AMERICAN STANDARD COMPANIES INC, S-2/A, 1994-12-20

AMERICAN STANDARD COMPANIES INC
S-2/A, 1994-12-20
AIR-COND & WARM AIR HEATG EQUIP & COMM & INDL REFRIG EQUIP

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1994.

REGISTRATION NO. 33-56409

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------

AMENDMENT NO. 1

Form S-2
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------------------

AMERICAN STANDARD COMPANIES INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 13-3465896
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
(908) 980-6000
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
------------------------------

Richard A. Kalaher, Esq.
Acting General Counsel & Acting Secretary
American Standard Companies Inc.
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
(908) 980-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

Copies to:

<TABLE>
<S> <C>
Paul H. Wilson, Jr., Esq. Michael A. Becker, Esq.
Debevoise & Plimpton Cahill Gordon & Reindel
875 Third Avenue 80 Pine Street
New York, New York 10022 New York, New York 10005
(212) 909-6000 (212) 701-3000
</TABLE>

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States (the "U.S. Prospectus")
and one to be used in a concurrent international offering outside the United
States (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus are identical except for the front and back cover
pages, the inside front cover page, the sections entitled "Underwriting" and
"Certain United States Tax Consequences to Non-U.S. Holders" (the section
entitled "Certain United States Tax Consequences to Non-U.S. Holders" appears
only in the International Prospectus) and certain cross-references relating
thereto. The form of U.S. Prospectus is included herein and is followed by those
pages to be used in the International Prospectus which differs from, or are in
addition to, those in the U.S. Prospectus. Each of the alternate pages for the
International Prospectus included herein is labeled "Alternate Page for
International Prospectus."

<PAGE> 3

AMERICAN STANDARD COMPANIES INC.

CROSS REFERENCE SHEET PURSUANT TO REGULATION S-K, ITEM 501(B),
SHOWING LOCATION OF INFORMATION REQUIRED BY ITEMS ON FORM S-2

<TABLE>
<CAPTION>
FORM S-2 ITEM NUMBER AND CAPTIONS LOCATION OR CAPTION IN PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges.............. Prospectus Summary; Certain Investment
Considerations; Summary Historical
Financial Data; Summary Pro Forma
Financial Data
4. Use of Proceeds............................. Use of Proceeds
5. Determination of Offering Price............. Underwriting
6. Dilution.................................... Dilution
7. Selling Security Holders.................... *
8. Plan of Distribution........................ Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Description of Capital Stock
10. Interests of Named Experts and Counsel...... *
11. Information with Respect to the Registrant
(a) Description of Business................. Prospectus Summary; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business
(b) Financial Statements.................... Consolidated Financial Statements
(c) Industry Segments....................... Prospectus Summary; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business
(d) Market Price and Dividends on
Registrant's Common Equity and Related
Stockholders' Matters.................. Dividend Policy; Description of Capital
Stock
(e) Selected Financial Data................. Pro Forma Financial Data; Selected
Historical Consolidated Financial Data
(f) Supplementary Financial Information..... Selected Historical Consolidated Financial
Data and Consolidated Financial Statements
(g) Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
(h) Disagreements with Accountants on
Accounting and Financial Disclosure.... *
12. Incorporation of Certain Information by
Reference................................. Inside Front Cover Page
13. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Part II
</TABLE>

- ---------------

*Not applicable or answer is in the negative.
<PAGE> 4

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED DECEMBER 20, 1994

13,500,000 SHARES

AMERICAN STANDARD COMPANIES INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-------------------

Of the 13,500,000 shares of Common Stock offered, 9,500,000 shares are
being offered hereby in the United States and 4,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share are
identical for both offerings (collectively, the "Offerings"). See
"Underwriting".

All of the shares of Common Stock offered are being issued and sold by the
Company. None of the Company's current stockholders, including Kelso ASI
Partners, L.P. ("ASI Partners"), the Company's majority stockholder, the
American-Standard Employee Stock Ownership Plan or management stockholders, will
sell any Common Stock in the Offerings. Upon completion of the Offerings, ASI
Partners will own approximately 60% of the outstanding Common Stock and will
retain the power to elect a majority of the Company's directors and thereby to
determine the Company's corporate policies.

Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share will be between $ and $ . For factors to be considered
in determining the initial public offering price, see "Underwriting".

SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

Application will be made to list the Common Stock on the New York Stock
Exchange.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share................ $ $ $
Total(3)................. $ $ $
</TABLE>

- ------------

(1) The Company and American Standard Inc. have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $ payable by the Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days after
the date of this Prospectus to purchase up to an additional 1,420,000 shares
at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, an over-allotment
option on 605,000 shares has been granted by the Company as part of the
international offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to the
Company will be $ , $ and $ , respectively. See
"Underwriting".

-------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1995.
GOLDMAN, SACHS & CO.
CS FIRST BOSTON
MORGAN STANLEY & CO.
INCORPORATED
SMITH BARNEY INC.
------------------------

The date of this Prospectus is , 1995.
<PAGE> 5

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

American Standard Companies Inc. (formerly named ASI Holding Corporation)
(the "Company") has filed with the Securities and Exchange Commission (the
"Commission"), pursuant to Section 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), an Annual Report on Form 10-K for the year
ended December 31, 1993 (the "1993 10-K"), Quarterly Reports on Form 10-Q for
the fiscal quarters ended March 31, June 30 and September 30, 1994 and an
amended Quarterly Report on Form 10-Q/A for the fiscal quarter ended March 31,
1994 (the "1994 10-Qs") and a Current Report on Form 8-K, dated November 10,
1994 (the "8-K"), which are hereby incorporated by reference in and made a part
of this Prospectus (to the extent not superseded hereby).

Any statements contained in the 1993 10-K, the 1994 10-Qs or the 8-K shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.

The 1993 10-K, the 1994 10-Qs and the 8-K, without exhibits, are available
without charge upon request directed to: Office of the Secretary, American
Standard Companies Inc., One Centennial Avenue, P.O. Box 6820, Piscataway, NJ
08855-6820 ((908) 980-6000).

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on Form
S-2 (the "Registration Statement", which term shall encompass all amendments
thereto) under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the shares (the "Shares") of its common stock, par value $.01
per share (the "Common Stock") offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete; with respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. Items of information omitted from this Prospectus but contained
in the Registration Statement may be inspected and copied without charge at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549 and at the following regional
offices of the Commission: 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661; and 7 World Trade Center, New York, New York 10048. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 at
prescribed rates.

The Company complies with the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. All such information may be inspected and copied at the public
reference facilities maintained by the Commission at the locations referred to
above.
------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

2
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements
included elsewhere in this Prospectus. American Standard Companies Inc. is a
Delaware corporation that has as its only significant asset all the outstanding
common stock of American Standard Inc., a Delaware corporation ("American
Standard Inc."). Hereinafter, "American Standard" or "the Company" will refer to
the Company, or to the Company and American Standard Inc., including its
subsidiaries, as the context requires. Unless otherwise indicated, all
information set forth in this Prospectus (i) gives effect to a 2.5 to 1 split of
the Common Stock effected in December 1994, (ii) assumes an initial public
offering price of $22.00 per share and (iii) assumes no exercise of the
over-allotment options to be granted to the U.S. Underwriters and the
International Underwriters (collectively, the "Underwriters").

THE COMPANY
GENERAL

American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which it
competes. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including antilock braking systems ("ABS")) that utilize electronic controls.

American Standard had sales and operating income of $3.8 billion and $282
million, respectively, in 1993. Sales and operating income were $3.3 billion and
$291 million, respectively, in the first nine months of 1994, compared with $2.9
billion and $244 million, respectively, in the first nine months of 1993. During
the first nine months of 1994, sales from operations outside the United States
represented approximately 45% of the Company's total sales. At September 30,
1994 American Standard had 94 manufacturing facilities in 32 countries.

American Standard's business strategy is to promote growth in sales and
operating income. Key elements of this strategy are:

- INCREASE MARKET SHARES. The Company plans to increase the market
shares of its products by developing, manufacturing and selling high
quality, technologically advanced products and by providing superior
customer service.

- EXPAND SALES IN DEVELOPING MARKETS. The Company plans to build on its
historical global presence by focusing a significant portion of its
new business activities (principally through joint ventures in which
the Company has operating control) in developing market areas with the
potential for high economic growth and/or demand for the Company's
products, such as the Far East, including the People's Republic of
China, Latin America and Eastern Europe.

- CONTINUE APPLICATION OF DEMAND FLOW. To build on its position as a
leader in each of its industries, the Company plans to continue to
apply Demand Flow methods ("Demand Flow") to all its businesses. The
Company's use of Demand Flow is designed to streamline processes,
improve product quality, enhance customer service and reduce product
cycle times, while improving efficiency, reducing working capital
needs and lowering costs. Demand Flow, which the Company began to
apply in 1990, has resulted in significant benefits.

3
<PAGE> 7

BUSINESS SEGMENTS

American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Transportation Products.

AIR CONDITIONING PRODUCTS. American Standard is a leading U.S.
manufacturer of air conditioning systems for both domestic and export sales, and
also manufactures air conditioning systems outside the United States. Air
Conditioning Products manufactures "applied" (custom engineered, site-assembled)
and "unitary" (self-contained, factory-assembled) air conditioning systems that
are sold primarily under the TRANE(R)name. Over one-half of Air Conditioning
Products' sales in 1993 and the first nine months of 1994 was in the
replacement, repair and service markets which have been less cyclical than the
new residential and commercial construction markets. Air Conditioning Products'
sales in these periods to the commercial and residential markets represented
approximately 75% and 25%, respectively, of total Air Conditioning Products'
sales.

Air Conditioning Products' sales increased to $1,861 million in the first
nine months of 1994, compared with $1,556 million in the first nine months of
1993. This increase was due principally to increased market shares, higher
replacement, repair and service revenues and increased levels of new residential
and commercial construction activity. Management believes that Air Conditioning
Products is well positioned for growth because of its high quality, brand-name
products, significant existing market shares, the introduction of new product
features such as electronic controls and environmentally-preferred refrigerants,
and the expansion of its broad distribution network.

Plumbing Products' sales increased to $905 million in the first nine months
of 1994, compared to $875 million in the first nine months of 1993, due
principally to increased sales to the replacement and retail "do-it-yourself"
markets as well as increased levels of new residential and commercial
construction activity. Of Plumbing Products' worldwide 1993 sales, approximately
74% were derived from operations outside the United States. Management believes
that Plumbing Products is well positioned for growth due to the high quality of
its brand-name products, significant existing market shares in a number of
countries and the expansion of existing operations in developing market areas
throughout the world (principally the Far East, Latin America and Eastern
Europe).

Transportation Products' sales increased to $543 million in the first nine
months of 1994, compared to $420 million in the first nine months of 1993, due
principally to increased levels of commercial vehicle production in Europe and
Brazil and the addition of sales of Deutsche Perrot-Bremsen GmbH ("Perrot"), a
German brake manufacturer acquired in January 1994. Management believes that
Transportation Products is well positioned to benefit from improved market
conditions in Europe and Brazil and increasing demand in a number of markets
(including the U.S. commercial and utility vehicle markets) for ABS and other
sophisticated electronic control systems, as well as from the technological
advances embodied in the Company's products and its close relationships with a
number of vehicle manufacturers.

See "Business -- Air Conditioning Products Segment"; "-- Plumbing Products
Segment" and "-- Transportation Products Segment".

4
<PAGE> 8

GLOBALIZATION

American Standard has historically had a significant global presence. One
of its major strategic objectives is to continue to expand that presence,
through the growth of existing operations and the establishment of new
operations in developing market areas in the Far East, Latin America and Eastern
Europe. The Company often uses joint ventures with local manufacturing and
distribution partners to facilitate risk sharing and to allow the Company to
benefit from the additional expertise of local market participants.

Air Conditioning Products plans to continue to expand its operations in the
Far East, Latin America and Europe. It has recently established a joint venture
in Australia and is establishing joint ventures in the People's Republic of
China ("PRC"). Air Conditioning Products also recently expanded its sales forces
in the Far East and Latin America.

Plumbing Products has entered new markets through joint ventures in the Far
East, Eastern Europe, Spain and Portugal and is continuing to expand using this
approach. Plumbing Products is significantly expanding its operations in the
People's Republic of China through its affiliate, A-S China Plumbing Products
Limited ("ASPPL"), to which American Standard is obligated to contribute $10
million and has contributed an operation valued at $20 million for an initial
ownership position of 27% with effective control over day-to-day operations. In
April 1994, ASPPL received other capital commitments of $82.5 million. As of
December 15, 1994, ASPPL had drawn down approximately $6.7 million of American
Standard's $10.0 million capital commitment and approximately $55 million of the
capital commitments of its other investors. ASPPL is expanding its operations to
Beijing, Tianjin, Shanghai and Guangzhou in order to provide a full product line
of fixtures, fittings and bathtubs throughout the PRC market.

Transportation Products, headquartered in Europe, has recently acquired a
business in Spain, is in the process of establishing joint ventures in Eastern
Europe and the PRC, and plans to expand its existing joint ventures in Japan and
the United States.

See "Business -- Strategy -- Globalization".

DEMAND FLOW

To build on its position as a leader in each of its industries and to
increase sales and operating income, American Standard began in 1990 to apply
Demand Flow methods to its businesses. Under Demand Flow, products are produced
as and when required by the customer, the production process is streamlined, and
quality control is integrated into each step of the manufacturing process. The
benefits of Demand Flow include better customer service, quicker response to
changing market needs, improved quality control, higher productivity, increased
inventory turnover rates and reduced requirements for working capital and
manufacturing and warehouse space.

Demand Flow has been implemented in substantially all of American
Standard's production facilities. American Standard believes that its
implementation of Demand Flow methods has achieved significant benefits. Product
cycle time (the time from the beginning of the manufacturing of a product to its
completion) has been reduced and, on average, inventory turnover rates have more
than doubled. Principally as a result of the implementation of Demand Flow,
American Standard achieved an aggregate $251 million reduction in inventories
for the years 1990 through 1993. American Standard is also applying Demand Flow
to administrative functions and is re-engineering its organizational structure
to manage its businesses based on processes instead of functions.

See "Business -- Strategy -- Demand Flow".

5
<PAGE> 9

OWNERSHIP

The Company was formed in 1988 by Kelso & Company, L.P. ("Kelso") to effect
the acquisition (the "Acquisition") of American Standard Inc. The Company
changed its name from ASI Holding Corporation to American Standard Companies
Inc. in November 1994. Upon completion of the Offerings, the Company's Common
Stock will be owned approximately 60% by Kelso ASI Partners, L.P., an affiliate
of Kelso ("ASI Partners"), approximately 14% by the American-Standard Employee
Stock Ownership Plan (the "ESOP"), approximately 8% by certain current and
former officers and employees of American Standard and approximately 18% by
purchasers of Shares in the Offerings. These percentages do not include up to
7,455,636 shares of Common Stock (assuming no exercise of the Underwriters'
over-allotment options) issuable, upon exercise of stock options or otherwise,
to officers and other key executive and management employees of the Company and
its subsidiaries pursuant to the Company's Stock Incentive Plan (the "Stock
Plan"). See "Management -- Stock Incentive Plan".

THE OFFERINGS

<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering.......................................................... 9,500,000 shares
International Offering................................................. 4,000,000 shares
------------
Total.................................................................. 13,500,000 shares
------------
------------

Common Stock to be outstanding after the Offerings(1).................... 74,556,365 shares

Proposed NYSE Symbol..................................................... ASD
</TABLE>

- ---------------

(1) Based upon shares outstanding at November 30, 1994, and exclusive of (i) up
to 2,025,000 shares subject to over-allotment options to be granted by the
Company to the Underwriters and (ii) 5,000,000 shares of Common Stock
issuable upon exercise of stock options expected to be granted at the
initial public offering price in connection with the Offerings. See
"Underwriting" and "Management -- Stock Incentive Plan".

USE OF PROCEEDS

Net proceeds of the Offerings, estimated to be approximately $275 million
(assuming an initial public offering price of $22 per share and after deducting
estimated underwriting discounts and commissions and expenses of the Offerings),
will be used to reduce American Standard's bank borrowings. At September 30,
1994, after giving effect to a $325 million borrowing incurred in October 1994
(the "October Borrowing"), the Company would have had borrowings aggregating
approximately $1.0 billion outstanding under its existing credit agreement (the
"Existing Credit Agreement"). The proceeds of the October Borrowing were used to
redeem on November 21, 1994 all of the outstanding 14 1/4% Subordinated Discount
Debentures Due 2003 (the "14 1/4% Subordinated Discount Debentures") and 12 3/4%
Junior Subordinated Debentures Due 2003 (the "12 3/4% Junior Subordinated
Debentures") of American Standard Inc., which aggregated $316.8 million in
principal amount. See "Use of Proceeds" and "-- Recent Financial Results and
Developments -- New Credit Facility."

CERTAIN INVESTMENT CONSIDERATIONS

Prospective purchasers of the Shares should consider carefully the specific
investment considerations set forth under "Certain Investment Considerations",
as well as the other information set forth in this Prospectus.

6
<PAGE> 10

SUMMARY HISTORICAL FINANCIAL DATA

The following table sets forth summary historical financial data of the
Company for each of the three years in the period ended December 31, 1993 and
the nine months ended September 30, 1993 and 1994. The summary historical
financial data were derived from the Company's Consolidated Financial
Statements. Information for the nine months ended September 30, 1993 and 1994 is
derived from unaudited interim financial statements which reflect, in the
opinion of the Company, all adjustments, which include only normal recurring
adjustments, necessary to a fair presentation of the financial data for such
periods. Results for interim periods are not necessarily indicative of results
for the full year.

For additional information, see the Consolidated Financial Statements of
the Company and the accompanying notes thereto included elsewhere in this
Prospectus. The following table should also be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------- -----------------------
1991 1992 1993 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED FINANCIAL DATA:
STATEMENT OF OPERATIONS DATA:
Sales......................................................... $ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
Cost of sales............................................... 2,752 2,852 2,903 2,133 2,487
Selling and administrative expenses......................... 615 679 692 512 570
Other....................................................... 30(a) 24 38 27 25
Interest expense............................................ 286 289 278 213 194
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes, extraordinary loss and
cumulative effects of changes in accounting methods......... (88) (52) (81) (34) 33
Income taxes.................................................. 23 5 36 21 47
---------- ---------- ---------- ---------- ----------
Loss before extraordinary loss and cumulative effects of
changes in accounting methods............................... (111) (57) (117) (55) (14)
Extraordinary loss on retirement of debt...................... -- -- (92) (92) --
Cumulative effects of changes in accounting methods........... (32) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net loss...................................................... (143) (57) (209) (147) (14)
Preferred dividend............................................ (14) (16) (8) (8) --
---------- ---------- ---------- ---------- ----------
Net loss applicable to common shares.......................... $ (157) $ (73) $ (217) $ (155) $ (14)
============ ============ ============ ============ ============

OTHER DATA:
Depreciation expense.......................................... $ 107 $ 112 $ 106 $ 81 $ 81
Amortization of goodwill...................................... 33 33 31 23 23
EBIT(b)....................................................... 198 237 197 179 227

BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................................... $ 228 $ 292 $ 80 $ 165 $ 101
Goodwill (net)................................................ 1,208 1,102 1,026 1,063 1,074
Total assets.................................................. 3,270 3,126 2,987 3,154 3,281
Total debt.................................................... 2,180 2,145 2,336 2,424 2,375
Exchangeable preferred stock.................................. 117 133 -- -- --
Stockholders' deficit......................................... (350) (449) (723) (646) (690)
</TABLE>

SEGMENT FINANCIAL DATA:

<TABLE>
<S> <C> <C> <C> <C> <C>
SALES:
Air Conditioning Products..................................... $ 1,836 $ 1,892 $ 2,100 $ 1,556 $ 1,861
Plumbing Products............................................. 1,018 1,170 1,167 875 905
Transportation Products....................................... 741 730 563 420 543
---------- ---------- ---------- ---------- ----------
$ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
============ ============ ============ ============ ============

OPERATING INCOME:
Air Conditioning Products..................................... $ 55(a) $ 104 $ 133 $ 123 $ 164
Plumbing Products............................................. 66 108 108 87 88
Transportation Products....................................... 121 88 41 34 39
---------- ---------- ---------- ---------- ----------
$ 242 $ 300 $ 282 $ 244 $ 291
============ ============ ============ ============ ============
</TABLE>

- ---------------

(a) Includes $22 million loss on the sale of Tyler Refrigeration.

(b) EBIT represents the sum of (i) income (loss) before income taxes,
extraordinary loss and cumulative effects of changes in accounting methods
and (ii) interest expense.

7
<PAGE> 11
SUMMARY OF HISTORICAL OPERATING RESULTS

As a result of the Acquisition, American Standard's results of operations
include purchase accounting adjustments and reflect a highly leveraged capital
structure. Results of operations in periods reflected in the preceding table
(including the nine months ended September 30, 1994) have also been adversely
affected by charges related to employee severance, consolidation of production
facilities, other cost reduction actions and asset dispositions. The results of
all three of the Company's business segments are cyclical, and have been
affected by recessions in a number of the Company's markets (including Europe).
Operating results improved in the first nine months of 1994, due principally to
volume increases and cost reductions in each of the Company's business segments.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations".

RECENT FINANCIAL RESULTS AND DEVELOPMENTS

RECENT FINANCIAL RESULTS. The factors that contributed to the improvements
in the Company's results of operations for the first nine months of 1994
continued during the fourth quarter. Based upon preliminary results of
operations for October and November, and forecasted sales for December, the
Company estimates that consolidated sales for all of 1994 will be approximately
$ billion, an increase of approximately % from $3.8 billion in 1993.
Operating income is estimated to be in the range of $ million to $
million for all of 1994, as compared to $282 million in 1993. After interest
expense, corporate costs, income taxes, and an extraordinary loss on the
retirement of debt, the Company estimates that it will incur a net loss in the
range of $ million to $ million, as compared with a net loss of $217
million in 1993. The 1994 estimates are based upon preliminary interim results
for October and November and upon management's forecast of December results. The
Company's estimates are also subject to completion of year-end accounting and
audit. The 1994 estimated net loss reflects (i) charges totalling approximately
$40 million ($34 million after tax) related to employee severance, consolidation
of production facilities, other cost reduction actions and asset obsolescence,
(ii) a fee of $20 million paid in December to Kelso in connection with the
amendment of the Company's consulting agreement as well as various covenants
made and responsibilities assumed by Kelso (see "Management -- Compensation
Committee Interlocks and Insider Participation") and (iii) an extraordinary loss
of $9 million upon retirement of debt. The 1993 net loss included (i) charges
totalling $8 million (with no tax benefit) related to employee severance,
consolidation of production facilities and other cost reduction actions and (ii)
an extraordinary loss of $92 million (with no tax benefit) upon retirement of
debt.

NEW CREDIT FACILITY. The Company has retained Chemical Bank as
administrative agent and is negotiating to amend and restate the Existing Credit
Agreement to provide for lower interest costs, increased borrowing capacity and
less restrictive covenants. Such amended and restated credit facility (the "New
Credit Facility") is expected to take the form of a secured multi-currency,
multi-borrower term and revolving credit facility aggregating $1.0 billion. As
of December 15, 1994, the Company had obtained non-binding commitments
significantly in excess of the $1.0 billion amount sought. There can be no
assurance given that the New Credit Facility will be obtained, and the Offerings
are not conditioned on the arrangement of, or borrowings under, the New Credit
Facility. See "Use of Proceeds" and "Pro Forma Financial Data".

8
<PAGE> 12

SUMMARY PRO FORMA FINANCIAL DATA

The following summary unaudited pro forma financial data give effect to the
Offerings and the application of the net proceeds therefrom to reduce term
borrowings under the Existing Credit Agreement, which was increased by the
October Borrowing, and the planned refinancing of the remaining balance of the
Existing Credit Agreement with the New Credit Facility. The summary pro forma
financial data also give effect to the October Borrowing and the application of
the net proceeds therefrom to redeem all outstanding 14 1/4% Subordinated
Discount Debentures and 12 3/4% Junior Subordinated Debentures. In addition, as
noted in the Pro Forma Financial Data contained elsewhere in this Prospectus,
certain adjustments have been made in the pro forma statement of operations data
for the year ended December 31, 1993 and for the nine months ended September 30,
1993 to give effect to a refinancing (the "1993 Refinancing") which was
completed in July 1993. The pro forma statement of operations data have been
prepared assuming that each of the Offerings, the October Borrowing, the New
Credit Facility and the application of the net proceeds therefrom had occurred
at January 1, 1993. The pro forma statement of operations data exclude
extraordinary charges estimated at $41 million related to the write-off of debt
issuance costs and premiums paid with respect to debt retired or repaid in
connection with the Offerings, the October Borrowing and the New Credit
Facility. Of such extraordinary charges, approximately $9 million will occur in
the fourth quarter of 1994 and approximately $32 million in the first quarter of
1995. The 1993 pro forma statement of operations data also reflect the capital
structure of the Company as it existed after the 1993 Refinancing as if it had
occurred on January 1, 1993. The pro forma balance sheet data have been prepared
assuming that each of the Offerings, the October Borrowing, the New Credit
Facility and the application of the net proceeds therefrom occurred on September
30, 1994. The pro forma data are based upon available information and certain
assumptions that management believes are reasonable, including the assumption
that the New Credit Facility will be entered into. The pro forma financial data
do not purport to represent what the Company's financial position or results of
operations would actually have been had the transactions in fact occurred on the
assumed dates or at the beginning of the periods indicated or to project the
Company's financial position or results of operations for any future date or
period.

For additional information, see "Pro Forma Financial Data" and the
Consolidated Financial Statements of the Company and the accompanying notes
thereto included elsewhere in this Prospectus. The following table should also
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

<TABLE>
<CAPTION>
YEAR NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1993 1993 1994
------------ -------------- --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales............................................ $ 3,830 $ 2,851 $ 3,309
Cost of sales.................................. 2,903 2,133 2,487
Selling and administrative expenses............ 692 512 570
Other expense.................................. 38 27 25
Interest expense............................... 207 155 156
------------ -------------- --------------
Income (loss) before income taxes and
extraordinary loss............................. (10) 24 71
Income taxes................................... 36 21 47
------------ -------------- --------------
Income (loss) before extraordinary loss.......... $ (46) $ 3 $ 24
=========== ============ ============

INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary loss.......... $ (.63) $ .04 $ .33
Average number of outstanding common shares and
equivalents.................................... 72,813,073 72,787,348 73,411,525

BALANCE SHEET DATA (AT SEPTEMBER 30, 1994):
Working capital.................................. $ 182
Total assets..................................... 3,248
Total debt....................................... 2,108
Stockholders' deficit............................ (456)
</TABLE>

The pro forma statement of operations data reflect no change to the tax
provision as the impact of decreased interest expense reduces U.S. domestic
losses for which no tax benefit has been provided.

9
<PAGE> 13

CERTAIN INVESTMENT CONSIDERATIONS

Prospective purchasers of the Shares should consider carefully the
following investment considerations, as well as other information set forth in
this Prospectus.

SUBSTANTIAL LEVERAGE

In connection with its 1988 acquisition of American Standard Inc., the
Company incurred substantial indebtedness, resulting in its highly leveraged
capital structure. See "The Acquisition." At September 30, 1994, the Company's
total indebtedness was approximately $2.4 billion, including short-term debt and
the current portion of long-term debt. See "Capitalization." At September 30,
1994, after giving effect to the Offerings and the October Borrowing, American
Standard will have scheduled annual principal payments ranging from
approximately $105 million to $120 million for the years 1995 through 1998.
American Standard intends to use cash generated by operations to reduce its
indebtedness and, subject to restrictions imposed by the terms of the Existing
Credit Agreement or, if entered into, the New Credit Facility (the Existing
Credit Agreement or the New Credit Facility, as appropriate, the "Credit
Agreement"), for capital investments and acquisitions. Subject to restrictions
in its debt instruments, the Company may also incur additional indebtedness from
time to time to finance expansion through capital expenditures, acquisitions or
joint ventures or to fund other expenditures. American Standard is not currently
planning to make any material acquisitions.

American Standard's substantial leverage could have important consequences,
including the following: (i) the Company's ability to obtain additional
financing for working capital, capital expenditures or other purposes could be
impaired; (ii) a substantial portion of the Company's cash flow from operations
will be required to meet interest and principal repayment obligations; (iii)
American Standard may be more highly leveraged than its competitors, which may
place it at a competitive disadvantage in each of the highly competitive
businesses in which it operates; (iv) the Company's indebtedness under the
Credit Agreement bears interest at floating rates, exposing the Company to
increases in interest rates; and (v) the Company's high degree of leverage
increases its vulnerability to changes in general economic conditions, to
competitive pressures and to adverse changes in government regulation and may
limit its ability to capitalize on significant business opportunities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

The Existing Credit Agreement contains covenants that, among other things,
restrict (a) mergers, certain sales of assets (including stock of subsidiaries)
and changes in business or the conduct of business of the Company and its
subsidiaries, (b) liens, mortgages or other encumbrances on their assets, (c)
sale/leaseback transactions, (d) operating leases, (e) dividends and
distributions on, and repurchases and redemptions of, capital stock of American
Standard Inc., and issuances and sales of stock of American Standard Inc. and
its subsidiaries, (f) voluntary prepayments, purchases, redemptions or
defeasance of other indebtedness, or required payments of principal or interest
thereon during any event of default under the Existing Credit Agreement, (g)
loans and other investments, including capital expenditures, investments in
subsidiaries and joint ventures, (h) intercompany transactions and (i)
transactions with affiliates.

American Standard's operating results and cash flow in the first nine
months of 1994 improved from the level attained in the same period of 1993. See
the Company's Unaudited Interim Financial Statements -- Summary Statement of
Operations and Summary Statement of Cash Flows. To meet its debt service
obligations with operating cash flow and comply with the covenants and
restrictions contained in the Credit Agreement, the Company will have to sustain
this improved level of operating results and cash flow. Although its interest
costs and debt service obligations will be reduced as a result of the Offerings,
there can be no assurance that the Company will be able to sustain that level of
improved results, particularly because the Company's results depend
significantly on financial, business and other factors, including prevailing
economic conditions that are beyond its control. If American Standard were
unable to meet its debt service obligations, the Company could be in default
under the Credit Agreement as well as in respect of other borrowings. To avoid
potential

10
<PAGE> 14

non-compliance with the covenants and restrictions contained in the Existing
Credit Agreement, as well as in its previous credit agreement, the Company has
from time to time had to obtain waivers and amendments. No assurance can be
given that, if needed, the Company will be able to obtain similar waivers or
amendments in the future under the Existing Credit Agreement or the New Credit
Facility. American Standard will seek covenants in the New Credit Facility that
are more favorable to the Company than those contained in the Existing Credit
Agreement, but there can be no assurance that the Company will be successful.

HISTORICAL LOSSES

Since the Acquisition in 1988, American Standard has had net losses (after
income taxes, cumulative effects of changes in accounting methods and
extraordinary loss on retirement of debt) of $227 million in 1989, $54 million
in 1990, $143 million in 1991, $57 million in 1992 and $209 million in 1993. In
addition, the Company had a net loss of $14 million for the nine months ended
September 30, 1994, compared with a net loss of $147 million for the same period
in 1993. The Company's results of operations have reflected purchase accounting
adjustments and significant interest expense resulting from its highly leveraged
capital structure. Results of operations in 1991, 1992 and 1993 were further
affected by recessions in a number of the Company's markets. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

INTERNATIONAL OPERATIONS

The Company has substantial operations and assets located outside the
United States, primarily in Western Europe as well as other countries. See Note
15 of the Notes to Consolidated Financial Statements. International operations
are subject to a number of special risks, including currency exchange rate
fluctuations, trade barriers, exchange controls, governmental expropriation,
political risks and risks of increases in taxes. In addition, various
jurisdictions outside the United States have laws limiting the right and ability
of non-U.S. subsidiaries and affiliates to pay dividends and remit earnings to
affiliated companies unless specified conditions are met.

Earnings of international subsidiaries are subject to income taxes of
non-U.S. jurisdictions that reduce cash flow available to meet required debt
service and other obligations of the Company. In 1993, despite a consolidated
net loss of $209 million, the Company paid cash income taxes, principally
outside the U.S., of $41 million.

The Company's financial performance on a U.S. dollar-denominated basis has
historically been significantly affected by changes in currency exchange rates.
Although the Company does not currently engage in significant foreign exchange
hedging activities, the Company's borrowings in foreign currencies mitigate the
effect of fluctuating currency exchange rates. Nonetheless, adverse changes in
certain exchange rates could impair the Company's ability to meet its interest
and principal obligations with respect to its U.S. dollar-denominated debt. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".

TAX MATTERS

The Company has from time to time reorganized and restructured, and may in
the future reorganize and restructure, its international operations based on
certain assumptions about the various tax (including capital gains and
withholding tax) laws, U.S. and international tax treaty developments,
international currency exchange and capital repatriation laws and other relevant
laws of a variety of non-U.S. jurisdictions. While management believes that such
assumptions are correct, there can be no assurance that taxing or other
authorities will reach the same conclusion. If such assumptions are incorrect,
or if such laws were changed or modified, the Company may suffer adverse tax and
other financial consequences.

In connection with examinations of the tax returns of American Standard's
German subsidiaries for the years 1984 through 1990, the German tax authorities
have raised questions regarding the treatment of certain significant matters.
The Company has paid approximately $20 million (using September 30, 1994
exchange rates) of a disputed German income tax. A suit is pending to obtain a

11
<PAGE> 15

refund of this tax. The Company anticipates that the German tax authorities may
propose other adjustments (principally relating to the 1988 to 1990 period)
resulting in additional taxes of up to approximately $120 million (using
September 30, 1994 exchange rates), plus interest, for the tax return years
under audit. In addition, significant transactions similar to those which gave
rise to the possible adjustments referred to above occurred in years subsequent
to 1990. If the German tax authorities should propose adjustments for the
1988-1990 period, they might, after future tax audits, propose tax adjustments
that are comparable for years 1991 to 1993. American Standard, on the basis of
the opinion of German legal counsel, believes the tax returns are substantially
correct as filed and any such adjustments would be inappropriate and intends to
contest vigorously any adjustments which have been or may be assessed.
Accordingly, the Company had not recorded any loss contingency at September 30,
1994 with respect to such matters.

Under German tax law, if an assessment is made for the years under audit,
the authorities may demand immediate payment of the amount assessed prior to
final resolution of the issues. (The same principles would apply as to any
assessment in connection with possible audits for subsequent years.) American
Standard believes, however, on the basis of the opinion of German legal counsel,
that it is highly likely that a suspension of payment pending final resolution
would be obtained. If immediate payment were required, the Company expects that
it will be able to meet such payment from available sources of liquidity or
credit support but that future cash flows and capital expenditures, and
subsequent results of operations for any particular quarterly or annual period,
could be adversely affected.

As a result of recent changes in German tax legislation, the Company's tax
provisions in 1994 and thereafter will be higher in Germany. As a result of this
German tax legislation and the related additional tax provisions, the Company
believes its exposure to the issues under the audit referred to above will be
reduced for 1994 and future years.

The Company makes substantial annual interest payments to its indirect
wholly-owned Netherlands subsidiary. These interest payments have been exempt
from U.S. withholding tax under an income tax treaty between the United States
and the Netherlands. A provision in a new treaty raises the possibility that
such payments may become subject to 15% U.S. withholding tax. The Company has
filed a Competent Authority request with the Internal Revenue Service ("IRS")
seeking a determination that no withholding tax will be imposed. The Company
believes, based upon a recent IRS News Release that authorizes the requested
relief, that the Competent Authority request will be resolved favorably. If the
Competent Authority request is not resolved favorably, additional withholding
taxes of approximately $12 million per year could be imposed on the Company
commencing in 1996. In such case, the Company will consider alternatives
designed to mitigate such increased withholding taxes; however, there is no
assurance that such alternatives will be found.

CYCLICALITY; SEASONALITY

American Standard's businesses are cyclical. Although the exposure of Air
Conditioning Products and Plumbing Products to cyclicality in the new
construction market is somewhat mitigated by their increasing emphasis on the
service, repair and replacement markets (approximately 60% of their 1993 sales),
which have been less cyclical, Air Conditioning Products' and Plumbing Products'
sales to the new construction market continue to constitute a substantial
portion of their sales (approximately 40% of their 1993 sales). Transportation
Products' sales are highly dependent on production levels of medium-sized and
heavy trucks and buses, particularly in Europe, which also have been cyclical.
For a more detailed discussion of U.S. non-residential construction activity and
housing starts, and Western European commercial vehicle production, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Cyclicality; Seasonality".

Total Company sales tend to be seasonally higher in the second and third
quarters of the year because a significant percentage of Air Conditioning
Products' sales is attributable to residential and commercial construction
activity, which is generally higher in the second and third quarters of the
year, and because Summer is the peak season for sales of air conditioning
products.

12
<PAGE> 16

ENVIRONMENTAL CONSIDERATIONS

The Company's U.S. operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air, water and soil and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. A number of the
Company's plants are in the process of making changes or modifications to comply
with such laws and regulations as well as undertaking response actions to
address soil and groundwater issues at certain of its facilities. The Company is
a party to a number of remedial actions under various federal and state
environmental laws and regulations which impose liability on companies to clean
up, or contribute to the cost of cleaning up, sites at which their hazardous
wastes or materials were disposed or released, including approximately 30
proceedings under the Comprehensive Environmental Response, Compensation and
Liability Act and similar state statutes in which the Company has been named a
potentially responsible party or a third party by a potentially responsible
party. Expenditures in 1992, 1993 and the first nine months of 1994 to evaluate
and remediate such sites were not material. On the basis of the Company's
historical experience and information currently available, the Company believes
these remedial actions will not have a material adverse effect on its financial
condition, results of operations or liquidity.

Additional sites may be identified for environmental remediation in the
future, including properties previously transferred by the Company and with
respect to which the Company may have contractual indemnification obligations.
The Company cannot estimate at this time the ultimate aggregate costs of all
remedial actions, because of (a) uncertainties surrounding the nature and
application of environmental regulations, (b) the Company's lack of information
about additional sites at which it may be listed as a potentially responsible
party, (c) the level of clean-up that may be required at specific sites and
choices concerning the technologies to be required at specific sites and choices
concerning technologies to be applied in corrective actions, (d) the number of
contributors and the financial capacity of others to contribute to the cost of
remediation at specific sites and (e) the time periods over which remediation
may occur.

The Company's international operations are also subject to various
environmental statutes and regulations. Generally, these requirements tend to be
no more restrictive than those in effect in the United States. The Company
believes it is in substantial compliance with such existing domestic and foreign
environmental statutes and regulations.

The Company has derived significant revenues in 1993 and prior years from
the sale of air conditioning products using chlorofluorocarbons ("CFCs") and
hydrochlorofluorocarbons ("HCFCs"). Use of CFCs, HCFCs and other ozone-depleting
chemicals is to be phased out over various periods of time under regulations
that will require use of substitute permitted refrigerants. Also, adoption of
new refrigerants will require replacement or modification of much of the air
conditioning equipment already installed. The Company believes that these
regulations have begun to have the effect of generating additional product sales
and parts and service revenues, as existing air conditioning equipment operating
on CFCs is converted to operate on environmentally-preferred refrigerants or
replaced. This is likely to happen only over a number of years and the Company
is unable to estimate reliably the magnitude or timing of additional conversion
or replacements. The Company has been working with the manufacturers of
refrigerants that are developing substitutes for the CFCs and HCFCs to be phased
out so that its products will be compatible with the substitutes. Although the
Company believes that its commercial products will not require substantial
modification to use substitutes, residential and light commercial products
produced by the Company and its competitors may require modification for
substitute refrigerants. The costs of the substitution of alternative
refrigerants are industry-wide product modification costs that are expected to
be reflected in product pricing and accordingly are not expected to have a
material adverse impact on the Company. See "Business -- General -- Regulations
and Environmental Matters".

LABOR RELATIONS

The Company employed approximately 38,500 people (excluding employees of
unconsolidated joint venture companies) at September 30, 1994. The Company has a
total of 18 labor union

13
<PAGE> 17

contracts in North America (covering approximately 8,500 employees), one of
which expired in the last quarter of 1994 (covering approximately 200 Canadian
employees who are continuing to work), one of which expires in 1995 (covering
approximately 900 employees) and six of which expire in 1996 (covering
approximately 4,600 employees). There can be no assurance that the Company will
successfully negotiate either a new contract with such Canadian employees or the
labor contracts expiring during 1995 or 1996 without work stoppages. However,
the Company does not anticipate any problems in renegotiating those contracts
that would materially affect its results of operations.

In 1994, 230 Plumbing Products' employees went on strike for 64 days at the
Landsdowne (Toronto), Canada chinaware manufacturing plant. In 1991, 1,200 Air
Conditioning Products employees went on strike for 54 days at the LaCrosse,
Wisconsin facility and, in 1989, 1,300 Air Conditioning Products workers went on
strike for 40 days at the Clarksville, Tennessee facility. Other than these
strikes, the Company has not experienced any other significant work stoppages
since 1985. The Company also has a total of 40 labor contracts outside North
America (covering approximately 18,000 employees), where the Company has not
experienced any significant work stoppage in the last five years.

Although the Company believes relations with its employees are generally
satisfactory, there can be no assurance that the Company will not experience
significant work stoppages in the future or that its relations with employees
will continue to be satisfactory.

CONTROL BY PRINCIPAL STOCKHOLDERS

Upon completion of the Offerings, ASI Partners will own approximately 60%
of the then outstanding Common Stock and will retain the power to elect a
majority of the directors of the Company and thereby to determine American
Standard's corporate policies, the persons constituting its management and the
outcome of corporate actions requiring stockholder approval. An existing
stockholders agreement, entered into in connection with the Acquisition, has
been amended and restated (the "Amended Stockholders Agreement"). The Amended
Stockholders Agreement provides that Kelso may nominate for election a majority
of the Company's Board of Directors for so long as ASI Partners continues to own
at least 35% of the outstanding Common Stock. See "Management -- Executive
Officers and Directors," "-- Compensation Committee Interlocks and Insider
Participation," "Certain Transactions and Relationships" and "Security Ownership
of Certain Beneficial Owners".

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

The Company's Restated Certificate of Incorporation, Amended Bylaws and
Stockholder Rights Plan contain provisions that may, if a majority of the shares
of the Company's Common Stock is no longer owned by ASI Partners, have the
effect of making more difficult an acquisition of control of the Company that
has not been approved by the Company's Board of Directors. See "Description of
Capital Stock -- Certain Provisions Relating to Changes in Control".

In addition, the terms of the Existing Credit Agreement and the indentures
governing certain of American Standard Inc.'s publicly-held debt securities
permit the lenders under the Existing Credit Agreement and the holders of such
debt securities, respectively, to accelerate payments or require redemption upon
certain events which constitute a change of control of the Company or American
Standard Inc. Such change in control provisions could limit the Company's
ability to complete future equity financings. The Offerings will not constitute
a change of control under such provisions. See "Certain Indebtedness".

SHARES ELIGIBLE FOR FUTURE SALE

Immediately following the consummation of the Offerings, the Company will
have outstanding approximately 74.5 million shares of Common Stock, including
shares of Common Stock beneficially owned by current stockholders (including ASI
Partners, the ESOP and officer and employee

14
<PAGE> 18

stockholders and employee benefit plans). The 13.5 million shares of Common
Stock to be sold in the Offerings will be eligible for resale without
restriction or further registration under the Securities Act of 1933, as amended
(the "Securities Act"), in the public market after the consummation of the
Offerings by persons other than affiliates of the Company (as defined in Rule
144 under the Securities Act). Sales of Common Stock without registration may
also be made outside the United States pursuant to Regulation S under the
Securities Act. In addition, contemporaneously with the Offerings, American
Standard will register under the Securities Act approximately 7.5 million shares
of Common Stock issuable pursuant to the Stock Plan. The Company may issue
additional Common Stock to the ESOP over the next several years. Shares of
Common Stock distributed to ESOP beneficiaries (generally upon such
beneficiaries' retirement or termination) will also be generally available for
resale without further registration by non-affiliates. Sales of Common Stock by
affiliates of the Company will be subject to Rule 144 under the Securities Act.

The Company and certain current stockholders (including ASI Partners and
certain executive officer stockholders), who will beneficially own approximately
outstanding shares of Common Stock immediately following the consummation
of the Offerings, have agreed with the Underwriters not to offer, sell or
otherwise dispose of any shares of Common Stock for a period of 180 days after
the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. Based on shares outstanding at November 30,
1994, following the expiration or waiver of the foregoing restrictions and any
applicable holding periods under Rule 144, shares of Common Stock
owned by existing stockholders will be available for sale into the public market
pursuant to Rule 144 (including the volume and other limitations set forth
therein) or otherwise and could impair the Company's future ability to raise
capital through an offering of its equity securities. Most of such shares were
issued more than three years ago, and thus are subject to resale without being
subject to the holding periods established by Rule 144. Pursuant to the Amended
Stockholders Agreement, ASI Partners has been granted certain demand
registration rights and ASI Partners, together with certain executive officers
and other employees of the Company who own Common Stock, have been granted
certain "piggyback" registration rights in connection with future offerings of
Common Stock. See "Management -- Compensation Committee Interlocks and Insider
Participation" and "Certain Transactions and Relationships".

Sales of substantial amounts of the Common Stock in the public market, or
the prospect of such sales, could materially adversely affect the market price
of the Common Stock. See "Shares Eligible for Future Sale".

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock. Although application will be made to list the Common Stock on the New
York Stock Exchange, no assurance can be given that an active trading market
will be created or sustained. The initial public offering price will be
determined by negotiations among the Company and representatives of the
Underwriters based on several factors and will not necessarily reflect the
market price of the Common Stock following the Offerings. See "Underwriting".

DILUTION

At September 30, 1994, the Company had a tangible net deficit of
approximately $1.8 billion, or $29.99 per share. Purchasers of Shares in the
Offerings will experience immediate and substantial dilution in the net tangible
book value of their Common Stock. At an assumed initial public offering price of
$22 per share, investors in the Offerings will experience dilution in net
tangible book value per share of $43.27. See "Dilution".

15
<PAGE> 19

THE COMPANY

American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which they
compete. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including ABS) that utilize electronic controls. See "Business".

The Company is a Delaware corporation formed by Kelso in 1988 to effect the
Acquisition. The Company changed its name from ASI Holding Corporation to
American Standard Companies Inc. in November 1994. The Company's only
significant asset is the common stock of American Standard Inc., a Delaware
corporation which was incorporated in 1929 following the merger of American
Radiator Company and Standard Sanitary Manufacturing Company, each of which
traced its roots to the nineteenth century. Kelso is a private merchant banking
firm specializing in leveraged buyout transactions.

THE ACQUISITION

The Acquisition of American Standard Inc. by the Company was effected
through a cash tender offer in April 1988 and a subsequent merger in June 1988.
The aggregate purchase price of the Acquisition was approximately $3.2 billion
(including assumed debt), financed by approximately $350 million in equity
financing (including $275 million from the sale of Common Stock) and by
approximately $2.8 billion in new or assumed debt. As a result of the
Acquisition, the Company's results of operations include purchase accounting
adjustments and reflect a highly leveraged capital structure. See "Certain
Investment Considerations -- Substantial Leverage" and "-- Historical Losses".

As part of the equity financing for the Acquisition, ASI Partners purchased
45 million shares of Common Stock at a price of $4 per share. Based on the
estimated initial public offering price of $22 per share, the 45 million shares
of Common Stock owned by ASI Partners would have a market value of approximately
$990 million. ASI Partners will not sell any shares in connection with the
Offerings. In connection with the Acquisition, Kelso received certain investment
banking fees, and also entered into a Consulting Agreement with American
Standard Inc., pursuant to which Kelso agreed to provide general management and
financial consulting services in return for an annual fee. In connection with
the Offerings, and based on Kelso's agreement to provide ongoing consulting
services without future compensation (other than reimbursement of expenses), to
release any claims for fees in respect of past services, to make certain
covenants with respect to Common Stock owned by ASI Partners or its affiliates,
and to undertake additional administrative responsibilities as manager of ASI
Partners and such affiliates, American Standard made a one-time payment of $20
million to Kelso in December 1994. The amendment to the Consulting Agreement,
and the covenants made and additional responsibilities assumed by Kelso, are
described in "Certain Transactions and Relationships" and
"Management -- Compensation Committee Interlocks and Insider Participation".

USE OF PROCEEDS

The net proceeds of the Offerings, estimated to be approximately $275
million (assuming an initial public offering price of $22 per share and after
deducting estimated underwriting discounts and commissions and expenses of the
Offerings), will be used to reduce American Standard's bank borrowings. At
September 30, 1994, after giving effect to the October Borrowing, the Company
would have had available borrowing capacity of approximately $1.2 billion and
outstanding borrow-

16
<PAGE> 20

ings aggregating approximately $1.0 billion under the Existing Credit Agreement.
On September 30, 1994, the weighted average interest rate per annum on
borrowings under the Existing Credit Agreement was 7.9%. The proceeds of the
October Borrowing were used to redeem on November 21, 1994 all outstanding
14 1/4% Subordinated Discount Debentures and 12 3/4% Junior Subordinated
Debentures of American Standard Inc., aggregating $316.8 million in principal
amount. See "Pro Forma Financial Data".

The Company has retained Chemical Bank as administrative agent and is
negotiating to amend and restate the Existing Credit Agreement as the New Credit
Facility to provide for lower interest costs, increased borrowing capacity and
less restrictive covenants. The Company has also engaged Citibank, N.A. and
NationsBank of North Carolina, N.A. as senior managing agents for the New Credit
Facility, together with an additional 10 managing agents. The New Credit
Facility is expected to take the form of a secured multi-currency,
multi-borrower term and revolving credit facility aggregating $1.0 billion. As
of December 15, 1994, the Company had obtained non-binding commitments
significantly in excess of the $1.0 billion amount sought. After giving effect
to such amendment and restatement, the Offerings and the application of net
proceeds therefrom, the Company expects that it would have approximately $100
million in additional borrowing capacity available under the New Credit
Facility. There can be no assurance given that the New Credit Facility will be
obtained, and the Offerings are not conditioned on the arrangement of, or
borrowings, under the New Credit Facility.

DIVIDEND POLICY

The Company has not historically paid dividends on its Common Stock, and
does not currently intend to pay dividends. Moreover, the terms of certain debt
instruments (including the Existing Credit Agreement as well as a number of
American Standard Inc.'s publicly traded debt securities) prohibit or restrict
the payment of dividends and other extensions of funds by American Standard Inc.
to the Company. The declaration and timing of any future dividends will be
determined by the Company's Board of Directors, based on its results of
operations, financial condition, cash requirements, certain corporate law
requirements and other factors.

17
<PAGE> 21

DILUTION

The difference between the initial public offering price per share of the
Shares and the pro forma net tangible deficit per share of the Common Stock,
after giving effect to the Offerings, the October Borrowing and the New Credit
Facility, constitutes immediate dilution to investors in the Offerings. At
September 30, 1994, the Company had a tangible net deficit of approximately $1.8
billion, or $29.99 per share. Tangible net deficit per share of Common Stock
represents the difference between tangible assets and liabilities of the
Company, divided by the total number of shares of Common Stock outstanding.
After giving effect to the Offerings, the October Borrowing, the New Credit
Facility and the application of the net proceeds therefrom, the tangible net
deficit would be approximately $1.6 billion, or $21.27 per share. This
represents an immediate dilution of $43.27 per share to investors in the
Offerings. The following table illustrates such dilution.

<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $ 22.00
Tangible net deficit per share at September 30, 1994.............. $(29.99)
Net increase per share attributable to the Offerings, the October
Borrowing and the New Credit Facility.......................... 8.72
-------
Pro forma tangible net deficit per share at September 30, 1994,
after giving effect to the Offerings, the October Borrowing and
the New Credit Facility........................................... (21.27)
-------
Dilution per share to investors in the Offerings.................... $(43.27)
========
</TABLE>

The following table summarizes, on a pro forma basis after giving effect to
the Offerings, the number of shares of Common Stock held by, and the effective
consideration and the average price per share paid by, the existing stockholders
and the investors in the Offerings.

<TABLE>
<CAPTION>
SHARES CONSIDERATION AVERAGE PRICE
HELD PAID PER SHARE
---------- ------------ -------------
<S> <C> <C> <C>
Current stockholders............................. 61,062,078 $264,000,000(a) $ 4.32
Investors in the Offerings....................... 13,500,000 $297,000,000 $ 22.00
</TABLE>

- ---------------

(a) The effective cash consideration paid by current stockholders at September
30, 1994, is represented by the sum of (i) capital surplus and (ii) stock
dividends on exchangeable preferred stock charged to capital surplus.

18
<PAGE> 22

CAPITALIZATION

The following table sets forth the capitalization of the Company and its
subsidiaries at September 30, 1994, and as adjusted to give effect to the
Offerings, the October Borrowing and the New Credit Facility and the redemption
of all outstanding 14 1/4% Subordinated Discount Debentures at 102.5% of par and
the 12 3/4% Junior Subordinated Debentures at par, and the redemption and
refinancing of borrowings under the Existing Credit Agreement. The accumulated
deficit, as adjusted, reflects a $40.8 million write-off of unamortized debt
issuance costs and premium costs related to the redemptions and repayments. This
table should be read in conjunction with the Company's Consolidated Financial
Statements and accompanying notes thereto included elsewhere in this Prospectus.
All amounts are translated where applicable using September 30, 1994 currency
exchange rates. Common Stock and capital surplus actual and as adjusted amounts
reflect the 2.5 to 1 stock split effected in December 1994.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
----------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
SHORT-TERM DEBT:
Loans payable to banks............................................. $ 30.0 $ 30.0
Revolving credit facility.......................................... 70.0 287.0
Current maturities of long-term debt............................... 130.1 38.1
-------- --------
Total short-term debt........................................... 230.1 355.1
LONG-TERM DEBT:
14 1/4% Subordinated Discount Debentures........................... 175.0 --
12 3/4% Junior Subordinated Debentures............................. 141.8 --
Existing Credit Agreement.......................................... 617.0 --
New Credit Facility................................................ -- 450.0
9 1/4% Sinking Fund Debentures..................................... 150.0 150.0
10 7/8% Senior Notes............................................... 150.0 150.0
11 3/8% Senior Debentures.......................................... 250.0 250.0
9 7/8% Senior Subordinated Notes................................... 200.0 200.0
10 1/2% Senior Subordinated Discount Debentures.................... 515.9 515.9
Other loans........................................................ 75.2 75.2
-------- --------
2,274.9 1,791.1
Less current maturities............................................ (130.1) (38.1)
-------- --------
Total long-term debt............................................ 2,144.8 1,753.0

STOCKHOLDERS' DEFICIT:
Preferred Stock, par value $.01 per share, 2,000,000 shares
authorized; no shares issued and outstanding.................... -- --
Common Stock, par value $.01 per share, 200,000,000 shares
authorized; 61,062,078 shares issued and outstanding;
(74,562,078 shares issued and outstanding, as adjusted)......... .6 .7
Capital surplus.................................................... 196.6 471.5
Accumulated deficit................................................ (763.6) (804.4)
Foreign currency translation effects............................... (115.4) (115.4)
Other.............................................................. (8.1) (8.1)
-------- --------
Total stockholders' deficit..................................... (689.9) (455.7)
-------- --------
Total capitalization.......................................... $1,685.0 $1,652.4
======== ========
</TABLE>

19
<PAGE> 23

PRO FORMA FINANCIAL DATA

The following unaudited pro forma financial data give effect to the
Offerings and the application of the net proceeds therefrom to reduce term
borrowings under the Existing Credit Agreement, which was increased by the
October Borrowing, and the planned refinancing of the remaining balance of the
Existing Credit Agreement with the New Credit Facility. The pro forma financial
data also give effect to the October Borrowing and the application of the net
proceeds to redeem all outstanding 14 1/4% Subordinated Discount Debentures and
12 3/4% Junior Subordinated Debentures. In addition, as more fully described in
Note 8 of the Notes to Consolidated Financial Statements -- "Debt" under the
caption "The 1993 Refinancing", the Company completed a refinancing of its
existing debt structure in July 1993. As a result of the 1993 Refinancing, the
Company's previous credit facility was amended and restated into the Existing
Credit Agreement and offerings with respect to two new issues of debt (9 7/8%
Senior Subordinated Notes and 10 1/2% Senior Subordinated Discount Debentures)
were completed. The net proceeds of the Existing Credit Agreement and the new
debt issuances were used to replace the Company's previous credit facility
(which, in general, had higher rates of interest than the Existing Credit
Agreement), and to redeem all outstanding 12 7/8% Senior Subordinated Debentures
and a substantial portion of the 14 1/4% Subordinated Discount Debentures. The
Company is currently negotiating to amend the Existing Credit Agreement as the
New Credit Facility. See "Use of Proceeds".

Accordingly, for the latter half of 1993 and for 1994, the Company's
results reflect a lower cost capital structure than was in place prior to the
1993 Refinancing. The pro forma statement of operations data for the year ended
December 31, 1993 and for the nine months ended September 30, 1993 have been
adjusted at January 1, 1993 to reflect (i) the capital structure of the Company
as it existed after the 1993 Refinancing; (ii) the October Borrowings and the
use of the net proceeds therefrom to redeem the remaining outstanding 14 1/4%
Subordinated Discount Debentures at 102.5% of par and all outstanding 12 3/4%
Junior Subordinated Debentures at par; (iii) the application of the net proceeds
from the Offerings to reduce term borrowings under the Existing Credit
Agreement; and (iv) the planned refinancing of the remaining balance of the
Existing Credit Agreement with the New Credit Facility. The pro forma statement
of operations data for the nine months ended September 30, 1994 have been
adjusted to reflect the October Borrowing, the Offerings, the New Credit
Facility and the use of the proceeds therefrom to retire or repay debt as
described above as if the transactions had occurred on January 1, 1993. The pro
forma balance sheet data have been prepared assuming that each of the Offerings,
the New Credit Facility and the application of the net proceeds therefrom to
repay or retire debt had occurred on September 30, 1994. The pro forma data are
based upon available information and certain assumptions that management
believes are reasonable, including those set forth in the footnotes to the pro
forma financial data. The pro forma financial data do not purport to represent
what the Company's financial position or results of operations would actually
have been had the transactions in fact occurred on the assumed dates or at the
beginning of the periods indicated or to project the Company's financial
position or results of operations for any future date or period.

For additional information, see the Consolidated Financial Statements of
the Company and the accompanying notes thereto included elsewhere in this
Prospectus. The following table should also be read in conjunction with
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".

20
<PAGE> 24

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, 1993 SEPTEMBER 30, 1993 SEPTEMBER 30, 1994
--------------------------- --------------------------- ---------------------------
ACTUAL(A) PRO FORMA(B) ACTUAL(A) PRO FORMA(B) ACTUAL(A) PRO FORMA(C)
---------- ------------ ---------- ------------ ---------- ------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales...................... $ 3,830 $ 3,830 $ 2,851 $ 2,851 $ 3,309 $ 3,309
Cost of sales............ 2,903 2,903 2,133 2,133 2,487 2,487
Selling and
administrative
expenses............... 692 692 512 512 570 570
Other expense............ 38 38 27 27 25 25
Interest expense......... 278 207 213 155 194 156
---------- ------------ ---------- ------------ ---------- ------------
Income (loss) before income
taxes and extraordinary
loss..................... (81) (10) (34) 24 33 71
Income taxes............... 36 36 21 21 47 47
---------- ------------ ---------- ------------ ---------- ------------
Income (loss) before
extraordinary loss....... $ (117) $ (46) $ (55) $ 3 $ (14) $ 24
========== =========== ========== =========== ========== ===========

INCOME (LOSS) PER COMMON
SHARE(A):
Income (loss) before
extraordinary loss....... $ (2.11) $ (.63) $ (1.07) $ .04 $ (.23) $ .33
Average number of
outstanding common shares
and
equivalents.............. 59,313,073 72,813,073 59,287,348 72,787,348 59,911,525 73,411,525

BALANCE SHEET DATA (AT
SEPTEMBER 30, 1994):
Working capital............ $ 101 $ 182
Total assets............... 3,281 3,248
Total debt................. 2,375 2,108
Stockholders' deficit...... (690) (456)
</TABLE>

- ---------------

(a) Income (loss) per common share and average number of outstanding common
shares and equivalents data reflect the 2.5 to 1 stock split effected in
December 1994.

