior Notes is 029712AA4.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain anticipated U.S. federal income tax
consequences of the purchase, ownership and disposition of the senior notes,
based upon the Internal Revenue Code of 1986, as amended, and existing
regulations, rulings and judicial decisions under the Code as of the date of
this prospectus supplement of this prospectus supplement. Such authorities may
be repealed, revoked or modified, possibly with retroactive effect so as to
result in federal income tax consequences different from those discussed below.
Except as specifically set forth in this prospectus supplement, this summary
deals only with senior notes held as capital assets by initial holders, and does
not deal with special situations, such as those of dealers in securities or
currencies, financial institutions, banks, tax-exempt organizations, insurance
companies, holders that are partnerships or other pass-through entities and
holders whose "functional currency" is not the U.S. dollar, or special rules
with respect to "straddle," "conversion," "hedging" or "constructive sales"
transactions. This summary is not binding on the Internal Revenue Service or the
courts. No ruling has been sought or will be sought from the Internal Revenue
Service with respect to the positions and issues discussed herein, and there can
be no assurance that the Internal Revenue Service will not take a different
position concerning the tax consequences of the purchase, ownership or
disposition of the senior notes or that any such position would not be
sustained. PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING
OF SENIOR NOTES THAT MAY BE SPECIFIC TO THEM,
S-17
<PAGE> 18
INCLUDING THE TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL OR FOREIGN LAWS.
As used in this prospectus supplement, the term "U.S. Holder" means a
beneficial owner of a senior note who or that is for United States federal
income tax purposes (i) a citizen or resident of the United States, (ii) a
corporation created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate, the income of which is
subject to U.S. federal income taxation regardless of source, or (iv) a trust if
both: (A) a U.S. court is able to exercise primary supervision over the
administration of the trust, and (B) one or more U.S. persons have the authority
to control all substantial decisions of the trust. As used in this prospectus
supplement, the term "Non-U.S. Holder" means a holder of a senior note that is
not a U.S. Holder.
U.S. HOLDERS
INTEREST
Interest on the senior notes generally will be taxable to a U.S. Holder as
ordinary interest income at the time accrued or received in accordance with the
U.S. Holder's regular method of accounting for federal income tax purposes. A
U.S. Holder who uses the cash method of accounting for federal income tax
purposes and who receives interest on a Euro Senior Note in Euros or Sterling
Senior Note in pounds sterling, as the case may be, will be required to include
in income the U.S. dollar value of such Euros and pounds sterling. The U.S.
dollar value will be determined using the spot rate in effect on the date such
payment is received, regardless of whether the payment is in fact converted to
U.S. dollars at that time. No exchange gain or loss will be recognized by such
holder if the Euros or pounds sterling are converted to U.S. dollars on the date
received. The U.S. federal income tax consequences of the conversion of Euros or
pounds sterling into U.S. dollars are described below. See "-- Exchange of
Foreign Currencies."
A U.S. Holder who uses the accrual method of accounting for federal income
tax purposes, or who is otherwise required to accrue interest prior to receipt,
will be required to include in income the U.S. dollar value of the amount of
interest income accrued, or otherwise required to be taken into account, with
respect to a Euro Senior Note or Sterling Senior Note in a taxable year. The
U.S. dollar value of the accrued income will be determined by translating that
income at the average rate of exchange for the relevant interest accrual period,
or with respect to an accrual period that spans two taxable years, at the
average rate for the portion of the accrual period within the taxable year. The
average rate of exchange for an interest accrual period, or portion thereof, is
the simple average of the exchange rates for each business day of the period, or
another average that is reasonably derived and consistently applied.
An accrual basis U.S. Holder may elect, however, to translate the accrued
interest income using the spot rate of exchange in effect on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the spot rate of exchange in effect on the last day of the taxable
year. In addition, if the last day of an accrual period is within five business
days of the receipt, or payment, of the accrued interest, a U.S. Holder may
elect to translate such interest using the spot rate of exchange in effect on
the date of receipt, or payment. The above election must be made in a statement
filed with the U.S. Holder's tax return and will apply to other debt obligations
held by the U.S. Holder at the beginning of the first taxable year in which the
election applies or acquired thereafter and may not be changed without the
consent of the Internal Revenue Service. Whether or not such election is made, a
U.S. Holder may recognize exchange gain or loss with respect to accrued interest
income on the date such interest income is received. The exchange gain or loss
will be treated as ordinary income or loss. The amount of ordinary income or
loss recognized will equal the difference, if any, between the U.S. dollar value
of the Euros or pounds sterling received, determined using the spot rate in
effect on the date the payment is received, in respect of the interest accrual
period and the
S-18
<PAGE> 19
U.S. dollar value of the interest income that has accrued during the interest
accrual period, as determined above. No additional exchange gain or loss will be
recognized by the holder if the Euros or pounds sterling are converted to U.S.
dollars on the date received. The U.S. federal income tax consequences of the
conversion of Euros or pounds sterling into U.S. dollars are described below.
See "-- Exchange of Foreign Currencies."
DISPOSITIONS
Upon the sale, exchange, retirement or other disposition of a senior note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the disposition, other than any
amounts attributable to accrued but unpaid interest income, and the holder's
adjusted tax basis in the senior note. The gain or loss generally will be
capital gain or loss, except with respect to gains or losses attributable to
changes in currency exchange rates, as described below. To the extent that the
amount realized represents accrued but unpaid interest, however, such amounts
must be taken into account as interest income, with exchange gain or loss
computed as described above. If a U.S. Holder receives foreign currency on a
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the foreign currency on the date of disposition assuming the
senior notes are not traded on an established securities market. A U.S. Holder's
adjusted tax basis in a senior note will equal the U.S. dollar cost of the
senior note to the holder on the date of purchase assuming the senior notes are
not traded on an established securities market. If a U.S. Holder purchases a
senior note with previously owned foreign currency, the holder will recognize
ordinary income or loss in an amount equal to the difference, if any, between
the holder's tax basis in the foreign currency and the U.S. dollar value of the
foreign currency used to purchase the senior note, determined on the date of
purchase.
If the Euro Senior Notes or Sterling Senior Notes are traded on an
established securities market, there is a special rule for purchases and sales
of those notes by a cash basis taxpayer under which units of foreign currency
paid or received are translated into U.S. dollars at the spot rate on the
settlement date of the purchase or sale. In that case, no exchange gain or loss
will result from currency fluctuations between the trade date and the settlement
of such a purchase or sale. An accrual basis taxpayer may elect the same
treatment required of cash basis taxpayers with respect to purchases and sales
of publicly traded senior notes, provided the election is applied consistently.
Such election cannot be changed without the consent of the Internal Revenue
Service.
Gain or loss realized by a U.S. Holder upon the sale, exchange or
retirement of a senior note that is attributable to fluctuations in the currency
exchange rates will be ordinary income or loss and generally will not be treated
as interest income or expense. Gain or loss attributable to fluctuations in
exchange rates will equal the difference between the U.S. dollar value of the
foreign currency principal amount of the senior note, determined on the date the
payment is received or the senior note is disposed of, and the U.S. dollar value
of the foreign currency principal amount of the senior note, determined on the
date the U.S. Holder acquired the senior note. The foreign currency gain or loss
will be recognized only to the extent of the total gain or loss realized by the
U.S. Holder on the sale, exchange or retirement of the senior note.
For certain non-corporate U.S. Holders, including individuals, the rate of
taxation of capital gains will depend upon (i) the holder's holding period in
the capital asset, with a preferential rate generally available for capital
assets held for more than one year, and (ii) the holder's marginal tax rate for
ordinary income. The deductibility of capital losses is subject to limitations.
EXCHANGE OF FOREIGN CURRENCIES
A U.S. Holder will have a tax basis in any Euros or pounds sterling
received, as the case may be, as interest or on the sale, exchange, retirement
or other disposition of a senior note, equal. to their U.S. dollar value at
S-19
<PAGE> 20
the time the interest is received or at the time payment is received in
consideration of the sale, exchange or retirement. Any gain or loss realized by
a U.S. Holder on a sale or other disposition of Euros or pounds sterling,
including their exchange for U.S. dollars or their use to purchase senior notes,
will be ordinary income or loss.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a senior note that is a Non-U.S. Holder.
INTEREST
Subject to the discussion below concerning backup withholding, payments of
interest on a senior note to any Non-U.S. Holder will generally not be subject
to U.S. federal income or withholding tax, provided that (1) the holder is not
(i) a direct or indirect owner, taking into account certain attribution rules,
of 10% or more of the total voting power of all voting stock of the issuer or
(ii) a controlled foreign corporation related to the issuer through stock
ownership, (2) such interest payments are not effectively connected with the
conduct by the Non-U.S. Holder of a trade or business within the United States
and (3) the issuer or its paying agent receives (i) from the Non-U.S. Holder, a
properly completed Form W-8, or substitute Form W-8, under penalties of perjury
which provides the Non-U.S. Holder's name and address and certifies that the
Non-U.S. Holder of the senior note is a Non-U.S. Holder or (ii) from a security
clearing organization, bank or other financial institution that holds the senior
notes in the ordinary course of its trade or business (a "financial
institution") on behalf of the Non-U.S. Holder, certification under penalties of
perjury that such a Form W-8, or substitute Form W-8, has been received by it,
or by another such financial institution, from the Non-U.S. Holder, and a copy
of the Form W-8, or substitute Form W-8, is furnished to the payor.
A Non-U.S. Holder that does not qualify for exemption from withholding
under the preceding paragraph generally will be subject to withholding of U.S.
federal income tax at the rate of 30%, or lower applicable treaty rate, on
payments of interest on the senior notes.
If the payments of interest on a senior note are effectively connected with
the conduct by a Non-U.S. Holder of a trade or business in the United States,
such payments will be subject to U.S. federal income tax on a net basis at the
rates applicable to United States persons generally and, with respect to
corporate holders, may also be subject to a 30% branch profits tax. If payments
are subject to U.S. federal income tax on a net basis in accordance with the
rules described in the preceding sentence, those payments will not be subject to
United States withholding tax so long as the holder provides the issuer or its
paying agent with a properly executed Form 4224.
Non-U.S. Holders should consult any applicable income tax treaties, which
may provide for a lower rate of withholding tax, exemption from or reduction of
branch profits tax, or other rules different from those described above.
DISPOSITIONS
Subject to the discussion below concerning backup withholding, any gain
realized by a Non-U.S. Holder on the sale, exchange, retirement or other
disposition of a senior note generally will not be subject to U.S. federal
income or withholding tax, unless (i) such gain is effectively connected with
the conduct by such Non-U.S. Holder of a trade or business within the United
States, (ii) the Non-U.S. Holder is an individual who is present in the United
States for 183 days or more in the taxable year of the disposition and certain
other conditions are satisfied, or (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of U.S. tax law applicable to certain U.S.
expatriates.
FEDERAL ESTATE TAX
Senior notes held, or treated as held, by an individual who is a Non-U.S.
Holder at the time of his or her death will not be subject to U.S. federal
estate tax provided that (i) the individual does not actually or constructively
S-20
<PAGE> 21
own 10% or more of the total voting power of all voting stock of the issuer and
(ii) income on the senior notes was not effectively connected with the conduct
by the Non-U.S. Holder of a trade or business within the United States.
INFORMATION REPORTING AND
BACKUP WITHHOLDING
Payments with respect to the senior notes and the proceeds upon the sale or
other disposition of the senior notes may be subject to information reporting
and possibly U.S. backup withholding at a 31% rate. Backup withholding will not
apply to a U.S. Holder who furnishes its correct taxpayer identification number
and provides other certification. Backup withholding and information reporting
will not apply to payments made by the issuer in respect of the senior notes to
a Non-U.S. Holder, if the holder certifies, under penalties of perjury, that it
is not a U.S. person and provides its name and address, provided that neither
the issuer nor its paying agent has actual knowledge that the holder is a U.S.
person, or the Non-U.S. Holder otherwise establishes an exemption. Copies of
information returns may be made available, under the provisions of a specific
treaty or agreement, to the tax authorities of the country in which the Non-
U.S. Holder resides.
Payment of proceeds from the disposition of senior notes to or through the
United States office of any broker, U.S. or foreign, will be subject to
information reporting and backup withholding unless the owner certifies as to
its non-U.S. status under penalty of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. person or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a senior
note to or through a non-U.S. office of a non-U.S. broker that is not a "U.S.
related person," as defined in applicable Treasury Regulations, will not be
subject to information reporting or backup withholding. In the case of the
payment of proceeds from the disposition of senior notes to or through a
non-U.S. office of a broker that is a U.S. person or a "U.S. related person,"
the regulations require information reporting on the payment unless the broker
has documentary evidence in its files that the owner is not a U.S. person and
the broker has no knowledge to the contrary. Backup withholding will not apply
to payments made through a non-U.S. foreign office of a broker that is a U.S.
person or a "U.S. related person," absent actual knowledge that the payee is a
U.S. person.
Amounts withheld under the backup withholding rules do not constitute a
separate United States federal income tax. Rather, any amounts withheld under
the backup withholding rules will be allowed as a refund or a credit against a
holder's U.S. federal income tax liability, if any, provided that the requisite
procedures are followed.
The Treasury Department recently promulgated final regulations regarding
the withholding and information reporting rules discussed above. In general, the
final regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify certain standards governing the information
upon which a withholding agent may rely. The final regulations are generally
effective for payments made after December 31, 1999, subject to certain
transition rules. Non-U.S. Holders should consult their own tax advisors with
respect to the impact, if any, of the final regulations.
GENERAL LISTING INFORMATION
1. Application has been made to list the senior notes on the Luxembourg
Stock Exchange. The certified Certificate of Incorporation of the issuer and the
guarantor and the legal notice relating to the issue of the senior notes will be
deposited prior to any listing with the Chief Registrar of the District Court in
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg), where
such documents are available for
S-21
<PAGE> 22
inspection and where copies thereof can be obtained upon request. As long as the
senior notes are listed on the Luxembourg Stock Exchange, an agent for making
payments on, and transfers of, senior notes will be maintained in Luxembourg.
2. The consolidated financial statements of American Standard Inc. and
American Standard Companies Inc. as of December 31, 1997 and 1998, and for each
of the three years in the period ended December 31, 1998 have been prepared in
accordance with United States generally accepted accounting principles and have
been audited by Ernst & Young LLP in accordance with United States generally
accepted auditing standards. On April 30, 1999 Ernst & Young LLP gave consent to
the incorporation by reference in the Registration Statement (Form S-3 No.