(b) Pro forma interest expense for the year ended December 31, 1993 reflects (i)
twelve months' interest expense (at 8.94%) and amortization of debt
issuance costs with respect to the October Borrowing, and the exclusion of
twelve months' interest expense (or the preferred dividend on the 12 3/4%
Exchangeable Preferred Stock which was exchanged into the 12 3/4% Junior
Subordinated Debentures on June 30, 1993) and amortization of debt issuance
costs with respect to the 14 1/4% Subordinated Discount Debentures and the
12 3/4% Junior Subordinated Debentures redeemed; (ii) five months' interest
expense and amortization of debt issuance costs with respect to the debt
issued in connection with the 1993 Refinancing and the exclusion of five
months' interest expense and amortization of debt issuance costs with
respect to the debt replaced or redeemed in the 1993 Refinancing; (iii) the
exclusion of twelve months' interest expense on the portion of the Existing
Credit Agreement repaid with the net proceeds of the Offerings; and (iv)
the lower interest expense and amortization of debt issue costs for twelve
months as a result of the planned refinancing of the remaining balance of
the Existing Credit Agreement with the New Credit Facility.

Pro forma interest expense for the nine months ended September 30, 1993
reflects (i) nine months' interest expense (at 8.94%) and amortization of
debt issuance costs with respect to the October Borrowing, and the
exclusion of nine months' interest expense (or the preferred dividend on
the 12 3/4% Exchangeable Preferred Stock which was exchanged into the
12 3/4% Junior Subordinated Debentures on June 30, 1993) and amortization
of debt issuance costs with respect to the 14 1/4% Subordinated Discount
Debentures and the 12 3/4% Junior Subordinated Debentures redeemed; (ii)
five months' interest expense and amortization of debt issuance costs with
respect to the debt issued in connection with the 1993 Refinancing and the
exclusion of five months' interest expense and amortization of debt
issuance costs with respect to the debt replaced or redeemed in the 1993
Refinancing; (iii) the exclusion of nine months' interest expense on the
portion of the Existing Credit Agreement repaid with the net proceeds of
the Offerings; and (iv) the lower interest expense and amortization of debt
issue costs for nine months as a result of the planned refinancing of the
remaining balance of the Existing Credit Agreement with the New Credit
Facility.

21
<PAGE> 25

The Company expects that the New Credit Facility will bear interest at
floating rates. Based upon the September 30, 1994 pro forma balance of the
New Credit Facility outstanding a change of interest rates of 1/4 of one
percent would result in an annual change in interest expense of
approximately $2 million.

Pro forma interest expense on the 1993 Refinancing is based on the
effective interest rates for the 9 7/8% Senior Subordinated Notes and the
10 1/2% Senior Subordinated Discount Debentures, respectively, and at a
weighted average interest rate of 8.0% for borrowings under the Existing
Credit Agreement, based on rates in effect on borrowings under the Existing
Credit Agreement on June 2, 1993.

The pro forma statement of operations data reflect no change to the tax
provision as the impact of decreased interest expense reduces U.S. domestic
losses for which no tax benefit has been provided.

Pro forma statement of operations data exclude extraordinary charges
estimated at $41 million related to the write-off of debt issuance costs
and premiums paid with respect to debt retired or repaid in connection with
the Offerings, the October Borrowing and the New Credit Facility. Of such
extraordinary charges, approximately $9 million will occur in the fourth
quarter of 1994 and approximately $32 million will occur in the first
quarter of 1995. No tax benefit is expected to be available with respect to
such extraordinary charges.

See "Capitalization" for a description of the amounts of the respective
securities issued and amounts borrowed in connection with the Offerings,
the October Borrowing and the New Credit Facility and the use of proceeds
therefrom to retire or refinance other existing indebtedness of the
Company. See also Note 8 of the Notes to Consolidated Financial Statements
for a description of the 1993 Refinancing.

(c) Pro forma interest expense for the nine months ended September 30, 1994
reflects nine months' interest expense (at 8.94%) and amortization of debt
issuance costs with respect to the October Borrowing, and excludes nine
months' interest expense and amortization of debt issuance costs with
respect to the debt redeemed with the net proceeds of the Offerings, the
October Borrowing and the New Credit Facility.

The pro forma balance sheet data at September 30, 1994 reflect the net
proceeds of the Offerings (estimated at $275 million) and the expected
proceeds of New Credit Facility and the application of the proceeds
therefrom to redeem debt, to pay premiums in respect of the redeemed debt
and to pay debt issuance costs. In addition, the pro forma stockholders'
deficit at that date reflects the extraordinary charge ($41 million)
related to the write-off of debt issuance costs and premiums paid with
respect to debt retired or repaid in connection with the Offerings, the
October Borrowing and the New Credit Facility.

(d) The following table summarizes the pro forma adjustments to interest
expense:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1993 1993 1994
------------- -------------- --------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Application of the October Borrowing to redeem
the 14 1/4% Subordinated Discount Debentures
and 12 3/4% Junior Subordinated Debentures.... $ (5) $ (1) $(11)
Effects of 1993 Refinancing..................... (28) (28) --
Effects of the application of the net proceeds
from the Offerings............................ (24) (19) (17)
Planned refinancing of the Existing Credit
Facility with the New Credit Facility......... (14) (10) (10)
------ ------ ------
$ (71) $(58) $(38)
=========== ============ ============
</TABLE>

22
<PAGE> 26

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth selected historical consolidated financial
data of the Company for each of the five years in the period ended December 31,
1993, and the nine months ended September 30, 1993 and 1994. The selected
historical consolidated financial data were derived from the Company's
Consolidated Financial Statements. Information for the nine months ended
September 30, 1993 and 1994 is derived from unaudited interim financial
statements which reflect, in the opinion of the Company, all adjustments, which
include only normal recurring adjustments, necessary to a fair presentation of
the financial data for such periods. Results for interim periods are not
necessarily indicative of results for the full year. For additional information,
see the Consolidated Financial Statements of the Company and the accompanying
notes thereto included elsewhere in this Prospectus. The following table should
also be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------------------------------- --------------------------
1989 1990 1991 1992 1993 1993 1994
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................ $ 3,334 $ 3,637 $ 3,595 $ 3,792 $ 3,830 $ 2,851 $ 3,309
Cost of sales...... 2,488 2,750 2,752 2,852 2,903 2,133 2,487
Selling and
administrative
expenses......... 567 630 615 679 692 512 570
Other (income)
expense.......... (3) 5 8 24 38 27 25
Loss on sale of
Tyler
Refrigeration.... -- -- 22 -- -- -- --
Interest expense... 289 294 286 289 278 213 194
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
continuing op-
erations before
income taxes,
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ (7) (42) (88) (52) (81) (34) 33
Income taxes......... 26 12 23 5 36 21 47
----------- ----------- ----------- ----------- ----------- ----------- -----------
Loss from continuing
operations before
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ (33) (54) (111) (57) (117) (55) (14)
Loss from
discontinued
operations(a)...... (12) -- -- -- -- -- --
Extraordinary loss on
retirement of
debt(b)............ -- -- -- -- (92) (92) --
Cumulative effects of
changes in
accounting
methods............ (182)(c) -- (32)(d) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss............. (227) (54) (143) (57) (209) (147) (14)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Preferred
dividend(e)........ (11) (12) (14) (16) (8) (8) --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss applicable
to common shares... $ (238) $ (66) $ (157) $ (73) $ (217) $ (155) $ (14)
========== ========== ========== ========== ========== ========== ==========
LOSS PER COMMON
SHARE(F):
Loss from continuing
operations before
extraordinary loss
and cumulative
effects of changes
in accounting
methods............ $ (.77) $ (1.12) $ (2.14) $ (1.24) $ (2.11) $ (1.07) $ (.23)
Loss from
discontinued
operations......... (.20) -- -- -- -- -- --
Extraordinary loss on
retirement of
debt............... -- -- -- -- (1.55) (1.55) --
Cumulative effects of
changes in
accounting
methods............ (3.19) -- (.55) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss per common
share.............. $ (4.16) $ (1.12) $ (2.69) $ (1.24) $ (3.66) $ (2.62) $ (.23)
========== ========== ========== ========== ========== ========== ==========
Average number of
outstanding common
shares and
equivalents........ 57,163,750 58,597,918 58,338,195 58,636,118 59,313,073 59,287,348 59,911,525
OTHER DATA:
Depreciation
expense............ $ 109 $ 109 $ 107 $ 112 $ 106 $ 81 $ 81
Amortization of
goodwill........... 31 33 33 33 31 23 23
EBIT(g).............. 282 252 198 237 197 179 227
BALANCE SHEET DATA (AT
END OF PERIOD):
Working capital...... $ 426 $ 347 $ 228 $ 292 $ 80 $ 165 $ 101
Goodwill (net)....... 1,235 1,323 1,208 1,102 1,026 1,063 1,074
Total assets......... 3,592 3,488 3,270 3,126 2,987 3,154 3,281
Total debt........... 2,381 2,287 2,180 2,145 2,336 2,424 2,375
Exchangeable
preferred
stock(e)........... 91 104 117 133 -- -- --
Stockholders'
deficit............ (136) (200) (350) (449) (723) (646) (690)
</TABLE>

Footnotes appear on the following page.

23
<PAGE> 27

- ---------------
(a) Represents the operating losses of the discontinued Railway Braking business
sold in February 1990.

(b) The retirement of debt in connection with the 1993 Refinancing resulted in
an extraordinary charge of $92 million (including call premiums, the
write-off of deferred debt issuance costs, and loss on cancellation of
foreign currency swap contracts) on which there was no tax benefit (see
Notes 5 and 8 of Notes to Consolidated Financial Statements).

(c) The $182 million charge in 1989 represents the cumulative effect of the
change in accounting for income taxes upon the adoption of FAS 109. The
Company elected to adopt FAS 109 and to apply the provisions retroactively
to January 1, 1989.

(d) Represents the cumulative effect of the accounting changes related to
postretirement benefits other than pensions and warranty contract revenues
at January 1, 1991. The cumulative effect of these accounting changes
increased the postretirement benefit and warranty accruals at January 1,
1991 by $52 million and increased the net loss in the year by a total of
$32 million (net of the tax effect).

(e) In June 1993 the exchangeable preferred stock was exchanged for 12 3/4%
Junior Subordinated Debentures which were redeemed on November 21, 1994.

(f) Per share data and average number of outstanding common shares and
equivalents data reflect the 2.5 to 1 stock split effected in December
1994.

(g) EBIT represents the sum of (i) income (loss) from continuing operations
before income taxes, extraordinary loss and cumulative effects of changes
in accounting methods and (ii) interest expense.

24
<PAGE> 28

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following sections summarize the Company's consolidated results of
operations and then discuss the results of its three operating segments for the
nine months ended September 30, 1994 compared to the first nine months of 1993,
for 1993 compared to 1992 and for 1992 compared to 1991. As a result of the
Acquisition, American Standard's results of operations include purchase
accounting adjustments and reflect a highly leveraged capital structure. Results
of operations in these periods (including the nine months ended September 30,
1994) have also been adversely affected by changes related to employee
severance, consolidation of production facilities, other cost reduction actions
and asset dispositions. The results of all three of the Company's business
segments are cyclical, and have been affected by recessions in a number of the
Company's markets (including Europe), and the results of Air Conditioning
Products are also affected by seasonal factors. See "-- Cyclicality;
Seasonality". Operating results improved in the first nine months of 1994, due
principally to volume increases and cost reductions in each of the Company's
business segments.

SALES

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1991 1992 1993 1993 1994
------- ------- ------ ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Air Conditioning Products(a)................................ $ 1,836 $ 1,892 $2,100 $ 1,556 $1,861
Plumbing Products........................................... 1,018 1,170 1,167 875 905
Transportation Products..................................... 741 730 563 420 543
------- ------- ------ ------- ------
Sales..................................................... $ 3,595 $ 3,792 $3,830 $ 2,851 $3,309
====== ====== ====== ====== ======
</TABLE>

OPERATING INCOME
AND
INCOME (LOSS) BEFORE INCOME TAXES, EXTRAORDINARY LOSS
AND CUMULATIVE EFFECTS OF CHANGES IN ACCOUNTING METHODS

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ----------------
1991 1992 1993 1993 1994
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Air Conditioning Products(a)................................. $ 55 $ 104 $ 133 $ 123 $ 164
Plumbing Products............................................ 66 108 108 87 88
Transportation Products...................................... 121 88 41 34 39
------ ------ ------ ------ ------
Operating income........................................... 242 300 282 244 291
Interest expense............................................. (286) (289) (278) (213) (194)
Corporate items(b)........................................... (44) (63) (85) (65) (64)
------ ------ ------ ------ ------
Income (loss) before income taxes, extraordinary loss and
cumulative effects of changes in accounting methods........ $ (88) $ (52) $ (81) $ (34) $ 33
===== ===== ===== ===== =====
</TABLE>

- ---------------

(a) For 1991 the amounts presented for Air Conditioning Products include the
following amounts for Tyler Refrigeration (which was sold on September 30,
1991): sales of $99 million and operating loss of $18 million (including a
$22 million loss on the sale).

(b) Corporate items include administrative and general expenses, accretion
charges on postretirement benefit liabilities, equity in net income (loss)
of affiliated companies, minority interest, foreign exchange transaction
gains and losses, and miscellaneous income and expense.

25
<PAGE> 29

CONSOLIDATED RESULTS OF OPERATIONS FOR FIRST NINE MONTHS OF 1994 COMPARED WITH
FIRST NINE MONTHS OF 1993

Consolidated sales for the first nine months of 1994 of $3,309 million
increased by $458 million, or 16% (with little effect from foreign exchange),
from $2,851 million in the first nine months of 1993. Sales increased for all
three segments with gains of 20% for Air Conditioning Products, 3% for Plumbing
Products and 29% for Transportation Products.

Operating income for the first nine months of 1994 was $291 million, an
increase of $47 million, or 19% (with little effect from foreign exchange), from
$244 million in the first nine months of 1993. Operating income increased 33%
for Air Conditioning Products, was flat for Plumbing Products, and increased 15%
for Transportation Products. Operating income for the nine months ended
September 30, 1994 reflected pre-tax charges of $26 million ($20 million after
tax) related to: employee severance ($20 million); the consolidation of
production facilities ($5 million); and the implementation of other cost
reduction actions ($1 million). Other than costs related to the consolidation of
production facilities, which costs will be liquidated over several years, the
charges will be paid by June 30, 1995. In the 1994 period, the Company also
provided $14 million (with no available tax benefit) of reserves for losses on
operating assets expected to be disposed of prior to the expiration of their
originally estimated useful lives. The first nine months of 1993 included $8
million of charges for plant shutdowns and other cost reduction actions.
Excluding those charges from the respective periods, operating income would have
increased to $331 million from $252 million, or 31%, in the 1994 period over the
1993 period.

AIR CONDITIONING PRODUCTS SEGMENT

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1993 1994
------ ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
SALES:
U.S. portion................................... $1,316 $1,579
International portion.......................... 240 282
------ ------
Total..................................... $1,556 $1,861
====== ======
OPERATING INCOME (LOSS):
U.S. portion................................... $ 131 $ 175
International portion.......................... (8) (11)
------ ------
Total..................................... $ 123 $ 164
====== ======
</TABLE>

The U.S. portion of Air Conditioning Products is composed of the Unitary
Products Group, the Commercial Systems Group (excluding Canada), and exports
from the U.S. by the International Group. The international portion consists of
the non-U.S.-based operations of the International Group and the Canadian
operations of the Commercial Systems Group.

Sales of Air Conditioning Products increased 20% (with little effect from
foreign exchange) to $1,861 million for the first nine months of 1994 from
$1,556 million for the first nine months of 1993. The Unitary Products Group
achieved a gain of 23% because of higher volume (as a result of improved markets
and gains in market share) and a shift to newer, larger-capacity,
higher-efficiency products, offset in part by the effect of lower prices for
certain products due to competitive pressures. Sales of the Commercial Systems
Group increased by 18% primarily because of improved markets, gains in market
share, and the acquisition of additional sales offices in the latter half of
1993. For the International Group, sales increased 17%, due principally to
volume increases in the Far East and Latin America.

26
<PAGE> 30

Operating income of Air Conditioning Products increased 33%, to $164
million in the first nine months of 1994 from $123 million in the first nine
months of 1993. This gain was primarily the result of increased operating income
for the Unitary Products Group and the Commercial Systems Group because of
higher sales and cost reductions. Despite higher sales, the International Group
experienced an overall decrease in operating results. A decline for the European
group was partly offset by a gain for the Far East and Latin America operations.
The decline in European group results was attributable to continued poor
economic conditions and competitive pricing pressures. The improvement in Far
East and Latin America groups was principally attributable to higher sales.

BACKLOG. The worldwide backlog for Air Conditioning Products as of
September 30, 1994 was $489 million, an increase of 33% from September 30, 1993,
excluding the favorable effects of foreign exchange. The increase was a result
of higher volume for the Commercial Systems Group and the commercial portion of
the Unitary Products Group, and expanded distribution channels and market
penetration in the Far East and Latin America. The backlog is comprised of
unshipped product orders taken in the ordinary course of business and recorded
at normal sales prices. Sales are recorded when shipment to a customer occurs.
The current backlog is expected to be filled during the next twelve months.
Although most backlog orders are cancellable, in whole or in part, by customers,
cancellations have not been material to date.

PLUMBING PRODUCTS SEGMENT

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1993 1994
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
SALES:
International portion............................ $656 $659
U.S. portion..................................... 219 246
---- ----
Total....................................... $875 $905
===== =====
OPERATING INCOME (LOSS):
International portion............................ $105 $107
U.S. portion..................................... (18) (19)
---- ----
Total....................................... $ 87 $ 88
===== =====
</TABLE>

The international portion of Plumbing Products is composed of the European
Plumbing Products Group, the Americas International Group, and the Far East
Group. The U.S. portion is generated primarily by the U.S. Plumbing Products
Group and by export sales from the U.S.

Sales of Plumbing Products increased 3% (6% excluding the unfavorable
effects of foreign exchange) to $905 million in the first nine months of 1994
from $875 million in the first nine months of 1993. The exchange-adjusted
improvement resulted from sales increases of 4% for the European Plumbing
Products Group, 2% for the Far East and Americas International Groups on a
combined basis, and 12% for the U.S. Plumbing Products Group. Sales of the
European Plumbing Products Group increased primarily because of volume and price
gains as economic conditions in several countries (particularly the United
Kingdom ("U.K.") and Germany) showed modest improvement over the prior year
period. Exchange-adjusted sales increased for the Far East Group (primarily on
higher volumes in Thailand and Korea) but declined for the Americas
International Group (primarily because of lower sales in Canada where poor
economic conditions continued, offset partly by a gain in Mexico). Sales
increased for the Far East Group despite the deconsolidation of operations in
the PRC which in April 1994 were contributed to ASPPL. Sales of the U.S.
Plumbing Products Group increased as a result of improved markets and an
expanded retail customer base.

Operating income of Plumbing Products was $88 million in the first nine
months of 1994 compared with $87 million for the same period of 1993 (with
little effect from foreign exchange).

27
<PAGE> 31

Operating income for the European Plumbing Products Group increased due to price
and volume gains in the U.K. and Germany, and cost reductions in most
operations. Operating income of the Far East and Americas International Groups
on a combined basis decreased, as gains in most operations (due to the higher
sales, except in Canada) were more than offset by the effect of deconsolidation
of operations in the PRC. Improvements for the U.S. Plumbing Products Group from
increased sales and cost reductions at manufacturing facilities were more than
offset by a provision of $14 million related to certain assets (principally
machinery and equipment used in the production of chinaware) that will be
disposed of prior to the expiration of their originally estimated useful lives.
Overall Plumbing Products' results were also negatively affected by a provision
of $5 million related to employee severance, compared to $1 million of similar
charges in 1993. Excluding such provisions from the respective periods operating
income would have increased to $107 million from $88 million, or 22%, in the
1994 period from the 1993 period.

BACKLOG. Plumbing Products' backlog as of September 30, 1994 was $210
million, an increase of 16% from September 30, 1993 (excluding the favorable
effects of foreign exchange), primarily from expanded sales volume. The backlog
is comprised of unshipped product orders taken in the ordinary course of
business and recorded at normal sales prices. Sales are recorded when shipment
to a customer occurs. The current backlog is expected to be filled during the
next twelve months. Although most backlog orders are cancellable, in whole or in
part, by customers, cancellations have not been material to date.

TRANSPORTATION PRODUCTS SEGMENT

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1993 1994
----- -----
<S> <C> <C>
(DOLLARS IN
MILLIONS)
SALES................................................. $ 420 $ 543
OPERATING INCOME...................................... 34 39
</TABLE>

Sales of Transportation Products in the first nine months of 1994 were $543
million, an increase of 29% (with little effect from foreign exchange), from
$420 million in the first nine months of 1993. More than half of the gain
resulted from a 23% increase in the unit volume of truck and bus production in
Western Europe and a 5% increase in aftermarket sales. Approximately 37% of the
gain represented sales of Perrot ($46 million), a German brake manufacturer
which the Company acquired in January 1994. Sales volumes were significantly
higher in the U.K. (as a result of the growing utility vehicle business in that
country), in Sweden (where truck manufacturing increased by approximately 50%),
and in Brazil, France and Spain (where demand also increased).

Operating income for Transportation Products was $39 million in the first
nine months of 1994, an increase of 15% (with little effect from foreign
exchange) compared with $34 million in the first nine months of 1993. The
increase was primarily attributable to increased sales volume and the effect of
cost reductions, partly offset by a small loss experienced by Perrot. Operating
income for the 1994 period reflected charges of $14 million related to employee
severance ($10 million) and the consolidation of production facilities ($4
million). Charges of a similar nature in the 1993 nine-month period totalled $2
million. Excluding those charges from the respective periods, operating income
would have increased to $53 million from $36 million, or 47%, in the 1994 period
over the 1993 period.

BACKLOG. Transportation Products' backlog as of September 30, 1994, was
$293 million, an increase of 50% from September 30, 1993 (excluding the
favorable effects of foreign exchange), as a result of the significantly
improved volumes and the inclusion of backlog of Perrot. The backlog is
comprised of unshipped product orders taken in the ordinary course of business
and recorded at normal sales prices. Sales are recorded when shipment to a
customer occurs. The current backlog

28
<PAGE> 32

is expected to be filled during the next twelve months. Although most backlog
orders are cancellable, in whole or in part, by customers, cancellations have
not been material to date.

FINANCIAL REVIEW

The Company's financing and corporate costs for the first nine months of
1994 were $258 million, a decrease from $278 million in the first nine months of
1993. Interest expense decreased $19 million as a result of lower overall
interest rates on debt issued as part of the 1993 Refinancing, despite a $9
million increase in interest expense related to the 12 3/4% Junior Subordinated
Debentures issued in June 1993 in exchange for American Standard Inc.'s 12 3/4%
Exchangeable Preferred Stock.

For the nine months ended September 30, 1994 the income tax provision was
$47 million on income before income taxes, extraordinary loss and cumulative
effects of accounting changes of $33 million. The tax provision for the nine
months ended September 30, 1993 was $21 million despite a loss before income
taxes, extraordinary loss and cumulative effects of accounting changes of $34
million. These provisions reflected the annualized estimate of taxes payable on
those foreign operations that are expected to be profitable, offset partly in
the 1993 period by tax benefits from certain foreign net operating losses. The
provision for the first nine months of 1994 was adversely affected by less
favorable tax treatment with respect to certain foreign income, primarily in
Germany. See "-- Liquidity and Capital Resources". The unusual relationship
between the pre-tax results and the tax provision for both periods is explained
by the nondeductibility for tax purposes of the amortization of goodwill and
other purchase accounting adjustments and the share allocations made by the ESOP
as well as by tax rate differences and withholding taxes on foreign earnings.

As a result of the 1993 Refinancing, the 1993 nine-month period included an
extraordinary charge of $92 million related to the debt retired (including call
premiums, the write-off of unamortized debt issuance costs and the loss on
cancellation of foreign currency swap contracts), on which no tax benefit was
available.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities, after cash interest paid of $114
million, was $127 million for the nine months ended September 30, 1994, compared
with $73 million in the first nine months of 1993. The $54 million increase
resulted primarily from improved operating results ($41 million), a non-cash
asset loss provision ($14 million) and an increase in timing differences in
funding ($51 million, principally accruals for severance and facilities
consolidations, income taxes and employee compensation), offset in part by a
decrease in non-cash interest costs ($13 million) and an increase in working
capital invested in operations during the 1994 period ($40 million, which was
principally attributable to higher sales volumes). The other principal source of
cash was net borrowings of $63 million under the Revolving Credit Facility (as
defined below). The principal uses of cash in the 1994 period were repayments of
$101 million of bank term loans and capital expenditures of $63 million,
including $13 million of investments in affiliated companies. See "-- Capital
Expenditures".

In connection with the Acquisition in 1988, American Standard incurred
substantial indebtedness, resulting in its highly leveraged capital structure.
At September 30, 1994, the Company's total indebtedness was approximately $2.4
billion, including short-term debt and the current portion of long-term debt. At
September 30, 1994, after giving effect to the Offerings and the October
Borrowing and the application of net proceeds therefrom, the Company's annual
scheduled debt maturities will range from approximately $105 million to $120
million for the years 1995 through 1998. The Company believes that the amounts
available from operating cash flows, funds available under the Revolving Credit
Facility and future debt or equity financings will be sufficient to meet its
expected cash needs and planned capital expenditures for the foreseeable future.

29
<PAGE> 33

The Existing Credit Agreement currently provides for an aggregate facility
of approximately $1.2 billion as follows: (a) a $242 million multi-currency
revolving credit facility (the "Revolving Credit Facility") available to all
Borrowers (as defined); (b) a $176 million multi-currency periodic access
facility (the "Periodic Access Facility") available to all Borrowers; and (c)
four term loan facilities (each, a "Term Loan Facility"), consisting of a $222
million U.S. dollar Tranche A facility available to American Standard Inc.; a
$136 million Deutschemark Tranche B facility available to WABCO Standard GmbH; a
$82 million U.S. dollar Tranche C facility available to all Borrowers; and a
$325 million U.S. dollar Tranche D Facility available to American Standard Inc.

The Company is required to reduce to $50 million the amount of borrowings
outstanding under the Revolving Credit Facility for at least 30 consecutive days
in each 12-month period ending May 31. On August 31 of each year, the Revolving
Credit Facility is reduced by $8.3 million. In addition, the Company is required
to repay the full amount of each of its outstanding revolving loans at the end
of each interest period (a maximum of six months). The Company may, however,
immediately reborrow such amounts subject to compliance with applicable
conditions of the Existing Credit Agreement.

At September 30, 1994, the Company had outstanding borrowings of $70
million under the Revolving Credit Facility. At September 30, 1994, there was
$118 million available under the Revolving Credit Facility after reduction for
borrowings and for $54 million of outstanding letters of credit. In addition,
the Company's foreign subsidiaries had $60 million available under overdraft
facilities which can be withdrawn by the banks at any time.

The Existing Credit Agreement contains various covenants that limit, among
other things, indebtedness, dividends on and redemptions of capital stock of the
Company, purchases and redemptions of other indebtedness of the Company
(including its outstanding debentures and notes), rental expense, liens, capital
expenditures, investments or acquisitions, disposal of assets, the use of
proceeds from asset sales, and certain other business activities and require the
Company to meet certain financial tests. In order to maintain compliance with
the covenants and restrictions contained in its previous credit agreement, the
Company from time to time has had to obtain waivers and amendments. In February
1994 the Company obtained an amendment to the Existing Credit Agreement that
among other things relaxed certain financial tests and covenants, and
facilitated the investment in an air conditioning joint venture and the
formation of a holding company to establish joint ventures in the PRC for the
manufacture and sale of plumbing products. The Company currently believes it
will comply with the amended financial tests and covenants but may have to
obtain similar amendments or waivers in the future.

In July 1993 the Company completed a refinancing (the "1993 Refinancing")
that included (a) the issuance of $200 million principal amount of 9 7/8% Senior
Subordinated Notes Due 2001; (b) the issuance of approximately $751 million
principal amount of 10 1/2% Senior Subordinated Discount Debentures Due 2005,
which yielded proceeds of approximately $450 million; (c) the amendment and
restatement of the Company's previous credit agreement into the Existing Credit
Agreement; and (d) the application of the proceeds of such issuances and such
borrowings as follows: (i) the redemption on July 1, 1993, of all of the
outstanding 12 7/8% Senior Subordinated Debentures at a redemption price of
104.83% ($571.3 million), (ii) the redemption on July 2, 1993 of a majority of
the outstanding 14 1/4% Subordinated Discount Debentures at a redemption price
of 105% ($389.5 million), (iii) the extension of the term of existing bank
borrowings ($405 million of term loans and $77 million of other bank debt
including revolving credit debt), (iv) the refunding of letters of credit ($58
million), and (v) payment of related fees and expenses.

30
<PAGE> 34

adjustments (principally relating to the 1988-1990 period) resulting in
additional taxes of approximately $120 million (using September 30, 1994
exchange rates), plus interest, for the tax return years under audit. In
addition, significant transactions similar to those which gave rise to the
possible adjustments referred to above occurred in years subsequent to 1990. If
the German tax authorities should propose adjustments for the 1988-1990 period,
they might, after future tax audits, propose tax adjustments that are comparable
for years 1991 to 1993. American Standard, on the basis of the opinion of German
legal counsel, believes the tax returns are substantially correct as filed and
any such adjustments would be inappropriate and intends to contest vigorously
any adjustments which have been or may be assessed. Accordingly, the Company had
not recorded any loss contingency at September 30, 1994, with respect to such
matters.

The Company makes substantial annual interest payments to its indirect
wholly-owned Netherlands subsidiary. These interest payments have been exempt
from U.S. withholding tax under an income tax treaty between the United States
and the Netherlands. A provision in a new treaty raises the possibility that
such payments may become subject to 15% U.S. withholding tax. The Company has
filed a Competent Authority request with the Internal Revenue Service seeking a
determination that no withholding tax will be imposed. The Company believes,
based upon a recent IRS News Release that authorizes the requested relief, that
the Competent Authority request will be resolved favorably. If the Competent
Authority request is not resolved favorably, additional withholding taxes of
approximately $12 million per year could be imposed on the Company commencing in
1996. In such case, the Company will consider alternatives designed to mitigate
such increased withholding taxes; however, there is no assurance that such
alternatives will be found.

CAPITAL EXPENDITURES

The Company's capital expenditures for the first nine months of 1994 were
$63 million, including $13 million of investments in affiliated companies,
compared with $54 million (including $8 million of investments in affiliated
companies) for the first nine months of 1993. The increase for 1994 relates
primarily to investments in affiliated companies, expansion in newer operations,
new products, and the continuing implementation of Demand Flow.

The Company's capital expenditures for 1993 amounted to $98 million,
including investments of $8 million in affiliated companies. The amount of
capital expenditures was $10 million less than in 1992 ($6 million less
excluding the effects of foreign exchange). The Company believes capital
spending in recent years has been sufficient for maintenance purposes, important
product and process redesigns, expansion projects, and strategic investments.
Capital expenditures for the full year 1994 are expected to increase
approximately 30% over the 1993 amounts. The Company expects capital
expenditures, including investments in related companies, will increase 10% to
15% in 1995.

31
<PAGE> 35

Capital expenditures for Air Conditioning Products for the first nine
months of 1994 were $21 million, including $2 million of investments in
affiliates. Major expenditures included projects related to Demand Flow and new
products such as the Voyager III (medium-tonnage product line), changes related
to new refrigerant requirements and capacity expansion. Total capital spending
for the full year 1994 is expected to be 25% higher than in 1993. Capital
expenditures were $38 million in 1993. This amount was 15% more than that of
1992. Capital expenditures in 1993 included projects related to Demand Flow and
spending on new products such as the Voyager III, the scroll compressor, and the
Series R chiller line, expansion of Voyager I and Voyager II capacity and
tooling and equipment for the American Standard line of air conditioning
products.

Plumbing Products' capital expenditures for the first nine months of 1994
were $24 million, including $3 million of investments in affiliated companies.
Expenditures for 1994 include cash investments in affiliates in the PRC and
Vietnam and expansion of capacity in other Far East operations, modernization of
the Czech Republic operations, completion of a brass fittings factory in Egypt,
and automatic glazing systems in Italy. Total capital expenditures for full year
1994 are expected to be approximately 15% higher than in 1993. Capital
expenditures in 1993 were $46 million, including investments of $8 million in
affiliated companies in France (Porcher) and the Czech Republic. Excluding the
investments in affiliated companies and the effects of foreign exchange, capital
spending in 1993 was 34% higher than in 1992 as a result of spending increases
in Europe and the Far East. Major projects included capacity expansion in
Thailand and China and various projects related to Demand Flow implementation.

Capital expenditures for Transportation Products in the first nine months
of 1994 were $18 million, including investments in affiliated companies of $8
million (Perrot and WABCO Espana). Major projects included construction of a
test track in Germany, continued implementation of Demand Flow, and
cost-reduction projects. Total capital expenditures for full year 1994 is
expected to be approximately double the 1993 level. Capital expenditures were
$14 million in 1993. Excluding the effects of foreign exchange, capital spending
in 1993 was 41% less than in 1992, a year with significant spending related to
Demand Flow cost-reduction projects in production and material flow.

CONSOLIDATED RESULTS OF OPERATIONS FOR 1993 COMPARED WITH 1992

Consolidated sales for 1993 were $3.83 billion, an increase of 1% (6%
excluding the unfavorable effects of foreign exchange) over $3.79 billion in
1992. A sales increase of 11% for Air Conditioning Products was partly offset by
a sales decline for Transportation Products of 23% (16% excluding the
unfavorable effects of foreign exchange). Sales for Plumbing Products were flat
(but up by 9% excluding the effects of foreign exchange).

Operating income for 1993 was $282 million, a decrease of $18 million, or
6% (but an increase of less than 1% excluding the unfavorable effects of foreign
exchange), from $300 million in 1992. The increase in operating income of 28%
for Air Conditioning Products was more than offset by a 53% decrease in
operating income for Transportation Products. Plumbing Products' operating
income was flat (but increased 15% excluding the unfavorable effects of foreign
exchange). The gain for Air Conditioning Products was the result of higher
volume, increased sales of higher-margin products, the benefits of manufacturing
improvements, and the effects of restructuring and cost-containment efforts
undertaken in 1991 and 1992, offset partly by the costs of further restructuring
in 1993. For Plumbing Products the effects of increased volume for the Far East
Group were offset partly by lower margins for the U.S. group and lower volumes
and unfavorable foreign exchange effects for the European group. Transportation
Products' operating income decreased primarily as a result of lower volumes due
to reduced demand in depressed markets in Europe, offset partly by the effects
of improvements in manufacturing efficiency.

32
<PAGE> 36

CONSOLIDATED RESULTS OF OPERATIONS FOR 1992 COMPARED WITH 1991

Consolidated sales for 1992 were $3.8 billion, an increase of 5% (4%
excluding the favorable effects of foreign exchange) over $3.6 billion in 1991.
The 1991 amount included the sales of Tyler Refrigeration, which was sold
September 30, 1991. Excluding Tyler Refrigeration, sales in 1992 were up 8% (7%
excluding favorable foreign exchange effects). Sales increases of 15% for
Plumbing Products and 9% for Air Conditioning Products (excluding Tyler
Refrigeration) were partly offset by a sales decline for Transportation Products
of 1% (6% excluding the favorable effects of foreign exchange).

Operating income for 1992 was $300 million, an increase of $58 million, or
24% (19% excluding the favorable effects of foreign exchange), from $242 million
in 1991. The 1991 amount included a loss for Tyler Refrigeration. Excluding
Tyler Refrigeration, operating income in 1992 was up 15% (10% excluding
favorable foreign exchange effects). Increases in operating income of 42% for
Air Conditioning Products and 64% for Plumbing Products were partly offset by a
27% decrease in operating income for Transportation Products. The gain for Air
Conditioning Products was the result of higher volume, increased sales of
higher-margin products, the benefits of manufacturing improvements,
restructuring and cost containment efforts, and the fact that 1991 also included
the effects of a work stoppage at the LaCrosse, Wisconsin, facility, partly
offset by decreased operating income for the International Group, principally in
Europe. In addition, approximately one-third of the gain in operating income for
Air Conditioning Products resulted because 1991 included an operating loss for
Tyler Refrigeration of $18 million (including a $22 million loss on the sale of
this division). Plumbing Products' operating income gain resulted from increased
prices and volumes, primarily in Europe and to a lesser extent in the United
States. Transportation Products' operating income decreased primarily as a
result of lower volumes due to reduced demand in depressed markets in Europe and
Brazil and lower prices offset partly by the favorable effects of foreign
exchange and improvements in manufacturing.

RESULTS OF OPERATIONS BY SEGMENT

AIR CONDITIONING PRODUCTS SEGMENT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)

SALES:

U.S. portion........................ $ 1,453 $ 1,572 $ 1,786
International portion............... 284 320 314
------- ------- -------
Subtotal....................... 1,737 1,892 2,100
Tyler Refrigeration................. 99 -- --
------- ------- -------
Total.......................... $ 1,836 $ 1,892 $ 2,100
====== ====== ======
OPERATING INCOME (LOSS):
U.S. portion........................ $ 58 $ 112 $ 148
International portion............... 15 (8) (15)
------- ------- -------
Subtotal....................... 73 104 133
Tyler Refrigeration................. (18)(a) -- --
------- ------- -------
Total.......................... $ 55 $ 104 $ 133
====== ====== ======
</TABLE>

---------------------
(a) Includes $22 million loss on the sale of Tyler Refrigeration.

1993 COMPARED WITH 1992. Sales and operating income of Air Conditioning
Products both increased in 1993 despite the continuing recession in U.S. and
Canadian commercial new construc-

33
<PAGE> 37

tion and only moderate increase in residential new construction in the U.S. and
despite the economic decline in Europe. Sales of Air Conditioning Products,
which accounted for approximately 55% of the Company's 1993 sales, increased by
11% (with little effect from foreign exchange) to $2,100 million in 1993 from
$1,892 million in 1992. There was a significant sales increase for each of the
three operating groups.

Operating income of Air Conditioning Products increased year to year by 28%
(with little effect from foreign exchange) to a record high of $133 million in
1993 from $104 million in 1992. The increase was attributable to gains achieved
by all three groups.

Unitary Products Group. In 1993 sales of the Unitary Products Group, which
accounted for approximately 42% of Air Conditioning Products sales, increased by
15% over the 1992 sales level. Residential markets were up 15%, as a result of
an unusually hot summer in the northern United States and a 7% increase in
housing starts. Sales of residential products increased by 18% year over year,
principally because of higher volumes driven by the improved market, increased
furnace sales in the replacement market, and a shift in the market to more
efficient products, offset partly by the continuation from 1992 of price
decreases due to competitive pressures. Commercial markets for unitary products
were up 9% overall from the 1992 markets, as the commercial replacement market
strengthened further. New-construction activity continued to struggle, however.
Sales of commercial unitary products increased by 10% overall, primarily as a
result of higher volume (driven by the strong replacement market for both light
and large commercial products); a shift to higher-priced, higher-tonnage
products; and a gain in market share for light commercial products due to the
success of the large Voyager products (packaged rooftop air conditioners). As a
result of these factors, together with product cost improvements, improved labor
productivity, and the benefits of organizational restructuring which reduced the
salaried workforce in 1992, the operating income for Unitary Products in 1993
increased by 43% year over year. This improvement was achieved even though 1993
included the initial start-up costs of the new national distribution center in
St. Louis, Missouri, and higher advertising costs.

Unitary Products' sales increased through the success of new and redesigned
products introduced recently and improved distribution channels. Commercial
products that were introduced included the 20-to-25-ton Voyager products in
1992, which more than doubled market share in that size range; commercial
microprocessor-controlled products; a line of convertible air handlers; and
rooftop and air cooled chiller products using more efficient scroll compressors.
Residential products introduced included the AMERICAN-STANDARD(R) brand outdoor
units and new lines of luxury and conventional retail residential products.

Commercial Systems Group. Sales of the Commercial Systems Group, which
accounted for approximately 37% of Air Conditioning Products' sales, increased
10%, primarily on volume increases for most product lines, especially air
handling systems and water chillers (principally due to improved replacement
markets and increased market share), and increased revenue from Company-owned
sales offices (acquisitions and volume growth). These gains were partly offset
by lower volume in Canada, which continued to be adversely affected by
recession. The non-residential new-construction market increased 4% in the
United States in 1993, following decreases of 5% in 1992 and 17% in 1991. The
non-residential replacement market was up by 6% over 1992.

Operating income for Commercial Systems increased 12% in 1993 over the
recession-affected figure for 1992. The increase was primarily the result of
volume gains, improvements in manufacturing efficiency, operating expense
reductions, and the benefits of restructuring actions taken in 1992. The effects
of these factors were partly offset by slightly lower prices, increases in
material, labor, and benefit costs, the costs of additional restructuring
actions in 1993, and a larger loss in the weak Canadian market.

Product development emphasis for Commercial Systems in 1993 and 1992 was on
new compressor, heat transfer and microelectronic control technology; adaptation
of products to refrigerants that comply with recent government regulations;
energy-efficient products; products for

34
<PAGE> 38

the aftermarket and replacement market (which exceeded the new-construction
market in both 1993 and 1992); and products redesigned to improve manufacturing
productivity. This strategy benefited operations in 1993 and 1992, and the
Company expects that this product development emphasis will result in greater
sales over the next several years.

International Group. Sales of Air Conditioning Products' International
Group, which accounted for approximately 21% of Air Conditioning Products' 1993
sales, increased 7% from those of 1992 (10% excluding the unfavorable effect of
foreign exchange). Most of the gain was from higher volume in the Far East
(especially Hong Kong, Taiwan, and export sales from the U.S.) resulting from
expanded markets and increased penetration; higher export sales from the U.S. to
the Middle East (markets were significantly stronger) and Latin America
(improved penetration in a market that was up 20%); and higher volumes in
Mexico. These gains were partly offset by lower sales in Europe (lower prices
and volumes in a declining market). Markets were down in all European countries
except the U.K., but the effect was partly offset by increased revenues from
service companies acquired in 1992 and prior years. Market growth in the Far
East was 6% overall, led by the PRC market, which was up by 21%. The sales
growth in Hong Kong was driven by the very strong market in the PRC. Markets in
Thailand also grew, and the Latin American market grew by 20%.

Operating income for the International Group increased by approximately 39%
in 1993. The increase was primarily the result of higher export sales from the
U.S. to the Middle East and Far East, offset partly by a larger operating loss
in Europe primarily because of the weak markets and lower margins, costs related
to restructuring in response to the lower markets, and the unfavorable effects
of lower volume on factory performance. Overall, income from the Far East and
Latin America was essentially unchanged from the prior year, as volume gains
were offset by increased costs related to expansion of distribution channels and
joint ventures and development of new and improved products to support present
and future growth.

1992 COMPARED WITH 1991. Except as otherwise indicated, the following
discussion, including the financial comparisons, does not include the results of
Tyler Refrigeration or the $22 million loss on the sale of Tyler Refrigeration
in 1991.

Sales and operating income of Air Conditioning Products both increased in
1992 even though U.S. and Canadian commercial and residential new construction
continued to be adversely affected by the recession in those countries and
despite the economic decline in Europe. Sales of Air Conditioning Products,
which accounted for approximately 50% of the Company's 1992 sales, increased by
9% (8% excluding the effects of foreign exchange) to $1,892 million in 1992 from
$1,737 million in 1991. There was a significant sales increase for each of the
three operating groups -- for the Unitary Products Group in both residential and
commercial products primarily because of higher volume and more favorable
product mix (partly offset by lower prices), for the Commercial Systems Group
primarily because of higher volume and prices, and for the International Group
principally because of increased volume in Europe and the Far East.

Operating income of Air Conditioning Products increased year to year by 42%
(with little effect from foreign exchange) to $104 million in 1992 from $73
million in 1991, and operating margins increased to 5.5% in 1992 from 4.2% in
1991. The increase was attributable to the sales gains of the three groups, the
benefits of manufacturing improvements and restructuring and cost containment in
the Unitary Products and Commercial Systems Groups, and the fact that in 1991
results of the Commercial Systems Group had been adversely affected by a 54-day
work stoppage at its LaCrosse, Wisconsin, facility. The impact of these factors
was partly offset by a decline in operating income for the International Group
caused by lower margins and costs related to the start-up of new facilities,
sales offices, and distribution channels.

Unitary Products Group. Sales in 1992 of the Unitary Products Group, which
accounted for approximately 41% of Air Conditioning Products sales, increased by
6% over the 1991 sales level. Commercial markets for unitary products were up 6%
overall from the depressed 1991 markets, as a

35
<PAGE> 39

very strong commercial replacement market more than offset the effects of low
new-construction activity. Sales of commercial unitary products increased by 7%
overall, primarily as a result of higher volume (driven by the strong
replacement market), a shift to higher-priced, higher-tonnage products, and a
gain in market share for light commercial products. Residential markets were
down
3.5% as poor replacement activity, a result of an unseasonably cool summer, more
than offset the 18% increase in new housing starts. Despite this poorer market,
sales of residential products increased by 5% year over year, principally
because of larger market share, improved furnace markets, and a partial shift in
the market to more efficient products stimulated by Federal efficiency
standards, offset partly by price degradation due to competitive pressures. As a
result of these factors, together with benefits of manufacturing improvements,
cost containment, and organizational restructuring which reduced the salaried
workforce, the operating profit for Unitary Products in 1992 increased by 50%
from the depressed level of 1991.

Unitary Products' sales in the commercial market increased through the
success of new and redesigned products introduced in 1991 and 1992 and improved
distribution channels. New and modified products in 1991 and 1992 included new
cost-reduced 20 to 25-ton Voyager products, commercial microprocessor-controlled
products, a new line of convertible air handlers, and rooftop and air-cooled
chiller products using more efficient scroll compressors.

Commercial Systems Group. Sales of the Commercial Systems Group, which
accounted for approximately 38% of Air Conditioning Products' sales, increased
9% primarily on volume increases in aftermarket replacement and parts sales,
increased revenue from Company-owned sales offices (volume growth and
acquisitions), and small price increases on most product lines. Other factors
contributing to the increase were higher sales of large applied systems and the
fact that in 1991 there was a 54-day work stoppage at the LaCrosse, Wisconsin,
plant. These gains were partly offset by lower volume in Canada, which continued
to be adversely affected by recession. The non-residential new construction
market dropped 5% in the United States in 1992, following a 17% decrease in
1991. The non-residential replacement market was even with 1991.

Operating income for Commercial Systems increased 129% in 1992 over the
recession-affected and work-interrupted level of 1991. The increase was
primarily the result of the volume and price gains, improvements in
manufacturing efficiency, cost containment and restructuring, and the fact that
1991 included the adverse impact of the LaCrosse work stoppage. The effects of
these factors were partly offset by slightly lower gross margins, as the price
increases did not completely recover increases in material, labor and benefits
costs.

International Group. Sales of Air Conditioning Products' International
Group, which accounted for approximately 21% of Air Conditioning Products' 1992
sales, increased 15% from those of 1991 (10% excluding the favorable effect of
foreign exchange). Most of the gain was from higher volumes in Mexico (two new
sales offices resulted in expanded distribution and penetration), the Far East
(especially Hong Kong and Singapore), the Middle East (markets were
significantly stronger), and Europe (sales of new products and increased
penetration despite declining markets). Markets were down in almost all European
countries except Italy, with the largest drop in the U.K., offset partly by
increased revenues from acquired service companies. Market growth in the Far
East was 9% overall, led by China, Singapore, and Korea. The sales growth in
Hong Kong was driven by the very strong market in China, even though the overall
market in Hong Kong was down. Markets in Malaysia and Indonesia also grew.

Operating income for the International Group decreased by approximately 68%
in 1992. The decline occurred in Europe, primarily because of the weak markets
and lower prices, costs related to the start-up of new facilities and new
distribution networks in the U.K. and France, costs related to the introduction
of new products, start-up costs of a company in Spain acquired near the end of
1991, and foreign exchange transaction losses from currency fluctuations in the
latter half of 1992. Income from the Far East and Latin America was essentially
unchanged from the prior year, as volume gains were offset by increased costs
related to expanded distribution channels, start-up of

36
<PAGE> 40

new joint ventures, and development of new and improved products to support
present and future growth.

PLUMBING PRODUCTS SEGMENT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1991 1992 1993
------- ------- -------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
SALES:

International portion...................... $ 783 $ 885 $ 865
U.S. portion............................... 235 285 302
------- ------- -------
Total................................. $ 1,018 $ 1,170 $ 1,167
====== ====== ======
OPERATING INCOME (LOSS):
International portion...................... $ 93 $ 124 $ 131
U.S. portion............................... (27) (16) (23)
------- ------- -------
Total................................. $ 66 $ 108 $ 108
====== ====== ======
</TABLE>

1993 COMPARED WITH 1992. Sales of Plumbing Products in 1993, at $1,167
million, which accounted for approximately 30% of the Company's 1993 sales, were
at essentially the same level as the $1,170 million of sales in 1992 (but
increased by 9% excluding the unfavorable effects of foreign exchange). Sales
increases of 42% for the Far East Group (46% excluding foreign exchange), 9% for
the Americas International Group (14% excluding foreign exchange), and 6% for
the U.S. Plumbing Products Group were offset partly by a sales decrease of 10%
for the European Plumbing Products Group (which had a 4% increase excluding the
effects of foreign exchange).

In 1993 operating income of Plumbing Products was $108 million, the same
amount as in 1992, but excluding the unfavorable effects of foreign exchange
operating income increased by 15%. The increase (on an exchange-adjusted basis)
was attributable primarily to increased profitability for the Far East Group and
for the Americas International Group, offset partly by a decline for the U.S.
group.

European Plumbing Products Group. Sales of the European group, which
accounted for approximately 51% of Plumbing Products' sales for 1993, decreased
10% in 1993 from 1992 but increased by 4% excluding the unfavorable effects of
foreign exchange. The exchange-adjusted gain resulted from price increases,
especially in Italy, Germany, the U.K., and Greece, offset partly by lower
volume in most countries because of depressed markets. In Italy sales were up
with price increases for most product lines, offset partly by lower volume and a
less favorable product mix. The German market was stable in total, as price
gains were offset by volume and mix declines. Greece, which had been in
recession for three years, recovered somewhat in 1993. The European group's
strength has been sales in the replacement market, which has more than made up
for the effects of poor new-construction markets.

Operating income for the European group decreased 7% but increased 10%
excluding the effects of foreign exchange. This increase occurred primarily
because of the price gains and cost reductions resulting from restructuring and
efficiency improvements in the U.K., France, Italy, and Germany. Partly
offsetting those favorable effects were the effects of lower volumes and the
unfavorable effect on margins caused by the decline in value of many European
currencies against the Deutschemark. The increased cost of fittings purchased
from Germany could not be completely recovered through sales price increases in
most of the operations in other countries.

U.S. Plumbing Products Group. Sales of the U.S. group, which accounted for
approximately 26% of total 1993 Plumbing Products sales, increased 6% in 1993.
During 1993 the U.S. building industry continued to be adversely affected by the
low level of new construction, although non-residential construction increased
4% from 1992 and new residential construction continued to recover from the
lowest levels since the mid-1940's (up by 7% in 1993 and 18% in 1992 but still
below pre-1990

37
<PAGE> 41

levels). A basic shift from wholesale distribution channels to retail channels
has been developing over the last few years, a trend the Company believes will
continue and will be beneficial to the Company because of strong product and
brand-name recognition. Retail markets account for 20% of the total sales of the
U.S. group. The growth of sales for the U.S. group was largely the result of
increased export sales from the U.S. and to a lesser extent price increases on
certain products, a more favorable sales mix, and a small increase in the
growing retail channel business. The overall gain in the retail business was
small because significant volume gains due to an expanding customer base were
partly offset by the loss of an important customer.

The operating loss for the U.S. group in 1993 was greater than that of the
prior year. Despite higher sales, operating results were poorer primarily
because of lower margins on both domestic and export sales, increased
advertising costs and other expenses associated with expansion of the retail
distribution channel, costs related to start-up and expansion of the
low-water-volume toilet line (now mandated for new construction), and factory
performance problems caused in part by the effects of fluctuating volumes. In
addition, costs were incurred in business system re-engineering activities
intended to improve customer service.

Americas International and Far East Groups. Combined sales of the Americas
International and Far East Groups, which accounted for approximately 23% of
total Plumbing Products sales, increased 21% in 1993 (26% excluding the effects
of foreign exchange). The sales gain was due primarily to the consolidation of
Incesa (a previously unconsolidated group of Central American joint ventures)
effective January 1, 1993, as a result of the purchase of additional shares of
stock, and to higher volume and prices in Thailand, the PRC, the Philippines,
and Brazil, offset partly by decreases in sales in Mexico, Canada, and Korea.

Combined operating income of the Americas International and Far East Groups
in 1993 increased 72% over the 1992 level. Gains were realized in all operations
except Mexican chinaware operations, which were adversely affected by poor
economic conditions and the uncertainty related to the North American Free Trade
Agreement. The increase was primarily from higher prices and volumes in Brazil,
Thailand, and the PRC, the consolidation of Incesa, and a smaller loss for
Mexican fittings operations.

1992 COMPARED WITH 1991. Sales of Plumbing Products, which accounted for
approximately 31% of the Company's 1992 sales, increased by 15% in 1992 (14%
excluding the effects of foreign exchange) to $1,170 million from $1,018 million
in 1991. The improvement resulted from sales increases of 9% (7% excluding the
effects of foreign exchange) for the European Plumbing Products Group, 21% for
the U.S. Plumbing Products Group, 4% for the Americas International Group (7%
excluding foreign exchange), and 101% for the Far East (98% excluding foreign
exchange). Sales of the European group increased primarily because of increases
in prices and volumes in Italy and Germany, partly offset by lower volume in
France. The sales increase for the U.S. Plumbing Products Group reflected volume
increases for products introduced in 1991 and, to a lesser extent, price
increases on certain other products as well as an increase in the growing retail
channel business. Sales increased for the Americas International group primarily
because of higher prices and volume in Mexico and higher volume in Brazil,
offset by declines in Canada, and for the Far East Group because of the
consolidation in 1992 of the Thailand operations (previously an unconsolidated
joint venture) and higher volume in China.

In 1992 operating income of Plumbing Products increased 64% (56% excluding
the effects of foreign exchange) to $108 million from $66 million in 1991 and
the operating margin increased to 9.2% from 6.5%. The increase was attributable
primarily to increased profitability for the European group on higher prices and
volumes (especially in Italy and Germany). Results for the U.S. group, whose
operations continued to be unprofitable as a result of the recession in the U.S.
markets, improved because of higher prices and volumes. Operating profit of the
Americas International and Far East Groups also improved as a result of gains in
Mexico, Brazil, Korea and China, offset partly by lower profitability in Canada
and the Philippines, both of which were affected by poor economies.

38
<PAGE> 42

European Plumbing Products Group. Sales of the European group, which
accounted for approximately 57% of Plumbing Products sales for 1992, increased
9% in 1992 over 1991, 7% excluding the favorable effects of foreign exchange.
The gain resulted primarily from price and volume increases, especially in Italy
and Germany, offset partly by lower volume in France from declining demand and
lower prices in England caused by a very poor market. In Italy sales were up 9%,
with gains for most product lines in price, volume and market share; however,
the market was trending down at year-end as the Italian government introduced
economic measures to reduce the public deficit. The German market was stable in
total but shifted to lower-value housing and economy products as eastern Germany
became a bigger factor. The gains in Germany were the result of higher volumes
and prices for brass fittings and luxury chinaware. European markets were down
overall, particularly in the U.K. which continued in an economic slump; France,
whose economy fell off significantly in the fourth quarter of 1992; and Greece,
which has been in recession for three years. The new-construction markets in
those three countries are in recession. The European group's strength has been
sales in the replacement market, which more than made up for the effects of poor
new-construction markets.

Operating income for the European group increased 28% (23% excluding the
effects of foreign exchange) primarily from the price and volume gains in Italy
and Germany and higher margins on German brass operations resulting from
improved manufacturing processes and cost containment, offset partly by lower
profitability in France because of decreased volume and in the U.K. because of
the recession. The recession continued to depress operating results in Greece.

U.S. Plumbing Products Group. Sales of the U.S. group, which accounted for
approximately 24% of total 1992 Plumbing Products sales, increased 21% in 1992.
During 1992 the U.S. building industry continued to be severely affected by the
low level of new construction, with non-residential construction down 5% from
1991 and with new residential construction recovering from the lowest levels
since the mid-1940's (though up by 18%, it was still low in historical terms).
The U.S. market for plumbing products was up an estimated 3% to 4%, with more
than half the gain occurring in the replacement and remodeling markets, which
accounts for about 60% of the total U.S. market. A basic shift from wholesale
distribution channels to retail channels has been developing over the last few
years, a trend the Company believes will continue and will be beneficial to the
Company because of strong product and brand-name recognition. Retail markets
accounted for 20% of the total sales of the U.S. group. The growth of sales for
the U.S. group was largely a result of the strength of retail business (which
had a significant increase in volume) and increased export sales from the U.S.,
together with smaller gains resulting from price increases and higher wholesaler
distribution sales. Sales of AMERICAST(R) products more than doubled in 1992,
and smaller volume gains were achieved for acrylic products, fixtures, and
faucets.

The operating loss for the U.S. group in 1992 was less than that of the
prior year. The improvement was primarily due to price increases and secondarily
to volume and margin gains (as a result of sourcing product from the Company's
Latin American plants), offset partly by non-recurring costs related to
implementation of improved manufacturing processes and the effects of a shift in
overall sales mix from commercial and luxury to lower-margin products.

Americas International and Far East Groups. Combined sales of the Americas
International and Far East Groups, which accounted for approximately 19% of
total Plumbing Products sales, increased 26% in 1992 (28% excluding the effects
of foreign exchange). The sales gain was due primarily to the consolidation in
1992 of a previously unconsolidated joint venture in Thailand and to a lesser
extent to price and volume increases in Mexico and Korea and higher volumes in
Brazil, offset partly by lower sales in Canada, which continued to be adversely
affected by severe recession.

Combined operating income of the Americas International and Far East Groups
in 1992 increased 134% over the 1991 level. Gains were realized in all
operations except Canada and the Philippines, both of which were adversely
affected by poor economies. The increase was primarily

39
<PAGE> 43

from price and volume gains in Mexico and Korea, higher volume and margins in
Brazil, and higher volume in China.