333-67943) and related prospectus of American Standard Inc. and American
Standard Companies Inc., of their reports dated February 19, 1999 with respect
to the consolidated financial statements of American Standard Inc. and American
Standard Companies Inc.
3. For so long as the senior notes are listed on the Luxembourg Stock
Exchange and the rules of such exchange so require, copies of the following
documents may be inspected at the specified office of the Paying and Transfer
Agent in Luxembourg:
- - Certified Certificate of Incorporation of the issuer;
- - Certified Certificate of Incorporation of the guarantor;
- - Paying Agency Agreement;
- - the indenture relating to the senior notes, which include the forms of the
senior note certificates.
In addition, copies of the most recent annual audited consolidated
financial statements of each of the issuer and the guarantor for the preceding
financial year, and any interim unaudited consolidated quarterly financial
statements published by each of the issuer and the guarantor, will be available
for collection at the specified office of the Paying Agent in Luxembourg for so
long as the senior notes are listed on the Luxembourg Stock Exchange and the
rules of such exchange so require. Each of the issuer and the guarantor
publishes only audited annual and unaudited quarterly financial statements on a
consolidated basis.
4. Except as disclosed in this document, each of the issuer and the
guarantor represents that there has been no material adverse change in its
financial position since December 31, 1998.
5. Except as disclosed in this document, neither the issuer nor the
guarantor is involved in any litigation or arbitration proceedings relating to
claims or amounts which are material in the context of the issue of the senior
notes nor (so far as the issuer or the guarantor is aware) is any such
litigation or arbitration pending or threatened.
6. The issuance of the senior notes was authorized by resolutions of the
issuer's and the guarantor's boards of directors passed on April 23, 1999.
7. The members of the Boards of Directors of the issuer and the guarantor
are the same. The following persons are members of the Boards of Directors:
Emmanuel A. Kampouris, Steven E. Anderson, James F. Hardymon, Horst Hinrichs,
George H. Kerckhove, Shigeru Mizushima, Roger W. Parsons, J. Danforth Quayle,
David M. Roderick and Joseph S. Schuchert.
S-22
<PAGE> 23
UNDERWRITING
American Standard Inc. and the underwriters for the offering named below
have entered into an underwriting agreement dated May 21, 1999 (the underwriting
agreement) with respect to each series of the senior notes. Subject to certain
conditions each underwriter has severally agreed to purchase the number of
senior notes indicated in the following table.
<TABLE>
<CAPTION>
Principal Amount of
Underwriter Sterling Senior Notes
----------- ---------------------
<S> <C>
Goldman Sachs International ......................... L39,000,000
Chase Securities Inc................................. L 7,000,000
Bank of America International Limited................ L 7,000,000
Salomon Brothers International Limited............... L 7,000,000
-----------
Total........................................... L60,000,000
===========
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
Underwriter Dollar Senior Notes
----------- -------------------
<S> <C>
Goldman Sachs International ......................... $ 65,200,000
Chase Securities Inc................................. $ 11,600,000
Banc of America Securities LLC....................... $ 11,600,000
Salomon Brothers International Limited............... $ 11,600,000
------------
Total........................................... $100,000,000
============
</TABLE>
<TABLE>
<CAPTION>
Principal Amount of
Underwriter Euro Senior Notes
----------- -------------------
<S> <C>
Goldman Sachs International ......................... E162,700,000
Chase Securities Inc................................. E 29,100,000
Bank of America International Limited................ E 29,100,000
Salomon Brothers International Limited............... E 29,100,000
------------
Total........................................... E250,000,000
============
</TABLE>
The underwriters propose to offer the senior notes outside of the United
States directly. Certain of the underwriters also propose to offer the senior
notes in the United States through their respective selling agents. Any offering
of the senior notes in the United States by Goldman Sachs International, Bank of
America International Limited or Salomon Brothers International Limited will be
made indirectly through their respective affiliates, Goldman, Sachs & Co., Banc
of America Securities LLC and Salomon Smith Barney Inc.
The senior notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus supplement. Any senior notes sold by the underwriters to securities
dealers may be sold at a discount from the initial public offering price of up
to 0.344% of the principal amount of the senior notes. Any such securities
dealers may resell any senior notes purchased from the underwriters to certain
other brokers or dealers at a discount from the initial public offering price of
up to 0.250% of the principal amount of the senior notes. If all the senior
notes are not sold at the initial offering price, the underwriters may change
the offering price and the other selling terms.
The senior notes are a new issue of securities with no established trading
market. American Standard Inc. has been advised by the underwriters that the
underwriters intend to make a market in the senior notes but are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be give as to the liquidity of the trading market for the senior
notes.
S-23
<PAGE> 24
In connection with the offering, the underwriters may purchase and sell
senior notes in the open market. These transaction may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
senior notes than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the senior notes while
the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discounts received by it because the representatives have repurchased senior
notes sold by or for the account of such underwriter in stabilizing or short
covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the senior notes. As a result, the price of the
senior notes may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected in the
over-the-counter market or otherwise.
American Standard Inc. estimates that its share of the total expenses of
the offering, excluding underwriting discounts and commissions, will be
approximately $500,000.
American Standard Inc. has agreed to indemnify the several underwriters
against liabilities arising as a result of the offering, including liabilities
under the Securities Act of 1933.
Application has been made to list the senior notes on the Luxembourg Stock
Exchange.
As described below, an affiliate of Goldman Sachs & Co. will receive more
than 10% of the proceeds from the sale of the senior notes. Accordingly, this
offering is being conducted pursuant to Rule 2710(c)(8) of the Rules of Conduct
of the National Association of Securities Dealers, Inc. In accordance with this
provision, Banc of America Securities LLC has acted as "qualified independent
underwriter," and the yield on the senior notes is not lower than that
recommended by Banc of America Securities LLC in compliance with the
requirements of Rule 2720(c)(3) of the NASD Rules of Conduct. In connection with
this offering, Banc of America Securities LLC has performed due diligence
investigations and reviewed and participated in the preparation of this
prospectus.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged and may in the future engage in commercial banking
and investment banking transactions with American Standard Inc. Goldman Sachs
International is an affiliate of Goldman Sachs Credit Partners, L.P. Goldman
Sachs Credit Partners L.P. is agent bank and the lender under our short term
loan facility and will receive more than 10% of the net proceeds in this
offering in repayment of amounts outstanding under the short term loan facility.
Affiliates of Chase Securities Inc., Banc of America Securities LLC and Salomon
Brothers International Limited are lenders under our 1997 credit agreement and
will receive a portion of the amounts repaid under the agreement with proceeds
of the offering.
No underwriter shall, prior to the expiration of the period of six months
from May 28, 1999, offer or sell any senior notes to persons in the United
Kingdom, except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which shall not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995. Each underwriter shall comply with
all applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the senior notes in, from or otherwise
involving the United Kingdom. Each underwriter shall issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Notes only to a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 (as
amended) or is a person to whom the document may otherwise lawfully be issued or
passed on.
S-24
<PAGE> 25
PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER AND THE GUARANTOR
AMERICAN STANDARD INC.
AMERICAN STANDARD COMPANIES INC.
One Centennial Avenue
Piscataway, New Jersey 08855
INDEPENDENT AUDITORS
ERNST & YOUNG LLP
787 7th Avenue
New York, NY 10019
LEGAL ADVISORS
<TABLE>
<CAPTION>
TO THE ISSUER AND THE GUARANTOR TO THE UNDERWRITERS
<S> <C>
RICHARD A. KALAHER, ESQ. CAHILL GORDON & REINDEL
American Standard Inc. 80 Pine Street
One Centennial Avenue New York, NY 10005
Piscataway, New Jersey 08855
</TABLE>
TRUSTEE, REGISTRAR, PRINCIPAL PAYING AND TRANSFER AGENT
THE BANK OF NEW YORK
101 Barclay Street
New York, New York 10286
LISTING AGENT, PAYING AND TRANSFER AGENT
BANQUE GENERALE DU LUXEMBOURG, S.A.
50, Avenue J.F. Kennedy
L-2591 Luxembourg
LU 10875081 -- R.C. Luxembourg B 6481
<PAGE> 26
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the prospectus. You must not rely on any unauthorized information or
representations. This prospectus supplement and the prospectus are an offer to
sell only the senior notes offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Supplement
Recent Developments................ S-3
Capitalization..................... S-5
Use of Proceeds.................... S-7
Description of the Senior Notes.... S-7
Certain United States Federal
Income Tax Considerations........ S-17
General Listing Information........ S-21
Underwriting....................... S-23
Prospectus
The Company........................ 3
Risk Factors....................... 3
Where You Can Find More
Information...................... 4
Use of Proceeds.................... 6
Ratio of Earnings to Fixed
Charges.......................... 6
Description of Debt Securities..... 6
Plan of Distribution............... 13
Legal Matters...................... 15
Experts............................ 15
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
AMERICAN STANDARD INC.
L60,000,000 8.25% Senior Notes
due 2009
$100,000,000 8.25% Senior Notes
due 2009
E250,000,000 7.125% Senior Notes
due 2006
Guaranteed as to payment of
Principal and Interest by
AMERICAN STANDARD
COMPANIES INC.
-------------------------
[AMERICAN STANDARD COMPANIES LOGO]
-------------------------
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
BANC OF AMERICA
SECURITIES LLC
SALOMON SMITH BARNEY
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 27
PROSPECTUS
$1,000,000,000
Debt Securities
AMERICAN STANDARD INC., AS ISSUER
AMERICAN STANDARD COMPANIES INC., AS GUARANTOR
ONE CENTENNIAL AVENUE
PISCATAWAY, NEW JERSEY 08855
(732) 980-6000
American Standard Inc. is a wholly-owned subsidiary of American Standard
Companies Inc. This prospectus describes the general terms that will apply to
all of the debt securities we intend to offer at one or more times under this
registration statement. We will describe the specific terms of each series of
debt securities that we offer in a supplement to this prospectus. Supplements
will be made available at the time of each offering of debt securities. You
should read this prospectus and the related supplement carefully before you
invest.
An investment in these debt securities involves a high degree of risk.
Consider carefully the risk factors beginning on page 3 in this prospectus.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is May 4, 1999.
<PAGE> 28
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY.......................... 3
RISK FACTORS......................... 3
WHERE YOU CAN FIND MORE
INFORMATION........................ 4
USE OF PROCEEDS...................... 6
RATIO OF EARNINGS TO FIXED CHARGES... 6
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DESCRIPTION OF DEBT SECURITIES....... 6
PLAN OF DISTRIBUTION................. 13
LEGAL MATTERS........................ 15
EXPERTS.............................. 15
</TABLE>
FOR CALIFORNIA RESIDENTS
With respect to sales of the debt securities being offered hereby to
California residents, such debt securities may be sold only to: (1) "Accredited
Investors" within the meaning of Regulation D under the Securities Act of 1933,
(2) banks, savings and loan associations, trust companies, insurance companies,
investment companies registered under the Investment Company Act of 1940,
pension and profit-sharing trusts, corporations or other entities which,
together with the corporation's or other entity's affiliates, have a net worth
on a consolidated basis according to their most recent regularly prepared
financial statements (which shall have been reviewed, but not necessarily
audited, by outside accountants) of not less than $14,000,000 and subsidiaries
of the foregoing, or (3) any person (other than a person formed for the sole
purpose of purchasing the debt securities being offered hereby) who purchases at
least $1,000,000 aggregate amount of the debt securities being offered hereby or
(4) any person who (A) had a minimum annual gross income of $65,000 during the
last tax year and an expected gross income of $65,000 during the current tax
year and a minimum net worth of $250,000 or (B) has a net worth of $500,000 (in
each case, excluding home, home furnishings and personal automobiles).
----------------------
Our registered trademarks include: AMERICAN STANDARD([), IDEAL STANDARD([),
STANDARD([), TRANE([), WABCO([), Copalis([), DiaSorin(]), Pylori-Chek(])
ARMITAGE SHANKS([), DOLOMITE([) and PORCHER([).
2
<PAGE> 29
THE COMPANY
We are a global, diversified manufacturer of high quality, brand-name
products. In 1998, we had sales of $6.7 billion. We have four operating
segments:
- - air conditioning products -- 59% of 1998 sales;
- - plumbing products -- 23% of 1998 sales;
- - automotive products -- 17% of 1998 sales; and
- - medical systems -- 1% of 1998 sales.
In the first three of these business segments, we are among the three
largest providers of the products we produce in the principal geographic areas
where we compete. The medical systems segment, formed in 1997, is developing new
medical diagnostic technologies.
Our brand name products include:
- - TRANE([) and AMERICAN STANDARD([) air conditioning equipment for use in
central air condition systems for commercial, institutional and residential
buildings;
- - AMERICAN STANDARD([), IDEAL STANDARD([), STANDARD([), PORCHER([), ARMITAGE
SHANKS([) and DOLOMITE([) for bathroom and kitchen fixtures and fittings;
- - WABCO([) braking and control systems for medium-sized and heavy trucks, buses,
trailers and utility vehicles; and
- - Copalis([) medical diagnostic systems and DiaSorin(]) and Pylori-Chek(])
medical diagnostic products.
One way in which we make our products more competitive is by emphasizing
technological advancements such as:
- - air conditioning systems that utilize energy-efficient compressors and
refrigerants meeting current environmental standards;
- - water-saving plumbing products;
- - commercial vehicle antilock braking systems and electronic controls systems;
and
- - innovative medical diagnostic testing using laser technology.
We conduct significant operations outside the United States which generate
approximately one-half of our sales. We have 116 manufacturing facilities in 33
countries and employ approximately 57,000 people.
RISK FACTORS
Before you invest in the debt securities, you should consider carefully the
following risk factors, in addition to the other information contained in this
prospectus.
SUBSTANTIAL LEVERAGE -- THE SIGNIFICANT AMOUNT OF OUR INDEBTEDNESS COULD
ADVERSELY AFFECT OUR FINANCIAL HEALTH AND COULD PREVENT US FROM FULFILLING OUR
OBLIGATIONS UNDER THE DEBT SECURITIES.