TRANSPORTATION PRODUCTS SEGMENT

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1991 1992 1993
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
SALES............................................ $741 $730 $563
OPERATING INCOME................................. 121 88 41
</TABLE>

1993 COMPARED WITH 1992. Sales of Transportation Products, which accounted
for 15% of the Company's 1993 sales, were $563 million, down 23% from $730
million in 1992 (16% excluding the effects of foreign exchange). The sales
decrease was due primarily to a volume decline in Germany as a result of a 30%
decrease in Western European truck and bus production, led by a 34% decline in
Germany, and a 23% decrease in Western European trailer production. Volumes were
also down in all other European countries in which Transportation Products has
operations, although at the end of 1993 sales and order trends were upward.
Volume in Brazil was slightly higher. Original equipment sales volume in Europe
was down 22%, and aftermarket business was down 10%. These declines affected
both conventional and electronic products.

Operating income for Transportation Products in 1993 decreased 53% (50%
excluding foreign exchange effects) to $41 million from $88 million in 1992,
principally because of the lower sales and production volume and the inability
to pass on material and labor cost increases in a very competitive, declining
market. In response to reduced production levels, plant employment was reduced
by 15%, the costs of which further depressed 1993 operating income. Those
effects were partly offset by the favorable effects of cost improvements in
manufacturing from Demand Flow implementation and reduced operating expenses.

Despite the market downturn, significant progress was made during 1993 in
obtaining market acceptance of electronically controlled air suspension systems
for commercial vehicles and for antilock braking systems on trailers.

1992 COMPARED WITH 1991. Sales of Transportation Products, which accounted
for 19% of the Company's 1992 sales, were $730 million, down 1% from $741
million in 1991 (6% excluding the effects of foreign exchange). The sales
decrease was due primarily to a volume decline in Germany as a result of a
significant decrease in truck and bus production. Volumes were also down in
nearly all other European countries in which Transportation Products has
operations except the U.K. There was also a decline in prices of electronic
control products, primarily as a result of industry cost reductions.

Operating income for Transportation Products in 1992 decreased 27% (32%
excluding foreign exchange effects) to $88 million from $121 million in 1991
(with the operating margin decreasing to 12.1% from 16.3%), principally because
of the lower sales and production volume, lower prices, and increased spending
for product engineering. Plant employment was kept in line with reduced
production levels, but the costs associated with these reductions also depressed
1992 operating income. Those effects were partly offset by the favorable effects
of cost reductions and increases in efficiency achieved in manufacturing
operations.

CYCLICALITY; SEASONALITY

40
<PAGE> 44

(approximately 40% of their 1993 sales). The following table presents a summary
of statistics on U.S. non-residential construction activity and housing starts
for the years 1989 through 1994.

<TABLE>
<CAPTION>
U.S. NON-RESIDENTIAL
CONTRACT AWARDS % CHANGE U.S. HOUSING STARTS % CHANGE
(MILLIONS OF SQUARE FEET)(A) YEAR TO YEAR (THOUSANDS OF UNITS)(B) YEAR TO YEAR
---------------------------- ------------ ----------------------- ------------
<S> <C> <C> <C> <C>
1989.............. 1,322 -1% 1,376 -8%
1990.............. 1,155 -13% 1,193 -13%
1991.............. 953 -17% 1,015 -15%
1992.............. 903 -5% 1,200 +18%
1993.............. 941 +4% 1,288 +7%
1994(c)........... 1,082 +15% 1,425 +11%
</TABLE>

- ------------
(a) Source: F.W. Dodge Division, McGraw Hill, Inc.
(b) Source: U.S. Department of Commerce, Bureau of Census.

Transportation Products' sales are highly dependent on production levels of
medium-sized and heavy trucks and buses, particularly in Europe, which have also
been cyclical. The following table presents a summary of statistics on unit
production of trucks, buses, and trailers in excess of six tons in Western
Europe for the years 1989 through 1994 (units in thousands).

<TABLE>
<CAPTION>
WESTERN EUROPE % CHANGE WESTERN EUROPE % CHANGE
TRUCK AND BUS PRODUCTION(A) YEAR TO YEAR TRAILER PRODUCTION(A) YEAR TO YEAR
--------------------------- ------------ --------------------- ------------
<S> <C> <C> <C> <C>
1989........ 395 +4% 132 +9%
1990........ 355 -10% 134 +2%
1991........ 363 +2% 146 +9%
1992........ 323 -11% 121 -17%
1993........ 227 -30% 93 -23%
1994(b)..... 279 +23% 108 +16%
</TABLE>

- ------------
(a) Principal sources: Verband der Deutschen Automobilindustrie (Germany);
Society of Motor Manufacturers and Traders (United Kingdom); and Chambre
Syndicate des Constructeurs Automobiles (France).

(b) Preliminary data -- 10 months annualized.

FINANCIAL REVIEW

1993 COMPARED WITH 1992

The Company's financing and corporate costs were $363 million and $352
million in 1993 and 1992, respectively. The principal causes of the increase
were effects of year-to-year changes in foreign exchange transaction gains and
losses, higher minority interest, lower equity income, higher accretion expense
on postretirement benefits, and lower miscellaneous income. Interest expense,
which accounted for most of these costs, decreased primarily because of lower
overall interest rates on new debt issued as part of the Refinancing (described
below), partly offset by additional interest expense as a result of the exchange
of the 12 3/4% Junior Subordinated Debentures for the 12 3/4% Exchangeable
Preferred Stock.

The tax provision for 1993 was $36 million despite a pre-tax loss of $81
million, whereas in 1992 the tax provision was $5 million on a pre-tax loss from
continuing operations of $52 million. The 1993 provision reflected taxes payable
on profitable foreign operations and was higher than in 1992 primarily because
no tax benefits were available on domestic losses. The unusual relationship
between the pre-tax losses and the tax provision is explained by the
nondeductibility for tax

41
<PAGE> 45

purposes of the amortization of goodwill and other purchase accounting
adjustments and the share allocations made by the ESOP as well as by tax rate
differences and withholding taxes on foreign earnings.

As a result of the 1993 Refinancing there was an extraordinary charge of
$92 million related to the debt retired (including call premiums, the write-off
of deferred debt issuance costs, and loss on cancellation of foreign currency
swap contracts) on which there was no tax benefit.

1992 COMPARED WITH 1991

The Company's financing and corporate costs were $352 million and $330
million in 1992 and 1991, respectively. The principal causes of the increase
were year-to-year effects of changes in foreign exchange transaction gains and
losses, higher minority interest, and lower miscellaneous income. Interest
expense and accretion expense on postretirement benefits, which accounted for
most of these costs, also increased.

The tax provision for 1992 was $5 million despite a pre-tax loss of $52
million, whereas in 1991 the tax provision was $23 million on a pre-tax loss
from continuing operations of $88 million. The 1992 provision reflected taxes
payable on profitable foreign operations, partly offset by available domestic
tax benefits. The 1992 provision was lower than in 1991 primarily because of
lower pre-tax earnings in foreign operations. In 1992, the provision was also
lower due to future income tax benefits resulting from carrybacks of foreign net
operating losses and the existence of deferred tax credits which reverse in the
carryforward period that is applicable to other foreign net operating losses.
The unusual relationship between the pre-tax losses and the tax provision is
explained by the nondeductibility for tax purposes of the amortization of
goodwill and other purchase accounting adjustments and the share allocations
made by the ESOP as well as by tax rate differences and withholding taxes on
foreign earnings.

42
<PAGE> 46

BUSINESS

GENERAL

American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (55%
of 1993 sales); bathroom and kitchen fixtures and fittings (30% of 1993 sales);
and braking systems for medium-sized and heavy trucks, buses, trailers and
utility vehicles (15% of 1993 sales). American Standard is a market leader in
each of these business segments in the principal geographic areas in which it
competes. The Company's brand names include TRANE(R) for air conditioning
systems, AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) for plumbing
products and WABCO(R) for braking and related systems. The Company emphasizes
technologically advanced products such as air conditioning systems that utilize
energy-efficient compressors and environmentally-preferred refrigerants, water-
saving plumbing products and commercial vehicle braking and related systems
(including ABS) that utilize electronic controls. At September 30, 1994,
American Standard had 94 manufacturing facilities in 32 countries.

American Standard's business strategy is to promote growth in sales and
operating income. Key elements of this strategy are:

- CONTINUE APPLICATION OF DEMAND FLOW. To build on its position as a
leader in each of its industries, the Company plans to continue to
apply Demand Flow to all its businesses. The Company's use of Demand
Flow is designed to streamline processes, improve product quality,
enhance customer service and reduce product cycle times, while
improving efficiency, reducing working capital needs and lowering
costs. Demand Flow, which the Company began to apply in 1990, has
resulted in significant benefits.

OVERVIEW OF BUSINESS SEGMENTS

American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Transportation Products.

AIR CONDITIONING PRODUCTS. American Standard is a leading U.S.
manufacturer of air conditioning systems for both domestic and export sales, and
also manufactures air conditioning systems outside the United States. Air
Conditioning Products manufactures "applied" (custom engineered, site-assembled)
and "unitary" (self-contained, factory-assembled) air conditioning systems that
are sold primarily under the TRANE(R) name. Over one-half of Air Conditioning
Products' sales in 1993 and the first nine months of 1994 was in the
replacement, repair and service markets which have been less cyclical than the
new residential and commercial construction markets. Air Conditioning Products'
sales in these periods to the commercial and residential markets represented
approximately 75% and 25%, respectively, of Air Conditioning Products' total
sales. Management believes that Air Conditioning Products is well positioned for
growth because of its high quality, brand-name products, significant existing
market shares, the introduction of new product features such as electronic
controls and environmentally-preferred refrigerants and the expansion of its
broad distribution network.

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<PAGE> 47

PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe
and a number of other countries of bathroom and kitchen fixtures and fittings
for the residential and commercial construction markets and retail sales
channels. Plumbing Products manufactures and distributes its products under the
AMERICAN-STANDARD(R), IDEAL-STANDARD(R) and STANDARD(R) names. Management
believes that Plumbing Products is well positioned for growth due to the high
quality of its brand-name products, significant existing market shares in a
number of countries and the expansion of existing operations in developing
market areas throughout the world (principally the Far East, Latin America and
Eastern Europe).

TRANSPORTATION PRODUCTS. Transportation Products is a leading manufacturer,
primarily in Europe and Brazil, of brake and related systems for the commercial
and utility vehicle industry. Its most important products are pneumatic braking
systems and related electronic and other control systems (including antilock
braking systems) marketed under the WABCO(R) name for medium-size and heavy
trucks, tractors, buses, trailers and utility vehicles. American Standard
supplies vehicle manufacturers such as Mercedes-Benz, Volvo, Iveco (Fiat), RVI
(Renault) and Rover. Management believes that Transportation Products is well
positioned to benefit from improved market conditions in Europe and Brazil and
increasing demand in a number of markets (including the U.S. commercial and
utility vehicle markets) for ABS and other sophisticated electronic control
systems, as well as from the technological advances embodied in the Company's
products and its close relationships with a number of vehicle manufacturers.

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STRATEGY

GLOBALIZATION

American Standard has historically had a significant global presence. One
of its major strategic objectives is to continue to expand that presence through
the growth of existing operations and the establishment of new operations in
developing market areas in the Far East, Latin America and Eastern Europe. The
Company often uses joint ventures with local manufacturing and distribution
partners to facilitate risk sharing and to allow the Company to benefit from the
additional expertise of local market participants.

Air Conditioning Products plans to continue to expand its operations in the
Far East, Latin America and Europe. It has recently established a joint venture
in Australia. Air Conditioning Products also recently expanded its sales forces
in the Far East and Latin America.

Plumbing Products entered new markets through joint ventures in Eastern
Europe, Spain and Portugal and is continuing to expand using this approach.
Plumbing Products is significantly expanding its operations in the People's
Republic of China ("PRC") through its affiliate ASPPL, to which American
Standard is obligated to contribute $10 million and has contributed an operation
valued at $20 million for an initial ownership position of 27% with effective
control over day-to-day operations. In April 1994, ASPPL received other capital
commitments of $82.5 million. As of December 15, 1994, ASPPL had drawn down
approximately $6.7 million of American Standard's $10 million capital commitment
and approximately $55 million of the capital commitments of its other investors.
ASPPL is expanding its operations to Beijing, Tianjin, Shanghai and Guangzhou in
order to provide a full product line of fixtures, fittings, and bathtubs
throughout the PRC market. ASPPL has entered into six joint ventures with local
business concerns which, together with one wholly-owned operation, have received
business licenses from Chinese government authorities. These include two
chinaware manufacturing facilities currently under construction, an existing
chinaware manufacturing facility being expanded and two operating fittings
plants and two operating steel tub factories. The Company's ownership interest
in ASPPL will increase over time to up to 51% of the equity of ASPPL through
mandatory reinvestment of royalties and management fees in additional ASPPL
shares.

Transportation Products, headquartered in Europe, has recently acquired a
business in Spain, is in the process of establishing joint ventures in the PRC
and Eastern Europe, and plans to expand its existing joint ventures in Japan and
the United States.

DEMAND FLOW TECHNOLOGY

To build on its position as a leader in each of its industries and to
increase sales and operating income American Standard began in 1990 to apply
Demand Flow methods to all its businesses. Under Demand Flow, products are
produced as and when required by the customer, the production process is
streamlined, and quality control is integrated into each step of the
manufacturing process. The benefits of Demand Flow include better customer
service, quicker response to changing market needs, improved quality control,
higher productivity, increased inventory turnover rates and reduced requirements
for working capital and manufacturing and warehouse space.

As part of American Standard's strategy to integrate Demand Flow into all
of its operations, over 70% of American Standard's 38,500 employees worldwide
had been trained in Demand Flow as of September 30, 1994. Demand Flow has been
implemented in substantially all of American Standard's production facilities.
In addition, American Standard is implementing Demand Flow methods in its
acquired operations such as Perrot. American Standard is also applying Demand
Flow to administrative functions and is re-engineering its organizational
structure to manage its businesses based on processes instead of functions.

American Standard believes that its implementation of Demand Flow methods
has achieved significant benefits. Product cycle time (the time from the
beginning of the manufacturing of a

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product to its completion) has been reduced and, on average, inventory turnover
rates have more than doubled. Principally as a result of the implementation of
Demand Flow, American Standard has achieved an aggregate $251 million reduction
in inventories for the years 1990 through 1993. American Standard further
believes that as a result of the introduction of Demand Flow, employee
productivity has risen significantly and customer service has improved, and
without reducing production capacity the Company has been able to free more than
three million square feet of manufacturing and warehouse space, allowing for
expansion, plant consolidation, or other uses.

AIR CONDITIONING PRODUCTS SEGMENT

Air Conditioning Products began with the 1984 acquisition by the Company of
The Trane Company, a manufacturer and distributor of air conditioning products
since 1913. Air conditioning products are sold primarily under the TRANE(R)
name. In 1993 Air Conditioning Products, with revenues of $2,100 million,
accounted for approximately 55% of the Company's sales and 47% of its operating
income. Air Conditioning Products derived approximately 15% of its sales in 1993
from operations outside the United States and over half from the replacement,
repair, and service markets, which in general are less cyclical than the new
residential and commercial construction market.

Air Conditioning Products manufactures three general types of air
conditioning systems. The first, called "unitary," which is sold for residential
and commercial applications, is a factory-assembled central air conditioning
system which generally encloses in one or two units all the components to cool
or heat, clean, dehumidify or humidify, and move air. The second, called
"applied," is typically custom-engineered for commercial use and involves field
installation of several different components of the air conditioning system.
Trane is a world leader in both unitary and applied air conditioning products.
The third type, called "mini-split," is a small unitary air conditioning system,
generally for residential use, which operates without air ducts. Air
Conditioning Products manufactures and distributes mini-split units, principally
in the Far East and Europe.

Product and marketing programs have been, and are being, developed to
increase penetration in the growing replacement, repair, and servicing
businesses, in which margins are higher than on sales of original equipment.
Much of the equipment sold in the fast-growing air conditioning markets of the
1960's and 1970's is reaching the end of its useful life. Also, equipment sold
in the 1980's is likely to be replaced earlier than originally expected with
higher-efficiency products recently developed to meet required efficiency
standards and to capitalize on the availability of environmentally-preferred
refrigerants.

In May 1994 a subsidiary of the Company, Standard Compressors Inc.,
concluded the final arrangements for a partnership formed in December 1993 with
Heatcraft Technologies Inc., a subsidiary of Lennox International Inc., for the
manufacture of compressors for use in air conditioning and refrigeration
equipment. Each partner has a 50% interest in the partnership, called Alliance
Compressors, which initially will manufacture reciprocating compressors in a
section of the Company's existing facility in Tyler, Texas. Construction of a
new facility in Natchitoches, Louisiana, for the manufacture of a newly
developed scroll compressor for use primarily in residential air conditioners is
expected to begin in 1995, with startup scheduled for early 1996. In connection
with this arrangement, American Standard received $22.5 million, of which $8
million was for assets transferred and $14.5 million for an initial preferred
distribution. American Standard will receive two additional payments of $10
million each, dependent upon achieving technological and manufacturing
milestones in the development of the new scroll compressor.

Many of the products manufactured by Air Conditioning Products utilize CFCs
and HCFCs as refrigerants. Various federal and state laws and regulations,
principally the 1990 Clean Air Act Amendments, require the eventual phase-out of
the production and use of these chemicals because of their possible deleterious
effect on the earth's ozone layer if released into the atmosphere. Phase-in of
substitute refrigerants will require replacement or modification of much of the
air

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conditioning equipment already installed, which management believes will present
a new market opportunity. In order to ensure that the Company's products will be
compatible with the substitute refrigerants, Air Conditioning Products has been
working closely with the manufacturers that are developing substitutes for those
refrigerants to be phased out. Air Conditioning Products has incurred and will
continue to incur research and development costs in this effort. These costs and
the substitution of alternative refrigerants are not expected to have a material
adverse impact on Air Conditioning Products. See "-- General -- Regulations and
Environmental Matters."

Various federal and state statutes, including the National Appliance Energy
Conservation Act of 1987, as amended, impose energy efficiency standards for
certain of the Company's unitary air conditioning products. Although the Company
has been able to meet or exceed such standards to date, stricter standards in
the future could require substantial research and development expense and
capital expenditures to maintain compliance.

At September 30, 1994 Air Conditioning Products had 28 manufacturing plants
in 8 countries, employing 16,600 people.

Air Conditioning Products comprises three operating groups: Unitary
Products, Commercial Systems, and International.

UNITARY PRODUCTS GROUP

Unitary Products, which accounted for approximately 42% of Air Conditioning
Products' 1993 sales, manufactures and distributes products for commercial and
residential unitary applications in the United States. This group benefits the
most from the growth of the replacement market for residential and commercial
air conditioning systems. Other major suppliers in the unitary market are
Carrier, Intercity Products, Rheem, and Lennox.

Commercial unitary products range from 2 to 120 tons and also include
combinations of air conditioners, heat pumps, and gas furnaces, along with
variable-air-volume equipment and integrated control systems. Typical
applications are in retail stores, small-to-medium-size office buildings,
manufacturing plants, restaurants, and commercial buildings located in office
parks and strip malls. These products are sold through 81 commercial sales
offices in 121 locations. Residential central air conditioning products range
from 1 to 5 tons and include air conditioners, heat pumps, air handlers,
furnaces, and coils. These products are sold through independent wholesale
distributors and Company-owned sales offices in over 250 locations to dealers
and contractors who sell and install the equipment.

During 1994 the Unitary Products Group successfully introduced several new
products, including a new line of outdoor condensing units for the
AMERICAN-STANDARD(R) brand; a new furnace line; micro-electronic controlled
large rooftop units, rooftop units with special features that appeal to national
accounts; and a large rooftop line (27.5 tons to 50 tons).

The Company also markets an AMERICAN-STANDARD(R) brand name product to
serve distributors who typically carry other products in addition to air
conditioning products.

COMMERCIAL SYSTEMS GROUP

Commercial Systems, which accounted for approximately 37% of Air
Conditioning Products' 1993 sales, manufactures and distributes products in the
United States for sale in the U.S. and Canada for air conditioning applications
in larger commercial, industrial, and institutional buildings. Other major
suppliers of commercial systems are Carrier, York, and McQuay.

Commercial Systems distributes its products through 100 sales offices.
Thirty of these offices are Company-owned and 70 are franchised. In 1993 the
Company acquired the franchises in New York City; Birmingham, Alabama; and
Columbia, South Carolina. In 1994 the Company acquired the

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<PAGE> 51

Toronto, Canada, and St. Louis, Missouri offices and expects to continue to
acquire major sales offices from its franchisees.

Over the last few years Commercial Systems has added additional aftermarket
business activities, such as emergency rentals of air conditioning equipment.
Also, the group has expanded its line to include components for converting
installed centrifugal chiller products to use more environmentally-preferred
refrigerants.

During 1993 and 1994 the Company successfully introduced a number of new
products such as the high-efficiency centrifugal chiller, expanded air cooled
series R chiller line, and the new fan coil line. Integrated Comfort Systems
continue to grow as a percentage of total sales. Indoor air quality is emerging
as a significant new application to be served by the Company's products and
services.

INTERNATIONAL GROUP

The International Group, which accounted for approximately 21% of Air
Conditioning Products' 1993 sales, manufactures applied and unitary products in
foreign facilities operated by subsidiaries and joint ventures and exports many
of the products manufactured in the United States by the Unitary Products and
Commercial Systems Groups.

Air Conditioning Products expects to continue the expansion of its presence
outside the U.S. In France, in addition to its plants in Epinal and Charmes, in
late 1991 the group opened a plant in Mirecourt to build mini-splits and air
moving products known as fan coils utilizing Demand Flow technology. The fan
coil line is tailored to the European market, and the mini-split products are
being sold in Europe, the Middle East, and the Far East. An operation was opened
in 1992 in Colchester, U.K., to provide large air handling products to the U.K.
Like the Commercial Systems Group, the International Group has an extensive
network of sales and service agencies, both Company-owned and franchised, to
provide maintenance and warranty service for its equipment installed around the
world. In 1992 a joint venture in Egypt commenced operations.

The Company has increased its presence in Asia by expanding its operations
in Malaysia, purchasing an air conditioning manufacturing and distribution firm
in Taiwan in 1990, and entering into a sales and manufacturing joint venture in
Thailand in 1991. The Company has recently established a joint venture in
Australia and is establishing joint ventures in the PRC. An important new
product for the Far East markets, which went into production in 1992 in
Malaysia, was a double-walled air handler designed for ease of manufacture and
compatibility with the Demand Flow process.

PLUMBING PRODUCTS SEGMENT

Plumbing Products manufactures and distributes bathroom and kitchen
fixtures and fittings primarily under the IDEAL-STANDARD(R),
AMERICAN-STANDARD(R), and STANDARD(R) names. In 1993 Plumbing Products, with
revenues of $1,167 million, accounted for 30% of the Company's sales and 38% of
its operating income. Plumbing Products derived approximately 74% of its total
1993 sales from operations outside the United States.

Approximately 53% of Plumbing Products' sales consists of vitreous china
fixtures, 26% consists of fittings (typically brass), 7% consists of bathtubs,
and the remainder consists of related plumbing products. Throughout the world
these products are generally sold through wholesalers and distributors and
installed by plumbers and contractors. In the United States sales through the
retail channel have continued to grow and accounted for approximately 20% of
U.S. Plumbing Products' sales in 1993. In total the residential market accounts
for approximately 75% of Plumbing Products' sales, with the commercial and
industrial markets providing the remaining 25%.

Plumbing Products operates through three primary geographic groups:
European Plumbing Products, the Americas Group (comprising U.S. Plumbing
Products and Americas International), and the Far East Group. Plumbing Products'
fittings operations are organized as the Worldwide Fittings Group, which has
primary responsibility for faucet technology, product development, and

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manufacturing, with manufacturing facilities in Europe, the U.S., and Mexico.
Worldwide Fittings sales and operating results are reported in the three primary
geographic groups within which it operates.

European Plumbing Products, which sells products primarily under the brand
name IDEAL-STANDARD(R), manufactures and distributes bathroom and kitchen
fixtures and fittings through subsidiaries or joint ventures in Germany, Italy,
France, England, Greece, the Czech Republic, Bulgaria, Spain, Portugal, and
Egypt. In 1991 the Company purchased 32% of Etablissements Porcher ("Porcher"),
a leading French manufacturer and distributor of plumbing products with
manufacturing facilities for ceramic fixtures, cast iron and acrylic bathtubs,
brass fittings, and plastic components in seven locations and with company-owned
distribution outlets throughout France.

U.S. Plumbing manufactures bathroom and kitchen fixtures and fittings,
selling under the brand names AMERICAN-STANDARD(R) and STANDARD(R) in the United
States. Americas International manufactures bathroom and kitchen fixtures and
fittings, selling under the names AMERICAN-STANDARD(R), IDEAL-STANDARD(R), and
STANDARD(R), through its wholly owned operations in Mexico, Canada, and Brazil
and its majority-owned subsidiaries in Central America.

The Far East Group manufactures bathroom and kitchen fixtures and fittings,
selling under the names AMERICAN-STANDARD(R), IDEAL-STANDARD(R), and STANDARD(R)
through its wholly owned operations in South Korea, its majority-owned
operations in Thailand and the Philippines, and its manufacturing joint venture
in Indonesia. The Company is also significantly expanding its operations in the
PRC. See "-- Globalization".

The market for the Company's plumbing products is divided into the
replacement and remodeling market and the new construction market. The
replacement and remodeling market accounts for about 60% of the European and
U.S. groups' sales but only about 40% of the sales of the Far East group, for
which new construction is more important. In the United States and Europe the
replacement and remodeling market has historically been more stable than the new
construction market and has shown moderate growth over the past several years.
The new construction market has generally been declining in Europe in recent
years. In the U.S. it hit its recent low in early 1991 but had some recovery in
1992, 1993 and 1994. The new construction market, in which the product selection
is made by builders or contractors, is more price-competitive and
volume-oriented than the replacement and remodeling market. In the replacement
and remodeling market consumers make the model selection, and, therefore, this
market is more responsive to quality and design than price, making it the
principal market for higher-margin luxury products. Although management believes
it must continue to offer a full line of fixtures and fittings in order to
support its distribution system, Plumbing Products' current strategy is to focus
on increasing its sales of higher-margin products in the middle and upper
segments of both the remodeling and new construction markets.

Plumbing Products also has continued its programs to expand its presence in
high-quality showrooms and showplaces featuring its higher-end products in
certain major countries. These programs, along with expanded sales training
activities, have enhanced the image of the Company's products with interior
designers, decorators, consumers and plumbers.

In the United States a Retail Division has been established to focus on the
unique needs of the growing mass retail home center industry, using products
sourced from several of the Company's manufacturing locations throughout the
Americas. This market channel accounted for about 20% of U.S. Plumbings' sales
in 1993, and this proportion is expected to grow.

In an effort to capture a larger share of the replacement and remodeling
market, over the last few years Plumbing Products has introduced a variety of
new products designed to suit customer tastes in particular countries. New
offerings include additional colors and ensembles, bathroom suites from
internationally known designers, and electronically controlled products. Faucet
technology is centered on anti-leak, anti-scald and other features to meet
emerging consumer and legislative requirements.

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Water-saving fixtures and fittings have been a major focus of Plumbing
Products for the past several years, particularly in light of recent water
shortages experienced in a number of areas of the U.S. The Company produces one
of the most extensive lines of water-saving fixtures available in the United
States. Manufacture of water-saving toilets was mandated for residential use by
federal law commencing in January 1994 and for commercial use in January 1997.

Many of the Company's bathtubs are made from a proprietary porcelain on
metal composite, AMERICAST(R), which has gained an increasing share of the
worldwide market. Products made from the composite AMERICAST(R) have the
durability of cast iron with only one-half the weight and are characterized by
improved resistance to breaking and chipping. AMERICAST(R) products are easier
to ship, handle, and install and are less expensive to produce than cast iron
products. Use of this advanced composite was extended to kitchen sinks, bathroom
lavatories and acrylic surfaced products during 1991 and 1992. In addition, new
techniques are being applied at all principal stages of production, including
CAD/CAM for mold-making; computer-controlled casting, drying and spraying; and
state-of-the-art kilns as well as faster ceramic molding techniques.

At September 30, 1994, Plumbing Products employed approximately 16,200
people and, including affiliated companies, had 52 manufacturing plants in 22
countries.

In the U.S. Plumbing Products has several important competitors, including
Kohler Company and Masco Corporation in selected product lines. There are also
important competitors in foreign markets, for the most part operating
nationally. Friederich Grohe GmbH, the major manufacturer of fittings in Europe,
is a pan-European competitor. In Europe Villeroy Boch and Sanitec are the major
fixtures competitors, and in the Far East Toto is the major competitor.

TRANSPORTATION PRODUCTS SEGMENT

Transportation Products manufactures air brake and related systems for the
commercial vehicle industry in Europe and Brazil and markets under the WABCO(R)
name. Transportation Products' most important products are pneumatic braking
systems and related electronic control and other systems and components
(including ABS) for medium-size and heavy trucks, tractors, buses, trailers and
utility vehicles. In 1993 Transportation Products, with sales of $563 million,
accounted for 15% of the Company's sales and 15% of its operating income. The
Company believes that Transportation Products is a worldwide technological
leader in the heavy truck and bus braking industry. Electronic controls, first
introduced in ABS in the early 1980's, are increasingly applied in other systems
sold to the commercial vehicle industry.

The Company's transportation products are sold directly to vehicle and
component manufacturers. Spare parts are sold through both original equipment
manufacturers and an independent distribution network. Although the business is
not dependent on a single or related group of customers, sales of truck braking
systems are dependent on the demand for heavy trucks. Some of the Company's
important customers are Mercedes-Benz, Volvo, Iveco (Fiat), RVI (Renault) and
Rover. Principal competitors are Knorr, Robert Bosch, and Bendix.

The European market for new trucks, buses, trailers, and replacement parts
declined significantly in 1992 and 1993. Despite the decline in the replacement
market, Transportation Products' share of sales to that market increased.
European legislation mandating the phase-in of ABS beginning in 1991 has had a
positive impact on sales and is expected to continue to do so. The Brazilian
market recovered somewhat in 1993 after declining in 1992 because of political
and economic uncertainties.

The WABCO(R) ABS system, which the Company believes leads the market, has
been installed in over 550,000 heavy trucks, buses, and trailers in Europe since
1981. Annual sales volume has significantly increased in recent years to
approximately 120,000 units in 1993. In addition, Transportation Products has
developed electronically controlled pneumatic gearshifting systems,
electronically controlled air suspension systems, and automatic climate-control
and door-control systems for

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<PAGE> 54

the commercial vehicle industry. These systems have resulted in greater sales
per vehicle for Transportation Products. Significant progress was made in 1992
and 1993 in market acceptance of electronically controlled systems. New products
under development are an advanced electronic braking system and additional
electronic drive line control systems. In addition, Transportation
Products has developed and implemented an electronic data interchange system,
which links certain customers directly to Transportation Products' information
systems, providing timely, accurate information and just-in-time delivery to the
customer.

Transportation Products and affiliated companies have 14 manufacturing
facilities and 7 sales organizations with operations in 17 countries. Principal
manufacturing operations are in Germany, France, the United Kingdom, and Brazil.
Transportation Products has joint ventures in the United States with Rockwell
International (Rockwell WABCO), in Japan with Sanwa Seiki (SANWAB), and in India
with TVS Group (Clayton Sundaram). There is also a licensee in the PRC.

In January 1994 the Company acquired Perrot, a German brake manufacturer.
Through this acquisition the Company will be able to offer complete brake
systems for trucks, buses and trailers, especially in the important and growing
air-disc brake business.

Since 1991 ABS for commercial vehicles have been gaining acceptance in the
United States and Japan, where Transportation Products participates through its
joint venture operations. Rockwell WABCO is now a supplier of WABCO systems to
Freightliner, Mack, Volvo-GM, Kenworth, Peterbilt, and other vehicle
manufacturers in North America. SANWAB supplies Hino, Nissan and trailer
manufacturers in Japan. In most European countries, ABS has become mandatory for
commercial vehicles. Should legislation or regulations making ABS mandatory
become effective in the United States or other countries, Transportation
Products is, it believes, in a good position to take advantage of the
opportunity.

At September 30, 1994, Transportation Products employed approximately 5,600
people.

GENERAL

RAW MATERIALS

The Company purchases a broad range of materials and components throughout
the world in connection with its manufacturing activities. Major items include
steel, copper tubing, aluminum, ferrous and nonferrous castings, clays, motors,
and electronics. The ability of the Company's suppliers to meet performance and
quality specifications and delivery schedules is important to its operations.
The Company is working closely with its suppliers to integrate them into the
Demand Flow manufacturing process by developing with them just-in-time supply
delivery schedules to coordinate with the Company's customer demand and delivery
schedules. The Company expects this closer working relationship to result in
better control of inventory quantities and quality and lower related overhead
and working capital costs. The energy and materials required for its
manufacturing operations have been readily available, and the Company does not
foresee any significant shortages.

PATENTS, LICENSES AND TRADEMARKS

The Company's operations are not dependent to any significant extent upon
any single or related group of patents, licenses, franchises or concessions. The
Company's operations also are not dependent upon any single trademark, although
some trademarks are identified with a number

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of the Company's products and services and are of importance in the sale and
marketing of such products and services. Some of the more important of the
Company's trademarks are:

<TABLE>
<CAPTION>
BUSINESS SEGMENT TRADEMARK
- -------------------------- --------------------
<S> <C>
Air Conditioning Products TRANE(R)
AMERICAN-STANDARD(R)

Plumbing Products AMERICAN-STANDARD(R)
IDEAL-STANDARD(R)
STANDARD(R)

Transportation Products WABCO(R)
WABCO WESTINGHOUSE
CLAYTON DEWANDRE
PERROT(R)
</TABLE>

The Company from time to time has granted patent licenses to, and has
licensed technology from, other parties.

RESEARCH AND PRODUCT DEVELOPMENT

The Company incurred costs of approximately $36 million in 1991, $40
million in 1992, $43 million in 1993 and $30 million for the nine months ended
September 30, 1994 on research activities and product development and
improvement. These expenditures were incurred primarily by Transportation
Products and Air Conditioning Products. Transportation Products, which expended
the largest amount, has conducted research and development in recent years on
advanced electronic braking systems, heavy-duty disc brake systems, and
additional electronic control systems for commercial vehicles. Air Conditioning
Products' research and development expenditures were primarily related to
alternative, environmentally-preferred refrigerants, compressors, heat transfer
surfaces, air flow technology, acoustics and micro-electronic controls. Any
amount spent on customer sponsored research and development activities in these
periods was insignificant.

REGULATIONS AND ENVIRONMENTAL MATTERS

The Company's U.S. operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air, water and soil and establish standards for the
treatment, storage and disposal of solid and hazardous wastes. A number of the
Company's plants are in the process of making changes or modifications to comply
with such laws and regulations as well as undertaking response actions to
address soil, and groundwater issues at certain of its facilities. The Company
is a party to a number of remedial actions under various federal and state
environmental laws and regulations that impose liability on companies to clean
up, or contribute to the cost of cleaning up, sites at which hazardous wastes or
materials were disposed or released, including approximately 30 proceedings
under the Comprehensive Environmental Response, Compensation and Liability Act
and similar state statutes in which the Company has been named a potentially
responsible party or a third party by a potentially responsible party.
Expenditures in 1992, 1993 and the first nine months of 1994 to evaluate and
remediate such sites were not material. On the basis of the Company's historical
experience and information currently available, the Company believes that these
environmental actions will not have a material adverse effect on its financial
condition, results of operations or liquidity.

Additional sites may be identified for environmental remediation in the
future, including properties previously transferred by the Company and with
respect to which the Company may have contractual indemnification obligations.
The Company cannot estimate at this time the ultimate aggregate costs of all
remedial actions because of (a) uncertainties surrounding the nature and
application of environmental regulations, (b) the Company's lack of information
about additional sites at which it may be listed as a potentially responsible
party, (c) the level of clean-up that may be required at specific sites and
choices concerning the technologies to be applied in corrective

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actions, (d) the number of contributors and the financial capacity of others to
contribute to the cost of remediation at specific sites and (e) the time periods
over which remediation may occur.

On May 31, 1994, the Company's Salem, Ohio plant received a Request for
Information Pursuant to the Clean Air Act from the U.S. Environmental Protection
Agency (Region 5). This request was fully complied with by July 22, 1994. During
the development of the response, American Standard noted several questions
concerning the status of certain air sources. On August 2, 1994, American
Standard Inc. proposed to enter a consensual "Findings and Orders" with the Ohio
Environmental Protection Agency to resolve these questions. The potential for
and amount of any penalties is uncertain. However, the Company does not expect
that these matters will result in material liabilities.

Although there is currently no federal standard for lead discharge into
drinking water, the Federal Safe Drinking Water Act imposes a limit on the lead
content of plumbing fittings of 8% by weight. In addition, the U.S.
Environmental Protection Agency is considering proposing a maximum federal
standard of approximately 11 to 15 parts per billion of lead leachate from
faucets in drinking water.

On December 15, 1992 the Company, along with 15 other major manufacturers
of plumbing fittings, was sued in the Superior Court of the State of California,
County of San Francisco by the State of California. The same companies were sued
in a companion case, filed the same day, by the Natural Resources Defense
Council and a second environmental group. In each case plaintiffs sought
injunctive relief, civil penalties and compensatory damages, alleging, inter
alia, that faucets sold by the parties discharged lead into drinking water in
excess of minimum standards allegedly established by Proposition 65. Pursuant to
Proposition 65, a discharge of lead into a source of drinking water in excess of
0.5 micrograms per day is prohibited, although the State of California has not
yet established any methodology for measuring this discharge. The Company
believes that the lead limitations should not apply to faucets because faucets
are not a "source" of drinking water as contemplated by the legislation (e.g.,
reservoirs, streams, etc.). The suits also claim that warnings provided with the
fittings relating to such lead discharge are inadequate. Although most of the
Company's fittings contain and discharge some amount of lead, the lead content
of the Company's fittings is one of the lowest in the industry, and all of the
Company's fittings will fall below the proposed federal discharge standard and
fall below the current federal weight standards mentioned above. The Company
believes its exposure in the California suits is minimal, if any. The Company
also believes that its low-lead fittings and its continuing efforts to further
reduce lead content will afford the Company a competitive edge. The discharge
claim in the State's case has been dismissed and has been appealed. The Natural
Resources Defense Council's case has been stayed pending the outcome of the
appeal in regard to the discharge claim in the State's case.

In September 1987 the United States became a signatory to an international
agreement known as the Montreal Protocol on Substances that Deplete the Ozone
Layer (the "Montreal Protocol"). The Montreal Protocol requires its signatories
to reduce production and consumption of CFCs. In November 1992 the Montreal
Protocol was amended in Copenhagen, Denmark, to phase out all except critical
uses of CFCs by January 1, 1996, and to limit consumption of HCFCs beginning in
1996 and phase them out completely by 2030. In 1988 the EPA issued regulations
implementing the Montreal Protocol in the United States. Mexico, the Federal
Republic of Germany, the United Kingdom, France and other countries have also
become signatories to the Montreal Protocol. The manner in which these countries
implement the Montreal Protocol and regulate CFCs could differ from the approach
taken in the United States.

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<PAGE> 57

The 1990 Clean Air Act Amendments (the "CAAA") implement the Montreal
Protocol by establishing a program for limiting the production and use of CFCs
and other ozone-depleting chemicals. Under the CAAA the production and
consumption of "Class I substances," including CFCs, are being phased out, and
most are currently scheduled to be banned completely by 1996.

The EPA has taken final action to totally phase out production of CFCs by
1996 and phase out production of the long-lived HCFCs, such as HCFC-22, for use
in new equipment by 2010 and totally by 2020, while adopting the current CAAA
schedule for the short-lived HCFCs, such as HCFC-123, by phasing them out for
use in new equipment by 2020 and completely out of production in 2030.

The Company derived significant revenues in 1993 and prior years from sales
of air conditioning products utilizing Class I substances, particularly CFC-11.
However, the more recent versions of these products are designed to operate with
substitute short-lived Class II substances, such as HCFC-123, which, the Company
believes, under current proposals is not likely to be subject to a phase-out
accelerated from the 2020/2030 schedule of the CAAA, or with refrigerants that
do not affect ozone and are not regulated at all. Beginning with orders accepted
after January 1, 1993, Air Conditioning Products ceased selling CFC-11 with any
of its products.

The Company continues to derive substantial revenues from servicing and
repairing installed equipment that uses Class I substances. The emissions from
servicing and repairing of equipment that uses Class I substances were regulated
by the EPA beginning in mid-1993, although the Company does not expect these
regulations to have a material adverse effect on its financial condition or
results of operations. The Company believes that these regulations will have the
effect of generating additional product sales and parts and service revenues, as
existing air conditioning equipment operating on CFCs is converted to operate on
environmentally-preferred refrigerants or replaced, although this is likely to
happen only over a number of years and the Company is unable to estimate the
magnitude or timing of such additional conversion or replacements. In addition,
the Company currently offers a number of products that improve the operation of
existing installed equipment using alternative refrigerants.

Prior to the effectiveness of any prohibition on use of Class I or Class II
substances it will be necessary for the Company and its competitors to address
the need to substitute permitted refrigerants for the Class I and Class II
substances used in their products. Adoption of the new refrigerants will require
replacement or modification of much of the air conditioning equipment already
installed. The Company has been working closely with the manufacturers of
refrigerants that are developing substitutes for the CFCs and HCFCs to be phased
out in order to ensure that its products will be compatible with the
substitutes. Although the Company believes that its commercial products will not
require substantial modification to use substitutes, residential and light
commercial products produced by the Company and its competitors may require
modification for substitute refrigerants. The costs of the substitution of
alternative refrigerants are industrywide product modification costs that are
expected to be reflected in product pricing and accordingly are not expected to
have a material adverse impact on the Company.

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<PAGE> 58

PROPERTIES

At September 30, 1994 the Company conducted its manufacturing activities
through 94 plants in 32 countries, of which the principal ones are as follows:

<TABLE>
<CAPTION>
BUSINESS SEGMENT LOCATION MAJOR PRODUCTS MANUFACTURED AT LOCATION
- ----------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Air Conditioning Clarksville, TN Commercial unitary air conditioning
Products Fort Smith, AK Commercial unitary air conditioning systems
La Crosse, WI Applied air conditioning systems
Lexington, KY Air handling products
Macon, GA Commercial air conditioning systems
Pueblo, CO Applied air conditioning systems
Rushville, IN Air handling products
Trenton, NJ Residential gas furnaces and air handlers
Tyler, TX Residential air conditioning
Waco, TX Water source heat pumps and air handling
products
Charmes, France Applied air conditioning systems
Epinal, France Applied air conditioning systems
Mirecourt, France Mini-splits and air handling products
</TABLE>

<TABLE>
<S> <C> <C>
Plumbing Products Salem, OH Enameled-steel fixtures and acrylic bathtubs
Tiffin, OH Vitreous china
Trenton, NJ Vitreous china
Toronto, Canada Vitreous china and enameled-steel fixtures
Hull, England Vitreous china and acrylic bathtubs
Middlewich, England Vitreous china
Dole, France Vitreous china and acrylic bathtubs
Neuss, Germany Vitreous china
Wittlich, Germany Brass plumbing fittings
Orcenico, Italy Vitreous china
Brescia, Italy Vitreous china
Mexico City, Mexico Vitreous china, water heaters
Monterrey, Mexico Brass plumbing fittings
Bangkok, Thailand Vitreous china
Seoul, South Korea Brass plumbing fittings
Manila, Philippines Vitreous china
Transportation Campinas, Brazil Braking equipment
Products Leeds, England Braking equipment
Claye-Souilly, France Braking equipment
Hanover, Germany Braking equipment
Mannheim, Germany Foundation brakes
</TABLE>

Except for the properties located in Mirecourt, France and Manila,
Philippines, all of the plants described above are owned by the Company or a
subsidiary. The properties listed above located in the United States, Canada,
and the U.K. are subject to mortgages securing the Company's obligations under
the Existing Credit Agreement. The Company is obligated to mortgage the
properties listed above located in France (other than the property located in
Mirecourt) to secure certain obligations under the Existing Credit Agreement and
related documents. In addition, to the extent required by the respective
indentures pursuant to which certain debt securities of American Standard Inc.,
were issued, the obligations of American Standard Inc. under such debt
instruments are secured by mortgages on principal U.S. properties equally and
ratably with indebtedness under the Existing Credit Agreement and certain
related indebtedness. See "Certain Indebtedness". Through joint ventures, the
Company participates in the operation (or is in the process of

55
<PAGE> 59

constructing) up to seven plants in the PRC, and operates one plant in each of
Indonesia and India. The Company considers that its properties are generally in
good condition, are well maintained, and are generally suitable and adequate to
carry on the Company's business.

In 1994 several Air Conditioning Products' plants operated near capacity
and others operated moderately below capacity. In 1993 Air Conditioning
Products' plants, both in the United States and abroad, operated at satisfactory
levels of utilization which overall were moderately below capacity.

In 1994 Plumbing Products' plants outside the United States operated at
levels of utilization which varied from country to country but overall were
satisfactory. Potteries (plants which produce vitreous china goods) located in
the United States also operated at levels which management believes to be
satisfactory, while other domestic facilities operated well below capacity in
1993.

Transportation Products' plants generally operated moderately below
capacity in 1994 but above 1993 levels, which were significantly below capacity.

EMPLOYEES

The Company employed approximately 38,500 people (excluding employees of
unconsolidated joint venture companies) at September 30, 1994. The Company has a
total of 18 labor union contracts in North America (covering approximately 8,500
employees), one of which expired in the last quarter of 1994 (covering
approximately 200 Canadian employees who are continuing to work), one of which
expires in 1995 (covering approximately 900 employees) and six of which expire
in 1996 (covering approximately 4,600 employees). There can be no assurance that
the Company will successfully negotiate either a new contract with such Canadian
employees or the labor contracts expiring during 1995 or 1996 without work
stoppages. However, the Company does not anticipate any problems in
renegotiating those contracts that would materially affect its results of
operations.

In 1994, 230 Plumbing Products employees went on strike for 64 days at the
Landsdowne (Toronto), Canada chinaware manufacturing plant. In 1991, 1,200 Air
Conditioning Products employees went on strike for 54 days at the LaCrosse,
Wisconsin facility and, in 1989, 1,300 Air Conditioning Products workers went on
strike for 40 days at the Clarksville, Tennessee facility. Other than these
strikes, the Company has not experienced any other significant work stoppages
since 1985. The Company also has a total of 40 labor contracts outside North
America (covering approximately 18,000 employees), where the Company has not
experienced any significant work stoppage in the last five years.

CUSTOMERS

The business of the Company taken as a whole is not dependent upon any
single customer or a few customers.

INTERNATIONAL OPERATIONS

The Company conducts significant non-U.S. operations through subsidiaries
in most of the major countries of Western Europe, Canada, Brazil, Mexico,
Central American countries, Malaysia, the Philippines, South Korea, Thailand,
Taiwan, Australia and Egypt. In addition, the Company conducts business through
affiliated companies in which the Company owns 50% or less of the stock or the
partnership.

Because the Company has manufacturing operations in 32 countries,
fluctuations in currency exchange rates may have a significant impact on its
financial statements. Such fluctuations have much less effect on local operating
results, however, because the Company for the most part sells

56
<PAGE> 60

its products within the countries in which they are manufactured. The allocation
of purchase costs which resulted from the Acquisition increased the asset
exposure of foreign operations from an accounting perspective; however, since
the Acquisition in 1988, the effects of exchange volatility have been
ameliorated by the fact that a portion of the Company's borrowings has been
denominated in foreign currencies.

LEGAL PROCEEDINGS

American Standard Inc. is the defendant in a lawsuit brought by Entech
Sales & Service, Inc., on behalf of an alleged class of contractors engaged in
the service and repair of commercial air conditioning equipment. The suit, which
was filed on March 5, 1993, in the United States District Court for the Northern
District of Texas, alleges principally that the manner in which Air Conditioning
Products distributes repair service parts for its equipment violates the Federal
antitrust laws. It demands $680 million in damages (which would be subject to
trebling under the antitrust laws) and injunctive relief. American Standard Inc.
has filed an answer denying all claims of violation and is defending itself
vigorously. The district court recently denied class certification with respect
to two of the three violations alleged in the suit. These alleged violations may
now only be asserted by Entech on its own behalf. With respect to the one claim
which was certified as a class action, alleging a price fixing conspiracy,
management believes that, on the basis of the facts now known to it, the claim
is without merit. In management's opinion the litigation will not have any
material adverse effect on the financial position, cash flows, or results of
operations of the Company.

For a discussion of German tax issues see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." For a discussion of environmental issues see
"-- General -- Regulations and Environmental Matters."

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<PAGE> 61

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information as of September 30,
1994, with respect to each person who is an executive officer or director of the
Company:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- -------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Emmanuel A. Kampouris........... 59 Chairman, President and Chief Executive Officer, and Director
Horst Hinrichs.................. 61 Senior Vice President, Transportation Products, and Director
</TABLE>

<TABLE>
<S> <C> <C>
George H. Kerckhove............. 57 Senior Vice President, Plumbing Products, and Director
Fred A. Allardyce............... 53 Vice President and Chief Financial Officer
Alexander A. Apostolopoulos..... 52 Vice President and Group Executive, Americas, Plumbing Products
Thomas S. Battaglia............. 52 Vice President and Treasurer
Gary A. Brogoch................. 44 Vice President and Group Executive, Plumbing Products in PRC
Roberto Canizares M............. 44 Vice President, Air Conditioning Products' Asia Pacific Zone
Wilfried Delker................. 54 Vice President and Group Executive, Worldwide Fittings, Plumbing
Products
Adrian B. Deshotel.............. 49 Vice President, Human Resources
Cyril Gallimore................. 65 Vice President, Systems and Technology
Luigi Gandini................... 56 Vice President and Group Executive, European Plumbing Products
Daniel Hilger................... 54 Vice President and Group Executive, Air Conditioning Products in
Europe, Middle East and Africa
Joachim D. Huwendiek............ 63 Vice President, Automotive Products in Germany
Frederick W. Jaqua.............. 73 Vice President and General Counsel and Secretary
Richard A. Kalaher.............. 54 Acting General Counsel and Acting Secretary
W. Craig Kissel................. 43 Vice President and Group Executive, Unitary Products Group
William A. Klug................. 62 Vice President and Group Executive, Trane International
Jean-Claude Montauze............ 48 Vice President, Automotive Products in France
G. Eric Nutter.................. 58 Vice President, Automotive Products in the United Kingdom
Raymond D. Pipes................ 45 Vice President and Group Executive, Plumbing Products in the Far
East
Bruce R. Schiller............... 50 Vice President, Compressor Business
James H. Schultz................ 45 Vice President and Group Executive, Commercial Systems Group
G. Ronald Simon................. 53 Vice President and Controller
Wade W. Smith................... 44 Vice President, U.S. Plumbing Products
Benson I. Stein................. 57 Vice President, General Auditor
Robert M. Wellbrock............. 47 Vice President, Taxes
Steven E. Anderson*............. 52 Director
Shigeru Mizushima............... 50 Director
Frank T. Nickell................ 46 Director
Roger W. Parsons*............... 52 Director
J. Danforth Quayle*............. 47 Director
David M. Roderick............... 70 Director
John Rutledge................... 45 Director
Joseph S. Schuchert*............ 65 Director
</TABLE>

- ---------------
* The Management Development Committee functions as the compensation committee
of the Company. Since December 2, 1993, its members were Messrs. Quayle and
Schuchert and on September 1, 1994, Messrs. Anderson and Parsons also became
members of the Committee.

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<PAGE> 62

Currently, directors are elected to hold office until the next annual
meeting of stockholders or until their successors are elected. Messrs.
Kampouris, Mizushima, Nickell, and Schuchert were elected in 1988; Mr. Kerckhove
in September 1990; Mr. Hinrichs in March 1991; Dr. Rutledge in March 1993; Mr.
Quayle in September 1993; Mr. Parsons in March 1994; Mr. Roderick in June 1994;
and Mr. Anderson in September 1994. In January 1995, the Company amended and
restated its Certificate of Incorporation (as so amended and restated, the
"Restated Certificate of Incorporation"). The Restated Certificate of
Incorporation divides the Board of Directors into three classes, each as nearly
equal in number as possible. At the annual meeting of stockholders in 1995,
directors of Class I shall be elected to hold office for a term expiring at the
annual meeting of stockholders to be held in 1996, directors of Class II shall
be elected to hold office for a term expiring at the annual meeting of
stockholders to be held in 1997, and directors of Class III shall be elected to
hold office for a term expiring at the annual meeting of stockholders to be held
in 1998. At each succeeding annual meeting of stockholders following such
initial classification and election, the respective successors of the directors
whose terms are expiring shall be elected for three-year terms.

The Company, ASI Partners and executive officers and certain other
management personnel of the Company who purchased shares of Common Stock
("Management Investors") entered into a Stockholders Agreement in connection
with the Acquisition that, among other things, provided for arrangements
regarding the control of the election of directors of the Company. These
provisions, which were superseded in the Amended Stockholders Agreement,
entitled the Management Investors to nominate at least two directors to the
Company's Board of Directors, entitled ASI Partners to nominate the other
directors, and obligated the Management Investors and ASI Partners to vote their
Common Stock in accordance with such nominations.

In connection with the Offerings, and following approval by the Company's
disinterested directors and the Board of Directors, the original Stockholders
Agreement was amended and restated. The Amended Stockholders Agreement entitles
ASI Partners to designate a number of director nominees which, if elected, will
result in an eleven-member Board of Directors of American Standard Companies
Inc. consisting of: (i) while ASI Partners and its Affiliates (as defined) own
at least 50% of the outstanding Common Stock, seven designees of ASI Partners
(at least one of whom will not be an Affiliate of ASI Partners or an officer of
the Company), and four designees of the directors not affiliated with ASI
Partners, none of whom will be an Affiliate of ASI Partners (at least one of
whom will not be an officer of the Company), (ii) while ASI Partners and its
Affiliates own less than 50% but at least 35% of the outstanding Common Stock,
six designees of ASI Partners, and five designees of the directors not
affiliated with ASI Partners (at least two of whom will not be Affiliates of ASI
Partners or officers of the Company); (iii) while ASI Partners and its
Affiliates own less than 35% but at least 20% of the outstanding Common Stock,
four designees of ASI Partners and seven designees of the directors not
affiliated with ASI Partners (at least three of whom will not be Affiliates of
ASI Partners or officers of the Company); and (iv) while ASI Partners and its
Affiliates own less than 20% but at least 10% of the outstanding Common Stock,
one designee of ASI Partners and ten designees of the directors not affiliated
with ASI Partners. The Amended Stockholders Agreement does not obligate any of
the parties thereto to vote its Common Stock in favor of the nominated
directors. See "-- Compensation Committee Interlocks and Insider Participation"
and "Certain Transactions and Relationships" for a description of other
amendments to the Stockholders Agreement and the Company's consulting agreement
with Kelso.

The sole holder of the outstanding common stock of American Standard Inc.
is the Company, and the Company exclusively elects the directors of American
Standard Inc. Currently the directors of the Company are also the directors of
American Standard Inc.

Set forth below is the principal occupation of each of the executive
officers and directors named above during the past five years (except as noted,
all positions are with American Standard Inc.).

Mr. Kampouris was elected Chairman in December 1993 and President and Chief
Executive Officer in February 1989. Prior thereto he was Senior Vice President,
Building Products, from 1984

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<PAGE> 63

to February 1989. He is also a director of Daido Hoxan Inc. Mr. Kampouris has
served as a director of the Company since July 1988.

Mr. Hinrichs was elected Senior Vice President, Transportation Products, in
December 1990. Prior thereto he served as Vice President and Group Executive,
Automotive Products, from 1987 to 1990. Mr. Hinrichs has served as a director of
the Company since March 1991.

Mr. Kerckhove was elected Senior Vice President, Plumbing Products, in June
1990. Prior thereto he was Vice President and Group Executive of European
Plumbing Products from 1988 until June 1990. Mr. Kerckhove has served as a
director of the Company since September 1990.

Mr. Allardyce was elected Vice President and Chief Financial Officer in
January 1992. Prior thereto he served as Vice President and Controller from
February 1983 until December 1991.

Mr. Apostolopoulos was elected Vice President and Group Executive, Americas
International Plumbing Products, in December 1990. Prior thereto he served as
the executive in charge of Plumbing Products' joint ventures from September 1989
to November 1990 and Managing Director of the Company's Egyptian subsidiary from
July 1984 to August 1989.

Mr. Battaglia was elected Vice President and Treasurer in September 1991.
Prior thereto he was Assistant Treasurer from June 1977.

Mr. Brogoch was elected Vice President and Group Executive, Plumbing
Products in the PRC, in December 1994. Prior thereto he served as Vice President
of Plumbing Products' operations in the PRC from August 1993 until December
1994. Previously he served as Vice President of Finance and Planning, European
Plumbing Products from 1983 until August 1993.

Mr. Canizares was elected Vice President, Air Conditioning Products' Asia
Pacific Zone, in December 1990. Prior thereto he served as the executive in
charge of this zone and Manager of Planning and Distribution from November 1986
to November 1990.

Mr. Delker was elected Vice President and Group Executive, Worldwide
Fittings, Plumbing Products, in April 1990. Prior thereto he served as executive
in charge of the Company's brass fittings manufacturing operations from June
1982 until March 1990.

Mr. Deshotel was elected Vice President, Human Resources, in January 1992.
Prior thereto he served as Group Vice President, Human Resources, for U.S.
Plumbing Products from January 1980 until December 1991.

Mr. Gallimore was elected Vice President, Systems and Technology, in
December 1990. Prior thereto he served as the executive in charge of
Manufacturing and Technology from 1984 to November 1990.

Mr. Gandini was elected Vice President and Group Executive, European
Plumbing Products, in July 1990. Prior thereto he served as General Manager of
Ideal Standard S.p.A., the Italian subsidiary of the Company, from January 1978
until June 1990.

Mr. Hilger was elected Vice President and Group Executive, Air Conditioning
Products, in Europe, Middle East and Africa, in June 1988.

Mr. Huwendiek was elected Vice President, Automotive Products in Germany,
in January 1992. Prior thereto he served as Managing Director of WABCO Germany
since June 1987.

Mr. Jaqua was elected Vice President and General Counsel and Secretary in
April 1989. Prior thereto he was Associate General Counsel and Assistant
Secretary. He is planning to retire in early 1995 and will be succeeded by Mr.
Kalaher.

Mr. Kalaher was elected Acting General Counsel and Acting Secretary in June
1994, having joined the Company in February 1994. Prior thereto, he was Vice
President and General Counsel of AMAX Inc. (until its merger and spinoff to
shareholders in November 1993, the third largest

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<PAGE> 64

aluminum and coal producer in the United States with operations also in oil and
gas, gold and molybdenum) from 1991 to 1994 and Vice President and Associate
General Counsel from 1985 to 1991.

Mr. Kissel was elected Vice President in charge of Air Conditioning
Products' Unitary Products Group in January 1992, becoming Group Executive in
March 1994. He served as Vice President, Sales and Distribution, for Air
Conditioning Products, from December 1990 until January 1992 and served as
divisional Senior Vice President in charge of U.S. Sales from January to
November 1990. He was in charge of Western Regional Sales from January 1989 to
January 1990.

Mr. Klug was elected Vice President in 1985 and has been Group Executive in
charge of Trane International since December 1993. He served as Group Executive,
Unitary Products Group, from April 1990 until December 1993. He was Group
Executive, North American Sales and Distribution, Air Conditioning Products,
from October 1987 to March 1990.

Mr. Montauze was elected Vice President, Automotive Products in France, in
October 1994. He served as Vice President of Finance and Controller of
Automotive Products at the Brussels headquarters from September 1989 until
September 1994. Prior thereto he was Financial Manager of the French
transportation business.

Mr. Nutter was elected Vice President, Automotive Products in the United
Kingdom, in January 1992. Prior thereto he served as Vice President and General
Manager of WABCO Transportation U.K. Limited, the United Kingdom transportation
subsidiary of the Company from March 1991 until December 1991 and Group Managing
Director of the United Kingdom transportation subsidiary from June 1987 until
February 1991.

Mr. Pipes was elected Vice President and Group Executive for the Far East
Region of Plumbing Products in May 1992. Prior thereto he served as Managing
Director of American Standard Inc.'s Philippine subsidiary from May 1990 until
April 1992 and was Vice President, Control & Finance, of U.S. Plumbing Products
Group from March 1985 until April 1990.

Mr. Schiller was elected Vice President, Compressor Business (Air
Conditioning Products) in March 1994. Prior thereto he served as General
Manager, Compressor Business Group, from May 1993 to February 1994 and Manager
and then General Manager of the Company's Tyler, Texas, facility from March 1986
to April 1993.

Mr. Schultz was elected Vice President and Group Executive, Commercial
Systems, in 1987.

Mr. Simon was elected Vice President and Controller in January 1992. Prior
thereto he served as Vice President and Controller of the Air Conditioning
Products' Commercial Systems Group from December 1984 to December 1991.

Mr. Wade W. Smith was elected Vice President, U.S. Plumbing Products, in
May 1992. Prior thereto he served as Vice President in charge of the Chinaware
Business Unit of U.S. Plumbing Products from February 1992 until April 1992 and
from April 1987 to February 1992 he was Vice President and General Manager of
the Building Automation Systems Division of the Commercial Systems Group of Air
Conditioning Products.

Mr. Stein was elected Vice President, General Auditor, in March 1994; from
December 1986 to February 1994 he was the Company's General Auditor.

Mr. Wellbrock was elected Vice President, Taxes, effective January 1, 1994.
Prior thereto he served as Director of Taxes from 1988 through 1993.

Mr. Anderson served as National Partner in Charge -- Industries of KPMG
Peat Marwick and a member of the firm's Management Committee from November 1990
until he retired in June 1994. Prior thereto his responsibilities have included
Partner in Charge of the Boston Audit Department and Managing Partner of the
Seattle office. He became a partner of the firm in 1977, having joined

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<PAGE> 65

the firm in 1967. He is a member of the AICPA. Mr. Anderson was elected as a
director of the Company on September 1, 1994.

Mr. Mizushima has been President and Chief Operating Officer of Daido Hoxan
Inc. since the merger in April 1993 of Hoxan Corporation with Daido Sanso
Company (a subsidiary of Air Products and Chemicals Inc.). Prior thereto Mr.
Mizushima was President of Hoxan Corporation, a position he held since 1984. He
is also a director of Daido Hoxan. Daido Hoxan Inc. is the second largest
supplier of industrial gases in Japan. One of its subsidiaries is a distributor
of American-Standard plumbing products in Japan. Mr. Mizushima has served as a
director of the Company since July 1988.

Mr. Nickell has been President and a director of Kelso & Companies, Inc.,
since March 1989. Kelso & Companies, Inc. is the general partner of Kelso &
Company, L.P. From 1984 to 1989 Mr. Nickell was a general partner of Kelso &
Company, L.P. He is also a director of The Bear Stearns Companies Inc., Club
Car, Inc., Earle M. Jorgensen Company, Harris Specialty Chemicals, Inc., King
Broadcasting Company and Tyler Refrigeration Corporation. Mr. Nickell has served
as a director of the Company since May 1988.

Mr. Parsons is Managing Director of Rea Brothers Group PLC ("Rea Brothers
Group"), which he joined in 1988 after a long banking career. Rea Brothers Group
is a U.K. holding company of subsidiaries engaged in the investment banking
business. He also holds directorships in several subsidiaries of Rea Brothers
Group. Mr. Parsons was elected as a director of the Company on March 2, 1994.

Mr. Quayle served as Vice President of the United States from January 1989
to January 1993. Since leaving that office Mr. Quayle has been associated with
Circle Investors, Inc. (an investment planning and consulting firm), and FX
Strategic Advisors, Inc. (an international trade consulting firm), both of which
he serves as Chairman. He is a Director of Central Newspapers, Inc. Mr. Quayle
has served as a director of the Company since September 1993.

Mr. Roderick joined the Board of Earle M. Jorgensen Company (a Kelso
affiliate engaged in the fabrication and sale of steel products) and was elected
its Chairman in 1994. He joined USX Corporation (formerly United States Steel
Corporation) in 1959, becoming Chairman of the Board and Chief Executive Officer
in 1979, retiring from the latter position in 1989 and from the USX Board in
1994. He is also a director of Aetna Life & Casualty Company, Texas Instruments
Incorporated, Kelso & Companies, Inc., Presbyterian University Hospital,
Pittsburgh Baseball Club and General Medical Corporation. He is also Vice
Chairman of the U.S. Korea Business Council. Mr. Roderick was elected as a
director of the Company on June 2, 1994.

Dr. Rutledge has been Chairman of Rutledge & Company, Inc., a merchant
banking firm, since January 1991. He is the founder and Chairman of Claremont
Economics Institute, an economic research firm established in 1975. He is also a
director of Earle M. Jorgensen Company, Lazard Freres Funds, Medical Specialties
Group, and Utendahl Capital Partners and is a special advisor to Kelso &
Companies, Inc. Dr. Rutledge has served as a director of the Company since March
1993.

Mr. Schuchert has been Chairman, Chief Executive Officer, and a director of
Kelso & Companies, Inc., since March 1989. Kelso & Companies, Inc. is the
general partner of Kelso. From 1984 to 1989 Mr. Schuchert was managing general
partner of Kelso & Company, L.P. He is also a director of Earle M. Jorgensen
Company. Mr. Schuchert has served as a director of the Company since May 1988.

On December 23, 1992, Kelso & Companies, Inc. and its Chief Executive
Officer, Mr. Schuchert, without admitting or denying the findings contained
therein, consented to an administrative order in respect of a Securities and
Exchange Commission ("Commission") inquiry relating to the 1990 acquisition of a
portfolio company by an affiliate of Kelso & Companies, Inc. The order found
that the tender offer filing by such affiliate in connection with the
acquisition did not comply fully with the Commission's tender offer reporting
requirements, and required Kelso & Companies, Inc. and Mr. Schuchert to comply
with these requirements in the future.

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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Schuchert is a member of the Management Development Committee (the
Compensation Committee) of the Company's Board of Directors. He is Chairman and
Chief Executive Officer of Kelso & Companies, Inc. (the general partner of
Kelso) and a general partner of Kelso American Standard Partners, L.P., the
general partner of Kelso ASI Partners, L.P.

Pursuant to the Consulting Agreement, the Company paid Kelso an annual fee
of $2.75 million for providing management consulting and advisory services,
including those of Messrs. Schuchert and Nickell. The fee was subject to
reduction depending on the number of shares Kelso controlled of the Company or
American Standard Inc., with final termination when Kelso's ownership control
fell below 20 percent.

On December 2, 1994, after approval by the Company's disinterested
directors and the Board of Directors, the Consulting Agreement was amended and
on December 8, 1994 the Company paid Kelso a one-time fee of $20 million in
consideration of (i) Kelso's agreement to provide ongoing consulting services
requested by the Company, including in connection with the Offerings, for the
originally specified term of the Consulting Agreement without charge (other than
reimbursement of expenses incurred in the performance of such services), (ii)
the release by Kelso of the Company for compensation in connection with all
services rendered or to be rendered by Kelso to the Company (other than
reimbursement of expenses incurred in the performance of such services), (iii)
the additional administrative responsibilities that Kelso will perform as
manager of ASI Partners in connection with the agreements described in the
following paragraph and (iv) the agreements described below insofar as they
apply to Kelso and its affiliates.

In order to facilitate the Offerings (which Kelso and ASI Partners deem to
be in the best interests of ASI Partners and the Company), Kelso has agreed to
(i) provide, and cause ASI Partners, any Affiliate (as defined) of Kelso or any
investment fund which Kelso controls and which owns Common Stock to provide,
advance notice to, and consult with, the Company a reasonable time prior to the
disposition of shares of Common Stock (other than in non-block trades on any
stock exchange or NASDAQ and other than to an Affiliate, pursuant to a public
offering or pursuant to the right of first offer contained in the Amended
Stockholders Agreement), (ii) use, and cause ASI Partners, any Affiliate of
Kelso or any investment fund which Kelso controls and which owns Common Stock to
use, reasonable efforts (consistent with fiduciary duties to their respective
investors) in connection with any sale by it or them of Common Stock not to
cause any undue fluctuations in the public markets for the Common Stock, (iii)
except as permitted by the Amended Stockholders Agreement, cause ASI Partners,
any Affiliate of Kelso and any investment fund controlled by Kelso which owns
Common Stock, not to initiate, propose or support any solicitation for the
approval of any stockholder proposal not supported by the Board of Directors,
(iv) not sell or otherwise dispose of, except in connection with a public
offering, or allow ASI Partners, any Affiliate of Kelso, or any investment fund
which Kelso controls and which owns Common Stock to sell or otherwise dispose
of, more than 15% of the Common Stock then outstanding without first offering to
the Company (or its designee) the right to purchase such shares for the same
price, and (v) provide advance notice to the Company of any proposed acquisition
of any additional shares of Common Stock or any assets of the Company by ASI
Partners, any Affiliate of Kelso or any investment fund which Kelso controls and
which owns Common Stock and, if objected to by a majority of the members of the
Board of Directors not affiliated with Kelso, not to acquire, and cause ASI
Partners, any Affiliate of Kelso and any investment fund which Kelso controls
not to acquire, additional shares of Common Stock or any assets of the Company.

The Amended Stockholders Agreement allows Kelso to designate nominees for
election to the Board of Directors, as described under "Management -- Executive
Officers and Directors," and entitles ASI Partners to demand registration rights
(the first three of which shall be at the Company's expense), as well as
"piggyback" registration rights in respect of registration statements filed by
the Company covering future offerings of Common Stock. The Management Investors

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<PAGE> 67

are also entitled to such "piggyback" registration rights pursuant to the
Amended Stockholders Agreement.

American Standard Inc. also entered into a transaction with Kelso Insurance
Services, Incorporated (an affiliate of Kelso) ("Kelso Insurance"), and American
Telephone and Telegraph Company ("AT&T") pursuant to which American Standard
Inc. as well as other Kelso affiliated companies participates in a
telecommunications network under which AT&T provides communications services to
the group at a special lower tariff rate. In connection with that transaction
American Standard Inc. has guaranteed a minimum annual usage by it of $2 million
for a period of five years commencing 1993 and Kelso Insurance has guaranteed
American Standard Inc.'s minimum usage to AT&T. No fee was paid by American
Standard Inc. to Kelso Insurance in connection with this transaction.

In August 1993 American Standard Inc. purchased a limited partnership
interest in Kelso Investment Associates V, L.P. ("KIA V") in exchange for its
commitment to make a capital contribution of $5 million to KIA V. KIA V was
formed to seek out business opportunities and invest primarily in equity
securities, leveraged buy-outs, and joint ventures. Kelso Partners V, L.P.
serves as the general partner of KIA V. The general partners of Kelso Partners
V, L.P., include Messrs. Schuchert and Nickell. Kelso & Company, L.P., is the
manager of KIA V and, as such, acts as investment adviser of KIA V. The
management fee relating to the interest held by American Standard Inc. has been
waived. As of December 20, 1994, an affiliate of Kelso has acquired 80% of the
Company's limited partnership interest in KIA V at a price equal to 80% of the
Company's net cost incurred to the date of such acquisition to obtain such
interest, thereby relieving the Company of 80% of the balance of its $5 million
capital contribution commitment. See "Certain Transactions and Relationships".

EXECUTIVE COMPENSATION

There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for 1993, 1992 and
1991, of those persons who were (i) at December 31, 1993, the chief executive
officer and the other four most highly compensated

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executive officers of the Company and (ii) a former executive officer (such
persons described in subdivisions (i) and (ii) hereinafter collectively called
the "Named Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
--------------------------------------------- COMPENSATION
NAME AND PRINCIPAL OTHER ANNUAL LTIP ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) PAYOUTS(4) COMPENSATION(5)
- -------------------- ---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Emmanuel A.
Kampouris......... 1993 $ 562,500 $600,000 $ 337,500 $ 966,710 $ 131,564
Chairman, President 1992 525,000 500,000 337,500 1,085,316 117,951
& Chief 1991 525,000 500,000 (6) 842,000 (6)
Executive Officer

George H.
Kerckhove......... 1993 $ 334,500 $141,000 $ 169,500 $ 464,059 $ 33,016
Senior Vice 1992 319,000 148,000 169,500 490,456 32,344
President 1991 293,369 148,000 (6) 342,000 (6)

Horst Hinrichs...... 1993 $ 292,211 $127,000 $ 135,000 $ 399,548 $ 30,912
Senior Vice 1992 303,415 130,000 135,000 354,727 21,707
President 1991 269,444 160,000 (6) 307,000 (6)

Fred A. Allardyce... 1993 $ 250,000 $ 96,000 $ 169,500 $ 286,713 $ 28,430
Vice President & 1992 240,000 90,000 169,500 298,401 32,581
Chief Financial 1991 192,000 70,000 (6) 207,000 (6)
Officer

Luigi Gandini....... 1993 $ 250,916 $ 81,000 $ 0 $ 285,314 $ 27,676
Vice President 1992 243,950 88,600 0 286,625 27,957
1991 226,316 80,000 (6) 119,000 (6)

H. Thompson
Smith............. 1993 $ 342,500 $154,000 $ 90,000 $ 524,449 $ 29,398
former Senior Vice 1992 330,000 144,000 90,000 579,078 24,845
President 1991 300,000 152,000 (6) 419,000 (6)
</TABLE>

- ---------------
(1) Includes amounts deferred by each of the Named Officers under the Savings
Plan of American Standard Inc. and Participating Subsidiary Companies (the
"Savings Plan").

(2) Represents annual bonus earned for the year reported but paid in the
subsequent year. Annual bonuses may be deferred at the election of the
recipient.

(3) Amounts shown for 1993 represent payments under the Company's 1988
Management Partners' Bonus Plan; payments were at the rate of $.60 per share
of Common Stock owned by Named Officers on July 7, 1993, that had been
previously acquired through stock offerings in 1988.

(4) Amounts for 1993 represent payments under the Long-Term Incentive
Compensation Plan ("LTIP") for the achievement of the 1991-1993 performance
goal with payments (95.1% cash; 4.9% in shares of the Company's Common
Stock) made partly in 1993 and partly in 1994. The 1992 LTIP payouts
represent achievement of the 1990-1992 performance goal, with payment
approximately 80% in cash and 20% in shares of the Company's Common Stock
made partially in 1992 and partially in 1993. The shares were distributed to
a grantor's trust for the account of the Named Officers. The 1991 LTIP
payouts represent achievement of the 1989-1991 performance goal, with
payment (all cash) made in 1992. LTIP payouts may be deferred at the
election of the recipient.

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<PAGE> 69

(5) Included in All Other Compensation for 1993 was the following:

<TABLE>
<CAPTION>
PREMIUMS FOR TERM ESOP COMPANY CONTRIBUTIONS
LIFE INSURANCE ALLOCATIONS TO SAVINGS PLAN
----------------- ----------- ---------------------
<S> <C> <C> <C>
E.A. Kampouris................... $ 110,338 $ 7,076 $14,150
G.H. Kerckhove................... 11,790 7,076 14,150
H. Hinrichs...................... 9,686 7,076 14,150
F.A. Allardyce................... 7,204 7,076 14,150
L. Gandini....................... 6,450 7,076 14,150
H.T. Smith....................... 8,172 7,076 14,150
</TABLE>

(6) Not required by Securities and Exchange Commission transitional rules.

RETIREMENT PLANS

TERMINATED PLAN

As a result of the change of control of American Standard Inc. in 1988, the
retirement plan of American Standard Inc. covering its U.S. salaried employees
was terminated as of June 30, 1988. Thereafter, the accrued benefits of all
participants through that date, all of which vested, are provided through
annuities purchased with the assets of the terminated plan (the "Terminated
Plan"). There were no further benefit accruals under the Terminated Plan after
June 30, 1988.

The annual retirement annuities that are payable to Named Officers,
assuming retirement at age 65 and no election of a joint and survivor option and
after giving effect to an offset for Social Security benefits, are as follows:
Mr. Kampouris, $90,662; Mr. Kerckhove, $109,828; Mr. Hinrichs, $72,945; Mr.
Allardyce, $25,764 and Mr. Smith, $22,426. Mr. Gandini did not participate in
the Terminated Plan.

SUPPLEMENTAL RETIREMENT PLAN

American Standard Inc. currently maintains a supplemental retirement plan
(the "Supplemental Plan") for most of its executive officers including all of
the Named Officers, with benefits, payable in the form of a single annual lump
sum settlement, that supplement, on the basis of a formula, their annual
retirement benefits (if any) under the Terminated Plan.

The table below shows the annualized target Supplemental Plan benefit
payable to a participant for life from normal retirement date (age 65) based on
years of service and covered compensation. If a participant dies after his
Supplemental Plan benefit vests but before he receives such benefit, his spouse
is entitled to Plan benefits, but in a reduced amount.

<TABLE>
<CAPTION>
HIGHEST 3-YEAR YEARS OF SERVICE
AVERAGE ANNUAL ------------------------------------------------
COMPENSATION 10 20 30 40
- -------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ 250,000........................... $ 100,000 $ 125,000 $ 150,000 $ 150,000
500,000.......................... $ 200,000 $ 250,000 $ 300,000 $ 300,000
750,000.......................... $ 300,000 $ 375,000 $ 450,000 $ 450,000
1,000,000.......................... $ 400,000 $ 500,000 $ 600,000 $ 600,000
1,250,000.......................... $ 500,000 $ 625,000 $ 750,000 $ 750,000
1,500,000.......................... $ 600,000 $ 750,000 $ 900,000 $ 900,000
</TABLE>

The Supplemental Plan benefits are based on credited years of service and
average annual compensation for the highest three calendar years of the final
ten calendar years of employment (not exceeding 60 percent of average annual
compensation for such years of service) and are reduced by an offset consisting
of certain other retirement benefits, including amounts payable under the
Terminated Plan, annual allocations to the executive officer's Employee Stock
Ownership Plan ("ESOP") accounts, and Social Security benefits. Benefits under
the Supplemental Plan are vested after five years of service or employment
continuation through age 65. Compensation used in

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<PAGE> 70

determining Supplemental Plan benefits (covered compensation) includes only
salary and bonus reflected in the Summary Compensation Table above. No covered
compensation of any Named Officer differs by more than 10% from the salary and
bonus set forth in the Summary Compensation Table.

As of December 31, 1993 the years of credited service under the
Supplemental Plan for the Named Officers are as follows: Mr. Kampouris, 28
years; Mr. Kerckhove, 32 years; Mr. Hinrichs, 35 years; Mr. Allardyce, 17 years;
Mr. Gandini, 33 years; and Mr. Smith, 13 years.

The current annual target benefit for Mr. Kampouris is approximately 20
percent higher than that shown in the above table since a different benefit
formula under the pre-1990 version of the Supplemental Plan applies to his
period of service and earnings prior to April 27, 1991. The method of
calculating the lump sum payable to Mr. Kampouris that is attributable to his
accrued benefit through April 27, 1991, has been adjusted to reflect the recent
increase in the Federal ordinary income tax rates.

An amendment to the Supplemental Plan in 1993 established minimum annual
lump sum payments for certain Named Officers which, after giving effect to Plan
offsets, are estimated as follows: Mr. Kampouris, $427,000; Mr. Kerckhove,
$37,000; Mr. Hinrichs, $143,000; and Mr. Gandini, $24,000.

LONG-TERM INCENTIVE COMPENSATION PLAN

LONG-TERM INCENTIVE COMPENSATION PLANS-AWARDS IN 1993

<TABLE>
<CAPTION>
PERFORMANCE
OR OTHER
NUMBER OF PERIOD ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS UNTIL NON-STOCK-PRICE-BASED PLANS
OR OTHER MATURATION -----------------------------------
NAME RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
- --------------------------------- ------------- ----------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris............ (a) 1/93-12/95 $ 499,350 $998,700 $1,997,400
Chairman, President & Chief
Executive Officer

George H. Kerckhove.............. (a) 1/93-12/95 $ 227,200 $459,400 $ 908,800
Senior Vice President

Horst Hinrichs................... (a) 1/93-12/95 $ 195,350 $390,700 $ 781,400
Senior Vice President

Fred A. Allardyce................ (a) 1/93-12/95 $ 165,000 $330,000 $ 660,000
Vice President & Chief Financial
Officer

Luigi Gandini.................... (a) 1/93-12/95 $ 138,639 $277,278 $ 554,556
Vice President

H. Thompson Smith................ (a) 1/93-12/95 $ 85,492 $170,983 $ 341,966
former Senior Vice President
</TABLE>

- ---------------
(a) Awards are denominated in dollars.

The above table shows the contingent target awards made in 1993 to each
Named Officer for the 1993-1995 performance period. The targets set for the
1993-1995 performance period are based on the achievement in 1995 of
predetermined company-wide increases in inventory turnover rates and a fixed
percentage of earnings (before interest and taxes) to sales. The threshold
reflects 50% of the target award; if the threshold level of inventory turnover
and earnings to sales is not achieved, no payouts are made. The maximum payout
is twice the target award and may be realized by achievement of inventory
turnover at a substantially increased rate or by a combination of an increase in
inventory turnover and percentage of earnings to sales above the threshold
level. Contingent awards are based on a participant's average annual base salary
during his participation

67
<PAGE> 71

in the performance period, subject to prorated adjustment to reflect the
duration of his participation in the period. At the end of a performance period
a payment, in cash, notes or in Common Stock of the Company or a combination of
both, is made on the basis of the achievement of the goal. Termination of
employment may result in forfeiture or proration of the award, depending on the
nature of the termination. A Plan participant may defer payment of his award.
Payment of awards will not be made or will be deferred if an event of default
under American Standard Inc.'s loan agreements or debt indentures has occurred
or will occur as a result of such payment.

Shares of Common Stock distributable to Plan participants are delivered to
a grantor's trust for their benefit. The trust may be terminated following a
public offering or offerings in which 25% or more of the Company's Common Stock
is sold, at which time shares or cash credited to each participant's account is
to be distributed. Payment, however, may be deferred if an event of default
under American Standard Inc.'s loan agreements or debt indentures has occurred
or will occur as a result of such payment. Until distribution, assets of the
trust are subject to the claims of creditors of the Company or American Standard
Inc. Shares held by the trust are voted by the trustee in accordance with
American Standard Inc.'s directions.

SUPPLEMENTAL INCENTIVE PLAN

In March 1994, the Board of Directors of American Standard Inc. adopted the
American Standard Inc. and Subsidiaries 1994-1995 Supplemental Incentive
Compensation Plan (the "Supplemental Incentive Plan") that provides for awards
to executive officers, including all the Named Officers, non-officer executive
employees and certain non-executive management employees of American Standard
Inc. and its subsidiaries. These awards will be based on American Standard
Inc.'s consolidated 1995 operating earnings before interest and taxes. The
maximum award which may be paid under the Supplemental Incentive Plan for
participants in each of the three categories is determined by reference to
awards paid under American Standard Inc.'s Long-Term Incentive Plan, American
Standard Inc.'s Annual Incentive Plan and a specified dollar amount,
respectively. The Supplemental Incentive Plan requires a participant's continued
employment (except in cases of death, disability or retirement) until December
31, 1995 in order to receive an award under the Plan. The awards, if any, are
payable 50% in Common Stock and 50% in cash for officers and non-officer
executive employees and 100% in cash in the case of non-executive management
employees.

STOCK INCENTIVE PLAN

The Company's Board of Directors has adopted the Stock Incentive Plan (the
"Stock Plan") subject to stockholder approval. Under the Stock Plan, a
compensation committee of the Board of Directors (the "Committee") may grant
awards to officers and other key executive and management employees of the
Company and its subsidiaries. The Committee will select the grantees from
approximately 850 employees, including 27 officers (including Messrs. Kampouris,
Kerckhove, Hinrichs, Allardyce and Gandini). The number of grantees may vary
from year to year.

The maximum number of shares of the Company's Common Stock that may be
issued under the Stock Plan is 10% of the number of shares of Common Stock
issued and outstanding as of the completion of the Offerings, less the number of
shares hereafter issued pursuant to other plans for the benefit of employees
(other than the ESOP). The shares may be unissued shares or treasury shares. If
there is a stock split, stock dividend, recapitalization, or other relevant
change affecting the Common Stock, appropriate adjustments will be made in the
number of shares that may be issued in the future and in the number of shares
and price under all outstanding grants made before the event. If shares under a
grant are not issued, those shares will again be available for inclusion in
future grants. Payment of cash in lieu of shares generally will not be
considered an issuance of shares of Common Stock, except in the case of the
exercise of a stock appreciation right ("SAR") granted in tandem with a stock
option.

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<PAGE> 72

GRANTS UNDER THE STOCK PLAN

The Committee has the authority to grant the following types of awards
under the Stock Plan: (1) stock options; (2) stock appreciation rights; (3)
restricted stock; and/or (4) restricted units. These awards may be granted
alone, in conjunction with, or in tandem with other awards under the Stock Plan
and/or cash awards outside the Stock Plan. The Committee may also grant awards
of Common Stock either directly or on a deferred basis in conjunction with other
incentive programs to be established by the Company or its subsidiaries.

STOCK OPTIONS. The Committee may grant nonqualified options and options
qualifying as incentive stock options under the Internal Revenue Code of 1986,
as amended (the "Code"). Incentive stock options ("ISOs") and non-qualified
stock options may be granted for such number of shares as the Committee shall
determine, except that, pursuant to the above-described adjustment, no
participant may be granted stock options in any 12-month period for more than
650,000 shares. The option price of either a non-qualified stock option or an
ISO will not be less than the fair market value of the underlying Common Stock
on the date of grant. To exercise an option, the grantee may pay the option
price in cash, or if permitted by the Committee, by delivering other shares of
Common Stock.

The term of each option will be fixed by the Committee but may not exceed
ten years from the date of grant. Unless otherwise determined by the Committee,
options will become exercisable in three equal installments on each of the first
three anniversaries of the date of grant. The exercisability of options may be
accelerated by the Committee.

STOCK APPRECIATION RIGHTS. The Committee may grant a SAR in conjunction
with, and subject to the same terms as, an option granted under the Stock Plan.
The Committee will determine the time or times at which a SAR may be exercised.
SARs may be exercised in installments, and the exercisability of SARs may be
accelerated by the Committee. If a grantee exercises a SAR, the grantee will
generally receive a payment equal to the excess of the fair market value of the
shares with respect to which the SAR is being exercised at the time of exercise
over the price of such shares as fixed by the Committee at the time the SAR was
granted. Payment may be made in cash, in shares, or in a combination of cash and
shares as the Committee determines.

RESTRICTED STOCK GRANTS. The Committee may also award shares of Common
Stock under a restricted stock grant. The grant will set forth a restriction
period (including, without limitation, a specified period of time and a period
related to the attainment of performance goals) during which the shares of
restricted stock granted will remain subject to forfeiture. The grantee can not
dispose of the shares prior to the expiration of the restriction period. During
this period, the grantee will generally have all the rights of a stockholder,
including the right to vote the shares and receive dividends. Each certificate
will bear a legend giving notice of the restrictions in the grant.

RESTRICTED UNIT GRANTS. The Committee may grant awards of restricted units,
and each such grant will set forth the terms of a restriction period in the same
manner as those applicable to the grant of restricted stock. With respect to
restricted units, no shares of Common Stock will actually be issued to a
participant at the time a restricted unit award is made. Rather, the Company
will establish a separate account for the participant and will record in such
account the number of restricted units awarded to the participant. The
Committee, in its sole discretion, will determine whether to credit to the
account of each recipient of a restricted unit award amounts equal to any
dividends paid by the Company with respect to the corresponding number of shares
of Common Stock ("dividend equivalents"). The participant will be entitled to
receive, upon the termination of the restricted period, one share of Common
Stock for each restricted unit with respect to which the restrictions have
lapsed ("vested unit") then credited to the recipient's account (or, at the
discretion of the Committee, cash in lieu thereof) plus cash equal to the any
dividend equivalents with respect to such vested units and any interest thereon.

PERFORMANCE RELATED AWARDS. To the extent required to ensure that an award
of restricted stock or restricted units granted subject to performance goals or
an award of Common Stock in conjunction with other incentive programs to be
established by the Company or its subsidiaries is

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<PAGE> 73

deductible by the Company for federal income tax purposes, the maximum number of
shares of Common Stock a participant may receive subject to any such performance
award in any 12-month period shall not exceed shares, subject to
adjustment as described above. The performance objectives for each of these
awards shall be determined over a measurement period or periods established by
the Committee and related to at least one of the following criteria, which may
be determined solely by reference to the performance of (i) the Company, (ii) a
subsidiary, (iii) an affiliate of the Company, or (iv) a division or unit of any
of the foregoing or based on comparative performance of any of the foregoing
relative to other companies: (A) earnings per share; (B) revenues; (C) operating
cash flow; (D) operating earnings; (E) working capital; (F) inventory turnover
rates; (G) earnings to sales ratio; and (H) return on capital.

TERMINATION OF EMPLOYMENT. Unless otherwise determined by the Committee,
the following will apply with respect to a participant's termination of
employment. In the event of termination of employment by reason of retirement,
long term disability or death, any restrictions on restricted units or shares of
restricted stock shall lapse and any option or SAR may thereafter be exercised
in full in the case of retirement for a period of three years and in the case of
disability or death for a period of one year (or such shorter period as the
Committee shall determine at grant), subject in each case to the stated term of
the option. In the event a participant's employment is terminated for Cause (as
defined in the Stock Plan), all outstanding options and SARs held by the
participant shall terminate and any restricted units or shares of restricted
stock then outstanding as to which the period of restriction has not lapsed will
be forfeited. In the event of termination of employment for any reason other
than retirement, disability, death or for Cause, any options and SARs will be
exercisable, to the extent exercisable at the date of termination, for a period
of 90 days, subject to the stated term of the option, and any restricted units
or shares of restricted stock then outstanding as to which the period of
restriction has not lapsed will be forfeited.

CHANGE OF CONTROL PROVISIONS. The Stock Plan provides that, except as
provided below, in the event of a "Change in Control" (as defined in the Stock
Plan), all SARs will become immediately exercisable and the restrictions
applicable to outstanding restricted units and restricted stock awards will
lapse and the shares in question will fully vest. Notwithstanding the foregoing,
any participant who holds an option or SAR on the date of a Change in Control,
may elect, in lieu of acquiring the shares of Common Stock covered by an option
(or, in the case of an SAR, the amount of cash and Common Stock such participant
would otherwise be entitled to receive upon the relinquishment of the option
related to such SAR), to receive an amount in cash equal to the excess of the
highest price paid (or offered) for Common Stock during the 60-day period
immediately preceding or following the date of the Change in Control over the
exercise price for such option.

FEDERAL INCOME TAX ASPECTS. The following is a brief summary of the Federal
income tax consequences of awards made under the Stock Plan based upon the
Federal income tax laws in effect on the date hereof. This summary is not
intended to be exhaustive, and does not describe state or local tax
consequences.

INCENTIVE STOCK OPTIONS. No taxable income is realized by the participant
upon the grant or exercise of an ISO. If a participant does not sell the stock
received upon the exercise of an ISO ("ISO Shares") for at least two years from
the date of grant and within one year from the date of exercise, when the shares
are sold any gain (loss) realized will be long-term capital gain (loss). In such
circumstances, no deduction will be allowed to the Company for Federal income
tax purposes.

If ISO Shares are disposed of prior to the expiration of the holding
periods described above, the participant generally will realize ordinary income
at that time equal to the excess, if any, of the fair market value of the shares
at exercise (or, if less, the amount realized on the disposition of the shares)
over the price paid for such ISO Shares. The Company will be entitled to deduct
any such recognized amount. Any further gain or loss realized by the participant
will be taxed as short-term or long-term capital gain or loss. Subject to
certain exceptions for disability or death, if an ISO is exercised more than
three months following the termination of the participant's employment, the
option will generally be taxed as a non-qualified stock option.

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NON-QUALIFIED STOCK OPTIONS. No income is realized by the participant at
the time a non-qualified stock option is granted. Generally upon exercise of a
non-qualified stock option, the participant will realize ordinary income in an
amount equal to the difference between the price paid for the shares and the
fair market value of the shares on the date of exercise. The Company will be
entitled to a tax deduction in the same amount. Any appreciation (or
depreciation) after date of exercise will be either short-term or long-term
capital gain or loss, depending upon the length of time that the participant has
held the shares.

STOCK APPRECIATION RIGHTS. No income will be realized by a participant in
connection with the grant of an SAR. When the SAR is exercised, the participant
will generally be required to include as taxable ordinary income in the year of
exercise, an amount equal to the amount of cash and the fair market value of any
shares received. The Company will be entitled to a deduction at the time and in
the amount included in the participant's income by reason of the exercise. If
the participant receives common stock upon exercise of an SAR, the post-exercise
appreciation or depreciation will be treated in the same manner discussed above
under Non-Qualified Stock Options.

RESTRICTED STOCK. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
any consideration paid for the stock. The Company will be entitled to a
deduction at same time and in same amount. The holding period to determine
whether the participant has long-term or short-term capital gain or loss on a
subsequent sale generally begins when the restriction period expires, and the
participant's tax basis for such shares will generally equal the fair market
value of such shares on such date.

However, a participant may elect, under Section 83(b) of the Code, within
30 days of the grant of the stock, to recognize taxable ordinary income on the
date of grant equal to the excess of the fair market value of the shares of
restricted stock (determined without regard to the restrictions) over the
purchase price of the restricted stock. By reason of such an election, the
participant's holding period will commence on the date of grant and the
participant's tax basis will be equal to the fair market value of the shares on
that date (determined without regard to restrictions). Likewise, the Company
generally will be entitled to a deduction at that time in the amount that is
taxable as ordinary income to the participant. If shares are forfeited after
making such an election, the participant will be entitled to a deduction,
refund, or loss for tax purposes only in an amount equal to the purchase price
of the forfeited shares regardless of whether he made a Section 83(b) election.

RESTRICTED UNITS. A participant receiving a restricted unit award will not
have taxable income when the restricted units or the dividend equivalents are
credited to the participant's account. The participant will recognize ordinary
income equal to the fair market value of the Common Stock delivered (or the
amount of cash paid in lieu of such shares) plus the amount of cash and the fair
market of any property credited to the participant's account as dividend
equivalents when the shares and/or cash are delivered or paid. The capital gain
or loss holding period for the Common Stock or other property will also commence
upon delivery of such share or property. The Company will generally be entitled
to a deduction for the year and to the extent the participant has ordinary
income, provided in the case of payment in shares or other property that the
Company complies with applicable withholding requirements.

OTHER INFORMATION. The Board of Directors may terminate or suspend the
Stock Plan at any time but such termination or suspension shall not affect any
stock options, SARs, or restricted unit and restricted stock awards then
outstanding under the Stock Plan. Unless terminated by action of the Board of
Directors, the Stock Plan will continue in effect until December 1, 2004, but
awards granted prior to such date shall continue in effect until they expire in
accordance with their terms. The Board of Directors may also amend the Stock
Plan as it deems advisable. The Board of Directors presently intends to submit
all material amendments to the Stock Plan to the stockholders for their approval
to the extent required by Rule 16b-3 promulgated under the Exchange Act. The
Committee may amend the term of any award or option theretofore granted,
retroactively or prospectively, but no such amendment shall adversely affect any
such award or option without the holder's consent. Management believes that the
number of options and other awards that will be granted under the Stock Plan

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<PAGE> 75

in the future is not determinable. The number of shares of Common Stock subject
to options which are initially proposed to be granted under the Stock Plan to
Messrs. Kampouris, Kerckhove, Hinrichs, Allardyce and Gandini are ,
, , and , respectively.

DIRECTORS' FEES AND OTHER ARRANGEMENTS

Each outside director is paid a fee of $6,750 per calendar quarter and in
addition receives a fee of $1,000 for each meeting of the Board or Committee
meeting attended. The only directors currently eligible for directors' fees are
directors who are neither employees of American Standard Inc. or Kelso. They are
Messrs. Anderson, Mizushima, Parsons, Quayle, Roderick and Rutledge. All
directors are reimbursed for reasonable expenses incurred in connection with
attendance at any meetings. No separate directors' fees are paid for attendance
at meetings of the Company that are held on the same day American Standard
Inc.'s Board of Directors meets.

A Supplemental Compensation Plan for Outside Directors ("Supplemental
Compensation Plan") was adopted in June 1989. A Plan Account was established for
each participating director at that time consisting of units equivalent to
$50,000 of Common Stock with each unit having a value of $19 per share, the
independently appraised value of the shares of Common Stock as of December 31,
1988. For the purpose of providing a measure of parity among the directors, the
$50,000 amount was increased to $100,000 for participating directors who became
Board Members after January 1, 1993, with such amount converted into units for
the account of such directors at the per share appraisal value of such stock as
of the December 31 immediately preceding commencement of Board membership. When
a participating director ceases to be a member of the Board, he or his
beneficiary will receive a cash payment equal to the number of units in his Plan
Account multiplied by the per-share value of Common Stock based on the then last
year-end appraisal. If a participating director is removed for cause, his entire
interest in the Plan is forfeited. Employee-directors and Messrs. Nickell and
Schuchert do not participate in this Plan.

CORPORATE OFFICERS SEVERANCE PLAN AND OTHER EMPLOYMENT OR SEVERANCE ARRANGEMENTS

The Board of Directors approved a severance plan for executive officers
(the "Officers Severance Plan"), effective April 27, 1991. The Officers
Severance Plan provides that any participant whose employment is involuntarily
terminated by American Standard Inc. without "Cause" (as defined in the Officers
Severance Plan) or who leaves American Standard Inc. for "Good Reason" (as
defined in the Officers Severance Plan) shall be paid an amount equal to the sum
of two (three in the case of the Chief Executive Officer) times such
participant's annual base salary at the rate in effect at the time of
termination, a proration of the then Annual Incentive Plan target award
(described previously), and one (two in the case of the Chief Executive Officer)
times such target award. In addition, group life, accident, and disability
insurance coverages, as well as group medical coverage, will be continued for up
to 24 (36 in the case of the Chief Executive Officer) months following such
officer's termination. The Named Officers (other than Mr. Smith, who retired in
December 1993) are participants in this Plan.

An agreement was entered into with H. Thompson Smith in December 1993
concerning the terms of his termination of employment and retirement. Under that
agreement he is entitled to receive his 1993 Annual Incentive Plan award in the
amount of $154,000 and will be entitled to receive the same amount in March
1995. In addition, Mr. Smith is retained as a consultant through 1995 at the
rate of $29,583 per month. In the event of Mr. Smith's death, the fees remaining
through the end of 1995 are payable in a lump sum to his spouse or estate. He is
also entitled to receive payments under American Standard Inc.'s Long-Term
Incentive Compensation Plan for the 1992-1994 and 1993-1995 performance periods
in accordance with its terms, such awards to be prorated to December 31, 1993.
Mr. Smith continues under American Standard Inc.'s medical and life insurance
programs through 1995.

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CERTAIN TRANSACTIONS AND RELATIONSHIPS

Messrs. Schuchert and Nickell, directors of the Company and American
Standard Inc., are Chairman and Chief Executive Officer, and President,
respectively, of Kelso & Companies, Inc. (the general partner of Kelso), and are
general partners of Kelso American Standard Partners, L.P., the general partner
of Kelso ASI Partners, L.P. Mr. Schuchert is also a member of the Management
Development Committee (the compensation committee) of the Company's Board of
Directors.

In connection with the Acquisition, the Company and Kelso entered into a
consulting agreement (the "Consulting Agreement") pursuant to which the Company
agreed to pay Kelso an annual fee of $2.75 million (plus reimbursement of
expenses) in consideration for general management and financial consulting
services, with the amount of the fee declining at stated decreased levels of
stock ownership. On December 2, 1994 the Consulting Agreement was amended and on
December 8, 1994 the Company paid Kelso a one-time fee of $20 million in
consideration of Kelso's agreement to provide ongoing consulting services, the
release by Kelso of the Company from the requirement to pay compensation for
services rendered or to be rendered and other consideration. See
"Management -- Compensation Committee Interlocks and Insider Participation". The
Company and ASI Partners are also parties to the Amended Stockholders Agreement.
See "Management -- Executive Officers and Directors".

American Standard Inc. also has entered into a transaction with Kelso
Insurance, and American Telephone and Telegraph Company ("AT&T") pursuant to
which the Company as well as other Kelso affiliated companies participates in a
telecommunications network under which AT&T provides communications services to
the group at a special lower tariff rate. In connection with that transaction
American Standard Inc. has guaranteed a minimum annual usage by it of $2 million
for a period of five years commencing 1993 and Kelso Insurance has guaranteed
American Standard Inc.'s minimum usage to AT&T. No fee was paid by American
Standard Inc. to Kelso Insurance in connection with this transaction.

In August 1993 American Standard Inc. purchased a limited partnership
interest in Kelso Investment Associates V, L.P. ("KIA V"), in exchange for its
commitment to make a capital contribution of $5 million to KIA V. KIA V was
formed to seek out business opportunities and invest primarily in equity
securities, leveraged buy-outs, and joint ventures. Kelso Partners V, L.P.
serves as the general partner of KIA V. The general partners of Kelso Partners
V, L.P. include Messrs. Schuchert and Nickell. Kelso is the manager of KIA V
and, as such, acts as investment adviser of KIA V. The management fee relating
to the interest held by American Standard Inc. has been waived. As of December
20, 1994, an affiliate of Kelso has acquired, directly or through affiliates,
80% of the Company's limited partnership interest in KIA V at a price equal to
80% of the Company's net cost incurred to the date of such acquisition to obtain
such interest, thereby relieving the Company of 80% of the balance of its $5
million capital contribution commitment.

In September 1991, American Standard Inc., after a determination by its
Board of Directors of the fairness of the transaction and comparability with an
arm's-length transaction with a third party, sold Tyler Refrigeration to an
affiliate of Kelso for approximately $85 million plus the purchaser's assumption
of approximately $2 million of long-term debt. Part of the consideration
received by American Standard Inc. was 89,700 (pre-split) shares of Common Stock
owned by Management Investors employed by Tyler Refrigeration, which were valued
at $28.37 per share (pre-split) (the same valuation established for ESOP
purposes at December 31, 1990). In addition, the Company purchased approximately
$3 million of preferred stock of the purchaser.

The Company has invested in a Cayman Islands corporation, ASPPL, to be used
for the establishment of various joint ventures in the PRC. The Company has
approximately a 27% voting interest in ASPPL with provisions for effective
control over day-to-day operations. In 1994, shares in ASPPL were sold to
certain institutions and other investors, including certain executive officers
and employees of the Company and its subsidiaries.

Mr. Mizushima, a director of American Standard Inc. and the Company, is
President and Chief Operating Officer of Daido Hoxan Inc., a Japanese
corporation which currently has an approxi-

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mately 13% limited partnership interest in ASI Partners. Daido Hoxan Inc. and
Kelso and its affiliates have engaged in certain transactions, including
transfers of limited partnership interests in ASI Partners and the provision by
Daido Hoxan Inc. of consulting services. Daido Hoxan Inc. is the largest
distributor of the Company's plumbing products in Japan. Its transactions as
distributor with American Standard and its subsidiaries, which were on customary
terms and in the ordinary course of business, have not been material to either
the Company or Daido Hoxan Inc. American Standard also entered into leasing
transactions with an affiliate of Daido Hoxan whereby it has leased certain
machinery and equipment on financial terms that were comparable to those
available from other leasing companies. The leasing transactions were not
material to either the Company or Daido Hoxan Inc.

Fidelity Management Trust Company ("Fidelity") is the owner of record of
the shares of the Company held by the ESOP, a 17% owner of the Company's shares.
Fidelity was paid by the Company approximately $180,000 in 1993 for services in
connection with administering the Company's ESOP and American Standard Inc.'s
Savings Plan.

Mr. Nickell's father is an officer and owns more than 10 percent of AC
Corporation, a contracting company which purchases air conditioning products
from the Company's Trane Division. Such purchases were on customary terms and in
the ordinary course of business and were not material to either the Company or
AC Corporation.

MANAGEMENT INVESTORS STOCKHOLDERS AGREEMENT

Under the Stockholders Agreement, pursuant to which Management Investors
purchased shares of Common Stock, the Company was obligated to repurchase,
subject to the limitations contained in the Company's lending arrangements and
debt instruments, such shares at certain fair market values in case of the
death, disability, retirement, or termination of employment of a Management
Investor. Shares were paid for within the constraints of the Company's lending
arrangement and debt instruments, as supplemented by a Schedule of Priorities
established by the Board of Directors. The Named Officers (other than Mr.
Gandini) and most of the executive officers were Management Investors and
parties to the Stockholders Agreement. The Amended Stockholders Agreement
deleted these provisions in their entirety effective upon the consent of a
majority in interest of the Management Investors.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Set forth below is the number of shares of Common Stock (after giving
effect to the 2.5 to 1 stock split effected in December 1994), the only
outstanding voting stock of the Company, beneficially owned as of September 30,
1994 by each Director, each Named Officer, all Directors and executive officers
of the Company as a group, and each 5% holder.

<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- -------------------------------------------------------------- ------------- --------
<S> <C> <C>
Kelso ASI Partners, L.P.(a)................................... 45,000,000 74%
Joseph S. Schuchert(a)(d)..................................... 45,000,000 74%
Frank T. Nickell(a)(d)........................................ 45,000,000 74%
George E. Matelich(a)(d)...................................... 45,000,000 74%
Thomas R. Wall IV(a)(d)....................................... 45,000,000 74%
Emmanuel A. Kampouris(b)...................................... 562,500 *
George H. Kerckhove(b)........................................ 282,500 *
Horst Hinrichs(b)............................................. 225,000 *
Fred A. Allardyce(b).......................................... 282,500 *
Luigi Gandini(b).............................................. 0 *
H. Thompson Smith(b).......................................... 0 *
Steven E. Anderson(b)......................................... 0 *
Shigeru Mizushima(b).......................................... 0 *
Roger W. Parsons(b)........................................... 0 *
J. Danforth Quayle(b)......................................... 0 *
David M. Roderick(b).......................................... 0 *
John Rutledge(b).............................................. 0 *
American-Standard Employee Stock Ownership Plan (the
"ESOP")(c).................................................. 10,426,853 17%
All current directors and executive officers of the Company
and American Standard Inc. as a group(e).................... 47,035,000 77%
</TABLE>

- ---------------
* Less than one percent.

(a) The business address for such persons is c/o Kelso & Company, Inc., 21st
Floor, 350 Park Avenue, New York, N.Y. 10022.

(b) Mr. Kampouris is Chairman, President and Chief Executive Officer and a
director of American Standard Inc. and of the Company. Messrs. Hinrichs and
Kerckhove are Named Officers and directors of American Standard Inc. and of
the Company. Messrs. Allardyce and Gandini are Named Officers of American
Standard Inc. and of the Company and Messrs. Anderson, Mizushima, Parsons,
Quayle, Roderick and Rutledge are directors of American Standard Inc. and
of the Company. Mr. Smith was a Senior Vice President of the Company and
American Standard Inc. until his retirement in December 1993.

(c) The business address for the ESOP is c/o American Standard Inc., One
Centennial Avenue, P.O. Box 6820, Piscataway, New Jersey 08855-6820. At
September 30, 1994, giving effect to the 2.5 to 1 stock split, 9,956,033
Plan shares were allocated to executive officers of the Company and
American Standard Inc. and other ESOP participants. The number of shares
shown for executive officers in the table above does not reflect shares
allocated to their accounts in the ESOP. Shares in the ESOP account are
voted by the ESOP trustee as directed by the plan board (the board
administering the trust which currently consists of executive officers of
American Standard Inc.). However, participants may direct the vote of their
ESOP account shares in matters involving mergers, recapitalizations, or
dispositions of substantial assets. Until termination of employment a
participant cannot dispose of shares in his ESOP account. Shares
distributed to a participant on termination are subject to American
Standard Inc.'s right of first refusal. The shares in the Named Officers
ESOP accounts are as follows: Mr. Kampouris, 10,519 shares; Mr. Kerckhove,
10,417 shares; Mr. Hinrichs, 11,199 shares;

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<PAGE> 79

Mr. Allardyce, 11,148 shares; and Mr. Gandini, 6,095 shares. The shares in
the ESOP accounts for all executive officers as a group total 187,226
shares.

The number of shares shown for executive officers in the table above also
does not reflect shares of Common Stock issued as part of the payouts under
the LTIP and held for them in trust under a trust agreement dated as of
January 1, 1993. Shares in the trust are voted by the trustee as directed
by American Standard Inc. Until termination of the trust, a beneficiary of
the trust cannot dispose of shares credited to his account. Shares in the
Named Officers' accounts in the trust are as follows: Mr. Kampouris, 13,742
shares; Mr. Kerckhove, 6,284 shares; Mr. Hinrichs, 5,545 shares; Mr.
Allardyce, 3,835 shares; Mr. Gandini, 3,710 shares; and Mr. Smith, 7,355
shares. The shares in the trust accounts for all executive officers as a
group total 68,150 shares.

Also not included above are 49,842 shares of Common Stock held in a similar
grantor's trust for the account of certain executive officers earned under
an employee incentive plan prior to their becoming officers.

(d) Messrs. Schuchert and Nickell, each a director of American Standard Inc. and
of the Company, and Messrs. Matelich and Wall may be deemed to share
beneficial ownership of shares owned of record by ASI Partners by virtue of
their status as general partners of Kelso American Standard Partners, L.P.,
the general partner of ASI Partners. Messrs. Schuchert, Nickell, Matelich
and Wall share investment and voting power with respect to securities owned
by ASI Partners. Messrs. Schuchert, Nickell, Matelich and Wall disclaim
beneficial ownership of such securities. See "Certain Transactions and
Relationships."

(e) Out of such 47,035,000 shares, 45,000,000 shares represent shares of Common
Stock owned by ASI Partners in which Messrs. Schuchert and Nickell, each a
director of the Company, may be deemed to share beneficial ownership by
virtue of their status as general partners of Kelso American Standard
Partners, L.P., the general partner of ASI Partners. Messrs. Schuchert and
Nickell disclaim beneficial ownership of such securities.

See "Certain Investment Considerations -- Control by Principal
Stockholders", "Management -- Executive Officers and Directors" and "The
Acquisition" for additional information regarding ASI Partners' investment in
the Common Stock and its ability to elect a majority of the Board of Directors
and thereby to determine the Company's corporate policies.

SHARES ELIGIBLE FOR FUTURE SALE

Immediately following the consummation of the Offerings, the Company will
have outstanding approximately 74.5 million shares of Common Stock, including
approximately 61 million outstanding shares of Common Stock beneficially owned
by current stockholders (including ASI Partners, the ESOP, the Management
Investors and others). The 13.5 million shares of Common Stock to be sold in the
Offerings will be eligible for resale without restriction or further
registration under the Securities Act in the public market after consummation of
the Offerings by persons other than affiliates of the Company (as defined in
Rule 144 under the Securities Act). Sales of Common Stock without registration
may also be made outside the United States pursuant to Regulation S under the
Securities Act. In addition, contemporaneously with the Offerings, American
Standard will register under the Securities Act approximately 7.5 million shares
of Common Stock issuable pursuant to the Stock Plan. Such registration is
expected to become effective as soon as practicable following the Offerings.
Shares registered and issued pursuant to such registration statement will be
tradeable except to the extent that the holders thereof are deemed to be
"affiliates" of the Company, in which case the transferability of such shares
will be subject to the volume limitations set forth in Rule 144 under the
Securities Act. The Company may issue additional Common Stock to the ESOP over
the next several years. Shares of Common Stock distributed to ESOP beneficiaries
(generally upon such beneficiaries' retirement or termination) will also be
generally available for resale without

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<PAGE> 80

registration by non-affiliates. Sales of Common Stock by affiliates of the
Company will be subject to Rule 144 under the Securities Act.

The Company and certain current stockholders (including ASI Partners and
certain executive officer stockholders), who will beneficially own approximately
outstanding shares of Common Stock immediately following the
consummation of the Offerings, have agreed with the Underwriters not to offer,
sell or otherwise dispose of any shares of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. Based on shares outstanding as of November
30, 1994, following the expiration or waiver of the foregoing restrictions and
any applicable holding periods under Rule 144, shares of Common Stock
owned by existing stockholders will be available for sale in the public market
pursuant to Rule 144 under the Securities Act (including the volume and other
limitations set forth therein) or otherwise and could impair the Company's
future ability to raise capital through an offering of its equity securities.
Most of the currently outstanding shares of Common Stock were issued more than
three years ago, and thus are subject to resale without being subject to the
holding periods established by Rule 144. Pursuant to the Amended Stockholders
Agreement ASI Partners was granted certain demand registration rights, and ASI
Partners and certain executive officers and other employees of the Company who
own Common Stock were granted certain "piggyback" registration rights, in
connection with future offerings of the Common Stock. See "Management --
Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions and Relationships". The Company is unable to estimate the number of
shares of Common Stock that may be sold from time to time by the Company's
current stockholders because this will depend in part on the market price for
the Common Stock, the personal circumstances of the sellers and other factors.
See "Underwriting".

In general, under Rule 144 as presently in effect, if a period of at least
two years has elapsed since the later of the date shares of Common Stock that
are "restricted securities" (as defined in Rule 144 to include securities
acquired directly from an issuer or affiliate thereof in a transaction not
involving a public offering) were acquired from the Company or the date they
were acquired from an "affiliate" (as that term is defined in Rule 144) of the
Company, as applicable, then the holder of such restricted shares (including an
affiliate) is entitled to sell a number of shares within any three-month period
that does not exceed the greater of 1% of the then outstanding shares of Common
Stock (approximately 745,000 shares immediately after the consummation of the
Offerings, assuming that the Underwriters' over-allotment options are not
exercised) or the average weekly trading volume of the Common Stock on the New
York Stock Exchange during the four calendar weeks preceding such sale. The
holder may only sell such shares through unsolicited brokers' transactions.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning American Standard. Affiliates may sell shares not
constituting restricted securities in accordance with the foregoing volume
limitations and other requirements but without regard to the two-year holding
period requirement. Restricted securities properly sold in reliance on Rule 144
are thereafter freely tradeable without restriction or registration under the
Securities Act, unless thereafter held by an "affiliate" of the Company.

Under Rule 144(k), if a period of at least three years has elapsed since
the later of the date restricted shares were acquired from the Company or the
date they were acquired from an affiliate of the Company, as applicable, then a
holder of such restricted shares who is not an affiliate of the Company at the
time of the sale and who has not been an affiliate of the Company for at least
three months prior to the sale would be entitled to sell the shares immediately
without regard to the volume limitations and other conditions described above.

The Company currently has up to 7,455,636 shares of Common Stock reserved
for issuance upon exercise of stock options granted under its Stock Plan,
including 5,000,000 shares reserved for issuance of stock options expected to be
granted at the initial public offering price in connection with the Offerings.

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<PAGE> 81

Prior to the Offerings there has been no public market for the Common
Stock. The Company can make no predictions as to the effect, if any, that sales
of shares or the availability of shares for sale will have on market prices
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market, or the prospect of such sales, could
adversely affect the market price of the Common Stock.

DESCRIPTION OF CAPITAL STOCK

The following description of the Company's capital stock and the
Stockholder Rights Agreement, dated January 5, 1995 (the "Rights Agreement"),
between the Company and Citibank, N.A., as Rights Agent, does not purport to be
complete and is qualified in its entirety by reference to applicable Delaware
law and to the provisions of the Company's Restated Certificate of Incorporation
and By-Laws, and to the Rights Agreement. Copies of the forms of Restated
Certificate of Incorporation, By-Laws and Rights Agreement will be filed as
exhibits to the Registration Statement of which this Prospectus forms a part.

COMMON STOCK

The Restated Certificate of Incorporation will authorize the Company to
issue up to 200,000,000 shares of Common Stock, par value $.01 per share. As of
November 30, 1994, after giving effect to the 2.5 to 1 split of the Common Stock
effected in December 1994, approximately 61 million shares of Common Stock were
issued and outstanding. Subject to the rights of the holders of any outstanding
shares of preferred stock and any restrictions that may be imposed by any lender
to the Company, holders of Common Stock are entitled to receive such dividends,
if any, as may be declared by the Board of Directors out of legally available
funds. In the event of the liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in the assets, if
any, remaining after payment of all of the Company's debts and liabilities and
the liquidation preference of any outstanding preferred stock.

Holders of Common Stock are entitled to one vote per share on any matter
submitted to the holders of Common Stock for a vote. Because holders of Common
Stock do not have cumulative voting rights in the election of directors, the
holders of a majority of the shares of Common Stock represented at a meeting can
elect all the directors. See "Management -- Executive Officers and Directors"
and "Security Ownership of Certain Beneficial Owners". Holders of Common Stock
will not have preemptive rights to subscribe for or purchase any additional
shares of capital stock issued by the Company. All outstanding shares of the
Common Stock are, and the Shares will be when issued, duly authorized, validly
issued, fully paid and nonassessable.

Each outstanding share of Common Stock (including the Shares to be sold in
the Offerings) will have associated with it one right to purchase a share of the
Company's preferred stock at a stipulated price in certain circumstances. See
"-- Certain Provisions Relating to Changes in Control -- Stockholder Rights
Plan".

PREFERRED STOCK

The Restated Certificate of Incorporation will authorize the Company to
issue 2,000,000 shares of preferred stock, par value $.01 per share, in one or
more series, and authorize the Board of Directors to designate the dividend
rights, preferences in liquidation and other rights, preferences, limitations
and restrictions of and upon shares of each series, including voting, redemption
and conversion rights. The Amended Stockholders Agreement provides that so long
as ASI Partners, together with its Affiliates (as defined), owns at least 35% of
the outstanding shares of Common Stock, the Company will not issue any shares of
Common Stock or preferred stock, except in connection with the Rights Agreement
or pursuant to the Company's Employee Stock Ownership Plan, the Stock Plan or
any other plans for the benefit of employees. In connection with the Rights
Agreement, the Board of Directors will designate 900,000 shares of preferred
stock as a new series

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<PAGE> 82

of Junior Participating Cumulative Preferred Stock. For a summary of the rights
and preferences of this series, see "-- Certain Provisions Relating to Changes
in Control -- Stockholder Rights Plan". It is not possible to state the actual
effect of the authorization and issuance of one or more other series of
preferred stock upon the rights of holders of Common Stock until the Board of
Directors determines the specific terms, rights and preferences of a series of
preferred stock. See "Certain Provisions Relating to Changes in
Control -- Certain Effects of Authorized but Unissued Stock".