We now have, and when debt securities are issued will continue to have, a
significant amount of indebtedness. Our level of indebtedness, approximately
$2.9 billion at March 31, 1999, could adversely affect our ability to:
- - generate sufficient cash to service our debt; and
- - obtain additional financing in the future.
If our available cash were no longer sufficient to fund our expenditures and
debt service obligations, we might need to raise additional funds by:
- - selling equity securities;
- - selling a significant amount of our assets; or
- - refinancing all or a part of our indebtedness.
We cannot assure you that any of these alternatives will be available, if
needed, to permit us to meet our obligations. Moreover,
3
<PAGE> 30
even if we could meet our obligations, we might otherwise be limited in our
ability to:
- - finance capital expenditures;
- - compete effectively;
- - expand our business; or
- - operate successfully under adverse economic conditions.
SUBORDINATION -- ALTHOUGH THE DEBT SECURITIES ARE REFERRED TO AS SENIOR DEBT
SECURITIES, THEY WILL BE EFFECTIVELY SUBORDINATED TO OUR SECURED DEBT AND ALL OF
THE DEBT AND OTHER OBLIGATIONS OF OUR SUBSIDIARIES.
SUBORDINATION TO SECURED CREDITORS IN BANKRUPTCY
The guarantor, the issuer and certain subsidiaries of the issuer have
guaranteed the repayment of the borrowings under the credit agreement, and the
stock of the issuer and its foreign and domestic subsidiaries has been pledged
as collateral to secure the guarantees. Your debt securities will not be
secured. Therefore, in the event of a bankruptcy or similar proceeding, the
guarantees granted and collateral pledged under the credit agreement will be
available to satisfy our obligations to the lenders under the credit agreement
before any payments are made on your securities.
SUBORDINATION TO SECURED CREDITORS IN DISPOSITION OF ISSUER'S EQUITY
As secured creditors, the lenders under the credit agreement would control
the disposition and sale of the equity of the issuer and its subsidiaries after
an event of default under the credit agreement. As secured creditors, they are
not legally required to take into account your interests as holders of the debt
securities.
SUBORDINATION TO CREDITORS OF OUR SUBSIDIARIES
The debt securities you receive will be effectively subordinated to
creditors (including possibly the lenders under the credit agreement and other
lenders, tax authorities and trade creditors) and preferred stockholders (if
any) of the issuer's subsidiaries.
TAX MATTERS -- THE ULTIMATE RESOLUTION OF DISPUTED GERMAN TAX ASSESSMENTS AND
PENDING GERMAN TAX AUDITS COULD HAVE A MATERIAL ADVERSE EFFECT ON US.
Audits of our German tax returns for the period 1984-1994 and tax
assessments related to certain of those years could result in the Company making
substantial monetary payments to German tax authorities. The amounts of any such
payments, and the timing thereof, could have a material adverse effect on our
liquidity, cash flows and/or results of operations and, consequently, impair our
competitive position. In addition, the Company might need to raise additional
capital and no assurances can be given as to the availability of debt or equity
financing if such need were to arise. See "Item 3. Legal Matters" in American
Standard Companies Inc.'s Annual Report on Form 10-K for the year ended December
31, 1998, incorporated herein by reference.
WHERE YOU CAN FIND MORE INFORMATION
American Standard Companies Inc. and its wholly-owned subsidiary, American
Standard Inc., file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference facilities maintained at 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information about its public reference rooms. Our SEC filings are also available
to the public over the Internet at the SEC's website at http://www.sec.gov.
American Standard Companies Inc.'s SEC filings are also available at the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
We "incorporate by reference" into this prospectus the information we file
with the SEC. That means that, rather than reprinting
4
<PAGE> 31
here all of the information contained in our other documents filed with the SEC,
we can disclose important information to you by referring you to those documents
that are already filed. The information incorporated by reference is an
important part of this prospectus and information that we file with the SEC in
the future will automatically update and supersede what is printed in this
prospectus. We incorporate by reference the following documents that we have
filed with the SEC and all of our future filings with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until we have
sold all the securities offered by this prospectus:
American Standard Companies Inc., as guarantor (File No. 1-11415):
- - Annual Report on Form 10-K for the year ended December 31, 1998, including
portions incorporated therein of the guarantor's definitive Proxy Statement
dated March 29, 1999.
- - Current Reports on Form 8-K filed February 12, 1999 and April 30, 1999.
American Standard Inc., as issuer (File No. 1-470):
- - Annual Report on Form 10-K for the year ended December 31, 1998.
- - Current Reports on Form 8-K filed February 12, 1999 and April 30, 1999.
You may request a copy of these filings, at no cost, by writing or calling
us at the following address:
American Standard Companies Inc.
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
Attention: Office of the Secretary
Telephone: (732) 980-6000
You should rely only on the information incorporated by reference or set
forth in this prospectus and that is set forth in the applicable prospectus
supplement. We have not authorized anyone else to provide you with different
information. We may only use this prospectus to sell securities if it is
accompanied by a prospectus supplement. We are only offering our debt securities
in states where the offer is permitted. You should not assume that the
information in this prospectus or the applicable prospectus supplement is
accurate as of any date other than the dates on the front of those documents.
The registration statement that contains this prospectus, including
exhibits to the registration statement, contains additional information about us
and the securities offered under this prospectus. That registration statement
can be read at the SEC's website or at the SEC office mentioned above.
DISCLOSURE REGARDING
FORWARD LOOKING STATEMENTS
We provide information and make statements in this prospectus that are
considered forward-looking information or statements. Many of these statements
contain words such as "believes," "expects," "intends" and other similar words.
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking information or statements. Many factors could cause actual
results to differ materially from those we believe, expect or intend will occur,
including:
(i) changes in future conditions in one or more of the various geographic
and/or product markets in which one or more of our businesses
competes, including, without limitation, as to governmental regulation
(including attitudes as to competition by non-locally owned
businesses); general economic conditions; weather or climate; local or
non-local competitive factors; interest rate or currency fluctuations;
and/or other conditions or factors;
(ii) the ability to carry out successfully strategic corporate, marketing,
tax and/or sales plans; and
(iii) accuracy of assessments as to the effects of contingent liabilities,
including, without limitations, taxes.
5
<PAGE> 32
We cannot predict the actual effect these factors will have on our results and
many of the factors and their effects are beyond our control. Given these
uncertainties, you should not place undue reliance on these forward-looking
statements.
USE OF PROCEEDS
Unless otherwise described in the applicable prospectus supplement, we
intend to use the net proceeds from the sale of debt securities for general
corporate purposes, which may include the repayment of outstanding debt,
including debt incurred to finance the acquisition of the Bathrooms Division of
Blue Circle Industries PLC, as well as for stock repurchases, certain
investments, acquisitions, additions to working capital or capital expenditures.
RATIO OF EARNINGS TO FIXED CHARGES
Set forth below is the ratio of earnings to fixed charges of American
Standard Companies Inc. for the periods indicated. For the purpose of computing
these ratios, fixed charges consist of interest on debt (including capitalized
interest), amortization of debt discount and expense, and a portion of rentals
determined to be representative of interest. Earnings consist of consolidated
net income before income taxes, plus fixed charges other than capitalized
interest but including the amortization thereof, adjusted by the excess or
deficiency of dividends over income of entities accounted for by the equity
method.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges............... -- 2.0 1.3 2.0 1.7
</TABLE>
Earnings were insufficient to cover fixed charges for the year ended
December 31, 1994 by $16.0 million. The year ended December 31, 1996 included a
non-cash asset impairment charge of $235.2 million resulting from the adoption
of Statement of Financial Accounting Standards No. 121. Excluding that charge,
the ratio of earnings to fixed charges in that period would have been 2.3.