TRANSFER AGENT AND REGISTRAR

Citibank, N.A. has been appointed as the transfer agent and registrar for
the Common Stock.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Section 203 of the Delaware General Corporation Law ("Section 203")
prohibits certain persons ("interested stockholders") from engaging in a
"business combination" with a Delaware corporation for three years following the
date such persons become interested stockholders. Interested stockholders
generally include (i) persons who are the beneficial owners of 15% or more of
the outstanding voting stock of the corporation and (ii) persons who are
affiliates or associates of the corporation and who hold 15% or more of the
corporation's outstanding voting stock at any time within three years before the
date on which such a person's status as an interested stockholder is determined.
Subject to certain exceptions, a "business combination" includes, among other
things (i) mergers or consolidations, (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation, (iii) transactions that result in
the issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder, except pursuant to a transaction that effects a pro
rata distribution to all stockholders of the corporation, (iv) any transaction
involving the corporation that has the effect of increasing the proportionate
share of the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation that is owned directly or
indirectly by the interested stockholder or (v) any receipt by the interested
stockholder of the benefit (except proportionately as a stockholder) of any
loans, advances, guarantees, pledges or other financial benefits provided by or
through the corporation.

Section 203 does not apply to a business combination if (i) before a person
becomes an interested stockholder, the board of directors of the corporation
approves the transaction in which the interested stockholder became an
interested stockholder or approves the business combination, (ii) upon
consummation of the transaction that resulted in the interested stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (other than certain excluded shares) or (iii) following a
transaction in which the person became an interested stockholder, the business
combination is (a) approved by the board of directors of the corporation and (b)
authorized at a regular or special meeting of stockholders (and not by written
consent) by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.

CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL

The Restated Certificate of Incorporation, By-Laws and Stockholder Rights
Plan will contain several provisions that may make the acquisition of control of
the Company by means of tender offer, open market purchases, a proxy contest or
otherwise more difficult if not approved by the Board of Directors. A summary of
those provisions is set forth below. In addition, certain events relating to a
change of control of the Company or American Standard Inc. will constitute an
event of default under the Existing Credit Agreement, and/or will entitle
holders of certain of American Standard Inc.'s debt securities to require
American Standard Inc. to repurchase such securities,

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which may indirectly make more difficult the acquisition of control of the
Company. See "Certain Indebtedness".

CLASSIFIED BOARD OF DIRECTORS. The Restated Certificate of Incorporation
will divide the Board of Directors into three classes. Each class will be nearly
equal in number as possible. At each annual meeting of stockholders, directors
will be elected to succeed those directors whose terms have expired, and each
newly elected director will serve for a three-year term. See "Management --
Executive Officers and Directors". American Standard believes that a classified
Board of Directors will help assure the continuity and stability of the Board of
Directors and the Company's business strategies and policies. The classified
board provision could increase the likelihood that, in the event of a takeover
of the Company, incumbent directors will retain their positions. In addition,
the classified board provision will help insure that the Board of Directors, if
confronted with an unsolicited proposal from a third party that has acquired a
block of the voting stock of the Company, will have sufficient time to review
the proposal and appropriate alternatives and to seek the best available result
for all stockholders. With a classified board, directors may only be removed for
cause, except as provided below. Pursuant to the Amended Stockholders Agreement,
so long as ASI Partners, together with its Affiliates (as defined), owns at
least 10% of the outstanding shares of Common Stock, ASI Partners will have the
right, exercisable at any time, to designate a certain number of nominees for
election to the Board of Directors. See "Management -- Executive Officers and
Directors." To exercise that right, ASI Partners may request that the Company
call a special meeting of stockholders or that the stockholders act by written
consent to vote on the election of director nominees ASI Partners is entitled to
designate in accordance with such right, in which case the Company would prepare
the requisite proxy statement or information statement for the Company's
stockholders. By exercising this right, ASI Partners can effectively replace
directors originally designated for nomination by ASI Partners with or without
cause. The Amended By-Laws will provide that vacant directorships may be filled
by the Board of Directors, provided that so long as ASI Partners, together with
its Affiliates, owns at least 10% of the outstanding shares of Common Stock, ASI
Partners will have the right to designate a nominee for any vacancy created by a
director originally designated for nomination by ASI Partners pursuant to the
Amended Stockholders Agreement.

NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. The Restated
Certificate of Incorporation will prohibit stockholders from taking action by
written consent in lieu of an annual or special meeting, and thus stockholders
will only be able to take action at an annual or special meeting called in
accordance with the Amended By-Laws, except that so long as ASI Partners,
together with its Affiliates, owns at least 10% of the outstanding shares of
Common Stock, stockholder action may be taken by written consent in order to
vote on director nominees designated by ASI Partners pursuant to the Amended
Stockholders Agreement. The Amended By-Laws will provide that special meetings
of stockholders may only be called by (i) the Chief Executive Officer or (ii)
the Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors or (iii) for purposes of voting on director
nominees designated by ASI Partners pursuant to the Amended Stockholders
Agreement, ASI Partners, so long as ASI Partners, together with its Affiliates,
owns at least 10% of the outstanding shares of Common Stock. Special meetings
will not be able to be called by the stockholders (except by ASI Partners as
provided above).

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The By-Laws will establish advance notice procedures with regard to
stockholder proposals and the nomination, other than by or at the direction of
the Board of Directors or a committee thereof, of candidates for election as
directors. These procedures will provide that notice of stockholder proposals
and stockholder nominations for the election of directors at an annual meeting
must be in writing and received by the Secretary of the Company no later than 50
days prior to such annual meeting (or if less than 50 days' notice of a meeting
of stockholders is given, stockholder proposals and nominations must be
delivered to the Secretary of the Company no later than the close of

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business on the seventh day following the day notice was mailed). Stockholder
proposals and nominations for the election of directors at a special meeting
must be in writing and received by the Secretary of the Company no later than
the close of business on the tenth day following the day on which notice of the
meeting was mailed or public disclosure of the date of the meeting was made,
whichever occurs first. The notice of stockholder nominations must set forth
certain information with respect to each nominee who is not an incumbent
director. The Amended By-Laws will provide that the foregoing requirements
applicable to stockholder proposals and nominations for, and the election of,
directors, will not apply to ASI Partners so long as ASI Partners, together with
its Affiliates, owns at least 10% of the outstanding shares of Common Stock.

CERTAIN VOTING REQUIREMENTS. A 65% vote will be required to amend or repeal
certain provisions of the Amended By-Laws and to amend or repeal certain
provisions of the Restated Certificate of Incorporation, including those:
authorizing directors to issue rights (such as the Rights referred to below);
requiring a 65% vote for amendments to certain By-Laws; relating to directors
and to the nomination and election of directors; limiting the liability and
authorizing the indemnification of directors; permitting directors to take into
account not only the interest of stockholders but also certain other interests;
requiring action by stockholders to be taken at a meeting of stockholders and
not by written consent; and dealing with amendments to the Restated Certificate
of Incorporation.

ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES. The Restated Certificate
of Incorporation provides the Company's directors will not be liable to the
Company or its stockholders for monetary damages resulting from breaches of
their fiduciary duties as directors. Directors remain liable: for breaches of
their duty of loyalty to the Company or its stockholders; for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law; under Section 174 of the Delaware General Corporation Law; and for
transactions from which a director derives improper personal benefit. In
addition, the Company will enter into indemnification agreements with its
directors which provide indemnification to the fullest extent permitted by the
Delaware General Corporation Law. The Restated Certificate of Incorporation also
provides that a director, in determining what he reasonably believes to be the
best interests of American Standard, shall consider the interests of the
stockholders and, in his or her discretion, may consider any of the following:
the interests of American Standard's employees, suppliers, creditors and
customers; the state of the U.S. and global economy; community and societal
interests; and the long-term as well as the short-term interests of the Company
and its stockholders, including the possibility that these interests may be best
served by the continued independence of the Company.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK. After consummation of the
Offerings, the Company will have authorized approximately 118,000,000 unissued
and unreserved shares of Common Stock and 2,000,000 unissued shares of preferred
stock. Of the unissued shares of preferred stock, 900,000 shares will be
designated by the Board of Directors as Junior Cumulative Participating
Preferred Stock. See "-- Certain Provisions Relating to Changes in
Control-Stockholder Rights Plan". The unissued and unreserved shares of Common
Stock and of preferred stock may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital and for
facilitating corporate acquisitions. The Amended Stockholders Agreement provides
that so long as ASI Partners, together with its Affiliates, owns at least 35% of
the outstanding shares of Common Stock, the Company will not issue any such
shares of Common Stock or preferred stock, except in connection with the Rights
Agreement or pursuant to the ESOP, the Stock Plan and other employee benefit
plans. The Company may issue additional Common Stock to the ESOP over the next
several years. Except pursuant to the ESOP, the Stock Plan, and other employee
benefit plans, the Company does not currently have any plans to issue additional
shares of Common Stock or preferred stock. One of the effects of issued and
unreserved shares of capital stock may be to enable the Board of Directors to
render more difficult or discourage an attempt to obtain control of the Company
by means of a merger, tender offer, proxy contest or otherwise, and thereby to
protect the continuity of its management. If, for example, the Board of
Directors were to determine that a takeover proposal was not in American
Standard's best interests,

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such shares could be issued by the Board of Directors without stockholder
approval in one or more private transactions or other transactions that might
prevent or render more difficult or costly the completion of the takeover
transactions by diluting the voting or other rights of the proposed acquiror or
insurgent stockholder group, by creating a substantial voting block in
institutional or other hands that might undertake to support the position of the
incumbent Board of Directors, by effecting an acquisition that might complicate
or preclude the takeover, or otherwise.

STOCKHOLDER RIGHTS PLAN. On January 4, 1995 the Board of Directors declared
a dividend distribution of one right ("Right") for each outstanding share of
Common Stock outstanding on January 4, 1995 (the "Record Date"). As a result,
each outstanding share of Common Stock, including the Shares sold in the
Offerings, and shares of Common Stock thereafter issued during the term of the
Rights Agreement, will have associated with it one Right. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a share
of the Company's Junior Participating Cumulative Preferred Stock, par value $.01
per share (the "Participating Preferred Stock"), at a price of $ per
one one-hundredth of a share (the "Purchase Price"), subject to adjustment.

Until the earlier to occur of (a) ten business days following the time (the
"Stock Acquisition Time") of a public announcement by the Company that a person
or group of affiliated or associated persons (other than (i) ASI Partners or any
of its affiliates or their immediate transferees (provided that any such
transferee holding 15% or more of the outstanding Common Stock does not acquire
any additional shares of Common Stock except from ASI Partners or any of its
affiliates), (ii) any employee benefit plan of the Company, including the ESOP
or (iii) directors, officers and employees of American Standard as a group) has
acquired beneficial ownership (as defined in the Rights Agreement) of 15% or
more of the outstanding shares of Common Stock (such 15% beneficial owner, an
"Acquiring Person"), or (b) ten business days, or such later date as may be
determined by the Board of Directors, after the date of the commencement or
announcement by a person of an intention to make a tender offer or exchange
offer for an amount of Common Stock which, together with the shares of such
stock already owned by such person, constitutes 15% or more of the outstanding
shares of Common Stock (the earlier of such dates being called the "Distribution
Date"), the Rights will be evidenced by the certificates representing the Common
Stock. The Rights Agreement provides that, until the Distribution Date, the
Rights will be transferred with and only with the Common Stock. Until the
Distribution Date (or earlier redemption or expiration of the Rights), new
Common Stock certificates issued after the Record Date, upon transfer or new
issuance of the Common Stock, will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any of the Common Stock
certificates will also constitute the transfer of the Rights associated with the
shares of Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Common Stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.

The Rights are not exercisable until the Distribution Date. The Rights will
expire on January 5, 2005, unless earlier redeemed by the Company as described
below.

The Purchase Price payable, and the number of shares of Participating
Preferred Stock or other securities or property issuable upon exercise of the
Rights, are subject to customary anti-dilution protections.

In the event that after the Stock Acquisition Time the Company is acquired
in a merger or other business combination transaction or 50% or more of its
assets, cash flow or earning power are sold or otherwise transferred, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, the number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value (as defined in
the Rights Agreement) of two times the exercise price of the Right. In the event
that the Company were the surviving corporation of a

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merger and its Common Stock were changed or exchanged, proper provision shall be
made so that each holder of a Right will thereafter have the right to receive
upon exercise that number of shares of common stock of the other party to the
transaction having a market value of two times the exercise price of the Right.

In the event that a person or group becomes an Acquiring Person (otherwise
than pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock at a price and on terms which are determined to be fair and in the
best interests of the Company and its stockholders by a majority of the members
of the Board of Directors who are not Acquiring Persons or representatives or
nominees of or affiliated or associated with an Acquiring Person and who either
were members of the Board of Directors prior to the Stock Acquisition Time or
subsequently became a member and whose election thereto was approved by a
majority of the directors who were not Acquiring Persons or representatives or
nominees of or affiliated or associated with an Acquiring Person ("Continuing
Directors")), proper provision shall be made so that each holder of a Right
(other than Rights that are beneficially owned by the Acquiring Person, which
will thereafter be void) will thereafter have the right to receive upon exercise
that number of shares of Common Stock having a market value (as defined in the
Rights Agreement) of two times the exercise price of the Right. A person or
group will not be an Acquiring Person if the Board of Directors determines that
such person or group became an Acquiring Person inadvertently and such person or
group promptly divests itself of a sufficient number of shares of Common Stock
so that such person or group is no longer an Acquiring Person.

At any time prior to the earlier of (i) ten business days after the Stock
Acquisition Time and (ii) January 5, 2005, the Company, by resolution of the
Board of Directors, may redeem the Rights in whole, but not in part, at a price
of $.01 per Right (the "Redemption Price"). If such resolution is adopted
following the Stock Acquisition Time, it will be effective only with the
concurrence of a majority of the Continuing Directors and only if the Continuing
Directors constitute a majority of the members of the Board of Directors then in
office. The Company may, by resolution of the Board of Directors at any time
prior to the Stock Acquisition Time, extend the time in which the Rights may be
redeemed. Immediately upon the action of the Board of Directors electing to
redeem the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.

At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person of 50% or more of the outstanding Common Stock, the
Board of Directors (with the concurrence of a majority of the Continuing
Directors and only if the Continuing Directors constitute a majority of the
members of the Board of Directors) may exchange the Rights (other than Rights
beneficially owned by such Acquiring Person, which have become void), in whole
or in part, for Common Stock at an exchange ratio of one share of Common Stock
per Right (subject to adjustment).

Each share of Participating Preferred Stock purchasable upon exercise of
the rights will have a minimum preferential dividend of $100 per year, but will
be entitled to receive, in the aggregate, a dividend of 100 times the dividend
declared on a share of Common Stock. In the event of liquidation, dissolution or
winding-up of the Company, the holders of the shares of Participating Preferred
Stock will be entitled to receive a minimum liquidation payment of $100 per
share, but will be entitled to receive an aggregate liquidation payment equal to
100 times the payment to be made per share of Common Stock. Each share of
Participating Preferred Stock will have 100 votes, voting together with the
shares of Common Stock. In addition, if dividends on the Participating Preferred
Stock are in arrears for four consecutive quarterly payment periods, the holders
of the Participating Preferred Stock will have the right, voting as a class, to
elect two members of the Board of Directors. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Participating Preferred Stock will be entitled to
receive 100 times the amount and type of consideration received per share of
Common Stock. The rights of the shares of

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<PAGE> 87

Participating Preferred Stock as to dividends and liquidation, and in the event
of mergers and consolidations, are protected by anti-dilution provisions.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

The Rights and the Rights Agreement can be amended by the Board of
Directors in any respect (including, without limitation, any extension of the
period in which the Rights may be redeemed) at any time prior to the Stock
Acquisition Time. From and after such time, without the approval of all holders
of the Common Stock or all holders of the Rights, the Board of Directors, by a
majority of the Continuing Directors, provided that the Continuing Directors
constitute a majority of the Board, may only supplement or amend the Rights
Agreement in order (i) to cure any ambiguity, (ii) to correct or supplement any
provision contained in the Rights Agreement which may be defective or
inconsistent with any other provision in the Rights Agreement (iii) to shorten
or lengthen any time period under the Rights Agreement or (iv) to make any
changes or supplements which the Company and the Rights Agent may deem necessary
or desirable which shall not adversely affect the interests of the holders of
Right Certificates (other than an Acquiring Person or an affiliate or associate
thereof).

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CERTAIN INDEBTEDNESS

EXISTING CREDIT AGREEMENT

The Company, American Standard Inc. and certain of its subsidiaries entered
into an Assignment and Amendment Agreement, dated as of June 1, 1993, relating
to the 1988 Credit Agreement, with Bankers Trust Company, as agent under the
1988 Credit Agreement, the financial institutions named as Banks in the 1988
Credit Agreement, certain of such financial institutions desiring to continue as
lenders to the Company and certain additional financial institutions named
therein (collectively, the "Lenders") and Chemical Bank, as Administrative Agent
and Arranger for the Lenders. On June 2, 1993, the 1988 Credit Agreement was
amended and restated in the form of a Credit Agreement, dated as of June 1, 1993
(the "Existing Credit Agreement"), Chemical Bank succeeded Bankers Trust Company
as agent, the outstanding loans and commitments were restructured and increased
to provide for a multi-currency, multi-borrower facility initially in an
aggregate amount of $1 billion. On October 21, 1994, the Existing Credit
Agreement was amended to provide for the making of an additional term loan of
$325 million to the Company (the "October Borrowing"), the proceeds of which
were applied to redeem on November 21, 1994 all of the $316.8 million in
aggregate principal amount of American Standard Inc.'s 14 1/4% Subordinated
Discount Debentures and 12 3/4% Junior Subordinated Debentures. The following
summaries of certain provisions of the Existing Credit Agreement do not purport
to be complete and are subject to, and are qualified in their entirety by
reference to, the Existing Credit Agreement and the definitions therein of terms
not defined in this Prospectus.

The Existing Credit Agreement currently provides for an aggregate facility
of approximately $1.2 billion as follows: (a) a $242 million multi-currency
revolving credit facility (the "Revolving Credit Facility") available to all
Borrowers (as defined); (b) a $176 million multi-currency periodic access credit
facility (the "Periodic Access Facility") available to all Borrowers; and (c)
four term loan facilities (each, a "Term Loan Facility"), consisting of a $222
million U.S. Dollar Tranche A Facility available to American Standard Inc., a
$136 million Deutschemark Tranche B Facility available to WABCO Standard GmbH,
an $82 million U.S. Dollar Tranche C Facility available to all Borrowers and a
$325 million U.S. Dollar Tranche D Facility available to American Standard Inc.

THE REVOLVING CREDIT FACILITY

The Revolving Credit Facility currently provides for aggregate borrowings
from time to time of up to $242 million for working capital purposes, of which
up to $200 million may consist of outstanding or unreimbursed letters of credit.
In addition, up to $40 million of the Revolving Credit Facility may be used for
same day short term borrowings ("Swingline Loans").

American Standard Inc. pays a commitment fee at the rate of 0.5% per annum
on the unused portion of the Lenders' commitments under the Revolving Credit
Facility, excluding any outstanding Swingline Loans. American Standard Inc. is
required to reduce to $50 million the amount of borrowings outstanding under the
Revolving Credit Facility for at least 30 consecutive days in each calendar
year. On August 31 each year, the Revolving Credit Facility is reduced by
$8,300,000. In addition, American Standard Inc. is required to repay the full
amount of each of its outstanding revolving loans at the end of each interest
period (a maximum of six months). American Standard Inc. may, however, reborrow
such amounts subject to compliance with applicable conditions under the Credit
Agreement.

THE PERIODIC ACCESS AND TERM FACILITIES

The Periodic Access Loans must be reduced by (a) $22,500,000 on the last
day of each February and August through and including February 28, 1997 and (b)
$10,417,000 on the last day of each February and August thereafter through the
last day of February 2000. Loans under the Periodic Access Facility ("Periodic
Access Loans") may be shifted among the borrowers during a particular 30-day
period every twelve months.

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The outstanding principal balance of the Tranche A Term Loan is payable in
semi-annual installments of $37,500,000 on the last day of February and August
of each year, commencing August 31, 1997.

The outstanding principal balance of the Tranche B Term Loan, subject to
exchange rate fluctuations, is payable in semi-annual installments, on the last
day of February and August of each year. Each installment is to be equal to
12.5% of the aggregate principal amount of the initial Tranche B Term Loan.

The outstanding principal balance of the Tranche C Term Loans is payable in
semi-annual installments of $8,350,000 on the last day of February and August of
each year. Tranche C Term Loans may be assigned from one borrower to another
during a particular 30-day period every twelve months, subject to certain
conditions.

The outstanding principal balance of the Tranche D Loan is payable on the
last day of each February and August in equal semiannual installments of
$5,000,000 in the years 1995 through 1997, $12,500,000 in year 1998, $42,500,000
in the years 1999 and 2000, with a final payment of $100,000,000 on February 28,
2001.

OTHER VOLUNTARY AND MANDATORY PREPAYMENTS

In addition to the scheduled principal payments described above, the
Existing Credit Agreement requires principal prepayments in an amount equal to
75% of Excess Cash Flow for any fiscal year (or 50%, in the case of any fiscal
year during which the ratio of Free Cash Flow (as defined) of American Standard
Inc. to Consolidated Cash Fixed Charges (as defined) is 2 to 1 or greater) and
in amounts equal to the Net Cash Proceeds of certain sales of assets and
specified percentages of the Net Cash Proceeds from certain issuances of equity
securities. In addition, partial prepayments of Revolving Credit and Periodic
Access Loans may be required in some cases if such Loans exceed the Lenders'
Revolving Credit and Periodic Access Loan Commitments as a result of currency
fluctuations.

INTEREST

Borrowings may bear interest based on a reserve adjusted London inter-bank
offered rate, or, in the case of U.S. Dollar denominated borrowings, based on
Chemical Bank's Alternate Base Rate. Swingline Loans in currencies other than
U.S. Dollars will bear interest based on the average rate for overnight deposits
for like principal amounts in the relevant currency obtainable by the Swingline
Lender. On September 30, 1994, the weighted average interest rate per annum on
borrowings under the Existing Credit Agreement was 7.9%.

SECURITY

All obligations of the borrowers under the Existing Credit Agreement are
guaranteed by the Company, American Standard Inc. and the significant Domestic
Subsidiaries of American Standard Inc. All such obligations of foreign borrowers
are also guaranteed by certain foreign subsidiaries. The Loans and guarantee
obligations are secured by mortgages and liens on the significant properties and
other assets (including inventory, receivables, contract rights and
intangibles), and pledges of the capital stock, of American Standard Inc. and
certain of its domestic and foreign subsidiaries.

COVENANTS

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leases, (e) dividends and distributions on, and repurchases and redemptions of,
capital stock of American Standard Inc. and the Company, and issuances and sales
of stock of the Company, American Standard Inc. and its subsidiaries, (f)
voluntary prepayments, purchases, redemptions or defeasance of other
Indebtedness, or required payments of principal or interest thereon during any
event of default under the Existing Credit Agreement, (g) loans and other
investments, including investments in subsidiaries and joint ventures, (h)
intercompany transactions and (i) transactions with affiliates.

The ability of American Standard Inc. to comply with the covenants and
restrictions contained in the Credit Agreement may be affected by events beyond
its control, and American Standard Inc. will be required to sustain the improved
operating results achieved in 1994 to remain in compliance with such covenants
and restrictions. There can be no assurance that such improved results will be
sustained. The breach of any of these covenants or restrictions could result in
a default under the Credit Agreement which could have the same consequences as a
payment default described above under "Certain Investment
Considerations -- Substantial Leverage". In order to avoid potential
non-compliance with the covenants and restrictions contained in the Existing
Credit Agreement, as well as its predecessor credit agreement, American Standard
Inc. from time to time has had to obtain waivers and amendments. No assurance
can be given that American Standard Inc. will be able to obtain similar waivers
or amendments in the future under the Existing Credit Agreement or the New
Credit Facility. American Standard Inc. is seeking to obtain covenants in the
New Credit Facility that are more favorable to American Standard Inc. than those
contained in the Existing Credit Agreement.

CERTAIN FINANCIAL COVENANTS AND RATIOS

DEBT. American Standard Inc. and its subsidiaries may not create, incur,
assume, guarantee or permit to exist any Indebtedness, including Intercompany
Indebtedness, except among other things: (a) the obligations under the Existing
Credit Agreement; (b) enumerated Indebtedness of American Standard Inc. and its
subsidiaries outstanding on June 1, 1993; (c) the Debentures; (d) certain
Intercompany Indebtedness; (e) certain Indebtedness and Guarantees resulting
from sales of receivables; (f) up to $25,000,000 in additional letters of credit
obtained outside the Existing Credit Agreement in the ordinary course of
business; (g) up to $25,000,000 in secured Indebtedness of 95% or less owned
subsidiaries; (h) Indebtedness incurred to finance permitted Capital
Expenditures and permitted Capital Leases; (i) Indebtedness of subsidiaries
existing at the time they become subsidiaries; (j) Indebtedness of subsidiaries
which are not Credit Parties or incurred before they become Credit Parties, or
of American Standard Inc.'s Mexican and Brazilian subsidiaries, in an aggregate
principal amount at any time outstanding which, together with the Indebtedness
referred to in clause (f) above, is not in excess of $100,000,000 or, after the
occurrence of a Deleveraging Event, $150,000,000; and (k) additional unsecured
Indebtedness incurred by certain Credit Parties not exceeding $5,000,000.

CAPITAL EXPENDITURES AND CAPITAL LEASES. American Standard Inc. and its
subsidiaries may not make any Capital Expenditures or incur Capital Lease
Obligations in any year (except for certain existing projects) in excess of $150
million in 1994 and 1995, and increasing amounts thereafter. Additional amounts
of Capital Expenditures may be made depending on those made in each immediately
preceding year and available cumulative Excess Cash Flow. The sum of the
aggregate amount of Capital Lease Obligations of the Company and its
subsidiaries (except for certain existing projects) plus the aggregate amount of
other Indebtedness incurred to finance Capital Expenditures may not exceed $10
million in 1994 and any subsequent fiscal year or $50 million at any time
outstanding.

FINANCIAL TESTS, RATIOS. American Standard Inc. must satisfy certain
financial tests, as follows:

(a) American Standard Inc. may not permit Consolidated EBITDA for the
periods beginning on July 1, 1993, and ending on the last day of each quarter
(in each case taken as a single accounting

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period) to be less than specified amounts, which progressively increase. Through
December, 31, 1995, such amounts are as follows and thereafter continue to
increase:

<TABLE>
<CAPTION>
DATE AMOUNT
-------------------------------------------------------------------- --------------
<S> <C>
September 30, 1994.................................................. $ 470,000,000
December 31, 1994................................................... $ 555,000,000
March 31, 1995...................................................... $ 630,000,000
June 30, 1995....................................................... $ 750,000,000
September 30, 1995.................................................. $ 925,000,000
December 31, 1995................................................... $1,045,000,000
</TABLE>

(b) American Standard Inc. may not permit the ratio of (i) Consolidated
Senior Debt at any time during any fiscal quarter to (ii) Consolidated Capital
Funds of American Standard Inc. at such time to exceed specified ratios. Through
December 31, 1995, such ratios are as follows and thereafter continue to
decrease progressively:

<TABLE>
<CAPTION>
QUARTER ENDING RATIO
------------------------------------------------------------------------ -----------
<S> <C>
1994: Last Day of Third Fiscal Quarter.................................. 1.50 : 1.00
Last Day of Fourth Fiscal Quarter................................. 2.70 : 1.00
1995: Last Day of First Fiscal Quarter.................................. 2.60 : 1.00
Last Day of Second Fiscal Quarter................................. 2.40 : 1.00
Last Day of Third Fiscal Quarter.................................. 2.20 : 1.00
Last Day of Fourth Fiscal Quarter................................. 2.00 : 1.00
</TABLE>

(c) American Standard Inc. may not permit the ratio of (i) Free Cash Flow
to (ii) Consolidated Cash Fixed Charges measured on specified measuring dates,
in each case for the specified period to exceed certain ratios, which continue
to increase after 1994. Through December 31, 1995, the measuring dates, periods
and ratios are as follows:

<TABLE>
<CAPTION>
MEASURING DATE PERIOD RATIO
- -------------------- ------------------------------------------------- -----------
<S> <C> <C>
September 30, 1994 Twelve Months Ended on Measuring Date 1.35 : 1.00
December 31, 1994 Twelve Months Ended on Measuring Date 1.55 : 1.00
March 31, 1995 Twelve Months Ended on Measuring Date 1.55 : 1.00
June 30, 1995 Twelve Months Ended on Measuring Date 1.65 : 1.00
September 30, 1995 Twelve Months Ended on Measuring Date 1.75 : 1.00
December 31, 1995 Twelve Months Ended on Measuring Date 1.90 : 1.00
</TABLE>

EVENTS OF DEFAULT

The Existing Credit Agreement contains customary Events of Default,
including payment defaults, failure of representations to be true in any
material respect, covenant defaults, defaults in respect of other Indebtedness,
bankruptcy, certain judgments, ERISA defaults, and a change of control of the
Company or American Standard Inc.

EXISTING CREDIT AGREEMENT DEFINITIONS

The following definitions apply to the Existing Credit Agreement provisions
described above. Capitalized terms used without definition in the description of
the Existing Credit Agreement are used as defined in the Existing Credit
Agreement.

"Consolidated Capital Funds" means, with respect to any person at any time,
the sum of (i) Consolidated Net Worth of such person at such time and (ii) the
outstanding principal amount of the Subordinated Indebtedness of such person at
such time; provided that, with respect to any Subordinated Indebtedness issued
with "original issue discount", the amount of such Subordinated

88
<PAGE> 92

Indebtedness is the accreted amount thereof, determined on the date Consolidated
Capital Funds is being determined.

"Consolidated EBITDA" means for any person, without duplication, for any
period for which such amount is being determined, the sum for such period of (i)
Consolidated Net Income (as defined to exclude after-tax gains, but not pre-tax
losses, on sales of assets out of the ordinary course of business and to exclude
premium expense and write-offs of financing costs in connection with prepayments
or redemptions of Indebtedness), (ii) provision for taxes based on income, (iii)
Consolidated Interest Expense and (iv) other non-cash items (including
depreciation expense and amortization expense) reducing Consolidated Net Income,
all as determined on a consolidated basis for such person and its Consolidated
Subsidiaries in accordance with GAAP.

"Consolidated Net Worth" means, with respect to any person, as at any date
of determination, the sum of the capital stock and additional paid-in capital
plus retained earnings (or minus accumulated deficit) of such person and its
Consolidated Subsidiaries on a consolidated after-tax basis determined in
accordance with GAAP, less the sum of the capital stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of such person and
its Consolidated Subsidiaries as of June 30, 1993, and excluding (i) premium
expense and write-offs of financing costs deducted in connection with the
prepayment or redemption of Indebtedness subsequent to June 30, 1993, and (ii)
after-tax gains on the sales of assets out of the ordinary course of business of
such person and its Consolidated Subsidiaries subsequent to June 30, 1993.

"Credit Parties" means the Company, American Standard Inc., the Borrowers,
certain Subsidiaries enumerated in the Existing Credit Agreement, and any
additional Subsidiaries which become Subsidiary Guarantors or members of
Standard Europe, a European Economic Interest Grouping, and includes most
significant Subsidiaries of the Company in North America, Europe and Brazil.

"Deleveraging Event" means the receipt by the Company of gross cash
proceeds aggregating $500,000,000 or more from one or more issuances by the
Company of its Common Stock.

"Free Cash Flow" means, for any person, for any period, Consolidated EBITDA
for such period minus Consolidated Capital Expenditures for such period.

CERTAIN OTHER INDEBTEDNESS

The following summaries of certain American Standard Inc. debt instruments
do not purport to be complete and each is qualified in its entirety by reference
to the relevant indenture, copies of which have been filed as exhibits to the
Registration Statement.

SINKING FUND DEBENTURES

In 1986, American Standard Inc. issued $150 million aggregate principal
amount of 9 1/4% Sinking Fund Debentures Due 2016 (the "Sinking Fund
Debentures"). The Sinking Fund Debentures are secured, equally and ratably with
indebtedness under the Existing Credit Agreement and certain related
indebtedness, by mortgages on the principal U.S. properties of American Standard
Inc.

The Sinking Fund Debentures are redeemable at the option of American
Standard Inc., in whole or in part, at redemption prices declining from 105.55%
in 1994 to 100% in 2006 and thereafter. Notwithstanding the foregoing
provisions, the Sinking Fund Debentures may not be redeemed prior to December 1,
1996, as part of, or in anticipation of, any refunding operation by the
application, directly or indirectly, of moneys borrowed having an interest cost
to American Standard Inc. of less than 9 1/4% per annum.

American Standard Inc. is required to provide for the retirement, by
redemption, of $7.5 million principal amount of Sinking Fund Debentures on or
before December 1 in each of the years 1997 to 2015, inclusive, at a redemption
price equal to 100% of the principal amount thereof plus accrued interest to the
redemption date. At its option, American Standard Inc. may redeem on each
Sinking Fund payment date an additional $15 million principal amount of Sinking
Fund Debentures, at such redemption price. The right to exercise such optional
redemption is not cumulative.

89
<PAGE> 93

SENIOR NOTES

On May 20, 1992, American Standard Inc. issued $150 million aggregate
principal amount of the 10 7/8% Senior Notes Due 1999 (the "Senior Notes"). To
the extent required under the indenture relating thereto, the Senior Notes are
secured equally and ratably with the other Senior Securities (as defined),
indebtedness under the Existing Credit Agreement and certain related
indebtedness, by mortgages on the principal U.S. properties of American Standard
Inc.

The Senior Notes may not be redeemed at the option of American Standard
Inc. There is no mandatory sinking fund for the Senior Notes. The Senior Note
indenture has provisions requiring American Standard Inc. to offer to repurchase
Senior Notes upon the occurrence of a change of control of the Company or
American Standard Inc.

SENIOR DEBENTURES

On May 20, 1992, American Standard Inc. issued $250 million aggregate
principal amount of the 11 3/8% Senior Debentures Due 2004 (the "Senior
Debentures"). To the extent required under the indenture relating thereto, the
Senior Debentures are secured, equally and ratably with the other Senior
Securities (as defined), indebtedness under the Existing Credit Agreement and
certain related indebtedness, by mortgages on the principal U.S. properties of
American Standard Inc.

The Senior Debentures may not be redeemed prior to May 15, 1997.
Thereafter, the Senior Debentures may be redeemed at the option of American
Standard Inc., in whole or in part, at redemption prices declining from 105.69%
in 1997 to 100% in 2002 and thereafter. There is no mandatory sinking fund for
the Senior Debentures.

The Senior Debenture indenture has provisions requiring American Standard
Inc. to offer to repurchase Senior Debentures upon the occurrence of a change of
control of the Company or American Standard Inc.

9 7/8% SENIOR SUBORDINATED NOTES

On June 1, 1993, American Standard Inc. issued $200 million aggregate
principal amount of the 9 7/8% Senior Subordinated Notes Due 2001 (the "9 7/8%
Senior Subordinated Notes"). The 9 7/8% Senior Subordinated Notes are unsecured.
The payment of the principal of, premium, if any, and interest on the 9 7/8%
Senior Subordinated Notes is subordinated in right of payment, as set forth in
the Senior Subordinated Note indenture, to the payment when due of all Senior
Debt (as defined in the Senior Subordinated Note indenture).

The 9 7/8% Senior Subordinated Notes may not be redeemed prior to June 1,
1998. Thereafter, the 9 7/8% Senior Subordinated Notes may be redeemed at the
option of American Standard Inc., in whole or in part, at redemption prices
declining from 102.82% in 1998 to 100% in 2000 and thereafter. There is no
mandatory sinking fund for the 9 7/8% Senior Subordinated Notes.

The Senior Subordinated Note indenture has provisions requiring American
Standard Inc. to offer to repurchase 9 7/8% Senior Subordinated Notes upon the
occurrence of a change of control of the Company or American Standard Inc.

10 1/2% SENIOR SUBORDINATED DISCOUNT DEBENTURES

On June 1, 1993, American Standard Inc. issued $750.7 million aggregate
principal amount of the 10 1/2% Senior Subordinated Discount Debentures Due 2005
(the "10 1/2% Senior Subordinated Discount Debentures"). Interest payments on
the 10 1/2% Senior Subordinated Discount Debentures are not required prior to
December 1, 1998. Commencing December 1, 1998, interest on the 10 1/2% Senior
Subordinated Discount Debentures at 10 1/2% per annum is payable semiannually on
June 1 and December 1 of each year. The 10 1/2% Senior Subordinated Discount
Debentures are unsecured. The payment of the principal of, premium, if any, and
interest on the 10 1/2% Senior Subordinated

90
<PAGE> 94

Discount Debentures is subordinated in right of payment, as set forth in the
Senior Subordinated Discount Debenture Indenture, to the payment when due of all
Senior Debt (as defined in the Senior Subordinated Discount Debenture Indenture)
of American Standard Inc.

Except as set forth below, the 10 1/2% Senior Subordinated Discount
Debentures may not be redeemed prior to June 1, 1998. Thereafter, the 10 1/2%
Senior Subordinated Discount Debentures may be redeemed at the option of
American Standard Inc., in whole or in part, at redemption prices declining from
104.66% in 1998 to 100% in 2002 and thereafter.

In the event that on or prior to June 1, 1996, American Standard Inc.
receives from the sale of its common stock or the Common Stock of the Company
aggregate net proceeds of at least $250 million, American Standard Inc. may, at
its option, use all or a portion of such proceeds to redeem up to 35% of the
original principal amount of the 10 1/2% Senior Subordinated Discount
Debentures, on not less than 30 nor more than 60 days' notice and within 75 days
of such sale, at a redemption price equal to the following percentages of
Accreted Amount (as defined in the Senior Subordinated Discount Debenture
indenture) at the date of redemption:

<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
-------------------------------------------- ----------------
<S> <C>
1994........................................ 110.50%
1995........................................ 109.33
1996........................................ 108.16
</TABLE>

American Standard Inc. is required to provide for the retirement, by
redemption of $187.7 million principal amount of 10 1/2% Senior Subordinated
Discount Debentures on each of June 1, 2003, and June 1, 2004, in each case at a
redemption price equal to 100% of the principal amount thereof, plus accrued
interest to the redemption date. Such redemptions are calculated to retire
approximately 50% of the principal amount of the 10 1/2% Senior Subordinated
Discount Debentures prior to maturity. In addition, the Senior Subordinated
Discount Debenture Indenture has provisions requiring American Standard Inc. to
offer to repurchase 10 1/2% Senior Subordinated Discount Debentures upon the
occurrence of a change of control of the Company or American Standard Inc.

CERTAIN COVENANTS; EVENTS OF DEFAULT

The indentures relating to the Sinking Fund Debentures, Senior Notes,
Senior Debentures, 9 7/8% Senior Subordinated Notes and 10 1/2% Senior
Subordinated Discount Debentures contain various restrictive covenants that,
among other things, impose limitations on American Standard Inc. and its
subsidiaries with respect to: (i) the incurrence of indebtedness by American
Standard Inc. and its subsidiaries; (ii) the declaration or payment of dividends
and the redemption or purchase of the capital stock or certain indebtedness of
American Standard Inc. and its subsidiaries; (iii) the issuance of preferred
stock by subsidiaries of American Standard Inc.; (iv) the ability of American
Standard Inc.'s subsidiaries to enter into agreements which restrict their
ability to declare and pay dividends and other distributions; (v) the sale or
other disposition of assets of American Standard Inc. or capital stock of its
subsidiaries; (vi) the ability of American Standard Inc. and its subsidiaries to
engage in transactions with affiliates; (vii) consolidations, mergers and sales
of all or substantially all the assets of American Standard Inc. and its
subsidiaries; (viii) the ability of American Standard Inc. and certain of its
subsidiaries to enter into certain sale and leaseback arrangements; and (ix) the
ability of American Standard Inc. and its subsidiaries to grant mortgages or
liens on their principal properties.

The indentures relating to the Senior Notes, the Senior Debentures and the
9 7/8% Senior Subordinated Notes contain provisions requiring American Standard
Inc. to offer to repurchase such securities upon the occurrence of a change of
control of the Company or American Standard Inc.

The indentures relating to the Sinking Fund Debentures, Senior Notes,
Senior Debentures, 9 7/8% Senior Subordinated Notes and 10 1/2% Senior
Subordinated Discount Debentures contain various events of default, including,
among other things, (i) default by American Standard Inc. in the payment of
principal or interest or any mandatory sinking fund payment on the relevant
security;

91
<PAGE> 95

(ii) failure by American Standard Inc. to comply with the covenants contained in
the relevant indenture; (iii) failure by American Standard Inc. to comply with
its obligations under any "Successor Corporation" section, if contained in the
relevant indenture; (iv) failure by American Standard Inc. or certain of its
subsidiaries to pay their respective indebtedness within any applicable grace
period after final maturity or acceleration of such indebtedness because of a
default, where the total amount of debt unpaid or accelerated exceeds a
specified amount ranging from $10 million to $25 million (as set forth in the
relevant indenture); (v) failure of certain subsidiaries to pay their respective
indebtedness within any applicable grace period after final maturity or
acceleration of such indebtedness because of a default, where the total amount
unpaid or accelerated exceeds $50 million; (vi) certain events of bankruptcy,
insolvency or reorganization of American Standard Inc. or certain of its
subsidiaries; and (vii) any judgment or decree for the payment of money in
excess of $25 million (to the extent not covered by insurance or a bond) being
rendered against American Standard Inc. or certain of its subsidiaries, which
judgment or decree is not discharged, waived or the execution thereof stayed
within a period of 60 days.

UNDERWRITING

Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., CS First Boston
Corporation, Morgan Stanley & Co. Incorporated, and Smith Barney Inc. are acting
as representatives, has severally agreed to purchase from the Company, the
respective number of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
----------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co........................................
CS First Boston Corporation................................
Morgan Stanley & Co. Incorporated..........................
Smith Barney Inc...........................................

------------
Total............................................ 9,500,000
============
</TABLE>

Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the Shares, if any are
taken.

The U.S. Underwriters propose to offer the Shares in part directly to the
public at the initial public offering price set forth on the cover page of this
Prospectus, and in part to certain securities dealers at such price less a
concession of $ per share. The U.S. Underwriters may allow, and such
dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the Shares are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the international offering
(the "International Underwriters") providing for the concurrent offer and sale
of 4,000,000 Shares in an international offering outside the United States. The
offering price and aggregate underwriting discounts and commissions per share
for the two offerings are identical. The closing of the offering made hereby is
a condition to the closing of the international offering, and vice versa. The
representatives of the International

92
<PAGE> 96

Underwriters are Goldman Sachs International, S.G. Warburg & Co. Inc., CS First
Boston Limited and Morgan Stanley International.

An affiliate of Smith Barney Inc. and an affiliate of CS First Boston
Corporation own indirect equity interests in ASI Partners which, after giving
effect to the Offerings, will own approximately 60% of the outstanding Common
Stock of the Company. Accordingly, the provisions of Schedule E to the By-Laws
of the National Association of Securities Dealers, Inc. apply to the Offerings,
and the initial public offering price can be no higher than that recommended by
a "qualified independent underwriter" meeting certain standards. In accordance
with this requirement, Goldman, Sachs & Co. has served in such role and has
recommended a price in compliance with the requirements of Schedule E. Goldman,
Sachs & Co. in its role as qualified independent underwriter has performed due
diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. The representatives of the Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority except in accordance with Schedule E. In
addition, an affiliate of Smith Barney Inc., affiliates of CS First Boston
Corporation and an affiliate of S.G. Warburg & Co. Inc. are investors in
investment funds sponsored by Kelso, which funds are not investors in the
Company.

Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the Shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the Shares offered hereby and other shares of Common Stock, directly
or indirectly, only in the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
or will agree pursuant to the Agreement Between that, as a part of the
distribution of the Shares offered as a part of the international offering, and
subject to certain exceptions, it will (i) not, directly or indirectly, offer,
sell or deliver shares of Common Stock (a) in the United States or to any U.S.
persons or (b) to any person whom it believes intends to reoffer, resell or
deliver the shares in the United States or to any U.S. persons, and (ii) cause
any dealer to whom it may sell such shares at any concession to agree to observe
a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.

The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
1,420,000 additional shares of Common Stock to cover over-allotments, if any, at
the initial public offering price, less the underwriting discount, as set forth
in this Prospectus. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the total number of shares. The U.S. Underwriters may exercise
such option only to cover over-allotments in connection with the sale of the
shares. The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 605,000 additional shares of Common Stock, solely to cover
over-allotments, at the initial public offering price less the underwriting
discount, as set forth on the cover page of this Prospectus.

93
<PAGE> 97

At the Company's request, the Underwriters have reserved up to
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.

The Company and certain existing stockholders (including ASI Partners) have
agreed not to offer, sell or otherwise dispose of any shares of Common Stock for
a period of 180 days after the date of this Prospectus without the prior written
consent of the representatives of the Underwriters, except for the shares of
Common Stock offered in connection with the concurrent U.S. and international
offerings and shares of Common Stock issued pursuant to the Stock Plan.

Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price will be negotiated among American
Standard and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, are the Company's historical performance, estimates of the business
potential and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

Application will be made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.

The representatives of the Underwriters have in the past provided and may
continue to provide investment banking services to the Company and Kelso.

The Company and American Standard Inc. have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.

LEGAL MATTERS

The validity of the Shares will be passed upon for the Company by Debevoise
& Plimpton, New York, New York. Debevoise & Plimpton also acts and may hereafter
act as counsel to Kelso and its affiliates, including ASI Partners. Certain
legal matters in connection with the Offerings will be passed upon for the
Underwriters by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York.

EXPERTS

The consolidated financial statements of the Company as of December 31,
1992 and 1993, and for each of the three years in the period ended December 31,
1993 appearing in this Prospectus and the Registration Statement and the
consolidated financial statements of the Company appearing in the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein or included herein or incorporated herein by
reference, and have been so included or incorporated by reference in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

94
<PAGE> 98

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<S> <C>
Audited Financial Statements:
Responsibility for Financial Statements....................................... F-2
Report of Independent Auditors................................................ F-3
Consolidated Statement of Operations
for the three years ended December 31, 1993................................. F-4
Consolidated Balance Sheet
as of December 31, 1992 and 1993............................................ F-5
Consolidated Statement of Stockholders' Equity
(Deficit) for the three years ended December 31, 1993....................... F-6
Consolidated Statement of Cash Flows
for the three years ended December 31, 1993................................. F-7
Notes to Consolidated Financial Statements.................................... F-8
Segment Data.................................................................. F-25
Quarterly Data................................................................ F-27
Unaudited Interim Financial Statements:
Summary Statement of Operations for the nine months ended
September 30, 1993 and 1994................................................. F-28

Summary Balance Sheet as of September 30, 1994................................ F-29

Summary Statement of Cash Flows for the nine months ended
September 30, 1993 and 1994................................................. F-30

Notes to Summary Financial Statements......................................... F-31
</TABLE>

F-1
<PAGE> 99

RESPONSIBILITY FOR FINANCIAL STATEMENTS

The accompanying consolidated balance sheets at December 31, 1992 and 1993,
and related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended December 31, 1991, 1992 and 1993,
have been prepared in conformity with generally accepted accounting principles,
and the Company believes the statements set forth a fair presentation of
financial condition and results of operations. The Company believes that the
accounting systems and related controls that it maintains are sufficient to
provide reasonable assurance that the financial records are reliable for
preparing financial statements and maintaining accountability for assets. The
concept of reasonable assurance is based on the recognition that the cost of a
system of internal control must be related to the benefits derived and that the
balancing of those factors requires estimates and judgment. Reporting on the
financial affairs of the Company is the responsibility of its principal
officers, subject to audit by independent auditors, who are engaged to express
an opinion on the Company's financial statements. The Board of Directors has an
Audit Committee of non-employee Directors which meets periodically with the
Company's financial officers, internal auditors, and the independent auditors
and monitors the accounting affairs of the Company.

AMERICAN STANDARD COMPANIES INC.
(formerly ASI Holding Corporation)

New York, New York
March 14, 1994

F-2
<PAGE> 100

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors
American Standard Companies Inc.

We have audited the accompanying consolidated balance sheets of American
Standard Companies Inc. (formerly ASI Holding Corporation) and subsidiaries as
of December 31, 1993 and 1992, and the related consolidated statements of
operations, stockholders' equity (deficit), and cash flows for each of the three
years in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of American
Standard Companies Inc. and subsidiaries at December 31, 1993 and 1992, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

New York, New York
March 14, 1994

F-3
<PAGE> 101

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1991 1992 1993
---------- ---------- ----------
<S> <C> <C> <C>
Sales.............................................. $3,595,267 $3,791,929 $3,830,462
---------- ---------- ----------
Costs and expenses
Cost of sales.................................... 2,752,068 2,852,230 2,902,562
Selling and administrative expenses.............. 614,259 678,742 692,229
Other expenses................................... 8,082 24,672 38,281
Interest expense (includes debt issuance cost
amortization of $5,335 for 1991, $5,983 for
1992 and $11,461 for 1993).................... 286,316 288,851 277,860
Loss on sale of Tyler Refrigeration.............. 22,391 -- --
---------- ---------- ----------
3,683,116 3,844,495 3,910,932
---------- ---------- ----------
Loss before income taxes, extraordinary loss and
cumulative effects of changes in accounting
methods.......................................... (87,849) (52,566) (80,470)
Income taxes....................................... 23,033 4,672 36,165
---------- ---------- ----------
Loss before extraordinary loss and cumulative
effects of changes in accounting methods......... (110,882) (57,238) (116,635)
Extraordinary loss on retirement of debt (Note
8)............................................... -- -- (91,932)
Cumulative effects of changes in accounting
methods (Notes 2 and 3).......................... (32,291) -- --
---------- ---------- ----------
Net loss........................................... (143,173) (57,238) (208,567)
Preferred dividend................................. (13,855) (15,707) (8,624)
---------- ---------- ----------
Net loss applicable to common shares............... $ (157,028) $ (72,945) $ (217,191)
========== ========== ==========
Loss per common share:
Loss from continuing operations before
extraordinary loss and cumulative effects of
changes in accounting methods.................... $ (2.14) $ (1.24) $ (2.11)
Extraordinary loss on retirement of debt........... -- -- (1.55)
Cumulative effects of changes in accounting
methods.......................................... (.55) -- --
---------- ---------- ----------
Net loss per common share.......................... $ (2.69) $ (1.24) $ (3.66)
========== ========== ==========
Average number of outstanding common shares and
equivalents...................................... 58,338,195 58,636,118 59,313,073
========== ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 102

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES

(FORMERLY ASI HOLDING CORPORATION)

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1992 1993
---------- ----------
<S> <C> <C>
Current assets
Cash and certificates of deposit................................ $ 111,549 $ 53,237
Cash in escrow.................................................. 1,722 932
Accounts receivable, less allowance for doubtful accounts --
1992, $12,827; 1993, $15,666................................. 468,731 507,322
Inventories..................................................... 384,857 325,819
Future income tax benefits...................................... 33,192 24,562
Other current assets............................................ 31,199 29,811
---------- ----------
Total current assets.................................... 1,031,250 941,683
Facilities, at cost net of accumulated depreciation............... 832,811 820,523
Other assets
Goodwill, net of accumulated amortization -- 1992, $141,858;
1993, $169,879............................................... 1,101,716 1,025,774
Debt issuance costs, net of accumulated amortization -- 1992,
$77,776; 1993, $9,670........................................ 51,308 78,102
Other........................................................... 109,333 120,997
---------- ----------
$3,126,418 $2,987,079
========== ==========
</TABLE>

LIABILITIES AND STOCKHOLDERS' DEFICIT

<TABLE>
<S> <C> <C>
Current liabilities
Loans payable to banks.......................................... $ 99,150 $ 38,036
Current maturities of long-term debt............................ 13,458 105,939
Accounts payable................................................ 271,855 307,326
Accrued payrolls................................................ 105,400 99,758
Other accrued liabilities....................................... 230,335 263,322
Taxes on income................................................. 18,848 47,003
---------- ----------
Total current liabilities............................... 739,046 861,384
Long-term debt.................................................... 2,032,064 2,191,737
Other long-term liabilities
Reserve for postretirement benefits............................. 368,868 387,038
Deferred tax liabilities........................................ 73,307 45,625
Other........................................................... 228,521 224,108
---------- ----------
Total liabilities....................................... 3,441,806 3,709,892
Commitments and contingencies
Exchangeable preferred stock...................................... 133,176 --
Stockholders' deficit
Common stock, $.01 par value, 200,000,000 shares authorized;
59,021,468 shares issued and outstanding in 1992, 59,645,838
in 1993...................................................... 590 596
Capital surplus................................................. 191,997 188,387
Subscriptions receivable........................................ (3,316) (2,588)
ESOP shares..................................................... (9,527) (4,331)
Accumulated deficit............................................. (541,436) (750,003)
Foreign currency translation effects............................ (86,872) (149,220)
Minimum pension liability adjustment............................ -- (5,654)
---------- ----------
Total stockholders' deficit............................. (448,564) (722,813)
---------- ----------
$3,126,418 $2,987,079
========== ==========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 103

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOREIGN
SUB- CURRENCY
CAPITAL SCRIPTIONS ESOP ACCUMULATED TRANSLATION
SURPLUS RECEIVABLE SHARES DEFICIT EFFECTS
-------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1990..... $216,041 $ (5,055) $(22,084) $(341,025) $ (48,549)
Net loss -- Year 1991.......... -- -- -- (143,173) --
Common stock repurchased....... (17,809) -- -- -- --
Common stock issued............ 6,010 -- -- -- --
Payments on subscriptions...... -- 1,086 -- -- --
ESOP shares allocated to
employees................... 12,928 -- 7,045 -- --
Stock dividend on exchangeable
preferred stock............. (13,855) -- -- -- --
Foreign currency translation... -- -- -- -- (2,147)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1991..... 203,315 (3,969) (15,039) (484,198) (50,696)
Net loss -- Year 1992.......... -- -- -- (57,238) --
Common stock repurchased....... (13,130) -- -- -- --
Common stock issued............ 3,103 -- -- -- --
Payments on subscriptions...... -- 653 -- -- --
ESOP shares allocated to
employees................... 14,416 -- 5,512 -- --
Stock dividend on exchangeable
preferred stock............. (15,707) -- -- -- --
Foreign currency translation... -- -- -- -- (36,176)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1992..... 191,997 (3,316) (9,527) (541,436) (86,872)
Net loss -- Year 1993.......... -- -- -- (208,567) --
Common stock repurchased....... (16,665) -- -- -- --
Common stock issued............ 4,585 -- -- -- --
Payments on subscriptions...... -- 728 -- -- --
ESOP shares allocated to
employees................... 17,094 -- 5,196 -- --
Stock dividend on exchangeable
preferred stock............. (8,624) -- -- -- --
Foreign currency translation... -- -- -- -- (62,348)
-------- ---------- -------- ----------- -----------
Balance at December 31, 1993..... $188,387 $ (2,588) $ (4,331) $(750,003) $ (149,220)
========= ========= ========= ========== ==========
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 104

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1991 1992 1993
--------- --------- ---------
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities:
Loss before extraordinary loss and cumulative effects of
changes in accounting methods.............................. $(110,882) $ (57,238) $(116,635)
Loss on Tyler Refrigeration sale............................. 22,391 -- --
Depreciation................................................. 107,153 111,643 106,041
Amortization of goodwill..................................... 33,036 33,064 30,807
Non-cash interest............................................ 56,859 65,527 65,031
Non-cash stock compensation.................................. 25,980 23,076 25,679
Amortization of debt issuance costs.......................... 5,335 5,983 11,461
Loss (gain) on sale of fixed assets.......................... (2,736) (660) 2,963
Changes in assets and liabilities:
Accounts receivable........................................ 2,615 (20,081) (48,680)
Inventories................................................ 60,364 44,163 47,321
Accounts payable and accrued payrolls...................... 49,516 (8,308) 40,124
Postretirement benefits.................................... 14,273 22,074 22,687
Income taxes............................................... (53,708) (48,974) (4,232)
Other long-term liabilities................................ 23,334 3,805 13,271
Other, net................................................. 7,211 (428) 5,003
--------- --------- ---------
Net cash provided by operating activities...................... $ 240,741 $ 173,646 $ 200,841
--------- --------- ---------
Investing activities:
Purchases of property, plant and equipment................... $ (90,713) $ (87,409) $ (90,474)
Investments in affiliated companies.......................... (19,734) (20,608) (7,556)
Cash of subsidiaries consolidated............................ -- 10,703 4,514
Proceeds from disposals of property, plant and equipment..... 12,703 11,133 4,003
Investment in Tyler Holdings preferred stock................. (2,780) -- --
Net proceeds from asset sales................................ 81,470 -- --
--------- --------- ---------
Net cash used by investing activities.......................... (19,054) (86,181) (89,513)
--------- --------- ---------
Financing activities:
Proceeds from issuance of notes and debentures............... -- 388,750 650,000
Proceeds from Term Loans..................................... -- -- 750,000
Repayment of Term Loans...................................... (159,629) (448,664) (454,630)
Redemptions of debentures.................................... -- (5,000) (915,851)
Premiums on redemption of debentures......................... -- -- (44,866)
Proceeds of Revolving Credit Facility........................ -- -- 7,000
Net change in short-term debt................................ (3,741) 41,675 (61,600)
Proceeds of other long-term debt............................. 40,023 5,409 5,557
Payments on other long-term debt............................. (35,309) (36,395) (12,642)
Common stock repurchased in Tyler Refrigeration sale......... (2,545) -- --
ESOP stock repurchases....................................... (10,142) (5,950) (7,194)
Common stock repurchases..................................... (4,919) (5,000) (5,000)
Payments on stock subscriptions receivable................... 616 653 482
Purchase of untendered shares related to acquisition......... (1,455) (959) (690)
Other financing costs........................................ -- (9,591) (76,554)
--------- --------- ---------
Net cash used by financing activities.......................... (177,101) (75,072) (165,988)
--------- --------- ---------
Increase in cash and certificates of deposit excluding
translation effects.......................................... 44,586 12,393 (54,660)
Effect of exchange rate changes on cash and certificates of
deposit...................................................... (246) (6,234) (3,652)
--------- --------- ---------
Net increase (decrease) in cash and certificates of deposit.... 44,340 6,159 (58,312)
Cash and certificates of deposit at beginning of period........ 61,050 105,390 111,549
--------- --------- ---------
Cash and certificates of deposit at end of period.............. $ 105,390 $ 111,549 $ 53,237
========= ========= =========
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE> 105

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION

American Standard Companies Inc. (the "Company") is a Delaware corporation
that was formed in 1988 by an affiliate of Kelso & Company L.P. ("Kelso"), an
investment banking firm that specializes in leveraged buyouts. On March 21,
1988, the Kelso affiliate commenced a tender offer (the "Tender Offer") for all
of the common stock of American Standard Inc. at $78 per share in cash. On April
27, 1988, the Kelso affiliate completed the Tender Offer with the purchase of
approximately 95% of the shares of American Standard Inc.

Pursuant to an Agreement and Plan of Merger, a merger was consummated (the
"Merger") on June 29, 1988, whereby American Standard Inc. became a wholly owned
subsidiary of the Company. At that time the remaining shares of American
Standard Inc.'s common stock were converted into the right to receive cash of
$78 per share. Hereinafter "American Standard" or "the Company" will refer to
the Company or to the Company and American Standard Inc. including its
subsidiaries, as the context requires. The Tender Offer, Merger, and related
transactions are hereinafter referred to as the "Acquisition." For financial
statement purposes the Acquisition has been accounted for under the purchase
method.