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities. The prospectus supplement will describe the particular terms of the
debt securities offered by that prospectus supplement and will note the extent,
if any, to which the general provisions described below do not apply to the debt
securities so offered. The prospectus supplement relating to each offering of
debt securities will also describe any applicable federal income tax
considerations. You should read both this prospectus and the applicable
prospectus supplement for a description of the terms of each particular series
of debt securities.
The debt securities will be issued under an indenture among the issuer, the
guarantor and The Bank of New York, as trustee. The indenture is subject to and
qualified by the Trust Indenture Act of 1939. The indenture has been filed as an
exhibit to the registration statement and you should read the indenture for
provisions that may be important to you. The following summaries of certain
provisions of the debt securities and the indenture are not meant to be a
complete description of the debt securities; however, this prospectus contains
the material terms and conditions of the debt securities.
6
<PAGE> 33
RANKING
American Standard Companies Inc., the guarantor, has as its only
significant asset all the outstanding common stock of American Standard Inc.,
the issuer. The debt securities will be direct unsecured obligations of the
issuer. The guarantor will fully and unconditionally guarantee the payment of
principal, premium, if any, and interest on the debt securities. The debt
securities will rank pari passu with other unsecured unsubordinated obligations
of the issuer. The guarantees will rank pari passu with other unsecured
unsubordinated obligations of the guarantor.
INCURRENCE OF ADDITIONAL DEBT
The indenture does not limit the amount of indebtedness we may issue
thereunder. We may issue the debt securities under the indenture from time to
time in one or more series pursuant to the terms of one or more securities
resolutions or supplemental indentures.
The indenture does not contain any provisions that would limit our ability
to incur indebtedness or that would afford holders of debt securities protection
in the event of a highly leveraged or similar transaction involving the issuer
or its subsidiaries or in the event of a change of control. Please see the
applicable prospectus supplement for information with respect to any deletions
from, modifications of, or additions to, the events of default or covenants that
are described below.
ADDITIONAL TRUSTEES
The issuer may designate more than one trustee under the indenture, with
each trustee acting with respect to one or more series of debt securities. Any
trustee under the indenture may resign or be removed with respect to one or more
series of debt securities, and a successor trustee may be appointed to act with
respect to such series. In the event that two or more persons are acting as
trustee with respect to different series of debt securities, each such trustee
shall be a trustee of a trust under the indenture separate and apart from any
trust administered by any other trustee under the indenture. Except as otherwise
indicated herein, any action described to be taken may be taken with respect to,
and only with respect to, the one or more series of debt securities for which it
is trustee under the indenture.
TERMS THAT MAY BE DESCRIBED IN A PROSPECTUS SUPPLEMENT
The prospectus supplement relating to any series of debt securities being
offered will contain specific terms of such series of debt securities. Those
specific terms will include some or all of the following:
- - designation, aggregate principal amount, currency or composite currency and
denominations
- - price and, if an index formula or other method is used, the method for
determining amounts of principal or interest
- - terms of any redemption at the option of holders
- - if the debt securities provide that payments of principal or interest may be
made in a currency other than that in which debt securities are denominated,
the manner for determining such payments
- - maturity date and other dates, if any, on which principal will be payable
- - interest rate (which may be fixed or variable), if any
- - date or dates from which interest will accrue and on which interest will be
payable, and the record dates for the payment of interest
- - manner of paying principal and interest
- - the place or places where principal and interest will be payable
- - terms of any mandatory or optional redemption by us including any sinking fund
- - terms of any conversion or exchange right
- - tax indemnity provisions
- - provisions, if any, granting special rights upon the occurrence of specified
events
7
<PAGE> 34
- - whether and upon what terms debt securities may be defeased
- - any events of default or restrictive covenants in addition to or in lieu of
those set forth in the indenture
- - provisions for electronic issuance of debt securities or for debt securities
in uncertificated form
- - any additional provisions or other special terms not inconsistent with the
provisions of the indenture, including any terms that may be required or
advisable under United States or other applicable laws or regulations, or
advisable in connection with the marketing of the debt securities.
The debt securities may be issued at a discount below their principal
amount and provide for less than their entire principal amount to be payable
upon any declaration of acceleration of their maturity. In such cases, all
material U.S. federal income tax and other considerations applicable to these
original issue discount securities will be described in the applicable
prospectus supplement.
GLOBAL SECURITIES
The debt securities of a series may be issued in whole or in part in
book-entry form consisting of one or more global securities. The global
securities will be deposited with a depositary identified in the applicable
prospectus supplement relating to such series. Global securities will be issued
in registered form. We will describe the specific terms of the depositary
arrangement with respect to a series of debt securities in the applicable
prospectus supplement.
DENOMINATION AND INTEREST
The debt securities will be issuable in denominations of $1,000 and
integral multiples thereof.
The principal of, premium, if any, and interest on any series of debt
securities will be payable at the corporate trust office of the applicable
trustee. Even though we will designate the trustee's corporate office as an
official place of payment, we may elect to pay interest by having the trustee
either mail a check to the person listed in the applicable register for such
debt securities as the owner of the debt securities or by delivering funds to
such person, in accordance with their instructions, by wire transfer at an
account maintained within the United States. The issuer may at any time
designate additional paying agents.
If we do not pay any interest when due on a debt security (defaulted
interest), the interest will not be payable to the holder on the applicable
regular record date. We may pay the defaulted interest either to the person in
whose name the debt security is registered at the close of business on a special
record date for the payment of the defaulted interest to be fixed by the
trustee, in which case notice of the special record date shall be given to the
holder of the debt security not less than 10 days prior to the special record
date, or at any time in any other lawful manner.
REGISTRATION AND TRANSFER
The debt securities of any series may be exchanged or transferred pursuant
to procedures in the indenture, without the payment of any service charge, other
than tax or other governmental charges. Debt securities in global form may
generally be transferred only as a whole unless they are being transferred to
nominees of the depository.
Neither the issuer nor any trustee shall be required to:
(1) issue, register the transfer of or exchange debt securities of any
series during a period beginning at the opening of business 15 days
before the selection of any debt securities for redemption and ending
at the close of business on the day of mailing of the relevant notice
of redemption;
(2) register the transfer of or exchange any debt security, or portion
thereof, so selected for redemption, in whole or in part, except the
unredeemed portion of any debt security being redeemed in part; or
8
<PAGE> 35
(3) issue, register the transfer of or exchange any debt security that has
been surrendered for repayment at the option of the holder, except the
portion, if any, of such debt security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
We have agreed not to consolidate with or sell, lease or convey all or
substantially all of our assets to, or merge with or into, any other entity in
any transaction in which the issuer or the guarantor, as applicable, is not the
surviving entity unless:
(1) the successor entity is organized under the laws of the United States
or any state or the District of Columbia and expressly assumes the
guarantor's or the issuer's obligations under the debt securities and
the indenture;
(2) immediately after giving effect to such transaction, no default or
event of default under the indenture shall have occurred and be
continuing; and
(3) we deliver to the trustee an officers' certificate and legal opinion
covering certain of such conditions.