NOTE 2. ACCOUNTING POLICIES

Consolidation

The financial statements include on a consolidated basis the results of all
majority-owned subsidiaries. All material intercompany transactions are
eliminated. Investments in affiliated companies are included at cost plus the
Company's equity in their net results.

Translation of Foreign Financial Statements

Assets and liabilities of most foreign operations are translated at
year-end rates of exchange, and the income statements are translated at the
average rates of exchange for the period. Gains or losses resulting from
translating foreign currency financial statements are accumulated in a separate
component of stockholder's equity until the entity is sold or substantially
liquidated.

Gains or losses resulting from foreign currency transactions (transactions
denominated in a currency other than the entity's local currency) are included
in net income. For operations in countries that have high rates of inflation,
net income includes gains and losses from translating assets and liabilities at
year-end rates of exchange, except for inventories and facilities, which are
translated at historical rates.

Revenue Recognition

Sales are recorded when shipment to a customer occurs.

Statement of Cash Flows

Cash and certificates of deposit include all highly liquid investments with
an original maturity of three months or less.

Inventories

Inventory costs are determined by the use of the last-in, first-out (LIFO)
method on a worldwide basis, and inventories are stated at the lower of such
cost or realizable value.

F-8
<PAGE> 106

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Facilities

The Company capitalizes costs, including interest during construction, of
fixed asset additions, improvements, and betterments that add to productive
capacity or extend the asset life. Maintenance and repair expenditures are
charged against income. Significant foreign investment grants are amortized into
income over the period of benefit.

Goodwill

Goodwill is being amortized over 40 years. In connection with its Employee
Stock Ownership Plan, the Company obtains an annual valuation of its businesses.
The results of such valuation are compared to the net book value of the
Company's operating segments including an allocated portion of goodwill and
debt. To date, such comparisons have indicated no impairment to the carrying
value of goodwill.

Debt Issuance Costs

The costs related to the issuance of debt are amortized using the interest
method over the lives of the related debt.

Warranties

The Company provides for estimated warranty costs at the time of sale.
Warranty obligations beyond one year are included in other long-term
liabilities.

The Company changed its method of accounting for revenues from extended
warranty contracts at the beginning of 1991 to conform with the FASB Technical
Bulletin, "Accounting for Separately Priced Extended Warranty and Product
Maintenance Contracts." The bulletin requires the deferral of the revenue from
the sales of such contracts and amortization thereof on a straight-line basis
over the terms of the contracts. The cumulative effect of this accounting change
for all contracts in place as of December 31, 1990, increased the net loss in
1991 by $7 million, net of income tax benefit. The effect on the 1991 net loss,
excluding the cumulative effect upon adoption, was not material.

Leases

The asset values of capitalized leases are included with facilities, and
the associated liabilities are included with long-term debt.

Postretirement Benefits

Postretirement benefits are provided for substantially all employees of the
Company, both in the United States and abroad. In the United States the Company
also provides various postretirement health care and life insurance benefits for
some of its employees. Effective January 1, 1991, such costs are calculated in
accordance with Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("FAS 106").

Depreciation

Depreciation and amortization are computed on the straight-line method
based on the estimated useful life of the asset or asset group.

F-9
<PAGE> 107

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Research and Development Expenses

Research and development costs are expensed as incurred except for costs
incurred (after technological feasibility is established) for computer software
products expected to be sold. The Company expensed costs of approximately $36
million in 1991, $40 million in 1992, and $41 million in 1993 for research
activities and product development. Computer software product development costs
capitalized in 1993 amounted to $2 million.

Income Taxes

In 1991 the Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("FAS 109"), and elected to apply the
provisions retroactively to January 1, 1989.

The Company recognizes deferred tax assets for the tax effects of items
that will be deducted for tax purposes in later years together with the tax
effects of income items included in current reporting for tax purposes but in
later years for financial statement purposes and the effects of certain tax
attributes such as net operating losses.

The Company provides for United States income taxes and foreign withholding
taxes on foreign earnings expected to be repatriated. Deferred tax liabilities
are provided on the excess of the financial statement basis over the tax basis
of certain assets, primarily for inventories and fixed assets, including fair
value adjustments resulting from purchase accounting in connection with the
Acquisition; fixed assets due to accelerated depreciation deductions for tax
purposes; and non-permanent investments in certain foreign subsidiaries.

Earnings per share

Earnings per share have been computed using the weighted average number of
common shares outstanding. All share amounts and earnings per share data have
been adjusted to reflect the 2.5 to 1 stock split effected in December 1994.

Financial Instruments with Off-Balance-Sheet Risk

The Company from time to time enters into foreign currency exchange
agreements in the management of foreign currency exposure. Gains and losses from
exchange rate changes are included in income unless the contract hedges a net
investment in a foreign entity or a firm commitment, in which case gains and
losses are deferred as a component of foreign currency translation effects in
stockholder's equity or included as a component of the transaction.

NOTE 3. POSTRETIREMENT BENEFITS

The Company sponsors postretirement benefit plans covering substantially
all employees, including an Employee Stock Ownership Plan (the "ESOP") for the
Company's U.S. salaried employees and certain U.S. hourly employees. In 1988 in
conjunction with the Acquisition the ESOP purchased 12,500,000 shares (adjusted
for the 100 to 1 stock split in 1990 and 2.5 to 1 split in 1994) of common stock
of the Company. The ESOP is an individual account, defined contribution plan.
The valuation of the ESOP shares is determined by independent appraisals. The
common stock acquired by the ESOP is being allocated to the accounts of eligible
employees over a period not exceeding eight plan years, including basic
allocation of 3% of covered compensation and a matching Company contribution of
up to 6% of covered compensation invested in the Company's savings plan by
employees.

F-10
<PAGE> 108

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Pension plan benefits are generally based on years of service and
employees' compensation during the last years of employment. In the United
States the Company also provides various postretirement health care and life
insurance benefits for some of its employees. Funding decisions are based upon
the tax and statutory considerations in each country. Accretion expense is the
implicit interest cost associated with amounts accrued and not funded and is
included in "other expense". At December 31, 1993, funded plan assets related to
pensions were held primarily in fixed income and equity funds. Postretirement
health and life insurance benefits are not prefunded.

Effective January 1, 1991, the Company changed its method of accounting for
postretirement benefits other than pensions to conform with FAS 106. The
cumulative effect of this change increased the recorded obligation for such
benefits by $40 million, thereby increasing the net loss in 1991 by $25 million
(net of the related income tax benefit). The effect of the change on the 1991
net loss, excluding the cumulative effect upon adoption, was not material.

F-11
<PAGE> 109

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the Company's postretirement plans' funded
status and amounts recognized in the balance sheet at December 31, 1992 and
1993.

<TABLE>
<CAPTION>
1992 1993
------------------------------------- -------------------------------------
ASSETS IN ACCUMULATED ASSETS IN ACCUMULATED
EXCESS OF BENEFIT HEALTH EXCESS OF BENEFIT HEALTH
ACCUMULATED OBLIGATIONS AND LIFE ACCUMULATED OBLIGATIONS AND LIFE
BENEFIT IN EXCESS INSURANCE BENEFIT IN EXCESS INSURANCE
OBLIGATIONS OF ASSETS BENEFITS OBLIGATIONS OF ASSETS BENEFITS
----------- ----------- --------- ----------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value
of benefit obligations:
Vested................. $ 92.0 $ 466.8 $ 105.2 $ 511.1
Non-vested............. 4.0 28.3 4.5 30.4
----------- ----------- ----------- -----------
Accumulated benefit
obligations............ 96.0 495.1 109.7 541.5
Additional amounts
related to projected
pay increases.......... 10.8 48.1 12.1 46.0
----------- ----------- ----------- -----------
Total projected benefit
obligations............ 106.8 543.2 $ 167.5 121.8 587.5 $ 175.4
----------- ----------- --------- ----------- ----------- ---------
Assets and book reserves
relating to such
benefits:
Market value of funded
assets.............. 141.7 292.1 -- 166.9 303.8 --
Reserve (asset) for
post-retirement
benefits net of
recognized
overfunding......... (38.9) 254.8 151.8 (36.8) 257.7 154.9
Additional minimum
liability........... -- -- -- -- 19.0 --
----------- ----------- --------- ----------- ----------- ---------
102.8 546.9 151.8 130.1 580.5 154.9
----------- ----------- --------- ----------- ----------- ---------
Assets and book reserves
in excess of (less
than) projected benefit
obligations............ $ (4.0) $ 3.7 $ (15.7) $ 8.3 $ (7.0) $ (20.5)
========== ========== ======== ========== ========== ========
Consisting of:
Unrecognized prior
service benefit
(cost).............. $ (6.3) $ (3.9) $ -- $ (6.6) $ 3.4 $ 10.3
Unrecognized net gain
(loss) from
actuarial
experience.......... 2.3 7.6 (15.7) 14.9 (16.0) (30.8)
Pension liability
adjustment to
stockholders'
equity.............. -- -- -- -- 5.6 --
----------- ----------- --------- ----------- ----------- ---------
$ (4.0) $ 3.7 $ (15.7) $ 8.3 $ (7.0) $ (20.5)
========== ========== ======== ========== ========== ========
</TABLE>

At December 31, 1993, the projected benefit obligation related to health
and life insurance benefits for active employees was $53.6 million and for
retirees was $121.8 million.

F-12
<PAGE> 110

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The weighted-average annual assumed rate of increase in the health care
cost trend rate is 10% for 1994 and is assumed to decrease gradually to 5% for
1999 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example, a
change in the assumed rate of one percentage point for each future year would
change the accumulated postretirement benefit obligation as of December 31,
1993, by $14.5 million and the annual postretirement cost by $1.9 million.

At December 31, 1993, the Company recognized an additional minimum
liability amounting to $19 million for certain plans, which is reflected in the
reserve for postretirement benefits. The minimum liability is the excess of the
accumulated obligation over plan assets and book reserves. In addition, the
Company has offset the additional liability by recording an intangible asset of
$13.4 million, to the extent of unrecognized prior service cost, and a charge to
stockholder's equity of $5.6 million.

The projected benefit obligation for postretirement benefits was determined
using the assumptions in the following table:

<TABLE>
<CAPTION>
1992 1993
------------------------- ------------------------
DOMESTIC FOREIGN DOMESTIC FOREIGN
-------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Discount rate......................... 8.50% 7.00%-10.00% 7.25% 4.50%-8.50%
Long-term rate of inflation........... 4.50% 2.50%-6.00% 2.80% .50%-5.00%
Merit and promotional increase........ 1.70% 2.00% 1.70% 1.50%
Rate of return on plan assets......... 8.75% 7.25%-10.25% 8.75% 6.25%-9.50%
</TABLE>

Postretirement cost had the following components:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1991 1992 1993
--------------------- --------------------- ---------------------
HEALTH & HEALTH & HEALTH &
PENSION LIFE INS. PENSION LIFE INS. PENSION LIFE INS.
BENEFITS BENEFITS BENEFITS BENEFITS BENEFITS BENEFITS
-------- --------- -------- --------- -------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during
the period........................ $ 20.7 $ 2.6 $ 21.7 $ 3.0 $ 20.1 $ 3.4
Interest cost on the projected
benefit
obligation........................ 49.2 12.6 50.4 13.7 50.6 14.1
Less assumed return on plan assets:
Actual return on plan assets...... (71.3) -- (35.7) -- (78.8) --
Excess (shortfall) deferred....... 33.2 -- (2.6) -- 42.9 --
-------- --------- -------- --------- -------- ---------
(38.1) -- (38.3) -- (35.9) --
Other, incl. amortization of prior
service cost...................... .6 -- 1.6 -- 2.7 .3
-------- --------- -------- --------- -------- ---------
Defined benefit plan cost........... $ 32.4 $15.2 $ 35.4 $16.7 $ 37.5 $17.8
======= ======= ======= ======= ======= =======
Accretion expense reclassified to
"other expense"................... $ 15.3 $12.6 $ 16.1 $13.7 $ 16.4 $14.1
======= ======= ======= ======= ======= =======
</TABLE>

- ---------------
* Excludes the cumulative effect of adoption of FAS 106 of $39.7 million.

F-13
<PAGE> 111

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total postretirement costs were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1991 1992 1993
----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pension benefits........................................... $32.4 $35.4 $37.5
Health and life insurance benefits......................... 15.2 16.7 17.8
----- ----- -----
Defined benefit plan cost.................................. 47.6 52.1 55.3
Defined contribution plan cost(a).......................... 20.0 20.4 22.4
----- ----- -----
Total postretirement cost, including accretion expense..... $67.6 $72.5 $77.7
===== ===== =====
</TABLE>

- ---------------
(a) Principally ESOP cost.

NOTE 4. OTHER EXPENSE

Other income (expense) was as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1991 1992 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Interest income........................................ $ 8.3 $ 8.7 $ 8.5
Royalties.............................................. 2.5 3.8 2.6
Equity in net income (loss) of affiliated companies.... 10.2 4.9 (0.1)
Minority interest...................................... (3.1) (9.8) (14.0)
Accretion expense...................................... (27.9) (29.8) (30.5)
Other, net............................................. 1.9 (2.5) (4.8)
------ ------ ------
$ (8.1) $(24.7) $(38.3)
====== ====== ======
</TABLE>

The decrease in equity in net income of affiliated companies and the
increase in minority interest in 1993 and 1992 compared with 1991 were primarily
the result of consolidation of the plumbing companies in Thailand, the People's
Republic of China, and Incesa, previously unconsolidated joint ventures.

F-14
<PAGE> 112

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. INCOME TAXES

The Company's loss before income taxes, extraordinary loss, and cumulative
effects of changes in accounting methods ("pre-tax income (loss)") and the
applicable provision (benefit) for income taxes were:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1991 1992 1993
------- ------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Pre-tax income (loss):
Domestic.......................................... $(272.6) $(170.1) $(223.2)
Foreign........................................... 184.8 117.5 142.7
------- ------- -------
Pre-tax loss.............................. (87.8) (52.6) (80.5)
Provision (benefit) for income taxes:
Current:
Domestic....................................... 5.1 5.1 12.4
Foreign........................................ 71.3 63.0 43.0
------- ------- -------
76.4 68.1 55.4
Deferred:
Domestic....................................... (52.4) (35.8) 1.1
Foreign........................................ (1.0) (27.6) (20.3)
------- ------- -------
(53.4) (63.4) (19.2)
------- ------- -------
Total provision........................... $ 23.0 $ 4.7 $ 36.2
======== ======== ========
</TABLE>

A reconciliation between the actual income tax expense provided and the
income tax benefit computed by applying the statutory federal income tax rate of
35% in 1993 and 34% in 1992 and 1991 to the pre-tax loss is as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1991 1992 1993
------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Tax benefit at statutory rate.......................... $(29.9) $(17.9) $(28.2)
Nondeductible goodwill charged to operations........... 10.6 10.5 10.4
Nondeductible goodwill related to operations sold...... 25.1* --
Nondeductible ESOP allocations......................... 4.6 4.9 6.1
Rate differences and withholding taxes related to
foreign operations................................... 4.7 1.4 9.0
Foreign exchange gains................................. (2.1) (6.3) (7.0)
State tax benefits..................................... (3.4) (3.3) (5.5)
Other, net............................................. 5.6 5.5 8.7
Increase in valuation allowance........................ 7.8 9.9 42.7
------ ------ ------
Total provision........................................ $ 23.0 $ 4.7 $ 36.2
====== ====== ======
</TABLE>

- ---------------
* Includes goodwill eliminated in the sale of Tyler Refrigeration.

In addition to the 1993 valuation allowance increase of $42.7 million shown
above, a valuation allowance of $32.1 million was also provided for the entire
amount of the tax benefit related to the

F-15
<PAGE> 113

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

extraordinary loss on retirement of debt (see Note 8 of Notes to Consolidated
Financial Statements).

The following table details the gross deferred liabilities and the gross
deferred tax assets and the related valuation allowances.

<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1992 1993
------- ------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Deferred tax liabilities:
Facilities (accelerated depreciation, capitalized interest and
purchase accounting differences)........................... $ 154.1 $141.1
Inventory (LIFO and purchase accounting differences).......... 30.3 18.5
Employee benefits............................................. 6.6 11.0
Foreign investments........................................... 48.8 50.1
Other......................................................... 26.6 26.2
------- ------
266.4 246.9
------- ------
Deferred tax assets:............................................
Employee benefits (pensions and other postretirement
benefits).................................................. 97.7 110.7
Warranties.................................................... 30.0 37.4
Alternative minimum tax....................................... 21.8 19.4
Foreign tax credits and net operating losses.................. 42.3 57.5
Reserves...................................................... 45.1 58.7
Other......................................................... 18.5 46.0
Valuation allowances.......................................... (29.1) (103.9)
------- ------
226.3 225.8
------- ------
Net deferred tax liabilities.................................. $ 40.1 $ 21.1
======== ======
</TABLE>

Deferred tax assets related to foreign tax credits, net operating loss
carryforwards, and future tax deductions have been reduced by a valuation
allowance since realization is dependent in part on the generation of future
foreign source income as well as on income in the legal entity which gave rise
to tax losses. Other deferred tax assets have not been reduced by valuation
allowances because of carrybacks and existing deferred tax credits which reverse
in the carryforward period. The foreign tax credits and net operating losses are
available for utilization in future years. In some tax jurisdictions the
carryforward period is limited to as little as five years; in others it is
unlimited.

As a result of the Acquisition (see Note 1) and the allocation of purchase
accounting (principally goodwill) to foreign subsidiaries, the book basis in the
net assets of the foreign subsidiaries exceeds the related U.S. tax basis in the
subsidiaries' stock. Such investments are considered permanent in duration, and
accordingly no deferred taxes have been provided on such differences, which are
significant. It is impracticable because of the complex legal structure of the
Company and the numerous tax jurisdictions in which the Company operates to
determine such deferred taxes.

Cash taxes paid were $79 million, $56 million, and $41 million in the years
1991, 1992, and 1993, respectively.

In connection with examinations of the tax returns of the Company's German
subsidiaries for the years 1984 through 1990, the German tax authorities have
raised questions regarding the

F-16
<PAGE> 114

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

treatment of certain significant matters. The Company has paid approximately $20
million of a disputed German income tax. A suit is pending to obtain a refund of
this tax. The Company anticipates that the German tax authorities may propose
other adjustments resulting in additional taxes of approximately $105 million
(principally relating to the 1988 to 1990 period), plus interest, for the tax
return years under audit. In addition, significant transactions similar to those
which gave rise to such possible adjustments occurred in years subsequent to
1990. In addition, significant transactions similar to those which gave rise to
the possible adjustments referred to above occurred in years subsequent to 1990.
If the German tax authorities should propose adjustments for the 1988-1990
period, they might, after future tax audits, propose tax adjustments that are
comparable for years 1991 to 1993. The Company, on the basis of the opinion of
German legal counsel, believes the tax returns are substantially correct as
filed and any such adjustments would be inappropriate, and intends to vigorously
contest any adjustments which have been or may be assessed. Accordingly, the
Company had not recorded any loss contingency at December 31, 1993 with respect
to such matters.

Under German tax law, if an assessment is made for the years presently
under audit, the authorities may demand immediate payment of the amount assessed
prior to final resolution of the issues. The Company however, believes, on the
basis of opinion of German legal counsel, that it is highly likely that a
suspension of payment pending final resolution would be obtained. If immediate
payment were required, the Company expects that it will be able to make such
payment from available sources of liquidity or credit support but that future
cash flows and capital expenditures and therefore subsequent results of
operations for any particular quarterly or annual period could be adversely
affected.

NOTE 6. INVENTORIES

The components of inventory are as follows:

<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1992 1993
------- -------
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Finished products.............................................. $ 200.6 $ 169.0
Products in process............................................ 95.8 78.0
Raw materials.................................................. 88.5 78.8
------- -------
Inventory at cost............................................ $ 384.9 $ 325.8
====== ======
</TABLE>

The carrying cost of inventories approximates current cost as a result of
purchase accounting adjustments being offset by LIFO reserves.

F-17
<PAGE> 115

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7. FACILITIES

The components of facilities, at cost, are as follows:

<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1992 1993
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Land.......................................................... $ 65.0 $ 66.2
Buildings..................................................... 310.2 314.6
Machinery and equipment....................................... 719.4 739.9
Improvements in progress...................................... 45.6 54.4
--------- ---------
Gross facilities.............................................. 1,140.2 1,175.1
Less: accumulated depreciation................................ 307.4 354.6
--------- ---------
Net facilities................................................ $ 832.8 $ 820.5
======== ========
</TABLE>

NOTE 8. DEBT

The 1993 Refinancing

In July 1993 the Company completed a refinancing (the "1993 Refinancing")
that included (a) the issuance of $200 million principal amount of 9 7/8% Senior
Subordinated Notes Due 2001; (b) the issuance of approximately $751 million
principal amount of 10 1/2% Senior Subordinated Discount Debentures Due 2005,
which yielded proceeds of approximately $450 million; (c) the amendment and
restatement of the Company's 1988 Credit Agreement (the "1988 Credit Agreement"
and as so amended and restated, the "Existing Credit Agreement") to establish a
$1 billion secured, multi-currency, multi-borrower credit facility; and (d) the
application of the proceeds of such issuances and such borrowings as follows:
(i) the redemption on July 1, 1993, of all of the outstanding 12 7/8% Senior
Subordinated Debentures Due 2000 (the "12 7/8% Senior Subordinated Debentures")
at a redemption price of 104.83% ($571.3 million), (ii) the redemption on July
2, 1993, of a majority of the outstanding 14 1/4% Subordinated Discount
Debentures Due 2003 (the "14 1/4% Subordinated Discount Debentures") at a
redemption price of 105% ($389.5 million), (iii) the refunding of bank
borrowings ($405 million of term loans and $77 million of other bank debt
including revolving credit debt), (iv) the refunding of letters of credit ($58
million), and (v) payment of related fees and expenses.

The Existing Credit Agreement provided to American Standard Inc. and
certain subsidiaries (the "Borrowers") a $1 billion facility as follows: (a) a
$250 million multi-currency revolving credit facility (the "Revolving Credit
Facility") available to all Borrowers, which expires in 2000; (b) a $225 million
multi-currency periodic access facility (the "Periodic Access Facility")
available to all Borrowers, which expires in 2000; and (c) three term loan
facilities (the "Term Loans") consisting of a $225 million U.S. dollar facility
("Tranche A") available to American Standard Inc., which expires in 2000; a $200
million Deutschemark facility ("Tranche B") available to a German subsidiary,
which expires in 1997; and a $100 million U.S. dollar facility ("Tranche C")
available to all Borrowers, which expires in 1999. In August 1993 the Company
repaid $50 million and the amount available under the Existing Credit Agreement
by its terms was reduced to $950 million.

Borrowings under the Periodic Access Facility and the Term Loans generally
bear interest at the London interbank offered rate ("LIBOR") plus 2 1/2% except
for the $225 million U.S. dollar facility, which bears interest at LIBOR plus
3%, and the $200 million Deutschemark facility, which bears

F-18
<PAGE> 116

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

interest at LIBOR plus 2%. The Company pays a commitment fee of 0.5% per annum
on the unused portion of the Revolving Credit Facility and a fee of 2.5% plus
issuance fees for letters of credit.

As a result of the 1993 Refinancing, results for the year ended December
31, 1993, included an extraordinary charge of $92 million related to the debt
retired (including call premiums, the write-off of deferred debt issuance costs,
and loss on cancellation of foreign currency swap contracts) on which there was
no tax benefit (see Note 5).

Short-term

The Revolving Credit Facility (the "Revolver") provides for aggregate
borrowings of up to $250 million for working capital purposes, of which up to
$200 million may be used for the issuance of letters of credit and $40 million
of which is available for same-day short-term borrowings ("Swingline Loans"). At
December 31, 1993, there were $7 million of borrowings outstanding under the
Revolver and $66 million of letters of credit. Availability under the Revolver
at December 31, 1993, was $177 million. Average borrowings under this facility
and under the revolving credit facility available under the previous 1988 Credit
Agreement for 1993, 1992, and 1991 were $39 million, $14 million, and $44
million, respectively. The Revolver and the Swingline Loans bear interest at the
prime rate plus 1 1/2% or LIBOR plus 2 1/2%.

The Company is required to reduce to $50 million the amount of borrowings
outstanding under the Revolver for at least 30 consecutive days in each 12-month
period ending May 31. In December 1993 the Company met this requirement for the
12-month period ending May 31, 1994. Commencing August 31, 1994, the Revolver is
reduced by $8.3 million annually, with a final maturity on June 1, 2000. In
addition, the Company is required to repay the full amount of each of its
outstanding revolving loans at the end of each interest period (a maximum of six
months). The Company may, however, immediately reborrow such amounts subject to
compliance with applicable conditions of the Existing Credit Agreement.

Other short-term borrowings are available outside the United States under
informal credit facilities and are typically a result of overdrafts. At December
31, 1993, the Company had $31 million of such foreign short-term debt
outstanding at an average interest rate of 11% per annum. The Company also had
an additional $50 million of unused foreign facilities. These facilities may be
withdrawn by the banks at any time.

F-19
<PAGE> 117

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Long-term

Long-term debt was as follows:

<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1993
1992 -
--------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Existing Credit Agreement................................... $ -- $ 689.9
1988 Credit Agreement....................................... 402.3 --
9 1/4% sinking fund debentures, due in installments from
1997 to 2016.............................................. 150.0 150.0
10 7/8% senior notes due 1999............................... 150.0 150.0
11 3/8% senior debentures due 2004.......................... 250.0 250.0
9 7/8% senior subordinated notes due 2001................... -- 200.0
10 1/2% senior subordinated discount debentures (net of
unamortized discount of $272.9 million in 1993) due in
installments from 2003
to 2005................................................... -- 477.8
12 7/8% senior subordinated debentures...................... 545.0 --
14 1/4% subordinated discount debentures (net of unamortized
discount of $36.3 million in 1992) due in installments
from 2002 to 2003......................................... 509.5 175.0
Other long-term debt........................................ 53.3 63.1
12 3/4% junior subordinated debentures due in installments
from 2001
to 2003 (Note 9).......................................... -- 141.8
Foreign currency swap contracts............................. (14.6) --
-------- --------
2,045.5 2,297.6
Less current maturities..................................... 13.4 105.9
-------- --------
$2,032.1 $2,191.7
======== ========
</TABLE>

The amounts of long-term debt maturing from 1995 through 1998 are:
1995-$126.3 million, 1996-$123.5 million, 1997-$121.2 million, 1998-$117.5
million.

Interest costs capitalized as part of the cost of constructing facilities
for the years ended December 31, 1991, 1992, and 1993, were $3.6 million, $3.1
million, and $2.7 million, respectively. Cash interest paid for those same years
on all outstanding indebtedness amounted to $224 million, $210 million, and $198
million, respectively.

F-20
<PAGE> 118

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Existing Credit Agreement loans, maturities, and effective weighted average
interest rates in effect at December 31, 1993, were as follows:

<TABLE>
<CAPTION>
U.S. DOLLAR
EQUIVALENT
-------------
(IN MILLIONS)
<S> <C>
Periodic Access Facility, due in semi-annual installments from February
1994 to February 2000:
British sterling loans at 7.85%....................................... $ 95.8
Deutschemark loans at 9.06%........................................... 49.4
Canadian dollar loans at 6.50%........................................ 20.2
French franc loans at 9.17%........................................... 18.5
Italian lira loans at 12.19%.......................................... 8.7
-------------
Total Periodic Access loans................................... 192.6
-------------
Term Loans:
Tranche A U.S. dollar loans, due in semi-annual installments from
August 1997 to February 2000 at 6.50%.............................. 225.0
Tranche B Deutschemark loans, due in semi-annual installments from
February 1994 to February 1997 at 7.88%............................ 172.3
Tranche C U.S. dollar loans, due in semi-annual installments from
February 1994 to August 1999 at 6.01%.............................. 100.0
-------------
Total Term Loans.............................................. 497.3
-------------
Total Credit Agreement long-term loans.................................. 689.9
Revolver loans at 7.5%.................................................. 7.0
-------------
Total Credit Agreement loans.................................. $ 696.9
==========
</TABLE>

Under the 1988 Credit Agreement the various term loans and effective
weighted average interest rates in effect at December 31, 1992, were as follows:

<TABLE>
<CAPTION>
U.S. DOLLAR
EQUIVALENT
-------------
(IN MILLIONS)
<S> <C>
Deutschemark loans at 11.4%............................................. $ 249.8
Canadian dollar loans at 13.05%......................................... 152.5
-------------
Total......................................................... $ 402.3
==========
</TABLE>

The 9 7/8% Senior Subordinated Notes may be redeemed at the Company's
option, in whole or in part, on and after June 1, 1998, at redemption prices
declining from 102.82% in 1998 to 100% on June 1, 2000, and thereafter. The
10 1/2% Senior Subordinated Discount Debentures may be redeemed at the Company's
option, in whole or in part, on and after June 1, 1998, at redemption prices
declining from 104.66% in 1998 to 100% on June 1, 2002, and thereafter. The
payment of the principal and interest on the 9 7/8% Senior Subordinated Notes
and on the 10 1/2% Senior Subordinated Discount Debentures (together the "Senior
Subordinated Debt") is subordinated in right of payment to the payment when due
of all Senior Debt (as defined in the related indenture) of the Company,
including all indebtedness under the Existing Credit Agreement and the 9 1/4%
Sinking Fund Debentures, the 10 7/8% Senior Notes, and the 11 3/8% Senior
Debentures (the said notes and debentures together the "Senior Securities").

F-21
<PAGE> 119

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The 9 1/4% Sinking Fund Debentures are redeemable at the Company's option,
in whole or in part, at redemption prices declining from 105.55% in 1994 to 100%
in 2006 and thereafter. The 10 7/8% Senior Notes are not redeemable by the
Company. The 11 3/8% Senior Debentures are redeemable at the option of the
Company, in whole or in part, on or after May 15, 1997, at redemption prices
declining from 105.69% in 1997 to 100% on May 15, 2002, and thereafter.

The 14 1/4% Subordinated Discount Debentures are redeemable at the
Company's option, in whole or in part, at redemption prices of 105% prior to
June 30, 1994, declining to 100% on and after June 30, 1995. The payment of the
principal and interest on the 14 1/4% Subordinated Discount Debentures issued by
the Company in 1988 is subordinated in right of payment to the payment when due
of all Senior Debt (as defined in the related indenture) of the Company,
including all indebtedness under the Existing Credit Agreement, the Senior
Securities, and the Senior Subordinated Debt. The 14 1/4% Subordinated Discount
Debentures rank senior to the 12 3/4% Junior Subordinated Debentures (described
below).

The 12 3/4% Junior Subordinated Debentures may be redeemed, at the
Company's option, in whole or in part at a redemption price of 101.8% prior to
June 30, 1994, and at 100% thereafter. The payment of principal and interest on
the 12 3/4% Junior Subordinated Debentures is subordinated in right of payment
to the payment when due of all Senior Debt (as defined in the related indenture)
of the Company, including all indebtedness under the Existing Credit Agreement,
the Senior Securities, the Senior Subordinated Debt, and the 14 1/4%
Subordinated Discount Debentures.

Obligations under the Existing Credit Agreement are guaranteed by the
Company, American Standard Inc. and significant domestic subsidiaries of
American Standard Inc. (with foreign borrowings also guaranteed by certain
foreign subsidiaries) and are secured by U.S., Canadian, and U.K. properties,
plant, and equipment; by liens on receivables, inventories, intellectual
property, and other intangibles; and by a pledge of the stock of American
Standard Inc. and nearly all shares of subsidiary stock. In addition, the
obligations of American Standard Inc. under the Senior Securities are secured,
to the extent required by the related indentures, by mortgages on the principal
U.S. properties of American Standard Inc. equally and ratably with the
indebtedness under the Existing Credit Agreement and certain related
indebtedness.

The Senior Subordinated Debt, the 14 1/4% Subordinated Discount Debentures,
and the 12 3/4% Junior Subordinated Debentures are unsecured.

The Existing Credit Agreement contains various covenants that limit, among
other things, indebtedness, dividends on and redemption of capital stock of the
Company, purchases and redemptions of other indebtedness of the Company
(including its outstanding debentures and notes), rental expense, liens, capital
expenditures, investments or acquisitions, disposal of assets, the use of
proceeds from asset sales, and certain other business activities and require the
Company to meet certain financial tests. In order to maintain compliance with
the covenants and restrictions contained in the 1988 Credit Agreement, the
Company from time to time has had to obtain waivers and amendments. In February
1994 the Company obtained an amendment to the Existing Credit Agreement that
among other things relaxed certain financial tests and covenants and facilitated
the investment in an air conditioning joint venture and the formation of a
holding company to establish joint ventures in the People's Republic of China
for the manufacture and sale of plumbing products. The Company currently
believes it will comply with the amended financial tests and covenants but may
have to obtain similar waivers or amendments in the future.

The indentures related to the Company's debentures and notes contain
various covenants which, among other things, limit debt and preferred stock of
the Company and its subsidiaries,

F-22
<PAGE> 120

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

dividends on and redemption of capital stock of the Company and its
subsidiaries, redemption of certain subordinated obligations of the Company, the
use of proceeds from asset sales, and certain other business activities.

NOTE 9. EXCHANGE OF EXCHANGEABLE PREFERRED STOCK

On June 30, 1993, in exchange for all of the Company's outstanding shares
of 12 3/4% Exchangeable Preferred Stock, the Company issued $141.8 million of
12 3/4% Junior Subordinated Debentures Due 2003 to the holder of the
Exchangeable Preferred Stock. Those debentures were sold by the holder in a
registered public offering in August 1993. The Company received none of the
proceeds of this offering.

NOTE 10. FOREIGN CURRENCY TRANSLATION

Assets and liabilities of most foreign operations are translated at
year-end rates of exchange, and the resulting gains or losses, net of income tax
effects, are accumulated in a separate component of stockholder's equity.

Changes in exchange rates which gave rise to significant translation
effects included in stockholder's equity for the years ended December 31, 1991,
1992, and 1993, are summarized in the accompanying table.

<TABLE>
<CAPTION>
CHANGE IN END OF
PERIOD EXCHANGE RATE
---------------------------
1991 1992 1993
----- ------ ------
<S> <C> <C> <C>
British sterling........................................ (3)% (19)% (2)%
Canadian dollar......................................... -- (9) (4)
French franc............................................ (2) (6) (6)
Deutschemark............................................ (1) (6) (7)
Italian lira............................................ (2) (22) (14)
===== ====== ======
Translation loss included in stockholder's equity, net
of tax (dollars in millions).......................... $(2.1) $(36.2) $(62.3)
===== ====== ======
</TABLE>

The allocation of purchase costs increased the net asset exposure of
foreign operations; however, since June 29, 1988, the date of the Merger, the
effects of exchange volatility have been ameliorated by the fact that a portion
of the Company's borrowings has been denominated in foreign currencies.

The losses from foreign currency transactions and translation from
operations in countries with high inflation rates reflected in expense were
$14.4 million in 1991, $19.3 million in 1992, and $21.9 million in 1993.

NOTE 11. FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Values of Financial Instruments" ("FAS 107"), requires disclosure
information about all financial instruments of a company except certain excluded
instruments and instruments for which it is not practicable to estimate fair
value. The fair values presented below are estimates as of December 31, 1993,
and are not necessarily indicative of amounts the Company could realize or
settle currently or indicative of the intent or ability of the Company to
dispose of or liquidate such instruments.

F-23
<PAGE> 121

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:

Cash and certificates of deposit: The carrying amount reported in the
balance sheet for cash and certificates of deposit approximates its fair
value.

Long- and short-term debt: The fair values of the Company's Existing
Credit Agreement loans are estimated using indicative market quotes
obtained from a major bank. The fair values of senior notes, senior
debentures, senior subordinated notes, senior subordinated discount
debentures, subordinated discount debentures, the sinking fund debentures,
and the junior subordinated debentures are based on indicative market
quotes obtained from a major securities dealer. The fair values of other
loans approximate their carrying value.

The carrying amounts and estimated fair values of selected financial
instruments at December 31, 1993 are as follows:

<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
-------- -----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
Existing Credit Agreement loans................................... $697 $ 679
10 7/8% Senior notes.............................................. 150 163
11 3/8% senior debentures......................................... 250 276
9 7/8% senior subordinated notes................................. 200 208
10 1/2% senior subordinated discount debentures................... 478 505
14 1/4% subordinated discount debentures.......................... 175 184
9 1/4% sinking fund debentures................................... 150 152
12 3/4% junior subordinated debentures............................ 142 143
Other loans....................................................... 63 63
</TABLE>

NOTE 12. RELATED PARTY TRANSACTIONS

The Company has agreed to pay Kelso an annual fee of $2.75 million for
providing management consulting and advisory services. In June 1993 American
Standard Inc. issued 1,000 shares of a new, non-voting Series A Preferred Stock,
par value $.01 per share, for $10,000 to an affiliate of Kelso & Company. The
Company is committed to contribute $5 million of capital to a Kelso limited
partnership. In addition, Tyler Refrigeration was sold to an affiliate of Kelso
in 1991.

NOTE 13. LEASES

The cumulative minimum rental commitments under the terms of all
noncancellable operating leases in effect at December 31, 1993, were $108
million. Net rental expenses for operating leases were $28 million, $32 million,
and $34 million for the years ended December 31, 1991, 1992, and 1993,
respectively.

NOTE 14. COMMITMENTS AND CONTINGENCIES

The Company and certain of its subsidiaries are parties to a number of
pending legal and tax proceedings. The Company is also subject to federal, state
and local environmental laws and regulations and is involved in environmental
proceedings concerning the investigation and remediation of numerous sites. In
those instances where it is probable that the Company will incur costs from such
proceedings and the amounts can be reasonably determined the Company has
recorded

F-24
<PAGE> 122

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

a liability. The Company believes that these legal, tax, and environmental
proceedings will not have a material adverse effect on its consolidated
financial position, cash flows, or results of operations.

The tax returns of the Company's German subsidiaries are currently under
examination by the German tax authorities (see Note 5).

NOTE 15. SEGMENT DATA

Sales and operating income by geographic location for the years ended
December 31, 1991, 1992, and 1993, are shown on the following page. Identifiable
assets are also shown as at years ended 1991, 1992, and 1993. See "Business" for
a description of each business segment.

F-25
<PAGE> 123

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

SEGMENT DATA
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
SALES
Air Conditioning Products........................................................... $1,836 $1,892 $2,100
Plumbing Products................................................................... 1,018 1,170 1,167
Transportation Products............................................................. 741 730 563
------ ------ ------
Total sales................................................................. $3,595 $3,792 $3,830
------ ------ ------
Geographic distribution:
United States..................................................................... $1,890 $1,877 $2,096
Europe............................................................................ 1,491 1,588 1,315
Other............................................................................. 317 392 483
Eliminations...................................................................... (103) (65) (64)
------ ------ ------
Total sales................................................................. $3,595 $3,792 $3,830
------ ------ ------
OPERATING INCOME
Air Conditioning Products........................................................... $ 55* $ 104 $ 133
Plumbing Products................................................................... 66 108 108
Transportation Products............................................................. 121 88 41
------ ------ ------
Total segment operating income.............................................. $ 242 $ 300 $ 282
------ ------ ------
Geographic distribution:
United States..................................................................... $ 13* $ 96 $ 125
Europe............................................................................ 206 180 118
Other............................................................................. 23 24 39
------ ------ ------
Total operating income...................................................... 242 300 282
Financing and corporate items....................................................... 330 352 363
Loss before income taxes, extraordinary loss, and cumulative effect of changes in
accounting methods................................................................ (88) (52) (81)
Income taxes........................................................................ 23 5 36
------ ------ ------
Loss before extraordinary loss and cumulative effect of changes in accounting
methods........................................................................... $ (111) $ (57) $ (117)
====== ====== ======
</TABLE>

- ---------------
* Includes $22 million loss on the sale of Tyler Refrigeration.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1991 1992 1993
------ ------ ------
<S> <C> <C> <C>
ASSETS
Air Conditioning Products........................................................... $1,174 $1,156 $1,167
Plumbing Products................................................................... 1,069 1,002 960
Transportation Products............................................................. 828 722 652
------ ------ ------
Total identifiable assets................................................... $3,071 $2,880 $2,779
------ ------ ------
Geographic distribution:
United States..................................................................... $1,015 $1,016 $1,013
Europe............................................................................ 1,577 1,370 1,196
Other............................................................................. 479 494 570
------ ------ ------
Total identifiable assets................................................... 3,071 2,880 2,779
Prepaid charges................................................................... 37 51 78
Future income tax benefits........................................................ 8 33 25
Cash and certificates of deposit.................................................. 108 113 54
Corporate assets.................................................................. 46 49 51
------ ------ ------
Total assets................................................................ $3,270 $3,126 $2,987
====== ====== ======
CAPITAL EXPENDITURES
Air Conditioning Products......................................................... $ 46 $ 33 $ 38
Plumbing Products................................................................. 40 48 46
Transportation Products........................................................... 24 27 14
------ ------ ------
Total segment capital expenditures.......................................... $ 110 $ 108 $ 98
====== ====== ======
DEPRECIATION AND AMORTIZATION
Air Conditioning Products......................................................... $ 56 $ 55 $ 53
Plumbing Products................................................................. 48 49 49
Transportation Products........................................................... 34 37 35
------ ------ ------
Total segment depreciation and amortization................................. $ 138 $ 141 $ 137
====== ====== ======
</TABLE>

F-26
<PAGE> 124

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

QUARTERLY DATA
(UNAUDITED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1992
----------------------------------------
FIRST SECOND THIRD FOURTH
------ ------- ------ ------
<S> <C> <C> <C> <C>
Sales............................................... $901.0 $ 995.9 $980.9 $914.1
Cost of sales....................................... 672.0 734.1 742.2 703.9
Income (loss) before income taxes................... (8.1) 11.4 (16.5) (39.3)
Tax provision (benefit)............................. 5.5 9.2 (1.5) (8.5)
------ ------- ------ ------
Net income (loss)......................... $(13.6) $ 2.2 $(15.0) $(30.8)
====== ======== ====== ======
Per share:
Net loss.................................. $ (.30) $ (.03) $ (.32) $ (.60)
====== ======== ====== ======
Average number of common shares (thousands)......... 58,348 58,675 58,668 58,765
</TABLE>

<TABLE>
<CAPTION>
1993
----------------------------------------
FIRST SECOND THIRD FOURTH
------ ------- ------ ------
<S> <C> <C> <C> <C>
Sales............................................... $879.4 $ 995.5 $976.5 $979.1
Cost of sales....................................... 650.5 754.5 727.7 769.9
Income (loss) before income taxes and extraordinary
loss.............................................. (9.5) (28.2) 4.1 (46.9)
Tax provision....................................... 8.1 6.1 7.2 14.8
------ ------- ------ ------
Loss before extraordinary loss...................... (17.6) (34.3) (3.1) (61.7)
Extraordinary loss (Note 8)......................... -- (91.9) -- --
------ ------- ------ ------
Net loss.................................. $(17.6) $(126.2) $ (3.1) $(61.7)
====== ======== ====== ======
Per share:
Loss before extraordinary loss...................... $ (.37) $ (.65) $ (.05) $(1.04)
Extraordinary loss.................................. -- (1.55) -- --
------ ------- ------ ------
Net loss.................................. $ (.37) $ (2.20) $ (.05) $(1.04)
====== ======== ====== ======
Average number of common shares (thousands)......... 59,248 59,390 59,225 59,390
</TABLE>

F-27
<PAGE> 125

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

UNAUDITED SUMMARY STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1993 1994
-------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Sales.......................................................... $2,851.4 $3,308.9
-------- --------
Cost and expenses
Cost of sales............................................. 2,132.7 2,487.1
Selling and administrative expenses....................... 511.9 569.5
Other expense............................................. 26.8 24.9
Interest expense.......................................... 213.6 194.3
-------- --------
2,885.0 3,275.8
Income (loss) before income taxes and extraordinary loss....... (33.6) 33.1
Income taxes................................................... 21.4 46.7
-------- --------
Loss before extraordinary loss................................. (55.0) (13.6)
Extraordinary loss............................................. (91.9) --
-------- --------
Net loss....................................................... (146.9) (13.6)
Preferred stock dividend....................................... (8.6) --
-------- --------
Net loss applicable to common shares........................... $ (155.5) $ (13.6)
======== ========
Loss per common share:
Loss before extraordinary loss............................ $ (1.07) $ (.23)
Extraordinary loss........................................ (1.55) --
-------- --------
Net loss per common share................................. $ (2.62) $ (.23)
======== ========
Average number of outstanding shares and equivalents........... 59,287,348 59,911,525
</TABLE>

See accompanying notes.

F-28
<PAGE> 126

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

UNAUDITED SUMMARY BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30,
1994
-------------
<S> <C>
(DOLLARS IN
MILLIONS)
ASSETS
Current Assets
Cash and certificates of deposit........................................... $ 62.9
Accounts receivable........................................................ 649.6
Inventories
Finished products....................................................... 237.6
Products in process..................................................... 88.0
Raw materials........................................................... 94.9
-------------
420.5
Other current assets....................................................... 59.5
-------------
Total Current Assets.................................................. 1,192.5
Facilities, less accumulated depreciation of $429.6.......................... 800.6
Goodwill..................................................................... 1,073.8
Other Assets................................................................. 213.8
-------------
$ 3,280.7
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Loans payable to banks..................................................... $ 100.0
Current maturities of long-term debt....................................... 130.1
Accounts payable........................................................... 304.2
Accrued payrolls........................................................... 157.5
Other accrued liabilities.................................................. 363.5
Taxes on income............................................................ 36.5
-------------
Total Current Liabilities............................................. 1,091.8
Long-Term Debt............................................................... 2,144.8
Other Liabilities............................................................ 734.0
-------------
Total Liabilities..................................................... 3,970.6
Commitments and Contingencies
Stockholders' Deficit
Common stock $.01 par value, 200,000,000 shares authorized; 61,062,078
shares issued and outstanding in 1994................................... .6
Capital surplus............................................................ 196.6
Subscriptions receivable................................................... (2.1)
ESOP shares................................................................ (.4)
Accumulated deficit........................................................ (763.6)
Foreign currency translation effects....................................... (115.4)
Minimum pension liability adjustment....................................... (5.6)
-------------
Total Stockholders' Deficit........................................... (689.9)
-------------
$ 3,280.7
===========
</TABLE>

See accompanying notes.

F-29
<PAGE> 127

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

UNAUDITED SUMMARY STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1993 1994
-------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash provided (used) by:
Operating activities:
Income-related:
Net loss before extraordinary loss..................................... $ (55.0) $ (13.6)
Depreciation and asset loss provisions................................. 81.0 95.3
Amortization of goodwill............................................... 23.2 23.4
Non-cash interest...................................................... 52.0 39.5
Accrued interest....................................................... 36.6 31.5
Amortization of debt issuance costs.................................... 8.4 11.0
Non-cash stock compensation............................................ 19.0 21.0
Changes in working capital invested in operations........................ (88.5) (128.4)
Timing differences in funding............................................ (3.3) 47.7
-------- --------
Net cash flow provided by operating activities............................. 73.4 127.4
-------- --------
Investing activities:
Purchase of property, plant and equipment................................ (46.3) (50.3)
Investment in affiliated companies....................................... (8.1) (12.9)
Proceeds from disposals of property, plant and equipment................. 2.1 11.1
Other.................................................................... 4.5 (2.1)
-------- --------
Net cash used by investing activities...................................... (47.8) (54.2)
-------- --------
Financing activities:
Proceeds from issuance of senior securities.............................. 650.0 --
Proceeds from term loans................................................. 750.0 --
Repayment of term loans.................................................. (454.6) (101.3)
Repayment of senior securities........................................... (915.9) --
Premiums on redemption of senior securities.............................. (44.9) --
Net revolver borrowings.................................................. 91.4 62.5
Net decrease in short-term debt.......................................... (54.6) (12.8)
Proceeds from other long-term debt....................................... 3.6 9.3
Repayments of other long-term debt....................................... (11.5) (16.6)
Common stock repurchases................................................. (3.6) (4.3)
ESOP stock repurchases................................................... (3.3) (3.7)
Repayment of stock subscriptions receivable.............................. .4 .4
Other financing costs.................................................... (77.0) --
-------- --------
Net cash used by financing activities...................................... (70.0) (66.5)
-------- --------
Decrease in cash and certificates of deposit excluding translation
effects.................................................................. (44.4) 6.7
Effect of exchange rate changes on cash and certificates of deposit........ (2.6) 3.0
-------- --------
Net decrease in cash and certificates of deposit........................... (47.0) 9.7
Cash and certificates of deposit at beginning of period.................... 111.5 53.2
-------- --------
Cash and certificates of deposit at end of period.......................... $ 64.5 $ 62.9
======= =======
</TABLE>

See accompanying notes.

F-30
<PAGE> 128

AMERICAN STANDARD COMPANIES INC. AND SUBSIDIARIES
(FORMERLY ASI HOLDING CORPORATION)

NOTES TO SUMMARY FINANCIAL STATEMENTS

(1) The accompanying summary statement of operations of American Standard
Companies Inc. (the "Company") and subsidiaries for the nine months ended
September 30, 1993 and 1994 has not been audited, but management believes that
all adjustments, consisting of normal recurring items, necessary to a fair
statement for those periods have been included. Results for the first nine
months of 1994 are not necessarily indicative of results for the entire year.
Share amounts and per share data have been adjusted to reflect the 2.5 to 1
split effected in December 1994.

(2) Included in the nine months ended September 30, 1994, are charges of
$26 million related to employee severance ($20 million), the consolidation of
production facilities ($5 million) and the implementation of other cost
reduction actions ($1 million), and $14 million of reserves for losses on
operating assets expected to be disposed of prior to the expiration of their
originally estimated useful lives. Of such amounts $36 million was included in
cost of sales. Other than costs related to the consolidation of production
facilities which will be liquidated over several years, the charges will be paid
by June 30, 1995.

(3) As described in Note 5 of Notes to Consolidated Financial Statements
for the year ended December 31, 1993, there are pending German tax issues for
the years 1984 through 1990. There has been no significant change in the status
of these issues since December 31, 1993.

(4) On October 21, 1994, the Existing Credit Agreement was amended to
provide for an additional term loan of $325 million (the "October Borrowing") to
the Company, the proceeds of which will be applied to redeem on November 21,
1994, all of the $316.8 million in aggregate principal amount of the Company's
12 3/4% Junior Subordinated Debentures and 14 1/4% Subordinated Discount
Debentures and to pay redemption premiums of $4.4 million and debt issue costs
of $3.8 million. The Company will incur an extraordinary loss estimated to be
$8.7 million related to the redemptions of debt described above. The Company
entered into an interest rate swap agreement to fix the interest rate on the
October Borrowing at 8.94% for a period of 105 days commencing October 25, 1994.

(5) The Company has filed a registration statement pursuant to which it
plans to offer common stock to the public. If completed, the offering is
anticipated to provide gross proceeds to the Company of approximately $300
million (assuming no exercise of the Underwriters' over-allotment options). The
net proceeds of this offering would be used to reduce bank borrowings.

F-31
<PAGE> 129

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

------------------

TABLE OF CONTENTS

<TABLE>
<S> <C>
Incorporation of Certain Documents by
Reference.............................. 2
Available Information.................. 2
Prospectus Summary..................... 3
Certain Investment Considerations...... 10
The Company............................ 16
The Acquisition........................ 16
Use of Proceeds........................ 16
Dividend Policy........................ 17
Dilution............................... 18
Capitalization......................... 19
Pro Forma Financial Data............... 20
Selected Historical Consolidated
Financial Data....................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 25
Business............................... 43
Management............................. 58
Certain Transactions and
Relationships........................ 73
Security Ownership of Certain
Beneficial Owners.................... 75
Shares Eligible for Future Sale........ 76
Description of Capital Stock........... 78
Certain Indebtedness................... 85
Underwriting........................... 92
Legal Matters.......................... 94
Experts................................ 94
Index to Consolidated Financial
Statements and Supplementary Data.... F-1
</TABLE>

13,500,000 SHARES

AMERICAN STANDARD
COMPANIES INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

-----------

GOLDMAN, SACHS & CO.

CS FIRST BOSTON

MORGAN STANLEY & CO.
INCORPORATED

SMITH BARNEY INC.

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION, DATED DECEMBER 20, 1994

13,500,000 SHARES

AMERICAN STANDARD COMPANIES INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
-------------------

Of the 13,500,000 shares of Common Stock offered, 4,000,000 shares are
being offered hereby in an international offering outside the United States and
9,500,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
are identical for both offerings (collectively, the "Offerings"). See
"Underwriting".

All of the shares of Common Stock offered are being issued and sold by the
Company. None of the Company's current stockholders, including Kelso ASI
Partners, L.P., ("ASI Partners") the Company's majority stockholder, the
American-Standard Employee Stock Ownership Plan or management stockholders, will
sell any Common Stock in the Offerings. Upon completion of the Offerings, ASI
Partners will own approximately 60% of the outstanding Common Stock and will
retain the power to elect a majority of the Company's directors and thereby to
determine the Company's corporate policies.

SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

Application will be made to list the Common Stock on the New York Stock
Exchange.

-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------

- ------------

(1) The Company and American Standard Inc. has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $ payable by the Company.

(3) The Company has granted the International Underwriters an option for 30 days
after the date of this Prospectus to purchase up to an additional 605,000
shares at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, an over-allotment
option on 1,420,000 shares has been granted by the Company as part of the
United States offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to the
Company will be $ , $ and $ , respectively. See
"Underwriting".

-------------------

The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about , 1995.

GOLDMAN SACHS INTERNATIONAL S.G. WARBURG SECURITIES (LONDON)

CS FIRST BOSTON LIMITED MORGAN STANLEY INTERNATIONAL

------------------------

The date of this Prospectus is , 1995.

<PAGE> 131

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on Form
S-2 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares (the "Shares") of its common
stock, par value $.01 per share (the "Common Stock") offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to each
such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. Items of information omitted from
this Prospectus but contained in the Registration Statement may be inspected and
copied without charge at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549
and at the following regional offices of the Commission: 14th Floor, 500 West
Madison Street, Chicago, Illinois 60661; and 7 World Trade Center, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates.

------------------------

This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy the Shares in any jurisdiction in which such offer or
solicitation is unlawful. There are restrictions on the offer and sale of the
Shares in the United Kingdom. All applicable provisions of the Financial
Services Act 1986 and the Companies Act 1985 with respect to anything done by
any person in relation to the Shares in, from, or otherwise involving the United
Kingdom must be complied with. See "Underwriting".

In this Prospectus, reference to "dollars", "U.S.$" and $ are United States
dollars.

------------------------

2
<PAGE> 132

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

CERTAIN UNITED STATES TAX

CONSEQUENCES TO NON-U.S. HOLDERS

The following is a general discussion of certain United States Federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a person other than (i) a citizen or resident of the United States,
(ii) a corporation, partnership or other entity created or organized in the
United States or under the laws of the United States or of any State or (iii) an
estate or trust whose income is includable in gross income for United States
Federal income tax purposes regardless of its source (referred to hereafter as a
"non-U.S. holder").

The discussion is based on provisions of the Internal Revenue Code of 1986,
as amended (the "Code") and administrative and judicial interpretations as of
the date hereof, all of which are subject to change, possibly with retroactive
effect. Furthermore, this discussion does not consider specific facts and
circumstances that may be relevant to a particular holder's tax position.
Prospective purchasers are urged to consult a tax adviser with respect to the
United States Federal income and estate tax consequences of owning and disposing
of Common Stock, as well as any tax consequences under the laws of any other
taxing jurisdiction.

INCOME TAX

DIVIDENDS. Generally, dividends paid to a non-U.S. holder of Common Stock
will be subject to U.S. Federal income tax. Except in the case of dividends that
are effectively connected with the holder's conduct of a trade or business
within the United States, this tax is imposed and withheld at the rate of 30% of
the amount of the dividend, unless reduced by an applicable income tax treaty.
Currently, dividends paid to an address in a foreign country are presumed to be
paid to a resident of such country in determining the applicability of a treaty
for such purposes. However, the Internal Revenue Service has issued proposed
regulations which, if adopted, would require a non-U.S. holder to provide
certain certifications under penalties of perjury in order to obtain treaty
benefits.

Except as may be otherwise provided in an applicable income tax treaty,
dividends which are effectively connected with the non-U.S. holder's conduct of
a trade or business within the United States are subject to tax at ordinary
Federal income tax rates, which tax is not collected by withholding (except as
described below under "Backup Withholding and Information Reporting"). All or
part of any effectively connected dividends received by a foreign corporation
may also, under certain circumstances, be subject to an additional "branch
profits" tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. Non-U.S. holders of Common Stock must comply with
certain certification and disclosure requirements to claim an exception from
withholding under the rules described in this paragraph.

92
<PAGE> 133

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

A non-U.S. holder that is eligible for a reduced rate of U.S. withholding
tax pursuant to a tax treaty may obtain a refund of any excess amounts withheld
by filing an appropriate claim for refund with the United States Internal
Revenue Service.

DISPOSITION OF COMMON STOCK. Generally, non-U.S. holders will not be
subject to United States Federal income tax (or withholding thereof) in respect
of gain recognized on a disposition of Common Stock unless (i) the gain is
effectively connected with the non-U.S. holder's conduct of a trade or business
within the United States (in which case the "branch profits" tax described above
may also apply if the holder is a foreign corporation), (ii) in the case of a
non-U.S. holder who is a non-resident alien individual and holds the Common
Stock as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year of the sale and certain other conditions are met;
or (iii) the Company is or has been a "United States real property holding
corporation" for Federal income tax purposes (which the Company does not believe
it has been or is currently) and the non-U.S. holder has held directly or
constructively more than 5% of the outstanding Common Stock within the five-year
period ending on the date of the disposition.

ESTATE TAX

If an individual non-U.S. holder owns, or is treated as owning, Common
Stock at the time of his or her death, such stock would be subject to U.S.
Federal estate tax imposed on the estates of nonresident aliens, in the absence
of a contrary provision contained in any applicable tax treaty.

BACKUP WITHHOLDING AND INFORMATION REPORTING

DIVIDENDS. Generally, dividends paid on Common Stock to a non-U.S. holder
at an address outside the United States will be exempt from backup withholding
tax and U.S. information reporting requirements (but not from regular
withholding tax discussed above).

BROKER SALES. Payments of proceeds from the sale of Common Stock by a
non-U.S. holder made to or through a foreign office of a broker generally will
not be subject to information reporting or backup withholding. However, certain
foreign offices, including the foreign offices of a U.S. broker, are subject to
information reporting unless the holder certifies its non-U.S status under
penalties of perjury or otherwise establishes its entitlement to an exemption.
Payments of proceeds from the sale of Common Stock by a non-U.S. holder to or
through a U.S. office of a broker are currently subject to both information
reporting and backup withholding at a rate of 31% unless the holder certifies
its status as a non-U.S. holder under penalties of perjury or otherwise
establishes an exemption.

A non-U.S. holder may obtain a refund of any excess amounts withheld under
the backup withholding rules by filing the appropriate claim for refund with the
IRS.

93
<PAGE> 134

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions of the International Underwriting
Agreement, the Company has agreed to sell to each of the International
Underwriters named below, and each of such International Underwriters, for whom
Goldman Sachs International, S.G. Warburg Securities (London), CS First Boston
Limited, and Morgan Stanley International are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL UNDERWRITERS COMMON STOCK
----------------------------------------------------------- ------------
<S> <C>
Goldman Sachs International................................
S.G. Warburg Securities (London)...........................
CS First Boston Corporation Limited........................
Morgan Stanley International...............................