The successor entity shall be substituted for the issuer or the guarantor,
as applicable, and thereafter the issuer or the guarantor would no longer have
any obligations under the indenture or the debt securities.
CERTAIN COVENANTS
The applicable prospectus supplement will describe any material covenants
in respect of a series of debt securities that are not described in this
prospectus. Unless otherwise indicated in the applicable prospectus supplement,
the debt securities will include the following covenants of the issuer and the
guarantor:
Existence. Except as permitted under "-- Merger, Consolidation or Sale of
Assets," each of us is required to do all things necessary to preserve and keep
in full force and effect our existence, rights and franchises, unless we
determine that their preservation is no longer desirable in the conduct of our
business.
Maintenance of Properties. We are required to maintain all of our material
properties used or useful in the conduct of our business in good condition,
repair and working order; provided, however, that we shall not be prevented from
selling or otherwise disposing of our properties for value in the ordinary
course of business.
Insurance. We are required to cause each of our subsidiaries to maintain
reasonably adequate insurance.
Payment of Taxes and Other Claims. We are required to pay or discharge,
before the same shall become delinquent,
(i) all taxes, assessments and governmental charges imposed upon us or any
subsidiary or upon our income, profits or property and
(ii) all lawful claims for labor, materials and supplies which, if unpaid,
might by law become a lien upon our property;
provided, however, that we shall not be required to pay or discharge any such
tax, assessment, charge or claim if the amount, applicability or validity of it
is being contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable prospectus supplement, the
following events are "events of default" with respect to any series of debt
securities:
(a) failure to pay interest on any debt security for 30 days;
(b) failure to pay the principal of, or premium, if any, on, any debt
security when due;
(c) failure to make any sinking fund payment as may be required for any
debt security;
(d) failure to perform any other covenant in the indenture and
continuance of such default for a
9
<PAGE> 36
period of 60 days after written notice as provided in the
indenture;
(e) default under any agreement or instrument under which there may be
issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the guarantor or the issuer, or
by any subsidiary if the issuer has guaranteed such indebtedness or
if the issuer is directly responsible or liable as obligor or
guarantor, having an aggregate principal amount outstanding of at
least $20,000,000, whether such indebtedness now exists or shall
hereafter be created, which default results in the acceleration of
such indebtedness, without such indebtedness having been
discharged, or such acceleration having been rescinded or annulled,
within a period of 30 days after written notice to the issuer as
provided in the indenture;
(f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the
guarantor, the issuer or any significant subsidiary of the issuer;
and
(g) any other event of default provided with respect to a particular
series of debt securities.
In clause (f) above, the term "significant subsidiary" has the meaning
given to such term in Regulation S-X under the Securities Act.
A default under one series of debt securities will not necessarily be a
default under another series. If an event of default for any series of debt
securities occurs and is continuing, then the applicable trustee or the holders
of at least 25% in principal amount of the debt securities of that series may
declare the principal amount of, and premium, if any, on, all the debt
securities of that series to be due and payable immediately. If the debt
securities of that series are original issue discount or indexed securities,
those debt securities will specify the portion of the principal amount that will
be due and payable. In the case of an event of default described in clause (f)
above with respect to the issuer, acceleration is automatic.
If payment on the debt securities has been accelerated, subject to
conditions described in the indenture, the holders of at least a majority in
principal amount of outstanding debt securities of such series may rescind and
annul such declaration and its consequences. The holders of at least a majority
in principal amount of the outstanding debt securities of any series may also
waive any past default with respect to such series and its consequences, except:
(a) a payment default or
(b) a default relating to a covenant in the indenture that cannot be
modified or amended without the consent of the holder of each
outstanding debt security affected thereby.
The trustee may require indemnity satisfactory to it before it enforces the
indenture or the debt securities of the series. Subject to limitations described
in the indenture, holders of a majority in principal amount of the debt
securities of the series may direct the trustee in its exercise of any trust or
power with respect to such series. Except in the case of default in payment on a
series, the trustee may withhold from securityholders of such series notice of
any continuing default if it determines that withholding notice is in their
interest. We are required to furnish the trustee annually a brief certificate as
to our compliance with all conditions and covenants under the indenture.
MODIFICATION OF THE INDENTURE
We may modify and amend the indenture only with the consent of the holders
of at least a majority in principal amount of all outstanding debt securities
affected by such
10
<PAGE> 37
modification or amendment. No such modification or amendment may, without the
consent of the holder of each such debt security affected thereby:
(1) change the stated maturity of any payment on any debt security;
(2) reduce the principal amount of, or the rate of interest on, any debt
security, or reduce the amount of principal of an original issue
discount security that would be due and payable upon declaration of
acceleration of the maturity thereof or would be provable in
bankruptcy;
(3) change the place of payment for, or the coin or currency in which any
payment is to be made on, any debt security;
(4) impair a holder's right to sue to enforce any payment on any debt
security;
(5) modify or affect in any manner adverse to the interest of holders of
debt securities the obligation of the guarantor under the guarantees;
(6) reduce the above-stated percentage of outstanding debt securities of
any series necessary to modify or amend the indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements
set forth in the indenture; or
(7) modify any of the foregoing amendment or waiver provisions, except to
increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the
consent of the holder of such debt security.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of each series, on behalf of all holders of debt securities of
that series, insofar as that series is concerned, may waive compliance by the
issuer and the guarantor with certain restrictive covenants of the indenture.
Without the consent of any holder of debt securities, we may modify and
amend the indenture with the agreement of the trustee thereunder for any of the
following purposes:
(1) to evidence the succession of another person to the obligations of the
issuer and the guarantor under the indenture;
(2) to add to the covenants for the benefit of the holders of all or any
series of debt securities or to surrender any right or power conferred
upon the issuer and guarantor in the indenture;
(3) to add events of default for the benefit of the holders;
(4) to add or change any provisions of the indenture to permit or
facilitate the issuance of debt securities in uncertificated form,
provided that such action shall not adversely affect the interests of
the holders of the debt securities of any series in any material
respect;
(5) to change or eliminate any provisions of the indenture, provided that
any such change or elimination shall become effective only when there
are no debt securities outstanding of any series created prior thereto
which are entitled to the benefit of such provision;
(6) to secure the debt securities;
(7) to establish the form or terms of debt securities of any series;
(8) to provide for the acceptance of appointment by a successor trustee or
facilitate the administration of the trusts under the indenture by
more than one trustee;
(9) to cure any ambiguity, defect or inconsistency in the indenture,
provided that such action shall not adversely affect the interests of
holders of debt securities of any
11
<PAGE> 38
series issued under the indenture in any material respect; or
(10) to supplement any of the provisions of the indenture to the extent
necessary to permit or facilitate defeasance and discharge of any
series of such debt securities, provided that such action shall not
adversely affect the interests of the holders of the outstanding debt
securities of any series in any material respect.