------------
Total............................................ 4,000,000
===============
</TABLE>

Under the terms and conditions of the International Underwriting Agreement,
the International Underwriters are committed to take and pay for all of the
Shares, if any are taken.

The International Underwriters propose to offer the Shares in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession of $ per share. The International Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the Shares are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the representatives.

The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 9,500,000 Shares
in an offering in the United States. The offering price and aggregate
underwriting discounts and commissions per share for the two offerings are
identical. The closing of the offering made hereby is a condition to the closing
of the international offering, and vice versa. The representatives of the U.S.
Underwriters are Goldman Sachs & Co., CS First Boston, Morgan Stanley & Co.,
Incorporated and Smith Barney Inc.

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<PAGE> 135

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

In addition, an affiliate of Smith Barney Inc., affiliates of CS First Boston
Corporation and an affiliate of S.G. Warburg & Co. Inc. are investors in
investment funds sponsored by Kelso, which funds are not investors in the
Company.

Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two Offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the Shares
offered as part of the U.S. Offering and subject to certain exceptions, it will
offer, sell or deliver the Shares offered as part of the U.S. Offering and other
shares of Common Stock, directly or indirectly, only in the United States of
America (including the States and the District of Columbia), its territories,
its possessions and other areas subject to its jurisdiction (the "United
States") and to U.S. persons, which term shall mean, for purposes of this
paragraph: (a) any individual who is a resident of the United States or (b) any
corporation, partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters named herein has agreed or will agree pursuant to the
Agreement Between that, as a part of the distribution of the Shares offered
hereby, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or (b) to any person whom it believes intends to
reoffer, resell or deliver the shares in the United States or to any U.S.
persons, and (ii) cause any dealer to whom it may sell such shares at any
concession to agree to observe a similar restriction.

The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 605,000 additional shares of Common Stock to cover over-allotments,
if any, at the initial public offering price, less the underwriting discount, as
set forth in this Prospectus. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the total number of shares. The International
Underwriters may exercise such option only to cover over-allotments in
connection with the sale of the shares. The Company has granted the U.S.
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 1,420,000 additional shares of Common Stock,
solely to cover over-allotments, at the initial public offering price less the
underwriting discount, as set forth on the cover page of this Prospectus.

95
<PAGE> 136

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

the Company's historical performance, estimates of the business potential and
earnings prospects of the Company, an assessment of the Company's management and
the consideration of the above factors in relation to market valuation of
companies in related businesses.

The representatives of the Underwriters have in the past provided and may
continue to provide investment banking services to the Company and Kelso.

The Company and American Standard Inc. has agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.

96
<PAGE> 137

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference.............................. 2
Available Information.................. 2
Prospectus Summary..................... 3
Certain Investment Considerations...... 10
The Company............................ 16
The Acquisition........................ 16
Use of Proceeds........................ 16
Dividend Policy........................ 17
Dilution............................... 18
Capitalization......................... 19
Pro Forma Financial Data............... 20
Selected Historical Consolidated
Financial Data....................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 25
Business............................... 43
Management............................. 58
Certain Transactions and
Relationships........................ 73
Security Ownership of Certain
Beneficial Owners.................... 75
Shares Eligible for Future Sale........ 76
Description of Capital Stock........... 78
Certain Indebtedness................... 85
Certain United States Tax Consequences
to Non-U.S. Holders.................. 92
Underwriting........................... 92
Legal Matters.......................... 94
Experts................................ 94
Index to Consolidated Financial
Statements and Supplementary Data.... F-1
</TABLE>

13,500,000 SHARES

AMERICAN STANDARD
COMPANIES INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

-----------

GOLDMAN SACHS INTERNATIONAL

S.G. WARBURG & CO. INC.,
SECURITIES (LONDON)

CS FIRST BOSTON LIMITED

MORGAN STANLEY INTERNATIONAL

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Registration fee......................................................... $
NASD fee.................................................................
NYSE listing fee.........................................................
Blue Sky fees and expenses...............................................
Transfer agent's fees....................................................
Printing and engraving expenses..........................................
Legal fees and expenses..................................................
Accounting fees and expenses.............................................
Miscellaneous............................................................
--------
Total............................................................... $
========
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he reasonably believed to be in, or
not opposed to, the corporation's best interests, and, for criminal proceedings,
had no reasonable cause to believe his conduct was illegal. A Delaware
corporation may indemnify officers and directors in an action by or in the right
of the corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation in the performance of his duty. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually and reasonably incurred.

In accordance with the Delaware Law, the Restated Certificate of
Incorporation of the Company contains a provision to limit the personal
liability of the directors for violations of their fiduciary duty. This
provision eliminates each director's liability to the Company or its respective
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware Law providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions, or (iv) for any transaction from which a director derived an
improper personal benefit. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.

Subsection (b) of Article EIGHTH of the Company's Restated Certificate of
Incorporation provides for indemnification of directors and officers as follows:

(b) The Corporation shall indemnify, to the fullest extent now or
hereafter permitted by the General Corporation Law of the State of
Delaware, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the
fact that he or she is or was or has agreed to become a director or officer
of the Corporation, or is or was serving or has agreed to serve at the
request of the

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<PAGE> 139

Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any action
alleged to be taken or omitted in such capacity, and may to the same extent
indemnify any person who was or is a party or is threatened to be made a
party to such an action, suit or proceeding by reason of the fact that he
or she is or was or has agreed to become an employee or agent of the
Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with such action, suit or proceeding or any appeal
therefrom.

Article VI of the Amended By-Laws of the Company provides for
indemnification of directors and officers as follows:

Section 6.1. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (1) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.

The termination of any action, suit or proceeding by judgment, order
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 6.2. Successful Defense. To the extent that a director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
6.01 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.

Section 6.3. Determination That Indemnification Is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.1
hereof (unless ordered by a court) shall be made by the Corporation unless a
determination is made that indemnification of the director or officer is not
proper in the circumstances because he has not met the applicable standard of
conduct set forth in Section 6.1 hereof. Any indemnification of an employee or
agent of the Corporation under Section 6.1 hereof (unless ordered by a court)
may be made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.1 hereof. Any such
determination shall be made (1) by the Board of Directors by a majority vote of
the Directors who were not parties to such action, suit or proceeding, or (2) if
there are no such Directors, or if such Directors so direct, by independent
legal counsel in a written opinion, or (3) by the stockholders.

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<PAGE> 140

Section 6.4. Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a Director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate. The Board of Directors may authorize the Corporation's
counsel to represent such Director, officer, employee or agent in any action,
suit or proceeding, whether or not the Corporation is a party to such action,
suit or proceeding.

Section 6.5. Procedure for Indemnification of Directors and Officers. Any
indemnification of a Director or officer of the Corporation under Sections 6.1
and 6.2, or advance of costs, charges and expenses to a Director or officer
under Section 6.4 of this Article, shall be made promptly, and in any event
within 30 days, upon the written request of the Director or officer. If a
determination by the Corporation that the Director or officer is entitled to
indemnification pursuant to this Article is required, and the Corporation fails
to respond within sixty days to a written request for indemnity, the Corporation
shall be deemed to have approved such request. If the Corporation denies a
written request for indemnity or advancement of expenses, in whole or in part,
or if payment in full pursuant to such request is not made within 30 days, the
right to indemnification or advances as granted by this Article shall be
enforceable by the Director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for the advance
of costs, charges and expenses under Section 6.4 of this Article where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in Section 6.1 of this
Article, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors, its
independent legal counsel, and its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 6.1 of this Article, nor the fact that there has
been an actual determination by the Corporation (including its Board of
Directors, its independent legal counsel, and its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.

Section 6.6. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware Corporation Law are in effect and any repeal or
modification thereof shall not affect any right or obligation then existing with
respect to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in whole or in
part upon any such state of facts. Such a "contract right" may not be modified
retroactively without the consent of such Director, officer, employee or agent.

The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.

Section 6.7. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
Director or officer of the Corporation, or is or was serving at the request of
the Corporation as a Director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is

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<PAGE> 141

available on acceptable terms, which determination shall be made by a vote of a
majority of the entire Board of Directors.

Section 6.8. Severability. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The File Number of American Standard Companies Inc., the Registrant, and
for all Exhibits incorporated by reference is 33-23070, except those Exhibits
incorporated by reference in filings made by American Standard Inc. ("American
Standard Inc.") whose File Number is 1-470.

A. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(1) Form of U.S. Underwriting Agreement.
(3) (i) Restated Certificate of Incorporation of American Standard Companies Inc. (the
"Company").*
(ii) By-Laws of the Company, as amended.*
(4) (i) Specimen of Common Stock Certificate.*
(ii) Indenture, dated as of November 1, 1986, between American Standard Inc. and
Manufacturers Hanover Trust Company, Trustee, including the form of 9 1/4%
Sinking Fund Debenture Due 2016 issued pursuant thereto on December 9, 1986, in
the aggregate principal amount of $150,000,000; previously filed as Exhibit
(4)(iii) by American Standard Inc. in its Form 10-K for the fiscal year ended
December 31, 1986, and herein incorporated by reference.
(iii) Instrument of Resignation, Appointment and Acceptance, dated as of April 25,
1988 among American Standard Inc., Manufacturers Hanover Trust Company (the
"Resigning Trustee") and Wilmington Trust Company (the "Successor Trustee"),
relating to resignation of the Resigning Trustee and appointment of the
Successor Trustee, under the Indenture described in (4)(ii) above; previously
filed as Exhibit (4)(ii) in Registration Statement No. 33-64450 of American
Standard Inc. under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(iv) Indenture dated as of May 15, 1992, between American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
10 7/8% Senior Notes due 1999, in the aggregate principal amount of
$150,000,000; previously filed as Exhibit (4)(i) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
(v) Form of 10 7/8% Senior Notes due 1999 included as Exhibit A to the Indenture
described in (4)(iv) above.
(vi) Indenture dated as of May 15, 1992, between American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
11 3/8% Senior Debentures due 2004, in the aggregate principal amount of
$250,000,000; previously filed as Exhibit (4)(iii) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
</TABLE>

- ---------------
* To be filed by amendment

** Previously filed

II-4
<PAGE> 142

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(vii) Form of 11 3/8% Senior Debentures due 2004 included as Exhibit A to the
Indenture described in (4)(vi) above.
(viii) Form of Indenture, dated as of June 1, 1993, between American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'s 9 7/8% Senior Subordinated Notes Due 2001; previously filed as
Exhibit (4) (xxxi) in Amendment No. 1 to Registration Statement No. 33-61130 of
American Standard Inc. under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(ix) Form of Note evidencing the 9 7/8% Senior Subordinated Notes Due 2001 included
as Exhibit A to the Form of Indenture referred to in 4(viii) above.
(x) Form of Indenture, dated as of June 1, 1993, between American Standard Inc. and
United States Trust Company of New York, as Trustee, relating to American
Standard Inc.'s 10 1/2% Senior Subordinated Discount Debentures Due 2005;
previously filed as Exhibit (4) (xxxiii) in Amendment No. 1 to Registration
Statement No. 33-61130 of American Standard Inc. under the Securities Act of
1933, as amended, and herein incorporated by reference.
(xi) Form of Debenture evidencing the 10 1/2% Senior Subordinated Discount
Debentures Due 2005 included as Exhibit A to the Form of Indenture referred to
in 4 (x) above.
(xii) Assignment and Amendment Agreement, dated as of June 1, 1993, among American
Standard Inc., the Company, certain subsidiaries of American Standard Inc.,
Bankers Trust Company, as agent under the 1988 Credit Agreement, the financial
institutions named as Lenders in the 1988 Credit Agreement and certain
additional Lenders and Chemical Bank, as Administrative Agent and Arranger;
previously filed as Exhibit (4)(xiii) in Amendment No. 1 to Registration
Statement No. 33-64450 of American Standard Inc. under the Securities Act of
1933, as amended, and herein incorporated by reference.
(xiii) Credit Agreement, dated as of June 1, 1993, among American Standard Inc., the
Company, certain subsidiaries of American Standard Inc. and the lending
institutions listed therein, Chemical Bank, as Administrative Agent and
Arranger; Bankers Trust Company, The Bank of Nova Scotia, The Chase Manhattan
Bank, N.A., Deutsche Bank AG, The Long-Term Credit Bank of Japan, Ltd., New
York Branch, and NationsBank of North Carolina, N.A., as Managing Agents, and
Banque Paribas, Citibank, N.A., and Compagnie Financiere de CIC et de l'Union
Europeenne, New York Branch, as Co-Agents; previously filed as Exhibit (4)(xiv)
in Amendment No. 1 to Registration Statement No. 33-64450 of American Standard
Inc. under the Securities Act of 1933, as amended, and herein incorporated by
reference.
(xiv) First Amendment, Consent and Waiver, dated as of February 10, 1994, to the
Credit Agreement referred to in paragraph (4)(xiii) above; previously filed as
Exhibit (4)(xvii) by American Standard Inc. in its Form 10-K for the year ended
December 31, 1993, concurrently with the filing of the Company's Form 10-K for
the same year, and herein incorporated by reference.
(xv) Second Amendment, dated as of October 21, 1994, to the Credit Agreement,
referred to in paragraph (4)(xiii) above.
(xvi) Stockholders Agreement, dated as of July 7, 1988, as amended as of August 1,
1988, among the Company, Kelso ASI Partners, L.P., and the Management
Stockholders named therein; previously filed as Exhibit 4.19 in Amendment No. 2
to Registration Statement No. 33-23070 of the Company under the Securities Act
of 1933, as amended, and herein incorporated by reference.
</TABLE>

- ---------------
* To be filed by amendment

** Previously filed

II-5
<PAGE> 143

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(xvii) Amendment to Section 2.1 of the Stockholders Agreement referred to in paragraph
(4)(xvi) above, effective as of January 1, 1991; previously filed as Exhibit
(4)(xxvii) by the Company in its Form 10-K for the year ended December 31,
1992, and herein incorporated by reference.
(xviii) Supplement and Amendment, dated as of September 4, 1991, to the Stockholders
Agreement, dated as of July 7, 1988, as amended, referred to in paragraph
(4)(xvi) above; previously filed as Exhibit (4)(ii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xix) Revised Schedule of Priorities, effective as of September 5, 1991, as adopted
by the Board of Directors of the Company, pursuant to the Stockholders
Agreement dated as of July 7, 1988, as amended, referred to in paragraph
(4)(xvi) above; previously filed as Exhibit (4)(iii) by the Company in its Form
10-Q for the quarter ended September 30, 1991, and herein incorporated by
reference.
(xx) Amended Paragraph 6.1 of the Stockholders Agreement referred to in paragraph
(4)(xvi) above, effective as of September 2, 1993; previously filed as Exhibit
(4)(xxi) by the Company in its Form 10-K for the fiscal year ended December 31,
1993, and herein incorporated by reference.
(xxi) Amended and Restated Stockholders Agreement, dated as of December 2, 1994,
among the Company, Kelso ASI Partners, L.P., and the Management Stockholders
named therein.
(xxii) Form of Rights Agreement, dated as of January 5, 1995 between the Company and
Citibank, N.A. as Rights Agent.*
(5) Opinion of Debevoise & Plimpton regarding the legality of the securities being
registered.*
(10) (i) Agreement and Plan of Merger, dated as of March 16, 1988, among American
Standard Inc., ASI Acquisition Company and the Company and Offer Letter, dated
March 16, 1988, between the Company and Kelso & Company, L.P.; previously filed
as Exhibit 2 to American Standard Inc.'s Schedule 14D-9 filed March 21, 1988,
in connection with the offer for all of the shares of American Standard Inc.'s
Common Stock by a corporation formed by Kelso & Company, L.P., and herein
incorporated by reference.
(ii) Amendment, dated June 3, 1988, to Agreement and Plan of Merger referred to in
paragraph (10)(i) above; previously filed as Exhibit 2.50 in Amendment No. 1 to
the Registration Statement No. 33-22126 of American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(iii) American Standard Inc. Long-Term Incentive Compensation Plan, as amended
through February 6, 1992; previously filed as Exhibit (10)(iv) by American
Standard Inc. in its Form 10-K for the fiscal year ended December 31, 1992, and
herein incorporated by reference.
(iv) Trust Agreement for American Standard Inc. Long-Term Incentive Compensation
Plan; previously filed as Exhibit (10)(iv) by American Standard Inc. in its
Form 10-K for the year ended December 31, 1993, concurrently with the filing of
the Company's Form 10-K for the same year, and herein incorporated by
reference.
(v) American Standard Inc. Annual Incentive Plan; previously filed as Exhibit
(10)(vii) by American Standard Inc. in its Form 10-K for the fiscal year ended
December 31, 1988, and herein incorporated by reference.
(vi) American Standard Inc. Management Partners' Bonus Plan, effective as of July 7,
1988; previously filed as Exhibit (10)(i) by American Standard Inc. in its Form
10-Q for the quarter ended September 30, 1988, and herein incorporated by
reference; amendments to Plan adopted on June 7, 1990, previously filed as
Exhibit (4)(ii) by American Standard Inc. in its Form 10-Q for the quarter
ended June 30, 1990, and herein incorporated by reference.
</TABLE>

- ---------------
* To be filed by amendment

** Previously filed

II-6
<PAGE> 144

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(vii) American Standard Inc. Executive Supplemental Retirement Benefit Program, as
restated to include all amendments through December 31, 1993; previously filed
as Exhibit (10)(vii) by American Standard Inc. in its Form 10-K for the fiscal
year ended December 31, 1993, concurrently with the filings of the Company's
Form 10-K for the same year, and herein incorporated by reference.
(viii) Form of Composite American-Standard Employee Stock Ownership Plan incorporating
amendments through December 3, 1992; previously filed as Exhibit (10)(x) in
Registration Statement No. 33-61130 of American Standard Inc. under the
Securities Act of 1933, as amended, and herein incorporated by reference.
(ix) American-Standard Employee Stock Ownership Trust Agreement, dated as of
December 1, 1991, between ASI Holding Corporation and Fidelity Management Trust
Company (as successor to Citizens & Southern Trust Company (Georgia), N.A.), as
trustee; previously filed as Exhibit (10)(xiv) by American Standard Inc. in its
Form 10-K for the year ended December 31, 1991, and herein incorporated by
reference.
(x) Consulting Agreement, made July 1, 1988, with Kelso & Company, L.P. concerning
general management and financial consulting services to American Standard Inc.;
previously filed as Exhibit (10)(xviii) by American Standard Inc. in its Form
10-K for the fiscal year ended December 31, 1988, and herein incorporated by
reference.
(xi) Agreement, dated as of December 2, 1994, among the Company, American Standard
Inc. and Kelso & Company, L.P., amending the Consulting Agreement referred to
in paragraph (10)(x) above.
(xii) American Standard Inc. Supplemental Compensation Plan for Outside Director; as
amended through September 1993; previously filed as Exhibit (10)(xv) by
American Standard Inc. in its Form 10-K for the year ended December 31, 1993,
and herein incorporated by reference.
(xiii) ASI Holding Corporation 1989 Stock Purchase Loan Program; previously filed as
Exhibit 10(i) by the Company in its Form 10-Q for the quarter ended September
30, 1989, and herein incorporated by reference.
(xiv) Corporate Officers Severance Plan adopted in December, 1990, effective April
27, 1991; previously filed as Exhibit 10(xix) by American Standard Inc. in its
Form 10-K for the fiscal year ended December 31, 1990, and herein incorporated
by reference.
(xv) Estate Preservation Plan adopted by American Standard Inc. in December, 1990;
previously filed as Exhibit (10)(xx) by American Standard Inc. in its Form 10-K
for the fiscal year ended December 31, 1990, and herein incorporated by
reference.
(xvi) Amendment adopted in March 1993 to Estate Preservation Plan referred to in
paragraph (10)(xv) above; previously filed as Exhibit (10)(xix) by American
Standard Inc. in its Form 10-K for the year ended December 31, 1993
concurrently with the filing of the Company's Form 10-K for the same year, and
herein incorporated by reference.
(xvii) Summary of terms of Unfunded Deferred Compensation Plan adopted December 2,
1993; previously filed as Exhibit (10)(xviii) by American Standard Inc. in its
Form 10-K for the year ended December 31, 1993 concurrently with the filing of
the Company's Form 10-K for the same year, and herein incorporated by
reference.
(xviii) Retirement/Consulting Agreement, dated December 28, 1993, between H. Thompson
Smith and American Standard Inc.; previously filed as Exhibit (10)(xix) by
American Standard Inc. in its Form 10-K for the year ended December 31, 1993
concurrently with the filing of the Company's Form 10-K for the same year, and
herein incorporated by reference.
</TABLE>

- ---------------
* To be filed by amendment

** Previously filed

II-7
<PAGE> 145

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(xix) Summary of the TNE Incentive Plan of American Standard Inc. and subsidiaries
previously filed as Exhibit (10)(i) by American Standard Inc. in its Form 10-Q
for the quarter ended March 31, 1994 concurrently with the filing of the
Company's Form 10-Q for the same period, and herein incorporated by reference.
(xx) American Standard Companies Inc. Stock Incentive Plan.*
(xxi) Form of Indemnification Agreement.*
(23) (i) Consent of Ernst & Young LLP.
(ii) Consent of Debevoise & Plimpton, included in the opinion of Debevoise &
Plimpton filed as Exhibit (5).*
(24) Powers of Attorney.**
(27) Financial Data Schedule.**
</TABLE>

- ---------------

* To be filed by amendment

** Previously filed

B. FINANCIAL STATEMENT SCHEDULES

Financial statement schedules, years ended December 31, 1991, 1992 and 1993

Report of Ernst & Young LLP, Independent Auditors

III -- Condensed Financial Information of Registrant

IX -- Short-Term Borrowings

ITEM 17. UNDERTAKINGS.

(A) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.

(B) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-8
<PAGE> 146

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Piscataway, State of New Jersey on
December 20, 1994.

AMERICAN STANDARD COMPANIES INC.

By: /s/ EMMANUEL A. KAMPOURIS
------------------------------
(Emmanuel A. Kampouris)
Chairman, President and Chief
Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on December 20, 1994.

<TABLE>
<C> <S>
/s/ EMMANUEL A. KAMPOURIS Chairman, President and Chief Executive Officer;
- ------------------------------------- Director (Principal Executive Officer)
(Emmanuel A. Kampouris)

/s/ FRED A. ALLARDYCE Vice President and Chief Financial Officer
- ------------------------------------- (Principal Financial Officer)
(Fred A. Allardyce)

/s/ G. RONALD SIMON Vice President and Controller (Principal Accounting
- ------------------------------------- Officer)
(G. Ronald Simon)

/s/ STEVEN E. ANDERSON* Director
- -------------------------------------
(Steven E. Anderson)

/s/ HORST HINRICHS* Director
- -------------------------------------
(Horst Hinrichs)

/s/ GEORGE H. KERCKHOVE* Director
- -------------------------------------
(George H. Kerckhove)

/s/ SHIGERU MIZUSHIMA* Director
- -------------------------------------
(Shigeru Mizushima)

/s/ FRANK T. NICKELL* Director
- -------------------------------------
(Frank T. Nickell)

/s/ ROGER W. PARSONS* Director
- -------------------------------------
(Roger W. Parsons)

/s/ J. DANFORTH QUAYLE* Director
- -------------------------------------
(J. Danforth Quayle)

/s/ DAVID M. RODERICK* Director
- -------------------------------------
(David M. Roderick)

/s/ JOHN RUTLEDGE* Director
- -------------------------------------
(John Rutledge)

/s/ JOSEPH S. SCHUCHERT* Director
- -------------------------------------
(Joseph S. Schuchert)

*By: /s/ RICHARD A. KALAHER
-------------------------
(Richard A. Kalaher,
as attorney-in-fact)
</TABLE>

II-9
<PAGE> 147

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION
- ------------- -------------------------------------------------------------------------------
<C> <C> <S>
(1) Form of U.S. Underwriting Agreement.
(3) (i) Restated Certificate of Incorporation of American Standard Companies Inc. (the
"Company").*
(ii) By-Laws of the Company, as amended.*
(4) (i) Specimen of Common Stock Certificate.*
(ii) Indenture, dated as of November 1, 1986, between American Standard Inc. and
Manufacturers Hanover Trust Company, Trustee, including the form of 9 1/4%
Sinking Fund Debenture Due 2016 issued pursuant thereto on December 9, 1986, in
the aggregate principal amount of $150,000,000; previously filed as Exhibit
(4)(iii) by American Standard Inc. in its Form 10-K for the fiscal year ended
December 31, 1986, and herein incorporated by reference.
(iii) Instrument of Resignation, Appointment and Acceptance, dated as of April 25,
1988 among American Standard Inc., Manufacturers Hanover Trust Company (the
"Resigning Trustee") and Wilmington Trust Company (the "Successor Trustee"),
relating to resignation of the Resigning Trustee and appointment of the
Successor Trustee, under the Indenture described in (4)(ii) above; previously
filed as Exhibit (4)(ii) in Registration Statement No. 33-64450 of American
Standard Inc. under the Securities Act of 1933, as amended, and herein
incorporated by reference.
(iv) Indenture dated as of May 15, 1992, between American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
10 7/8% Senior Notes due 1999, in the aggregate principal amount of
$150,000,000; previously filed as Exhibit (4)(i) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
(v) Form of 10 7/8% Senior Notes due 1999 included as Exhibit A to the Indenture
described in (4)(iv) above.
(vi) Indenture dated as of May 15, 1992, between American Standard Inc. and First
Trust National Association, Trustee, relating to American Standard Inc.'s
11 3/8% Senior Debentures due 2004, in the aggregate principal amount of
$250,000,000; previously filed as Exhibit (4)(iii) by American Standard Inc. in
its Form 10-Q for the quarter ended June 30, 1992, and herein incorporated by
reference.
</TABLE>

- ---------------
* To be filed by amendment

** Previously filed

<PAGE> 148

- ---------------
* To be filed by amendment

** Previously filed

<PAGE> 149

- ---------------
* To be filed by amendment

** Previously filed

<PAGE> 150

- ---------------
* To be filed by amendment

** Previously filed

<PAGE> 151

- ---------------

* To be filed by amendment

** Previously filed

<PAGE> 1
EXHIBIT 1
American Standard Companies Inc.

9,500,000 Shares
Common Stock
($.01 par value)

Underwriting Agreement
(U.S. Version)

-------------------------------

, 1995

Goldman, Sachs & Co.
CS First Boston
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
As representatives of the several
Underwriters named in Schedule I
hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004

Ladies and Gentlemen:

American Standard Companies Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of 9,500,000 shares (the "Firm Shares") and, at
the election of the Underwriters, up to 1,420,000 additional shares (the
"Optional Shares") of Common Stock ($.01 par value) ("Stock") of the Company
(the Firm Shares and the Optional Shares that the Underwriters elect to
purchase pursuant to Section 2 hereof being collectively called the "Shares").
The Company's only significant asset is all the outstanding common stock of
American Standard Inc., a Delaware corporation ("ASI").

It is understood and agreed to by all parties that the Company is
concurrently entering into an agreement (the "International Underwriting
Agreement") providing for the sale by the Company of up to a total of 4,605,000
shares of Stock (the "International Shares"), including the overallotment
option thereunder, through arrangements with certain underwriters outside the
United States (the "International Underwriters"), for whom Goldman Sachs
International, S.G. Warburg Securities (London), CS First Boston Limited and
Morgan Stanley International are acting as lead managers. Anything herein or
therein to the contrary notwithstanding, the respective closings under this
Agreement and the International Agreement are hereby expressly made conditional
on one another. The Underwriters hereunder and the International Underwriters
are simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between
<PAGE> 2
Syndicates") which provides, among other things, for the transfer of shares of
Stock between the two syndicates. Two forms of prospectus are to be used in
connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
International Shares. The latter form of prospectus will be identical to the
former except for certain substitute pages as included in the registration
statement and amendments thereto as mentioned below. Except as used in
Sections 2, 3, 4, 9 and 11 herein, and except as the context may otherwise
require, references hereinafter to the Shares shall include all the shares of
Stock which may be sold pursuant to either this Agreement or the International
Underwriting Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or supplemented, shall
include both the U.S. and the international versions thereof. All terms used
but not otherwise defined herein shall have the meanings ascribed to such terms
in the Prospectus (as hereinafter defined).

1. The Company represents and warrants to, and agrees with, each
of the Underwriters that:

(a) A registration statement on Form S-2 (File No. 33-56409) in
respect of the Shares has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and any
post-effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you for
each of the other Underwriters, have been declared effective by the
Commission in such form; no other document with respect to such
registration statement or document incorporated by reference therein has
heretofore been filed with the Commission; and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) of the
rules and regulations of the Commission under the Securities Act of 1933,
as amended (the "Act"), is hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all exhibits
thereto and including (i) the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b) under the Act
in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A
under the Act to be part of the registration statement at the time it was
declared effective and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part
of the registration statement became effective, each as amended at the
time
<PAGE> 3
such part of the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final prospectus,
in the form first filed pursuant to Rule 424(b) under the Act, is
hereinafter called the "Prospectus"; and any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act (as information included in such documents
incorporated by reference may have been amended or modified in the
Registration Statement or the Prospectus), as of the date of such
Preliminary Prospectus or Prospectus, as the case may be);

(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, complied as to form in all
material respects with the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not apply
to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein;

(c) The documents incorporated by reference in the Prospectus, when
they were filed with the Commission, complied as to form in all material
respects with the requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission thereunder, and none of such documents contained an untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall
not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein;

(d) The Registration Statement complies as to form, and the
Prospectus and any further amendments or supplements to the Registration
Statement or the Prospectus will comply as to form, in all material
respects with the requirements of the Act and the rules and regulations of
the Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment thereto
and
<PAGE> 4
as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; provided, however, that
this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter through Goldman,
Sachs & Co. expressly for use therein;

(e) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference would have a material
adverse effect, or would reasonably (based on information available to the
Company) be expected to have a prospective material adverse effect, on the
general affairs, financial position, stockholders' equity or consolidated
results of operations of the Company and its subsidiaries taken as a whole
(a "Material Adverse Effect"), otherwise than as set forth or contemplated
in the Prospectus; and, since the respective dates as of which information
is given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock (other than pursuant to the American-
Standard Employee Stock Ownership Plan (the "ESOP") or other employee
incentive or benefit plans) or any increase in the long-term debt of the
Company or any of its subsidiaries or any change that would have a
Material Adverse Effect otherwise than as set forth or contemplated in the
Prospectus (including, without limitation, borrowings in the ordinary
course of business under the Revolving Credit Facility);

(f) The Company and its Principal Subsidiaries have good title (or a
comparable interest with respect to foreign real property) with respect to
its real properties (other than liens, encumbrances, equities or claims
existing under the Existing Credit Agreement or to be created pursuant to
the New Credit Agreement) and good and sufficient title (other than liens,
encumbrances, equities or claims existing under the Existing Credit
Agreement or to be created pursuant to the New Credit Agreement) to all of
its other respective properties and assets reflected in the most recent
consolidated balance sheet contained in the Prospectus, in each case
except for (i) assets disposed of since the date of such consolidated
balance sheet and prior to the date of this Agreement in the ordinary
course of business, (ii) assets acquired or
<PAGE> 5
disposed of since the date of such consolidated balance sheet in
accordance with this Agreement, (iii) assets held under capital leases and
(iv) defects that in the aggregate do not result in a Material Adverse
Effect;

(g) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with power and authority (corporate and other) to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, except where the failure to possess such power or
authority, or to be so qualified, would not have a Material Adverse
Effect; and each Principal Subsidiary of the Company listed on Exhibit A
(the "Principal Subsidiaries") has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;

(h) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform in all material respects to the description of
the capital stock contained in the Prospectus; and all of the issued
shares of capital stock of each Principal Subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares and except as set forth in the
Prospectus) are owned directly or indirectly by the Company, free and
clear of all liens, encumbrances, equities or claims (other than liens,
encumbrances, equities or claims existing under the Existing Credit
Agreement or to be created pursuant to the New Credit Facility);

(i) The unissued Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and in the International
Underwriting Agreement, will be duly and validly issued, fully paid and
non-assessable and will conform to the description of the Stock contained
in the Prospectus;

(j) The issue and sale of the Shares by the Company hereunder and
under the International Underwriting Agreement and the compliance by the
Company and ASI with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation
<PAGE> 6
of the transactions herein and therein contemplated will not conflict
with or result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or
any of its Principal Subsidiaries is a party or by which the Company or
any of its Principal Subsidiaries is bound or to which any of the property
or assets of the Company or any of its Principal Subsidiaries is subject,
nor will such action result in any violation of the provisions of the
Restated Certificate of Incorporation or Amended By-laws of the Company or
any statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
Principal Subsidiaries or any of their properties except, in each case
(other than with respect to such Restated Certificate of Incorporation and
Amended By-laws), for such conflicts, violations, breaches or defaults
which would not have a Material Adverse Effect or impair the Company's
ability to perform its obligations hereunder or under the International
Underwriting Agreement; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company or ASI of the transactions contemplated by
this Agreement and the International Underwriting Agreement, except the
registration under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required under
state or foreign securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters and such consents, approvals and authorizations
required by the New York Stock Exchange, Inc. (the "Exchange") in
connection with the listing of the Shares;

(k) Neither the Company nor any of its Principal Subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust,
loan agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound except (other
than in respect of such Certificate of Incorporation or By-laws) for such
defaults which would not have a Material Adverse Effect;

(l) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, constitute in all material respects a
fair summary of such terms and the statements set forth in the
<PAGE> 7
Prospectus under the caption "Business-General-Regulation and
Environmental Matters" and the statements set forth in the International
Prospectus under the caption "Certain United States Tax Consequences To
Non-U.S. Holders," insofar as they purport to summarize Federal laws of
the United States referred to thereunder, fairly summarize such laws in
all material respects;

(m) Other than as set forth or contemplated in the Prospectus, there
are no legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would individually or in the
aggregate have a Material Adverse Effect; and, to the best of the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;

(n) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company" or an entity
controlled by a company required to register as an investment company, as
such terms are defined in the Investment Company Act of 1940, as amended
(the "Investment Company Act");

(o) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes;

(p) Ernst & Young LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries, is an
independent public accountant as required by the Act and the rules and
regulations of the Commission thereunder; and

(q) Except as referenced in the Prospectus or as specified in
writing to the Underwriters, there are no contracts, agreements or
understandings betweeen the Company and any person granting such person
the right to require the Company to file a registration statement under
the Act with respect to any securities of the Company owned or to be owned
by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Act.

2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at a purchase price per share of $........................, the number of
<PAGE> 8
Firm Shares set forth opposite the name of such Underwriter in Schedule I
hereto and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided below, the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company,
at the purchase price per share set forth in clause (a) of this Section 2, that
portion of the number of Optional Shares as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.

The Company hereby grants to the Underwriters the right to purchase at
their election up to ............ Optional Shares, at the purchase price per
share set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the
Company, given within a period of 30 calendar days after the date of this
Agreement, setting forth the aggregate number of Optional Shares to be
purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date of
such notice.

3. Upon the authorization by you of the release of the Firm Shares,
the several Underwriters propose to offer the Firm Shares for sale upon the
terms and conditions set forth in the Prospectus.

4. (a) The Shares to be purchased by each Underwriter hereunder,
in definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours prior
notice to the Company, shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., for the account of such Underwriter, against payment by
or on behalf of such Underwriter of the purchase price therefor by Federal
(same day) funds. The Company agrees to reimburse the Underwriters promptly at
the [ ] rate for the loss of income incurred by the Underwriters as a result
of payment in immediately available funds rather than in next-day funds. The
Company will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) with respect
<PAGE> 9
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on ............., 19.. or such other time and date as Goldman, Sachs &
Co. and the Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman,
Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the
Underwriters' election to purchase such Optional Shares, or such other time and
date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery", such time and date for delivery of the Optional Shares, if not
the First Time of Delivery, is herein called the "Second Time of Delivery", and
each such time and date for delivery is herein called a "Time of Delivery".

(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(j) hereof, will be delivered at the offices
of Cahill Gordon & Reindel, 80 Pine Street, New York, N.Y. 10005 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at 3:00
p.m., New York City time, on the New York Business Day next preceding such Time
of Delivery, at which meeting the final drafts of the documents to be delivered
pursuant to the preceding sentence will be available for review by the parties
hereto. For the purposes of this Section 4, "New York Business Day" shall mean
each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in New York are generally authorized or obligated by
law or executive order to close.

5. The Company agrees with each of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof; to advise you, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been
filed or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish you with
<PAGE> 10
copies thereof; to advise you, promptly after it receives notice thereof,
of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, of the initiation or (to the
Company's knowledge) threatening of any proceeding for any such purpose,
or of any request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional information;
and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus or suspending any such qualification, promptly to use their
best efforts to obtain the withdrawal of such order;

(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may reasonably request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation, file a general consent to service of process, or subject
itself to taxation in any jurisdiction;

(c) To furnish the Underwriters with copies of the Prospectus in
such quantities as you may from time to time reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time any
event shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you
and upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may from
time to time reasonably request of an amended Prospectus or a supplement
to the Prospectus which will correct such statement or omission or effect
such compliance, and in case any Underwriter is required to deliver a
prospectus in connection with sales of any of the Shares at any time nine
months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver to
such Underwriter as
<PAGE> 11
many copies as you may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act;

(d) To make generally available to the Company's securityholders as
soon as practicable, but in any event not later than eighteen months after
the effective date of the Registration Statement (as defined in Rule
158(c) under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of
the Act and the rules and regulations thereunder (including, at the option
of the Company, Rule 158);

(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, not
to offer, sell, contract to sell or otherwise dispose of, except as
provided hereunder and under the International Underwriting Agreement, any
common equity securities of the Company that are substantially similar to
the Shares, including but not limited to any securities that are
convertible into or exchangeable for, or that represent the right to
receive, Stock or any such substantially similar securities (other than
pursuant to employee stock option plans or other plans for the benefit of
employees (including, without limitation, the ESOP) or the Stockholders
Rights Agreement existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;

(f) To furnish to the Company's stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, stockholders' equity and cash flows of the
Company and its consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of the
first three quarters of each fiscal year (beginning with the fiscal
quarter ending after the effective date of the Registration Statement),
consolidated summary financial information of the Company and its
subsidiaries for such quarter in reasonable detail;

(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
national securities exchange on which any class of securities of the
Company is listed; and (ii) such additional publicly available information
concerning
<PAGE> 12
the business and financial condition of the Company as you may from
time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);

(h) To use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds"; and

(i) To use their best efforts to list, subject to official notice of
issuance, the Shares on the Exchange.

6. The Company and ASI covenant and agree with the several
Underwriters that the Company and ASI, jointly and severally, will pay or cause
to be paid the following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and filing of the Registration Statement, any Preliminary Prospectus
and the Prospectus and amendments and supplements thereto and the mailing and
delivering of copies thereof to the Underwriters and dealers; (ii) the cost of
printing or producing any Agreement among Underwriters, this Agreement, the
International Underwriting Agreement, the Agreement between Syndicates, the
Selling Agreement, the Blue Sky Memorandum, closing documents (including
compilations thereof) and any other documents in connection with the offering,
purchase, sale and delivery of the Shares; (iii) all expenses in connection
with the qualification of the Shares for offering and sale under state
securities laws as provided in Section 5(b) hereof, including the reasonable
fees and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky survey; (iv) all reasonable
fees and expenses in connection with listing the Shares on the Exchange; (v)
the filing fees incident to, and the fees and disbursements of counsel for the
Underwriters in connection with, securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of the Shares;
(vi) the cost of preparing stock certificates; (vii) the cost and charges of
any transfer agent or registrar; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees
of their counsel, stock transfer taxes on resale of any of the Shares by them,
and any advertising expenses connected with any offers they may make.
<PAGE> 13
7. The obligations of the Underwriters hereunder, as to the Shares
to be delivered at each Time of Delivery, shall be subject, in their
discretion, to the condition that all representations and warranties and other
statements of the Company herein are, at and as of such Time of Delivery, true
and correct, the condition that the Company shall have performed in all
material respects all of its obligations hereunder theretofore to be performed,
and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by the rules and regulations under the Act and in accordance
with Section 5(a) hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the part of the
Commission shall have been complied with to your reasonable satisfaction;

(b) Cahill Gordon & Reindel, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of
Delivery, with respect to the matters covered in paragraphs (i), (ii)
(only with respect to the Shares), (iii), (v) (only with respect to
statements under the caption "Underwriting"), and the first clause of
(viii) relating to compliance as to form of subsection (c) below as well
as such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;

(c) Debevoise & Plimpton, counsel for the Company, shall have
furnished to you their written opinion, dated such Time of Delivery, in
form and substance reasonably satisfactory to you, to the effect that:

(i) Each of the Company and ASI has been duly incorporated and
is validly existing as a corporation in good standing under the laws
of the State of Delaware, with power and authority (corporate and
other) to own its properties and conduct its business as described in
the Prospectus;

(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company (including the Shares being delivered at such Time of
Delivery) have been duly authorized and, when issued against payment
therefor in the manner contemplated by this Agreement and the
International
<PAGE> 14
Underwriting Agreement, will be validly issued, fully paid and
non-assessable; and the Shares conform as to legal matters in all
material respects to the description of the Stock contained in the
Prospectus;

(iii) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;

(iv) No consent, approval, authorization, order, registration
or qualification of or with any State of New York or Delaware or U.S.
Federal court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of
the transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the
Shares, and such consents, approvals, authorizations, registrations
or qualifications as may be required under state or foreign
securities or Blue Sky laws in connection with the purchase and
distribution of the Shares by the Underwriters and the International
Underwriters (as to which such counsel need not express an opinion);

(v) The statements set forth in the Prospectus under the
caption "Business-General-Regulation and Environmental Matters" and
the statements set forth in the International Prospectus under the
caption "Certain United States Tax Consequences To Non-U.S. Holders,"
insofar as they purport to summarize Federal laws of the United
States referred to thereunder, fairly summarize such laws in all
material respects;

(vi) The Company is not an "investment company" or an entity
"controlled" by a company required to register as an "investment
company", as such terms are defined in the Investment Company Act; and

(vii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements and
<PAGE> 15
related schedules and other financial [and statistical] information
contained or incorporated by reference therein, as to which such
counsel need express no belief) comply as to form in all material
respects with the requirements of the Act and the rules and
regulations thereunder; and they do not know of any contracts or
other documents of a character required to be filed as an exhibit to
the Registration Statement or required to be incorporated by
reference into the Prospectus which are not filed or incorporated by
reference as required.

In addition to the matters set forth above, such opinion shall also
include a statement to the effect that such counsel has not checked the
accuracy or completeness of, or otherwise verified, and is not passing upon and
assumes no responsibility for the accuracy or completeness of, the information
contained or incorporated by reference in the Registration Statement or the
Prospectus, or any amendment or supplement thereto, except to the limited
extent set forth in the concluding clause of Section 7(c)(ii) above, in the
course of the preparation of the Registration Statement and the Prospectus by
the Company, such counsel participated in conferences with representatives of
the Company, the independent public accountants of the Company and the
Representatives and their counsel with respect thereto, and that such counsel's
examination of the Registration Statement and the Prospectus and such counsel's
participation in the above-mentioned conferences did not cause such counsel to
believe that the Registration Statement or any amendment thereto (except as to
the financial statements and related schedules and other financial [or
statistical] information contained therein, as to which such counsel need not
express a belief), at the time the Registration Statement or amendment became
effective, contained an untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any amendment or
supplement thereto (other than the financial statements and related schedules
and other financial [and statistical] information contained or incorporated by
reference therein, as to which such counsel need not express a belief), at the
time it was filed pursuant to Rule 424(b) or on the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

In rendering such opinion, such counsel may state that they express no
opinion other than as to the laws of the State of New York, the General
Corporation Law of the State of Delaware and the Federal laws of the United
States. No persons other than you shall be entitled to rely on such opinion,
and
<PAGE> 16
such opinion may not be furnished or referred to, or quoted from to, any other
person.

(d) Richard A. Kalaher, Esq., Acting General Counsel for the Company
and ASI, shall have furnished to you his written opinion, dated such Time
of Delivery, in form and substance reasonably satisfactory to you, to the
effect that:

(i) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where the failure to be so qualified would not
have a Material Adverse Effect;

(ii) Each Principal Subsidiary incorporated within the United
States (a "U.S. Principal Subsidiary"), other than ASI, has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and
all of the issued shares of capital stock of each U.S. Principal
Subsidiary and of ASI have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for
directors' qualifying shares and except as otherwise set forth in
the Prospectus) are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims (other
than liens, encumbrances, equities or claims existing under the
Existing Credit Agreement or to be created pursuant to the New Credit
Facility) (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in
respect to matters of fact upon certificates of officers of the
Company or its subsidiaries and of government officials, provided
that such counsel shall state that they believe that both you and
they are justified in relying upon such opinions and certificates);

(iii) To the best of such counsel's knowledge and other than
as set forth or contemplated in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or
any of its subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would individually or in
the aggregate have a Material Adverse Effect; and, to the best of
such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
<PAGE> 17
(iv) Neither the Company nor any of its U.S. Principal
Subsidiaries is in violation of its Certificate of Incorporation or
By-laws or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other
agreement or instrument known to such counsel to which it is a party or
by which it or any of its properties may be bound except (other than
with respect to such Certificate of Incorporation or By-laws) for such
defaults which would not have a Material Adverse Effect;

(v) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company and
ASI with all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which the
Company or any of its U.S. Principal Subsidiaries is a party or by
which the Company or any of its U.S. Principal Subsidiaries is bound or
to which any of the property or assets of the Company or any of its
U.S. Principal Subsidiaries is subject, nor will such action result in
any violation of the provisions of the Restated Certificate of
Incorporation or Amended By-laws of the Company or any statute or any
order, rule or regulation known to such counsel of any court or
governmental agency or body having jurisdiction over the Company or any
of its U.S. Principal Subsidiaries or any of their properties except,
in each case (other than with respect to such Restated Certificate of
Incorporation and Amended By-laws), for such conflicts, violations,
breaches or defaults which would not have a Material Adverse Effect or
impair the Company's ability to perform its obligations hereunder or
under the International Underwriting Agreement; and

(vi) The documents incorporated by reference in the Prospectus
(other than the financial statements and related schedules and other
financial [and statistical] information contained therein, as to which
such counsel need express no belief), when they were filed with the
Commission, complied as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations of the
Commission thereunder. While such counsel has not checked the
accuracy or completeness of, or otherwise verified, and is not
passing upon, and assumes no responsibility for, the accuracy or
completeness of the documents incorporated by reference in the
Prospectus, such counsel reviewed such documents and discussed their
contents with other officers of the Company and the Company's
independent public accountants, and such review and discussions did
not
<PAGE> 18
give such counsel reason to believe that any of such documents, when
such documents were so filed, contained an untrue statement of a
material fact required to be stated therein or necessary to make the
statements therein not misleading.

In rendering such opinion, such counsel may state that he expresses
no opinion other than as to the laws of the State of New York, the
General Corporation Law of the State of Delaware and the Federal laws
of the United States. No persons other than you shall be entitled to
rely on such opinion, and such opinion may not be furnished or
referred to, or quoted from, any other person.

(e) Counsel for foreign Principal Subsidiaries of the Company
satisfactory to the Representatives shall have furnished to you their
written opinion, dated such Time of Delivery, in form and substance
reasonably satisfactory to you, to the effect that:

(i) Each foreign Principal Subsidiary of the Company has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation; and all
of the issued shares of capital stock of each such foreign Principal
Subsidiary have been duly and validly authorized and issued, are
fully paid and non-assessable, and (except for directors' qualifying
shares and except as otherwise set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims, except where the failure to be in
good standing would not have a Material Adverse Effect;

(ii) To the best of such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or governmental
proceedings pending to which any foreign Principal Subsidiary is a
party or of which any property of any such foreign Principal
Subsidiary is the subject which, if determined adversely to such
subsidiary, would individually or in the aggregate have a Material
Adverse Effect; and, to the best of such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others; and

(iii) No foreign Principal Subsidiary is in violation of its
Certificate of Incorporation or By-laws or other organizational
documents or in default in the performance or observance of any
material obligation, agreement, covenant or
<PAGE> 19
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument known to such
counsel to which it is a party or by which it or any of its
properties may be bound except (other than with respect to such
Certificate of Incorporation or By-laws or other organizational
documents) for such defaults which would have a Material Adverse
Effect.

(f) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date
of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of
Delivery, Ernst & Young shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto;

(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus, and (ii) since the respective
dates as of which information is given in the Prospectus there shall not
have been any change in the capital stock (other than pursuant to the ESOP
or other employee incentive or benefit plans) or any increase in the
long-term debt of the Company or any of its subsidiaries or any
development involving a Material Adverse Effect, or any development
involving a prospective Material Adverse Effect, otherwise than as set
forth or contemplated in the Prospectus (including, without limitation,
borrowings in the ordinary course of business under the Revolving Credit
Facility), the effect of which, in any such case described in clause (i)
or (ii), is in the judgment of the Representatives so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;

(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act,
and (ii) no such organization shall have publicly announced that it has
under surveillance or review, with
<PAGE> 20
possible negative implications, its rating of any of the Company's debt
securities;

(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension or
material limitation in trading in the Company's securities on the New York
Stock Exchange; (iii) a general moratorium on commercial banking
activities declared by either Federal or New York State authorities; or
(iv) the outbreak or escalation of hostilities involving the United States
or the declaration by the United States of a national emergency or war, if
the effect of any such event specified in this clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered at
such Time of Delivery on the terms and in the manner contemplated in the
Prospectus;

(j) The Shares to be sold at such Time of Delivery shall have been
duly listed, subject to notice of issuance, on the Exchange;

(k) The Company has obtained and delivered to the Underwriters
executed copies of an agreement from each of the persons listed on Exhibit
B hereto, substantially to the effect set forth in Subsection 5(e) hereof
in form and substance satisfactory to you; and

(l) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company and
ASI satisfactory to you as to the accuracy of the representations and
warranties of the Company and ASI herein at and as of such Time of
Delivery, as to the performance by the Company and ASI of all of their
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (g) of this
Section 7 and as to such other matters as you may reasonably request.

8. (a) The Company and ASI, jointly and severally, will indemnify
and hold harmless each Underwriter against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in
any Preliminary Prospectus, the Registration Statement or the Prospectus, or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
will reimburse each
<PAGE> 21
Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that neither the
Company nor ASI shall be liable (i) in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through Goldman, Sachs
& Co. expressly for use therein and (ii) with respect to any Preliminary
Prospectus to the extent that any such loss, claim, damage or liability of such
Underwriter results solely from the fact that such Underwriter sold Common
Stock to a person as to whom the Company or ASI shall establish that there was
not sent by commercially reasonable means, at or prior to the written
confirmation of such sale, a copy of the Prospectus in any case where such
delivery is required by the Act, if the Company or ASI has previously furnished
copies thereof in sufficient quantity to such Underwriter and the loss, claim,
damage or liability of such Underwriter results from an untrue statement or
omission of a material fact contained in the Preliminary Prospectus that was
corrected in the Prospectus.

(b) Each Underwriter will, severally and not jointly, indemnify and
hold harmless the Company and ASI against any losses, claims, damages or
liabilities to which the Company or ASI may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through Goldman, Sachs & Co.
expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.

(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party
<PAGE> 22
under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
shall not relieve it from any liability which it may have to any indemnified
party otherwise than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party (who shall not, except with
the consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from
all liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by
or on behalf of any indemnified party.

(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to reflect
the relative benefits received by the Company and ASI on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and ASI on the one hand and the Underwriters on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or
<PAGE> 23
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and ASI on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the Company bear
to the total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this Agreement, in each
case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
the Company and ASI on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, ASI and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (d) to contribute are several in proportion to
their respective underwriting obligations and not joint.

(e) The obligations of the Company and ASI under this Section 8
shall be in addition to any liability which the Company and ASI may otherwise
have and shall extend, upon the same terms and conditions, to each person, if
any, who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section 8 shall be in addition to
any liability which the respective Underwriters may otherwise have and shall
extend, upon the same terms and conditions, to each officer and director of
the Company and to
<PAGE> 24
each person, if any, who controls the Company within the meaning of the Act.

9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company
that you have so arranged for the purchase of such Shares, or the Company
notifies you that it has so arranged for the purchase of such Shares, you or
the Company shall have the right to postpone such Time of Delivery for a period
of not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your
opinion may thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section with like
effect as if such person had originally been a party to this Agreement with
respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall
have the right to require each non-defaulting Underwriter to purchase the
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter
to purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.

(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company
as provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase
<PAGE> 25
Shares of a defaulting Underwriter or Underwriters, then this Agreement (or,
with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Company to sell the Optional Shares) shall
thereupon terminate, without liability on the part of any non-defaulting
Underwriter or the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

10. The respective indemnities, agreements, representations,
warranties and other statements of the Company, ASI and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and
effect, regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Underwriter or any controlling person of
any Underwriter, or the Company or ASI, or any officer or director or
controlling person of the Company or ASI, and shall survive delivery of and
payment for the Shares.

11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company and ASI shall not then be under any liability to any
Underwriter except as provided in Sections 6 and 8 hereof; but, if for any
other reason, any Shares are not delivered by or on behalf of the Company as
provided herein, the Company and ASI, jointly and severally, will reimburse the
Underwriters through you for all out-of-pocket expenses approved in writing by
you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company and ASI shall then be under no further
liability to any Underwriter in respect of the Shares not so delivered except
as provided in Sections 6 and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
Representatives.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex
or facsimile transmission to you as the representatives in care of Goldman,
Sachs & Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company or ASI shall be delivered or sent by mail,
telex or facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any
<PAGE> 26
notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or
sent by mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Company by you upon
request. Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof.

13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company, ASI and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and ASI and
each person who controls the Company, ASI or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.

16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.

If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company, one for ASI and for each of the
Representatives plus one for each counsel counterparts hereof, and upon the
acceptance hereof by you, on behalf of each of the Underwriters, this letter
and such acceptance hereof shall constitute a binding agreement between each of
the Underwriters, the Company and ASI. It is understood that your acceptance
of this letter on behalf of each of the Underwriters is pursuant to the
authority set forth in a form of Agreement among Underwriters (U.S. Version),
the form of which shall be submitted to the Company for examination upon
request, but without warranty on your part as to the authority of the signers
thereof.
<PAGE> 27
Very truly yours,

American Standard Companies Inc.

By:
----------------------------
Name:
Title:

American Standard Inc.

By:
----------------------------
Name:
Title:

Accepted as of the date hereof:

Goldman, Sachs & Co.
CS First Boston
Morgan Stanley & Co. Incorporated
Smith Barney Inc.

By:
-----------------------------------
(Goldman, Sachs & Co.)

On behalf of each of the Underwriters
<PAGE> 28
SCHEDULE I

Number of Optional
Shares to be
Total Number of Purchased if
Firm Shares Maximum Option
Underwriter to be Purchased Exercised

Goldman, Sachs & Co. . . . . . . . . .
CS First Boston
Morgan Stanley & Co. Incorporated
Smith Barney Inc.
[Names of other Underwriters]. . . . .
Total. . . . . . . . . . .
<PAGE> 29
ANNEX I

Pursuant to Section 7(f) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the effect that:

(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;

(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included or incorporated by reference in the Registration Statement or the
Prospectus comply as to form in all material respects with the applicable
accounting requirements of the Act or the Exchange Act, as applicable, and
the related published rules and regulations thereunder; and they have made
a review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated interim
financial statements of the Company for the periods specified in such
letter;

(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus
and/or included in the Company's quarterly report on Form 10-Q
incorporated by reference into the Prospectus; and on the basis of
specified procedures including inquiries of officials of the Company who
have responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, nothing came to their
attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;

(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
<PAGE> 30
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since
the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of the
Company and its subsidiaries responsible for financial and accounting
matters and such other inquiries and procedures as may be specified in
such letter, nothing came to their attention that caused them to believe
that:

(A) (i) the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus and/or included or incorporated
by reference in the Company's Quarterly Reports on Form 10-Q
incorporated by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting requirements
of the Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the unaudited
condensed consolidated statements of income, consolidated balance
sheets and consolidated statements of cash flows included in the
Prospectus or included in the Company's Quarterly Reports on Form
10-Q incorporated by reference in the Prospectus, for them to be in
conformity with generally accepted accounting principles;

[(B) any other unaudited income statement data and balance
sheet items included in the Prospectus do not agree with the
corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis substantially
consistent with the basis for the corresponding amounts in the
audited consolidated financial statements included or incorporated by
reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;]*

[(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the unaudited
condensed financial statements referred to in Clause (A) and any
unaudited income statement data and balance sheet items included in
the Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
financial statements included or incorporated
______________
* To be discussed further based on financials actually
appearing in Prospectus.
<PAGE> 31
by reference in the Company's Annual Report on Form 10-K for the most
recent fiscal year;]*

(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not been
properly applied to the historical amounts in the compilation of
those statements;

(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the
consolidated capital stock or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or any decreases
in consolidated net current assets or increases in stockholders'
deficit or other items specified by the Representatives, or any
increases or decreases in any items specified by the Representatives,
in each case as compared with amounts shown in the latest balance
sheet included or incorporated by reference in the Prospectus, except
in each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur, which may result from exchange
rate movements, which may result from the award of shares net of
repurchases or which are described in such letter; and

(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus to
the specified date referred to in clause (E) there were any decreases
in consolidated net revenues or operating profit or the total or per
share amounts of consolidated net income or other items specified by
the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding
length specified by the Representatives, except in each case for
increases or decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and

(v) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus and the limited
procedures, inspection of
______________
* To be discussed further based on financials actually appearing
in Prospectus.
<PAGE> 32
minute books, inquiries and other procedures referred to in paragraphs
(iii) and (iv) above, they have carried out certain specified procedures,
not constituting an examination in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which are derived
from the general accounting records of the Company and its subsidiaries,
which appear in the Prospectus (excluding documents incorporated by
reference) or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus specified by the
Representatives, and have compared certain of such amounts, percentages
and financial information with the accounting records of the Company and
its subsidiaries and have found them to be in agreement.
<PAGE> 33

EXHIBIT A

Principal Subsidiaries

[To Come]
<PAGE> 34

EXHIBIT B

[LIST FOR LOCK UPS]

<PAGE> 1
EXHIBIT 4(xxi)
================================================================================

AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT

AMERICAN STANDARD COMPANIES INC.

Dated as of December 2, 1994

================================================================================

<PAGE> 2

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT

AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated as of
December 2, 1994, among American Standard Companies Inc., a Delaware
corporation (the "Company"), formerly named ASI Holding Corporation, Kelso ASI
Partners, L.P., a Delaware limited partnership ("ASI Partners"), and the other
stockholders of the Company listed on Schedule A hereto (such stockholders are
referred to herein collectively as the "Management Stockholders").

Recitals:

WHEREAS, the Company, ASI Partners and certain management
stockholders (the "Original Management Stockholders") entered into a
Stockholders Agreement, dated as of July 7, 1988, as amended as of August 1,
1988 (the "Original Stockholders Agreement");

WHEREAS, the Company, ASI Partners and a majority in interest
of the Original Management Stockholders believe it to be in their best
interests that they amend and restate the Original Stockholders Agreement;

NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, the parties hereby agree as follows:

1. Original Stockholders Agreement. The Original
Stockholders Agreement is hereby amended and restated in its entirety as
provided for herein.