DISCHARGE, DEFEASANCE AND
COVENANT DEFEASANCE
We are permitted to discharge obligations, as described below, to holders
of any series of debt securities that either have become due and payable or will
become due and payable within one year or scheduled for redemption within one
year. This discharge will occur when we deposit with the trustee, in trust,
funds and/or government obligations in an amount sufficient to pay principal,
premium, if any, and interest on the debt securities to the date of such
deposit, if such debt securities have become due and payable, or to the stated
maturity or redemption date, as the case may be.
The issuer may elect either:
(a) to defease and be discharged from all obligations with respect to such
debt securities, except for those obligations specified in the
indenture, including obligations to register the transfer or exchange
of such debt securities, to replace temporary or mutilated, destroyed,
lost or stolen debt securities, to maintain an office or agency in
respect of such debt securities, and to hold moneys for payment in
trust ("indenture defeasance") or
(b) to be released from those obligations specified in the indenture with
respect to such debt securities, including the restrictions described
under "-- Certain Covenants", or, if provided in the applicable
prospectus supplement, its obligations with respect to any other
covenant, and any omission to comply with such obligation shall not
constitute an event of default with respect to such debt securities
("covenant defeasance").
We may exercise our indenture defeasance option after we exercise our
covenant defeasance option. If we exercise our indenture defeasance option, a
series may not be accelerated because of an event of default. If we exercise our
covenant defeasance option, a series may not be accelerated by reference to any
restrictive covenants which may be applicable to such series. Any discharge of
the issuer's obligations shall result in a discharge of the same obligations of
the guarantor.
To exercise either defeasance option, the issuer must:
(1) irrevocably deposit with the trustee, in trust, funds or governmental
obligations, or both, in an amount sufficient to pay the principal of,
premium, if any, and interest on such debt securities, and any
mandatory sinking fund or similar payments thereon, on the scheduled
due dates therefor, and
(2) comply with other conditions specified in the indenture.
In particular, such a trust will only be permitted to be established if the
issuer or the guarantor has delivered to the trustee an opinion of counsel, as
specified in the indenture, to the effect that the holders of such debt
securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such indenture defeasance or covenant defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same time as would have been the case if such indenture
defeasance or covenant defeasance had not occurred. Such opinion of counsel, in
the case of indenture defeasance, will be required to refer to and be based upon
either a ruling received from the Internal Revenue Service or a change in
applicable United States federal income tax law
12
<PAGE> 39
occurring after the date of the indenture. In the event of such indenture
defeasance, the holders of such debt securities would thereafter be able to look
only to the trust fund, established in accordance with clause (1) above, for
payment of principal, premium, if any, and interest.
"Government Obligations" means securities that are (a) direct obligations
of the United States of America or the government which issued the foreign
currency in which the debt securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (b) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the debt securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
If the issuer effects covenant defeasance with respect to any debt
securities and those debt securities are accelerated because an event of default
other than the event of default occurs relating to restrictive covenants, the
amount on deposit with the applicable trustee will be sufficient to pay amounts
due on those debt securities at the time of their stated maturity but may not be
sufficient to pay amounts due on those debt securities at the time of the
acceleration resulting from the event of default. However, the issuer would
remain liable to make payment of the amounts due at the time of acceleration.
The applicable prospectus supplement may further describe the provisions,
if any, permitting indenture defeasance or covenant defeasance, including any
modification to the provisions described above, with respect to the debt
securities of a particular series.
PLAN OF DISTRIBUTION
We may sell debt securities through underwriters or dealers, directly to
one or more purchasers or through agents.
The applicable prospectus supplement will set forth the terms of the
offering of any debt securities, including:
- - the names of any underwriters or agents
- - the proceeds to the issuer from such sale
- - any other items constituting underwriters' compensation
- - any discounts or concessions allowed or reallowed or paid to dealers
- - the purchase price of such debt securities
- - any underwriting discounts
- - any initial public offering price
- - any securities exchanges on which such debt securities may be listed
If underwriters are used in the sale, debt securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. Such debt
securities may be offered to the public either through underwriting syndicates
represented by managing underwriters or by underwriters without a syndicate.
Unless otherwise set forth in the applicable prospectus supplement, the
obligations of the underwriters to
13
<PAGE> 40
purchase such debt securities will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all of such debt securities
if any of such debt securities are purchased. Any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time. Only underwriters named in a prospectus supplement
are deemed to be underwriters in connection with the debt securities offered
thereby.
We may sell debt securities directly or through agents designated by us
from time to time. Any agent involved in the offer or sale of debt securities
will be named, and any commissions payable by us to such agent will be set forth
in the applicable prospectus supplement. Unless otherwise indicated in the
applicable prospectus supplement, any such agent will act on a best efforts
basis for the period of its appointment.
If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers by certain institutions to purchase
such debt securities from us at the public offering price set forth in the
prospectus supplement pursuant to delayed delivery contracts providing for
payment and delivery on the date or dates stated in the prospectus supplement.
Each contract will be for an amount not less than, and the aggregate principal
amount of the debt securities sold pursuant to the contracts shall be not less
nor more than, the respective amounts stated in the prospectus supplement.
Institutions with whom the contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions, but
will in all cases be subject to our approval. The contracts will not be subject
to any conditions except:
(1) the purchase by an institution of the debt securities covered by its
contract shall not at the time of delivery be prohibited under the laws
of any jurisdiction in the United States to which such institution is
subject, and
(2) if the debt securities are being sold to underwriters, we shall have
sold to such underwriters the total principal amount of the debt
securities less the principal amount thereof covered by the contracts.
The underwriters will not have any responsibility in respect of the
validity or performance of the contracts.
If dealers are utilized in the sale of any debt securities, we will sell
such debt securities to the dealers, as principal. Any dealer may then resell
such debt securities to the public at varying prices to be determined by such
dealer at the time of resale. The name of any dealer and the terms of the
transaction will be set forth in the prospectus supplement with respect to such
debt securities being offered thereby.
It has not been determined whether any series of debt securities will be
listed on a securities exchange. Underwriters will not be obligated to make a
market in any series of debt securities. We cannot predict the level of trading
activity in, or the liquidity of, any series of debt securities. In order to
comply with the securities laws of certain states, if applicable, the debt
securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers.
Any underwriters, dealers or agents participating in the distribution of
debt securities may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of debt securities may be
deemed to be underwriting discounts and commissions under the Securities Act of
1933. Agents and underwriters may be entitled under agreements entered into with
us to indemnification by us against liabilities arising as a result of the
offering, including liabilities under the Securities Act of 1933 or to
contribution with respect to payments that the agents or underwriters may be
required to make in respect thereof. Agents and underwriters may be customers
of, engaged in transactions with, or perform services for, us or our affiliates
in the ordinary course of business.
14
<PAGE> 41
LEGAL MATTERS
The legality of the debt securities and the guarantees covered by this
prospectus will be passed upon for the issuer and the guarantor by Richard A.
Kalaher, Esq., Vice President, General Counsel & Secretary of the issuer and the
guarantor. Any underwriters, dealers or agents will be advised about other
issues relating to any offering by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York.
EXPERTS
The consolidated financial statements and schedules of American Standard
Inc. and American Standard Companies Inc. as of December 31, 1997 and 1998, and
for each of the three years in the period ended December 31, 1998, incorporated
by reference in American Standard Inc.'s and American Standard Companies Inc.'s
Annual Reports on Form 10-K for the year ended December 31, 1998, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
15