2. Registrations Upon Request.

2.1. Demands. At any time after the date hereof, ASI
Partners shall have the right to make eight requests that the Company effect
the registration under the Securities Act (as such term and any other
capitalized term used herein without definition are defined in Section 15) of
any of the Registrable Securities then owned by ASI Partners, each such request
to specify the intended method or methods of disposition thereof. Upon any
such request, the Company will promptly, but in any event within 15 days, give
written notice of such request to all holders of Registrable Securities and
thereupon the Company will use its best efforts to effect the prompt
registration under the Securities Act of:
<PAGE> 3
EXHIBIT 4(xxi)

(a) the Registrable Securities that the Company has been so
requested to register by ASI Partners, and

(b) all other Registrable Securities which the Company has
been requested to register by the holders thereof by written request given to
the Company within 20 days after the giving of such written notice by the
Company,

all to the extent required to permit the disposition (in accordance with ASI
Partners' intended method or methods of disposition) of the Registrable
Securities so to be registered, but, in any event, subject to the provisions of
Section 2.6. Notwithstanding the foregoing, but subject to the rights of
holders of Registrable Securities under this Section 2, (x) if the Board of
Directors of the Company (the "Board") determines in its good faith judgment,
(i) after consultation with a firm of nationally recognized underwriters, that
there will be an adverse effect on a then contemplated public offering of the
Company's Equity Securities, or (ii) that the disclosures that would be
required to be made by the Company in connection with such registration would
be materially harmful to the Company because of transactions then being
considered by, or other events then concerning, the Company, the Company may
defer the filing (but not the preparation) of the registration statement which
is required to effect any registration pursuant to this Section 2.1 for a
reasonable period of time, but not in excess of 90 calendar days (or any longer
period consented to by ASI Partners), provided that at all times the Company is
in good faith using all reasonable efforts to cause such registration statement
to be filed as soon as practicable and provided, further, that such period
shall end on such earlier date as may be consented to by the underwriters of
such underwritten public offering, and (y) if ASI Partners determines in its
good faith judgment to abandon the proposed registration of any Registrable
Securities that it has requested to be registered pursuant to this Section 2.1,
then ASI Partners shall have the right to withdraw such request prior to the
effectiveness of the registration statement prepared in connection therewith
and such request shall not be deemed to be a demand registration for purposes
of the first sentence of Section 2.3 hereof, provided, however, that if ASI
Partners withdraws three such requests, then any subsequent request that is
withdrawn shall, at ASI Partners' election, either be treated as a demand
registration for purposes of the first sentence of Section 2.3 hereof or ASI
Partners shall reimburse the Company for all out-of-pocket costs and expenses
reasonably

Stockholders Agreement

2
<PAGE> 4

incurred by the Company in connection with such requested registration.

2.2. Registration Statement Form. Each registration
requested pursuant to Section 2.1 shall be effected by the filing of a
registration statement on a form selected by the Company, provided that the
Company will include in any such registration statement any information
reasonably requested by ASI Partners which is required under any other form of
registration statement.

2.3. Expenses. The Company will pay all of ASI Partners's
Registration Expenses in connection with (a) the first three registrations
requested pursuant to Section 2.1 that become effective; (b) any registration
requested pursuant to Section 2.1 that does not become effective for reasons
other than the fault or withdrawal of ASI Partners, and (c) three registrations
that are withdrawn by ASI Partners for which the Company is responsible under
Section 2.1, provided that ASI Partners shall pay all Registration Expenses to
the extent required to be paid by a seller under applicable law. For purposes
of Section 2.1 and this Section 2.3, a registration shall not be deemed
effective if (a) a registration statement for such registration is not declared
effective within 90 days of the date such registration statement is first filed
with the Commission (or such later date as may be expressly agreed to in
writing by ASI Partners), (b) within 180 days after such registration statement
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason, provided, that such delay, stop
order, injunction, order or requirement is not due to the fault of ASI Partners
or (c) the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are
not satisfied (other than conditions to be satisfied by ASI Partners).

2.4. Priority in Demand Registrations. If a registration
pursuant to this Section 2 involves an underwritten offering, and the managing
underwriter (or, in the case of an offering which is not underwritten, an
investment banker) shall advise the Company in writing (with a copy to each
person requesting registration of Registrable Securities) that, in its opinion,
the number of securities requested and otherwise proposed to be included in
such registration exceeds the number that can reasonably be sold in such
offering without materially and adversely affecting the

Stockholders Agreement

3
<PAGE> 5

offering price or otherwise materially and adversely affecting such offering,
the Company will include in such registration (but only to the extent of the
number of securities that the Company is so advised can reasonably be sold in
such offering), first, the Registrable Securities of ASI Partners requested to
be included in such registration, second, the securities, if any, being sold by
the Company and third, the Registrable Securities, if any, of any other
stockholders requesting registration thereof, pro rata, among such
stockholders, on the basis of the number of Registrable Securities requested to
be included by such stockholders.

2.5. No Company Initiated Registration. After receipt of
notice of a requested registration pursuant to Section 2.1 of Registrable
Securities constituting at least 2% of the outstanding shares of Common Stock,
the Company shall not initiate, without the consent of ASI Partners, a
registration of any of its securities for its own account (other than a
"piggyback" registration by the Company pursuant to this Section 2 or a
registration on Form S-4 or S-8 or any successor form) until 90 days after such
registration has been effected or such registration has been terminated.

2.6. Offerings without Registration. The Company shall not
be obligated to register Registrable Securities requested to be registered
pursuant to Section 2.1 if, within ten business days of such request, the
Company delivers an opinion from outside counsel (which counsel shall be
reasonably acceptable to ASI Partners) or a no-action letter from the
Commission to ASI Partners that such registration is not required by the
Securities Act to permit the disposition thereof in accordance with ASI
Partners' intended method or methods of disposition, provided that such opinion
or no-action letter is in form and substance reasonably satisfactory to ASI
Partners and if the proposed disposition involves an underwritten offering, the
managing underwriter. If the Company is not required to register ASI Partners'
Registrable Securities pursuant to the foregoing sentence of this Section 2.6,
then (a) in the case of any offering of such Registrable Securities by ASI
Partners as to which a nationally recognized underwriter reasonably acceptable
to the Company has advised ASI Partners that such offering or the offering
price of such securities would be materially and adversely affected because
such securities are not being registered, then the provisions of Section 3(b)
of the Kelso Agreement and 12(b) of this Agreement shall be of no force and
effect with respect to the

Stockholders Agreement

4
<PAGE> 6

disposition of such Registrable Securities and (b) the provisions of Sections 2
and 4 through 8 of this Agreement shall apply to the disposition of such
Registrable Securities as though such disposition were a demand registration
pursuant to Section 2, except that:

(i) all references to "registration statement" shall refer to
the offering circular, prospectus or other selling document that ASI
Partners selects to use and the Company shall cooperate with ASI
Partners and prepare such document in accordance with the provisions
hereof relating to the preparation of registration statements;

(ii) all references to "registration" or any variation
thereof shall refer to the process of offering and selling such
securities in accordance with such holder's intended method or method
of disposition, except for the registration of such securities with
the Commission; and

(iii) the Company shall not be obligated to comply with any
of the provisions of Section 4 that relate explicitly to the
Commission or to the registration of securities under the Securities
Act.

3. Piggyback Registration.

3.1. Procedures. If the Company at any time proposes to
register any of its Equity Securities under the Securities Act (other than
pursuant to Section 2 or a registration on Form S-4 or S-8 or any successor
form), the Company shall give prompt written notice to all holders of
Registrable Securities of its intention to do so. Upon the written request of
any such holder made within 20 days after the receipt of any such notice (which
request shall specify the number of Registrable Securities intended to be
disposed of by such holder and the intended method or methods of disposition
thereof), the Company will use its best efforts to effect the registration
under the Securities Act of all such Registrable Securities in accordance with
such intended method or methods of disposition, provided that:

(a) ASI Partners may designate a minimum offering price and
maximum underwriting or selling discounts and commissions at which it has
agreed to sell its shares;

(b) The Company may at any time prior to the effectiveness of
any such registration statement abandon the

Stockholders Agreement

5
<PAGE> 7

proposed offering in which any such holders have requested to participate and,
thereupon, shall not be obligated to register any Registrable Securities in
connection with such registration (but shall nevertheless pay the Registration
Expenses in connection therewith), without prejudice, however, to the rights of
ASI Partners to request that a registration be effected under Section 2; and

(c) The first sentence of Section 2.6 shall be applicable to
any holder's rights hereunder (as though the reference therein to Section 2.1
were Section 3.1 and the references to ASI Partners referred to such holder);
provided that upon any request by ASI Partners, the Company shall use its
reasonable efforts to include in any underwritten offering of the shares being
registered by the Company the shares being offered for sale by ASI Partners on
a non-registered basis and the second sentence of Section 2.6 will apply to
such shares of ASI Partners (except that the underwriter shall evaluate the
effect on ASI Partners of including its shares on a non-registered basis).

3.2. Priority in Piggyback Registrations. If a registration
pursuant to this Section 3 involves an underwritten offering, and the managing
underwriter (or, in the case of an offering that is not underwritten, an
investment banker) shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting registration thereof) that, in its
opinion, the number of Registrable Securities requested and otherwise proposed
to be included in such registration exceeds the number which can reasonably be
sold in such offering without materially and adversely affecting the offering
price or otherwise materially and adversely affecting such offering, the
Company will include in such registration (but only to the extent of the number
which the Company is so advised can reasonably be sold in such offering),
first, the securities, if any, being sold by the Company, and second, the
Registrable Securities of each holder requesting registration thereof, pro
rata, among such holders, on the basis of the number of Registrable Securities
requested to be included by such holders. Notwithstanding the foregoing, the
Management Stockholders will not be entitled to participate in any such
registration if and to the extent the managing underwriter (or, in the case of
an offering that is not underwritten, an investment banker) shall determine in
good faith that the participation of such Management Stockholders would
adversely affect the marketability or offering price of the securities being
sold by the Company in such registration.

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3.3. Expenses. The Company will pay all Registration
Expenses in connection with each registration of Registrable Securities
requested pursuant to this Section 3, provided that each seller of Registrable
Securities shall pay all Registration Expenses to the extent required to be
paid by such seller under applicable law. No registration effected under this
Section 3 shall relieve the Company from its obligation to effect registrations
under Section 2.

4. Registration Procedures.

4.1. Company Covenants. If and whenever the Company is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2 and Section 3 (but
only if the holders of Registrable Securities are, in the aggregate, exercising
their rights under Section 3 with respect to at least 1% of the outstanding
shares of Common Stock), the Company will promptly:

(a) prepare, and as soon as practicable, but in any event
within 90 days thereafter (or any longer period consented to by ASI
Partners), file with the Commission, a registration statement with
respect to such Registrable Securities, make all required filings with
the NASD and use best efforts to cause such registration statement to
become effective;

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for so long as is required to comply with the
provisions of the Securities Act and to complete the disposition of
all securities covered by such registration statement in accordance
with the intended method or methods of disposition thereof, but in no
event for a period of more than six months after such registration
statement becomes effective;

(c) furnish to counsel selected by ASI Partners copies of all
documents and letters proposed to be filed with the Commission or any
other governmental agency, authority or self-regulatory body in
connection with such registration, which documents and letters will be
subject to the review of such counsel;

(d) refrain from filing any amendment or supplement to such
registration statement or such prospectus

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used in connection therewith to which ASI Partners shall have
reasonably objected in writing on the grounds that such amendment or
supplement does not comply (explaining why) in all material respects
with the requirements of the Securities Act or of the rules or
regulations thereunder except, in the case of a registration to be
effected under Section 3, unless the Company determines that the
filing of such amendment or supplement is required by law or necessary
to avoid liability under the securities laws;

(e) furnish to each seller of Registrable Securities, without
charge, such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case
including at least one copy of all exhibits and documents filed
therewith) and such number of copies of such prospectus included
therein (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request
in order to facilitate the disposition of the Registrable Securities
owned by such seller in accordance with the intended method or methods
of disposition thereof;

(f) use reasonable efforts to register or qualify such
Registrable Securities covered by such registration statement under
the securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things
which may be necessary or advisable to enable such seller to
consummate the disposition of such Registrable Securities in such
jurisdictions in accordance with the intended method or methods of
disposition thereof, provided that the Company shall not for any such
purpose be required to qualify generally to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified,
subject itself to taxation in any jurisdiction wherein it is not so
subject, or take any action which would subject it to general service
of process in any jurisdiction wherein it is not so subject;

(g) use reasonable efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such governmental agency, authority or
self-regulating body

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as may be necessary by virtue of the business and operations of the
Company to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities in accordance with the
intended method or methods of disposition thereof;

(h) use best efforts to furnish to each seller of Registrable
Securities a signed counterpart, addressed to the sellers, of

(i) an opinion of counsel for the Company experienced
in securities law matters, dated the effective date of the
registration statement (and, if such registration includes an
underwritten public offering, the date of the closing under
the underwriting agreement), and

(ii) a "comfort" letter (unless the registration is
pursuant to Section 3 and such a letter is not otherwise being
furnished to the Company), dated the effective date of such
registration statement (and if such registration includes an
underwritten public offering, dated the date of the closing
under the underwriting agreement), signed by the independent
public accountants who have issued an audit report on the
Company's financial statements included in the registration
statement,

covering such matters as are customarily covered in opinions of
issuer's counsel and in accountants' letters delivered to the
underwriters in underwritten public offerings of securities and such
other matters as ASI Partners may reasonably request;

(i) notify each seller of any Registrable Securities covered
by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the
happening of any event or existence of any fact as a result of which
the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the
circumstances in which they are made, and, as promptly as is
practicable, prepare and furnish to such seller a reasonable number of
copies of any required supplement to or amendment of such prospectus
as may be necessary

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so that, as thereafter delivered to the purchasers of such securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances in which they are made;

(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its stockholders, as soon as reasonably practicable, an earnings
statement of the Company (in form complying with the provisions of
Rule 158 under the Securities Act) covering the period of at least 12
months, but not more than 18 months, beginning with the first month
after the effective date of the registration statement;

(k) notify each seller of any Registrable Securities covered
by such registration statement (i) when the prospectus or any
prospectus supplement or post-effective amendment has been filed, and,
with respect to such registration statement or any post-effective
amendment, when the same has become effective, (ii) of any request by
the Commission for amendments or supplements to such registration
statement or to amend or to supplement such prospectus or for
additional information, (iii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or the initiation of any proceedings for that purpose and (iv) of the
suspension of the qualification of such securities for offering or
sale in any jurisdiction, or of the institution of any proceedings for
any of such purposes;

(l) use every reasonable effort to obtain the lifting of any
stop order that might be issued suspending the effectiveness of such
registration statement at the earliest possible moment;

(m) use its best efforts (i) (A) to list such Registrable
Securities on any securities exchange on which the Equity Securities
of the Company are then listed, or (B) if such listing is not
practicable, to secure designation of such securities as a "national
market system security" with the NASDAQ within the meaning of Rule
11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ
authorization for such Registrable Securities, and, without limiting
the foregoing, to arrange for at least two market makers to

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<PAGE> 12

register as such with respect to such Registrable Securities with the
NASD, and (ii) to provide a transfer agent and registrar for such
Registrable Securities not later than the effective date of such
registration statement and to instruct such transfer agent (A) to
release any stop transfer orders with respect to the shares of Common
Stock being sold and (B) to furnish certificates without restrictive
transfer legends representing ownership of the shares being sold, in
such denominations requested by ASI Partners or the lead underwriter;
and

(n) enter into such agreements and take such other actions as
the sellers of Registrable Securities or the underwriters reasonably
request in order to expedite or facilitate the disposition of such
Registrable Securities, including, without limitation, preparing for,
and participating in, such number of "road shows" and all such other
customary selling efforts as the underwriters reasonably request in
order to expedite or facilitate such disposition.

4.2. Additional Information. The Company may require each
seller of any Registrable Securities as to which any registration is being
effected to furnish to the Company such information regarding such seller, its
ownership of Registrable Securities and the disposition of such Registrable
Securities as the Company may from time to time reasonably request in writing
and as shall be required by law in connection therewith. Each such holder
agrees to furnish promptly to the Company all information so required to be
disclosed in order to make the information previously furnished to the Company
by such holder not materially misleading.

4.3. Preparation; Reasonable Investigation. In connection
with the preparation and filing of each registration statement registering
Registrable Securities under the Securities Act, the Company will give any
holder of Registrable Securities so to be registered which constitute at least
1% of the outstanding shares of Common Stock and its underwriters, if any,
counsel and accountants the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give
each such holder such access to the financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries and such
opportunities to discuss the business of the

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Company with its officers and the independent public accountants who have
issued audit reports on its financial statements as shall be reasonably
requested by each such holder in connection with such registration statement.

4.4. Consent of Sellers. The Company agrees not to file or
make any amendment to any registration statement with respect to any
Registrable Securities, or any amendment of or supplement to the prospectus
used in connection therewith, which refers to any seller of any Registrable
Securities covered thereby by name, or otherwise identifies such seller as the
holder of any Registrable Securities, without the consent of such seller, such
consent not to be unreasonably withheld (unless such disclosure is required by
law or is necessary to avoid liability under the securities laws). Such
consent shall be given or withheld promptly after receiving notice from the
Company of such proposed amendment or supplement.

4.5. Sellers' Covenants. By acquisition of Registrable
Securities, each holder of such Registrable Securities shall be deemed to have
agreed that upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 4.1(i), such holder will promptly
discontinue such holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such holder's
receipt of the copies of any required supplemented or amended prospectus
contemplated by Section 4.1(i). If so directed by the Company, each holder of
Registrable Securities will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, in such holder's possession of
the prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event that the Company shall give any such notice, the
period mentioned in Section 4.1(b) shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each seller of any Registrable Securities covered
by such registration statement shall have received the copies of the
supplemented or amended prospectus contemplated by Section 4.1(i).

5. Underwritten Offerings.

5.1. Underwriting Agreement. If requested by the
underwriters for any underwritten offering by holders of Registrable Securities
pursuant to a registration requested under Section 2 or 3 hereof, the Company
shall enter into an

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underwriting agreement with the underwriters for such offering, such agreement
to be reasonably satisfactory in substance and form to the Company, ASI
Partners and to the underwriters and to contain such representations and
warranties by the Company and such other terms and provisions as are
customarily contained in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in Section 8.
The holders of Registrable Securities to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that any or all of the representations and warranties by, and the
agreements on the part of, the Company to and for the benefit of such
underwriters be made to and for the benefit of such holders of Registrable
Securities and that any or all of the conditions precedent to the obligations
of such underwriters under such underwriting agreement shall also be conditions
precedent to the obligations of such holders of Registrable Securities. No
underwriting agreement (or other agreement in connection with such offering)
shall require any holder of Registrable Securities as such (or as a control
person or affiliate of the Company, if applicable) to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding such holder, the ownership
of such holder's Registrable Securities and such holder's intended method or
methods of disposition and any other representation required by law or to
furnish any indemnity to any person which is broader than the indemnity
furnished by such holder in Section 8.

5.2. Selection of Underwriters. If the Company at any time
proposes to register any of its securities under the Securities Act for sale
for its own account pursuant to an underwritten offering, the Company will have
the right to select the managing underwriter (which shall be of nationally
recognized standing) to administer the offering, but, so long as ASI Partners,
together with its Affiliates, owns at least 35% of the outstanding shares of
Common Stock, only with the approval of ASI Partners, such approval not to be
unreasonably withheld. Notwithstanding the foregoing sentence, whenever a
registration requested pursuant to Section 2 is for an underwritten offering,
ASI Partners will have the right to select the managing underwriter (which
shall be of nationally recognized standing) to administer the offering, but
only with the approval of the Company, such approval not to be unreasonably
withheld.

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6. Holdback Agreements. (a) If and whenever the Company
proposes to register any of its Equity Securities under the Securities Act for
its own account (other than on Form S-4 or S-8 or any successor form) or is
required to use its best efforts to effect the registration of any Registrable
Securities under the Securities Act pursuant to Section 2 or 3 hereof, each
holder of Registrable Securities agrees not to effect any public sale or
distribution, including any sale pursuant to a brokerage transaction under Rule
144 under the Securities Act ("Rule 144"), of any Registrable Securities within
seven days prior to and 180 days (or such shorter period as the managing
underwriter for any underwritten offering may agree) after the effective date
of the registration statement relating to such registration, except as part of
such registration.

(b) Except with the consent of ASI Partners, which shall
not be unreasonably withheld, the Company agrees not to effect any public sale
or distribution of any Equity Securities within seven days prior to and 180
days (or such shorter period as the managing underwriter for any underwritten
offering may agree) after the effective date of any registration statement with
respect to its Registrable Securities constituting more than 1% of the
outstanding shares of Common Stock (except as part of such registration or
pursuant to a registration on Form S-4 or S-8 or any successor form). In
addition, the Company shall cause each holder of its Equity Securities, whether
outstanding on the date of this Agreement or issued at any time after the date
of this Agreement, to agree not to effect any such public sale or distribution
of such securities during such period, except as part of any such registration
if permitted, and to cause each such holder to enter into a similar agreement
to such effect with the Company, provided, that the foregoing requirement shall
not apply to any such Equity Securities that (i) were sold in a public
offering, (ii) are held by the American Standard Employee Stock Ownership Plan
or (iii) are held by a holder, who is not an employee or director of the
Company or one of its subsidiaries, of less than 1% of the outstanding shares
of Common Stock, provided, further, however, that with respect to any such
holder who is either a former employee or director of the Company or who
acquired such shares in a transaction not involving a sale to such holder by
the Company of at least 1% of the then outstanding shares of Common Stock, the
Company shall only be required to use reasonable efforts to obtain such an
agreement.

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7. Additional Registration Rights. Except as provided for
herein, the Company shall not grant any other demand or piggyback registration
rights to any other person without the prior written consent of ASI Partners so
long as ASI Partners, together with its Affiliates, owns at least 10% of the
outstanding shares of Common Stock. ASI Partners shall have the right, in its
sole discretion, to have included in any registration pursuant to Section 2 or
Section 3 any shares of Common Stock owned by any former limited partner of
Kelso ASI Partners III, L.P. as though such shares were Registrable Securities
owned by ASI Partners.

8. Indemnification.

8.1. Indemnification by the Company. In the event of any
registration of any Registrable Securities pursuant to this Agreement, the
Company shall indemnify and hold harmless (a) the seller of such Registrable
Securities, (b) the directors, officers, partners, agents and Affiliates of
such seller, (c) each person who participates as an underwriter in the offering
or sale of such securities and (d) each person, if any, who controls (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) any such seller, partner or underwriter against any and all losses,
claims, damages or liabilities (or actions or proceedings in respect thereof),
joint or several, directly or indirectly based upon or arising out of (i) any
untrue statement or alleged untrue statement of a fact contained in any
registration statement under which such Registrable Securities were registered
under the Securities Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein or used in connection with the offering of
securities covered thereby, or any amendment or supplement thereto, or (ii) any
omission or alleged omission to state a fact required to be stated therein or
necessary to make the statements therein not misleading; and the Company will
reimburse each such indemnified party for any legal or any other expenses
reasonably incurred by it in connection with enforcing its rights hereunder or
investigating, preparing, pursuing or defending any such loss, claim, damage,
liability, action or proceeding, except insofar as any such loss, claim,
damage, liability, action, proceeding or expense arises out of or is based upon
an untrue statement or omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such seller expressly for use in

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the preparation thereof, provided that as to any preliminary prospectus such
indemnification shall not inure to the benefit of any such underwriter or any
person controlling any such underwriter on account of any loss, claim, damage
or liability arising from the sale of Registrable Securities to any person by
such underwriter if such underwriter failed to send or give a copy of the final
prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such preliminary prospectus was corrected in such final
prospectus. Such indemnity shall remain in full force and effect, regardless
of any investigation made by such indemnified party and shall survive the
transfer of such Registrable Securities by such seller. The indemnity
agreement contained in this Section 8 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, action or proceeding if
such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld).

8.2. Indemnification by the Sellers. The Company may
require, as a condition to including any Registrable Securities in any
registration statement filed pursuant to Section 2 or Section 3, that the
Company shall have received an undertaking satisfactory to it from each of the
prospective sellers of such Registrable Securities to indemnify and hold
harmless, severally, not jointly, in the same manner and to the same extent as
set forth in Section 8.1, the Company, its directors and officers and each
person, if any, who controls (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) the Company with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such seller expressly for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company
or any such director, officer or controlling person and shall survive the
transfer of such Registrable Securities by such seller. The indemnity
agreement contained in this Section 8.2 shall not apply to amounts

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paid in settlement of any such loss, claim, damage, liability, action or
proceeding if such settlement is effected without the consent of such seller
(which consent shall not be unreasonably withheld). The Company and the
holders of the Registrable Securities hereby acknowledge and agree that, unless
otherwise expressly agreed to in writing by such holders to the contrary, for
all purposes of this Agreement the only information furnished or to be
furnished to the Company for use in any such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement are statements specifically relating to (a) transactions between
such holder and its Affiliates, on the one hand, and the Company, on the other
hand, (b) the beneficial ownership of shares of Common Stock by such holder and
its Affiliates and (c) the name and address of such holder. If any additional
information about such holder or the plan of distribution (other than for an
underwritten offering) is required by law to be disclosed in any such document,
then such holder shall not unreasonably withhold its agreement referred in the
immediately preceding sentence of this Section 8.2. The indemnity provided by
each seller of Registrable Securities under this Section 8.2 shall be limited
in amount to the net amount of proceeds actually received by such seller from
the sale of Registrable Securities pursuant to such registration statement.

8.3. Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding paragraphs of this Section 8,
such indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, give written notice to the latter of the
commencement of such action or proceeding, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 8, except to the extent that the indemnifying party is materially
prejudiced by such failure to give notice. In case any such action is brought
against an indemnified party, the indemnifying party will be entitled to
participate therein and to assume the defense thereof, jointly with any other
indemnifying party similarly notified, to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred

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by the latter in connection with the defense thereof except for the reasonable
fees and expenses of any counsel retained by such indemnified party to monitor
such action or proceeding. Notwithstanding the foregoing, if such indemnified
party and the indemnifying party reasonably determine, based upon advice of
their respective independent counsel, that a conflict of interest may exist
between the indemnified party and the indemnifying party with respect to such
action and that it is advisable for such indemnified party to be represented by
separate counsel, such indemnified party may retain other counsel, reasonably
satisfactory to the indemnifying party, to represent such indemnified party,
and the indemnifying party shall pay all reasonable fees and expenses of such
counsel. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of such indemnified party, which
consent shall not be unreasonably withheld, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation.

8.4. Other Indemnification. Indemnification identical to
that specified in the preceding paragraphs of this Section 8 (with necessary
modifications) shall be given to the indemnified parties specified above by the
Company and each seller of Registrable Securities with respect to any required
registration (other than under the Securities Act) or other qualification of
such Registrable Securities under any federal or state law or regulation of any
governmental authority.

8.5. Indemnification Payments. Any indemnification required
to be made by an indemnifying party pursuant to this Section 8 shall be made by
periodic payments to the indemnified party during the course of the action or
proceeding, as and when bills are received by such indemnifying party with
respect to an indemnifiable loss, claim, damage, liability or expense incurred
by such indemnified party, provided that the indemnifying party receives an
undertaking by or on behalf of such indemnified party to repay amounts so
advanced if it shall ultimately be determined that such indemnified party is
not entitled to be indemnified hereunder.

8.6. Other Remedies. If for any reason the foregoing
indemnity is unavailable, or is insufficient to hold harmless an indemnified
party, other than by reason of the exceptions provided therein, then the
indemnifying party

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shall contribute to the amount paid or payable by the indemnified party as a
result of such losses, claims, damages, liabilities, actions, proceedings or
expenses in such proportion as is appropriate to reflect the relative benefits
to and faults of the indemnifying party on the one hand and the indemnified
party on the other in connection with the offering of Registrable Securities
(taking into account the portion of the proceeds of the offering realized by
each such party) and the statements or omissions or alleged statements or
omissions which resulted in such loss, claim, damage, liability, action,
proceeding or expense, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party shall
be determined by reference to, among other things, whether the untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statements or omissions. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. No party shall be liable for
contribution under this Section 8.6, except to the extent and under such
circumstances as such party would have been liable to indemnify under this
Section 8 if such indemnification were enforceable under applicable law.

9. Board of Directors.

9.1. Director Nominees. So long as ASI Partners, together
with its affiliates, owns at least 10% of the outstanding shares of Common
Stock (a) the By-laws shall provide that the Board shall consist of 11 members
and (b) ASI Partners and the Company shall have the respective rights,
exercisable at any time, and obligations to designate individuals for election
to the Board, as set forth below.

(i) So long as ASI Partners, together with its Affiliates,
owns at least 50% of the outstanding shares of Common Stock, ASI Partners shall
have the right to designate seven individuals, at least one of whom shall not
be an Affiliate of ASI Partners or be an officer of the Company, and the
directors not affiliated with ASI Partners shall have the right to designate
the remaining four individuals, none of whom shall be Affiliates of ASI
Partners and at least one of whom shall not be an officer of the Company;

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(ii) So long as ASI Partners, together with its Affiliates,
owns at least 35% but less than 50% of the outstanding shares of Common Stock,
ASI Partners shall have the right to designate six individuals and the
directors not affiliated with ASI Partners shall have the right to designate
the remaining five individuals, at least two of whom shall not be Affiliates of
ASI Partners or officers of the Company;

(iii) So long as ASI Partners, together with its Affiliates,
owns at least 20% but less than 35% of the outstanding shares of Common Stock,
ASI Partners shall have the right to designate four individuals, and the
directors not affiliated with ASI Partners shall designate the remaining seven
individuals, at least three of whom shall not be Affiliates of ASI Partners or
officers of the Company; and

(iv) So long as ASI Partners, together with its affiliates,
owns at least 10% but less than 20% of the outstanding shares of Common Stock,
ASI Partners shall have the right to designate one individual.

ASI Partners shall have the right, exercisable at any time, to request that the
Company hold a special meeting of stockholders within 30 days of ASI Partners'
written notification to the Company of the exercise of such right or solicit a
written consent of the stockholders to vote on the election of directors
designated for nomination by ASI Partners pursuant to this Section 9.1. ASI
Partners may change any or all of its designees at any time. If ASI Partners
exercises such right, the Company shall promptly prepare all requisite notices,
proxy statements, consent solicitations, consents, information statements or
other documents required by applicable law, the By-laws or the Restated
Certificate or as may be reasonably requested by ASI Partners, all such
documents to be in form and substance reasonably satisfactory to ASI Partners.
ASI Partners and its Affiliates shall not designate any director nominees
except as provided in this Section 9.1. Notwithstanding anything in this
Agreement to the contrary, ASI Partners and its Affiliates shall retain all
rights to vote their shares of Common Stock in the manner any such entity
determines and ASI Partners and its Affiliates shall retain the right to engage
in a solicitation of stockholders to elect directors designated by them for
nomination pursuant to this Section 9.1.

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9.2. Vacancies. So long as ASI Partners has the rights
specified in Section 9.1, then the By-laws shall provide that ASI Partners
shall have the exclusive right, in accordance with Section 9.1, to designate
for election an individual to fill any vacancy created by the removal or death
of or resignation by a director originally designated for election by ASI
Partners pursuant to Section 9.1 and that directors not affiliated with ASI
Partners shall similarly have the exclusive right to designate for election
individuals to fill vacancies created by removal or death of or resignation by
directors originally designated for election by such non-affiliated directors
pursuant to Section 9.1.

9.3. Restated Certificate; By-laws. So long as ASI Partners,
together with its Affiliates, holds at least 10% of the outstanding shares of
Common Stock (a) the Restated Certificate shall provide that the rights set
forth in Section 9.1 shall be an exception to the provisions in the Restated
Certificate that directors may only be removed for cause and that stockholders
may not act by written consent and (b) the By-laws shall provide that ASI
Partners shall have the right to call a special meeting of stockholders for the
purpose of voting on directors designated for election by ASI Partners pursuant
to Section 9.1 and that the rights set forth in Section 9.1 shall be an
exception to the requirements set forth in the By-laws governing advance notice
requirements for stockholder proposals and director nominations.

9.4. Exception to Prohibitions Against Solicitation. The
Company agrees that any exercise by ASI Partners of its rights set forth in
Section 9.1 shall not constitute a breach of either Section 12(c) hereof or
Section 3(c) of the Kelso Agreement.

9.5. Further Assurances. The Company will take all such
actions and execute and deliver such documents as ASI Partners may reasonably
request in order to effectuate the intent and purposes of this Section 9.

10. Issuances of Stock. So long as ASI Partners, together
with its Affiliates, owns at least 35% of the outstanding shares of Common
Stock, the Company will not issue any shares of Common Stock or preferred
stock, except in connection with the Stockholders Rights Agreement to be
entered into between the Company and a Rights Agent prior to the Offering, or
pursuant to the Company's Employee Stock

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Option Plan, the Stock 1994 Incentive Plan or any other employee benefit plan
adopted by the Board.

11. Right of First Offer. (a) If ASI Partners desires during
the term of this Agreement to sell shares of Common Stock constituting more
than 15% of the Common Stock then issued and outstanding (other than any sale
in connection with a bona fide public distribution or brokerage transaction
under Rule 144 or to one or more Affiliates), then prior to selling such
shares, ASI Partners shall first deliver to the Company a letter (the "Offer
Letter") signed by ASI Partners setting forth the following information:

(i) the prospective purchase price per share of Common Stock,
the number of shares ASI Partners desires to sell and any other
material terms and conditions of such sale; and

(ii) at least one prospective purchaser of such shares, which
such purchaser(s) shall be named by ASI Partners in good faith but
need not have made offers or acceptances to purchase any such shares.

After the receipt of the Offer Letter, the Company shall have a 60-day period
in which to determine whether to purchase the shares covered by the Offer
Letter on the terms set forth in the Offer Letter. If the Company chooses to
purchase the shares covered by the Offer Letter, it must, before the end of
such 60-day period, have (x) delivered to ASI Partners one or more binding
commitment letters from responsible financial institutions pursuant to which
the lenders party thereto have advised the Company that they are willing, on
the terms and subject to the conditions set forth in such letters, to provide
financing to the Company in an aggregate amount sufficient to purchase the
shares covered by the Offer Letter, or (y) available cash or existing credit
facilities which together are sufficient to enable it to purchase the shares
covered by the Offer Letter. The Company may assign its rights to purchase ASI
Partners' shares pursuant to this Section 11, provided that any such assignee
complies in full with the requirements of this Section 11. The Company must
consummate the purchase of all the shares covered by the Offer Letter within 60
days of the date beginning on the last day of the 60-day period referred to in
this paragraph on the terms and on the date set forth in the Offer Letter (if
applicable), or at such other place or on such other date as the parties may
agree. If the Company or its assignee fails to consummate such purchase within
such 60 day period, then this Section 11

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shall terminate and be of no further force and effect and ASI Partners shall be
free to sell any or all of its shares of Common Stock without restriction
(except as set forth in Section 12 below).

(b) If, upon the expiration of 30 days following receipt by
the Company of the Offer Letter, the Company shall not have accepted the offer
contained therein or the Company or its assignee shall not have met the other
conditions set forth in Section 11.1(a) above, ASI Partners may sell to any
third party or parties designated by ASI Partners as a potential purchaser
pursuant to Section 11.1(a) (ii) above all (but not less than all) of the
shares of Common Stock covered by the Offer Letter, for a purchase price not
less than the purchase price contained in such Offer Letter and on terms and
conditions (taken as a whole) no more favorable to the purchaser than those set
forth in the Offer Letter. Prior to consummating any such sale, ASI Partners
shall, upon request from Company, provide the Company with reasonable
supporting documentation with respect to the price, terms and conditions of any
such sale to a third party so as to demonstrate ASI Partners' compliance with
the provisions of the preceding sentence. If such sale has not been completed
within 90 days after the expiration of such 30-day period (unless ASI Partners
is acting in good faith to sell such shares, in which case such 90-day period
will be extended to 120 days), the shares of Common Stock covered by such Offer
Letter may not thereafter be sold by ASI Partners unless the procedures set
forth in this Section 11 shall have again been complied with.

(c) The foregoing provisions of this Section 11 shall also
apply to any sale by any Affiliate of ASI Partners and any sale by ASI Partners
together with any of its Affiliates. ASI Partners shall cause any such
Affiliate to comply with the foregoing provisions of this Section 11 as though
such Affiliate were ASI Partners thereunder.

12. Covenants of ASI Partners. In order to facilitate the
currently proposed public offering of the Company's Common Stock (which
offering ASI Partners deems to be in the best interests of ASI Partners and the
Company), ASI Partners agrees:

(a) to provide, and to cause each of its Affiliates to
provide, advance notice to, and to consult with the Company a
reasonable time prior to, the disposition of any shares of Common
Stock owned by ASI Partners or any of its Affiliates (other than

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<PAGE> 25

pursuant to non-block trades on any stock exchange or NASDAQ, any
dispositions to one or more Affiliates of ASI Partners, pursuant to a
public offering or pursuant to Section 11(b));

(b) except as provided in Section 2.6 of this Agreement, to
use, and to cause each of its Affiliates to use, reasonable efforts
(consistent with ASI Partners' and any such Affiliate's fiduciary
duties to its or such Affiliate's partners) in connection with any
sale by ASI Partners or any of its Affiliates of any shares of Common
Stock not to cause any undue fluctuations in the public markets for
the Common Stock;

(c) not to initiate, propose or support and to cause each of
its Affiliates not to initiate, propose or support any solicitation
for the approval of any stockholder proposal that is not supported by
the Board, except as provided in Sections 9.1 and 9.4 above; and

(d) to provide and to cause each of its Affiliates to provide
reasonable advance notice to the Board of any proposed acquisition by
ASI Partners or any of its Affiliates of any additional shares of
Common Stock or any assets of the Company or its subsidiaries and, if
objected to by a majority of the members of the Board not affiliated
with ASI Partners, not to acquire and to cause each such Affiliate not
to acquire any such shares or assets, including, without limitation,
by way of causing the distribution to the Company's shareholders of
any such assets.

13. Termination of Agreement. Any party (other than the
Company) to, or person who is subject to, this Agreement which ceases to own
any shares of Common Stock or any interest therein shall cease to be a party
to, or person who is subject to, this Agreement and thereafter shall have no
rights or obligations hereunder except for any rights or obligations respecting
indemnification accruing prior to such party ceasing to own any shares of
Common Stock, provided that ASI Partners shall only cease to be a party
hereunder if it has complied with the penultimate sentence of Section 16.3
hereof and provided, further, that if ASI Partners ceases to own any shares of
Common Stock, then each Affiliate of ASI Partners shall automatically cease to
be a party hereunder or entitled to any rights or subject to any obligations
hereunder, unless such Affiliate has acquired

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<PAGE> 26

Registrable Securities from ASI Partners or any of its Affiliates and such
Affiliate, together with all other Affiliates of ASI Partners, holds
Registrable Securities constituting more than 1% of the then outstanding shares
of Common Stock.

14. Exchange Act Reports. The Company shall at all times
timely file such information, documents and reports as the Commission may
require or prescribe under the Exchange Act and shall provide ASI Partners (so
long as ASI Partners, together with its Affiliates, owns at least 10% of the
outstanding shares of Common Stock) with two copies of each thereof or any
other communication with or from the Commission. The Company shall, whenever
requested by ASI Partners, notify ASI Partners in writing whether the Company
has, as of the date specified by ASI Partners, complied with the Exchange Act
reporting requirements to which it is subject for such period to such date as
shall be specified by ASI Partners. The Company acknowledges and agrees that
one of the purposes of the requirements contained in this Section 14 is to
enable ASI Partners and its current and former investors, including former
limited partners of Kelso ASI Partners III, L.P., to comply with the current
public information requirements contained in Paragraph (c) of Rule 144 (or any
corresponding rule hereafter in effect) should ASI Partners ever wish to
dispose, subject to this Agreement, of any Registrable Securities without
registration under the Act in reliance on Rule 144. In addition, the Company
shall take such other measures and file such other information, documents and
reports as shall hereafter be required by the Commission as a condition to the
availability of Rule 144. The Company covenants, represents and warrants that
all such information, documents and reports filed with the Commission shall not
contain any untrue statement of a material fact or fail to state therein a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading in light of the circumstances under which they
were made, and the Company shall indemnify and hold ASI Partners, its
Affiliates, and each broker, dealer, underwriter or other person acting for ASI
Partners (and any controlling person of ASI Partners) harmless from and against
any and all claims, liabilities, losses, damages, expenses and judgments and
shall promptly reimburse them, as and when incurred, for any legal or other
expenses incurred by them in connection with investigating any claim and
defending any actions insofar as such claims, liabilities, losses, damages,
expenses and judgments arise out of or are based upon any breach of the
foregoing covenants, representations or warranties. The

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25
<PAGE> 27

procedure for indemnification set forth in Section 8.3 hereof shall apply to
the indemnification provided under this Section 14. Notwithstanding the
foregoing, the Company shall not be deemed to have breached its obligations
under this Section 14 if the Company determines in good faith that it is in the
best interests of the Company and its stockholders to delay filing information,
documents or reports in the manner contemplated by this Section 14 for a period
not in excess of 60 days, provided that at all times the Company is in good
faith using all reasonable efforts to cause such information, documents or
reports to be filed as soon as practicable and provided, further, that the
Company promptly notifies ASI Partners of such delay, in which case any sales
of Registrable Securities by ASI Partners during such period may not be made in
reliance upon this Section 14.

15. Definitions. The following terms used in this Agreement
shall have the respective meaning set forth below:

"Affiliate" shall mean, with respect to any specified person,
any other person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
such specified person, except that for purposes of Section 12 hereof, an
"Affiliate" of ASI Partners shall not include any portfolio company of Kelso &
Company, L.P. or any of its Affiliates, provided that ASI Partners and its
Affiliates have not transferred any shares of Common Stock to such portfolio
company.

"By-laws" shall mean the Amended and Restated By-laws of the
Company as the same shall be amended from time to time.

"Commission" shall mean the Securities and Exchange Commission.

"Common Stock" shall mean the Company's common stock, par
value $.01 per share.

"Equity Securities" shall include common and preferred stock
and securities convertible into or exchangeable or exercisable for any such
stock.

"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.

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26
<PAGE> 28

"Kelso Agreement" shall mean the Agreement, dated as of
December 2, 1995, among American Standard Inc., the Company and Kelso &
Company, L.P., as the same shall be amended from time to time.

"NASD" shall mean the National Association of Securities
Dealers.

"NASDAQ" shall mean the Nasdaq National Market.

"outstanding shares of Common Stock" shall mean all
outstanding shares of Common Stock, without regard to any options, warrants,
convertible securities or other equity equivalents exercisable or convertible
into shares of Common Stock.

"Person" shall mean any individual, partnership, corporation,
trust or other entity.

"Registrable Securities" shall mean the shares of Common Stock
beneficially owned (within the meaning of Section 13d-3 of the Exchange Act)
(a) as of the date hereof by ASI Partners and its Affiliates and the Management
Stockholders, (b) that are hereafter acquired by ASI Partners or any of its
Affiliates at a time when ASI Partners, together with its Affiliates, owns at
least 5% of the outstanding shares of Common Stock and (c) that are hereafter
acquired by a Management Stockholder, provided such person is still an acting
executive or director of the Company or one of its subsidiaries. As to any
particular Registrable Securities, such securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with such
registration statement, (ii) they shall have been sold to the public pursuant
to Rule 144 under the Securities Act, (iii) they shall have been otherwise
transferred and subsequent disposition of them shall not require registration
or qualification of them under the Securities Act or any similar state law then
in force or (iv) they shall have ceased to be outstanding.

"Registration Expenses" shall mean all expenses incident to
the Company's performance of or compliance with any registrations pursuant to
this Agreement, including, without limitation, (a) registration, filing and
fees of the NASD, (b) fees and expenses of complying with securities or blue
sky laws, (c) fees and expenses associated with listing

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27
<PAGE> 29

securities on an exchange or NASDAQ, (d) word processing, duplicating and
printing expenses, (e) messenger and delivery expenses, (f) transfer agents',
trustees', depositories', registrars' and fiscal agents' fees, (g) fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of any special audits or "cold comfort"
letters, (h) reasonable fees and disbursements of any one counsel retained by
the sellers of Registrable Securities, which counsel shall be designated by ASI
Partners, and (i) any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any.

"Restated Certificate" shall mean the Amended and Restated
Certificate of Incorporation of the Company as the same shall be amended from
time to time.

"Securities Act" shall mean the Securities Act of 1933, as
amended.

16. Miscellaneous.

16.1. Injunctions. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached.
Therefore, the parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction,
such remedy being in addition to any other remedy to which they may be entitled
at law or in equity.

16.2. Invalidity of Provision. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction shall
not affect the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction.

16.3. Assignment; Representative. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns,
provided that neither the Company nor any Management Stockholder shall assign
or transfer any of its rights or obligations pursuant to this Agreement without
the prior written agreement of ASI Partners, and any attempt to assign or
transfer any such

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<PAGE> 30

rights or obligations without such consent shall be void, and provided,
further, that any transferee of Registrable Securities from ASI Partners shall
have the rights under Sections 2 through 8 and 14 and be subject to the
obligations of ASI Partners under Sections 2 through 8 and 14 hereof as and to
the extent set forth in an instrument executed by ASI Partners and such
transferee. Prior to any transfer of its rights hereunder, ASI Partners shall
designate in writing to the Company a representative (which may be ASI Partners
and which, if not, will be approved by the Company) to act on behalf of ASI
Partners and any such transferee in connection with any exercise of ASI
Partners' and such transferee's rights hereunder. All actions to be taken by
ASI Partners and any of its transferees hereunder, including the right to
provide consents or waivers, shall only be exercised by such representative.
Subject to Section 16.12, each of the other parties hereto shall be entitled to
rely on any consent or waiver given or any other action taken hereunder by such
representative as the consent, waiver, or action, as the case may be, of ASI
Partners and each of its transferees. ASI Partners shall be entitled, but only
with the consent of the Company, not to be unreasonably withheld, to change
such representative at any time by notice to the Company. If ASI Partners
intends to divest itself of all of its shares of Common Stock, but after such
divestiture one or more Affiliates of ASI Partners will, taken together, hold
Registrable Securities constituting more than 1% of the outstanding shares of
Common Stock, then prior to such divestiture, ASI Partners must assign the
foregoing obligation to appoint a representative and all of its obligations
under this Agreement to a person who the Company approves (such approval not to
be unreasonably withheld), who effectively assumes such obligations, and who
the Company determines, in its sole discretion, will be able to perform and
enforce the obligations of ASI Partners and its Affiliates under this
Agreement. Notwithstanding the foregoing, the Company may assign or transfer
its rights and obligations hereunder to any successor entity in connection with
a merger of the Company or sale of all, or substantially all, of the assets of
the Company.

16.4. Further Assurances. Subject to the specific terms of
this Agreement, each of the Company and ASI Partners shall make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as may be reasonably required in order to effectuate the
purposes of this Agreement and to consummate the transactions contemplated
hereby.

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<PAGE> 31

16.5. Waivers, Etc. No failure or delay on the part of any
party hereto in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. No modification or waiver of any provision of this
Agreement nor consent to any departure by any party hereto therefrom shall in
any event be effective unless the same shall be in writing, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.

16.6. Amendment and Modification. Except as otherwise
provided herein, this Agreement may only be amended, modified or supplemented
by written agreement of the Company and ASI Partners and, if such action would
adversely affect the rights of the Management Stockholders under Section 2 or
3, the Management Stockholders owning a majority of the shares of Common Stock
which are owned by all the Management Stockholders. The Company shall promptly
notify all Management Stockholders not party to any such amendment,
modification or supplement promptly after such amendment, modification or
supplement shall take effect. Notwithstanding the foregoing, Schedule A may be
supplemented by the written agreement of only the Company and ASI Partners and
the Company shall not be required to notify the other Management Stockholders
of any such supplement and any waiver of any provision hereunder may be given
by the party intended to be benefitted by such provision.

16.7. Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the transactions contemplated
hereby.

16.8. Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.

16.9. Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.

16.10. Notices. Any notice or other communication required or
permitted to be given hereunder or for the purposes hereof to any party shall
be in writing and shall

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30
<PAGE> 32

be sufficiently given if (a) delivered personally, (b) mailed certified or
registered mail, postage prepaid, (c) transmitted by facsimile (and confirmed
by next-day or overnight mail) or (d) sent by next-day or overnight mail or
delivery to:

The Company at: American Standard Companies Inc.
One Centennial Avenue
P.O. Box 6820
Piscataway, NY 08855-6820
Attn: Richard A. Kalaher, Esq.

ASI Partners at:
c/o Kelso & Companies, Inc.
350 Park Avenue.
New York, NY 10022
Attn: James J. Connors, II, Esq.

or at such other address or to such other person's attention as the party to
whom such notice is to be given shall have last notified to the party giving
the same in the manner provided in this Section. Any notice so delivered to
the party to whom it is addressed shall be deemed to have been given and
received (1) if by personal delivery, on the day of such delivery, (2) if by
certified or registered mail, on the seventh day after mailing thereof, (3) if
by facsimile, the day on which such facsimile was sent or (4) if by next-day or
overnight mail delivery, on the day delivered, provided that if any such day is
not a business day then the notice shall be deemed to have been given and
received on the business day next following such day.

16.11. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed therein.

16.12. Action by ASI Partners. Notwithstanding anything to
the contrary contained herein, no action may be taken by ASI Partners hereunder
or in connection herewith or be relied upon by any other party hereto as having
been duly authorized by ASI Partners unless (a) such action is consented to in
writing by (which list may be modified at any time by ASI Partners in writing
by notice to the Company hereunder) at least a majority of the following
individuals: Joseph Schuchert, Frank Nickell, George Matelich, Thomas Wall or
Michael Goldberg or (b) James Connors, General Counsel of Kelso (or any
successor general counsel),

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<PAGE> 33

delivers a certificate that such action was duly authorized by ASI Partners.

16.13. Effective Date. This Agreement shall become effective
as between and binding upon the Company and ASI Partners on the date hereof,
but shall not become effective with respect to or be binding on any of the
Original Management Stockholders or the Management Stockholders until executed
and delivered by a majority in interest of the Original Mangagement
Stockholders, in which case it shall be effective and binding upon the Original
Management Stockholders and the Management Stockholders as of the date hereof.

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<PAGE> 34

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.

AMERICAN STANDARD COMPANIES INC.

By: /s/ RICHARD A. KALAHER
------------------------
Name: Richard A. Kalaher
Title: Acting General Counsel & Secretary

KELSO ASI PARTNERS, L.P.

By: Kelso American Standard, L.P.,
its general partner

By: /s/ FRANK T. NICKELL
------------------------
Name: Frank T. Nickell
Title: General Partner

______________________________________
Name:

Stockholders Agreement

<PAGE> 1
EXHIBIT 10(xi)

AGREEMENT

AGREEMENT, dated as of December 2, 1994, among American
Standard Inc., a Delaware corporation ("ASI"), American Standard Companies
Inc., a Delaware corporation (the "Company"), and Kelso & Company, L.P., a
Delaware limited partnership ("Kelso").

WHEREAS, ASI and Kelso are parties to a Consulting Agreement,
dated as of July 1, 1988 (the "Consulting Agreement"), which, among other
things, provides that Kelso shall receive an annual fee of up to $2,750,000 so
long as Kelso, together with its affiliates, holds at least 20% of the
outstanding common stock of either the Company or ASI;

WHEREAS, Kelso has provided general management and financial
consulting services to ASI pursuant to the Consulting Agreement;

WHEREAS, Kelso also has provided and is providing other
services to the Company and ASI, including participating in strategic planning
and business strategy for ASI, advising the Company and ASI in connection with
the reorganization of ASI's senior management and the Company's and ASI's board
of directors, assisting the Company and ASI in connection with numerous
financings and refinancings and providing strategic consulting services with
respect to the proposed public offering (the "Offering") of the Company's
common stock (the "Common Stock");

WHEREAS, Kelso has agreed to release the Company and ASI from
any and all claims Kelso may have for any compensation in connection with such
prior and current services and to continue to provide such services without
compensation (other than the reimbursement of expenses incurred in the
performance of such services);

WHEREAS, in order to facilitate the Offering (which Kelso and
Kelso ASI Partners, L.P., a Delaware limited partnership ("ASI Partners"), deem
to be in the best interests of ASI Partners and the Company), Kelso has agreed
to make certain covenants with respect to shares of common stock of the Company
("Common Stock") owned by Kelso, ASI Partners or any investment fund controlled
by Kelso ("Kelso Fund") and to undertake additional administrative
responsibilities as manager of ASI Partners and each Kelso Fund in order to
insure compliance with such covenants by ASI Partners and each Kelso Fund;
<PAGE> 2

WHEREAS, in consideration of the foregoing, the Company has
agreed to pay Kelso a one-time fee;

NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements contained herein, the parties hereto agree as follows:

1. Amendment of the Consulting Agreement. Effective as
of the Payment Date (as defined in Section 4 hereof), ASI's obligation under
Section 3 of the Consulting Agreement to pay to Kelso any fees will terminate.
Notwithstanding the foregoing, the remainder of the Consulting Agreement will
remain in full force and effect, including Kelso's obligation to continue to
provide ongoing consulting services pursuant to Section 1 thereof for the term
specified in Section 2 thereof and ASI's obligation to reimburse Kelso's
expenses pursuant to Section 4 thereof.

2. Release. Effective as of the Payment Date, Kelso hereby
releases the Company and ASI from all claims for compensation for management,
financial advisory or other services rendered or to be rendered by Kelso to the
Company or ASI, including, without limitation, services rendered in connection
with the Offering, provided, however, that the Company shall promptly reimburse
Kelso for its reasonable and necessary out-of-pocket expenses incurred in the
performance of such services.

3. Agreements Relating to Common Stock. In order to
facilitate the Offering (which Kelso and ASI Partners deem to be in the best
interests of ASI Partners and the Company), Kelso agrees:

(a) to provide, and to cause ASI Partners, any other Affiliate
(as defined in Section 8 hereof) of Kelso or any Kelso Fund that owns
Common Stock to provide, advance notice to and to consult with the
Company a reasonable time prior to the disposition of any shares of
Common Stock (other than (i) pursuant to non-block trades on any stock
exchange or NASDAQ, (ii) any disposition by ASI Partners or any such
entity to an Affiliate of ASI Partners or any such entity, (iii)
pursuant to a public offering or (iv) pursuant to Section 11(b) of the
Amended and Restated Stockholders Agreement to be entered into by the
Company, ASI Partners and certain members of ASI's management as of
the date hereof (the "Stockholders Agreement "));

<PAGE> 3

(b) except as provided in Section 2.6 of the Stockholders
Agreement, to use, and to cause ASI Partners, any other Affiliate of
Kelso or any Kelso Fund that owns Common Stock to use, reasonable
efforts (consistent with such entity's fiduciary duties to its
investors) in connection with any sale by Kelso, ASI Partners, any
other Affiliate of Kelso or any Kelso Fund, respectively, of any
shares of Common Stock not to cause any undue fluctuations in the
public market for the Common Stock;

(c) except as permitted by the Stockholders Agreement, to
cause ASI Partners, any other Affiliate of Kelso and any Kelso Fund
that owns Common Stock not to initiate, propose or support (consistent
with such entity's fiduciary duties to its investors) any solicitation
for the approval of any stockholder proposal that is not supported by
the Board of Directors of the Company (the " Board");

(d) to comply, and to cause ASI Partners, any other Affiliate
of Kelso and any Kelso Fund that owns Common Stock to comply, with the
"Right of First Offer" provisions set forth in Section 11 of the
Stockholders Agreement prior to the sale by any such entity of more
than 15% of the Common Stock then outstanding other than any sale (i)
in connection with a bona fide public distribution or brokerage
transaction under Rule 144 under the Securities Act of 1933, as
amended, (ii) to any Affiliate of any such entity or (iii) pursuant to
Section 11(b) of the Stockholders Agreement, provided that such
Stockholders Agreement also contain ASI Partners' right to designate a
specified number of individuals for election to the Board and
specified demand and piggyback registration rights with respect to
public offerings of Common Stock; and

(e) to provide reasonable advance notice to the Board of any
proposed acquisition by Kelso, or any Affiliate of Kelso or any Kelso
Fund of any additional shares of Common Stock or any assets of the
Company or its subsidiaries and, if objected to by a majority of the
members of the Board not affiliated with Kelso, not to acquire and to
cause any Affiliate of Kelso and any Kelso Fund not to acquire, any
such shares or assets, including, without limitation, by way of
causing the distribution to the Company's stockholders of any such
assets.

<PAGE> 4

4. Fee. In consideration of the foregoing and of the
other arrangements and agreements being made in connection with the Offering
(other than the assignment of 80% of the Company's limited partnership interest
in Kelso Investment Associates V, L.P. to an Affiliate of Kelso), together with
Kelso's agreement to undertake the additional administrative responsibilities
as manager of ASI Partners and the Kelso Funds in order to insure compliance by
ASI Partners and each Kelso Fund with the covenants set forth in Section 3
hereof, ASI will pay Kelso a one-time fee of $20 million on or before December
15, 1994 (the date such payment is made being referred to herein as the
"Payment Date"), by wire transfer of immediately available funds to an account
of Kelso designated in writing to ASI at least one business day prior to the
Payment Date.

5. Indemnification. The Company and ASI, jointly and
severally, will indemnify Kelso and its officers, directors, employees, agents
and Affiliates to the full extent lawful against any and all claims, losses and
expenses as incurred (including all reasonable fees and disbursements of any
such indemnitee's counsel and other out-of-pocket expenses incurred in
connection with the investigation of and preparation for any such pending or
threatened claims and any litigation or other proceedings arising therefrom)
arising out of any services rendered by Kelso pursuant to the Consulting
Agreement or Kelso's status as a control person or Affiliate of the Company or
ASI, provided, however, there shall be excluded from any indemnification
pursuant to this Section 5 any such claim, loss or expense that is based upon
any action or failure to act by Kelso that is found in a final judicial
determination to constitute gross negligence or intentional misconduct on
Kelso's part or an action for which a control person or Affiliate, as the case
may be, would otherwise have liability to the Company or ASI or their
stockholders under applicable Delaware law. The Company and ASI will advance
costs and expenses, including attorney's fees, incurred by any such indemnitee
in defending any such claim in advance of the final disposition of such claim
upon receipt of an undertaking by or on behalf of such indemnitee to repay
amounts so advanced if it shall ultimately be determined that such indemnitee
is not entitled to be indemnified by the Company and ASI pursuant to this
Agreement. The Company's obligations set forth in this Section 5 shall survive
the termination of Kelso's services pursuant to Section 2 of the Consulting
Agreement.

<PAGE> 5

6. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.

7. Governing Law. This Agreement shall be construed in
accordance with and be governed by the laws of the State of New York, without
regard to the rules of conflicts of laws.

8. Affiliate. For purposes of this Agreement, "Affiliate"
shall mean, with respect to any specified person, any other person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified person, except
that for purposes of Section 3 hereof, "any Affiliate of Kelso" shall not
include any portfolio company of Kelso or any of its Affiliates, provided that
ASI Partners and its Affiliates have not transferred any shares of Common Stock
to such portfolio company.

9. Termination. This Agreement shall terminate when ASI
Partners and its Affiliates cease to be subject to any obligations under the
Stockholders Agreement.

<PAGE> 6

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.

AMERICAN STANDARD INC.

By: /s/ RICHARD A. KALAHER
--------------------------
Name: Richard A. Kalaher
Title: Acting General Counsel & Secretary

AMERICAN STANDARD COMPANIES INC.

By: /s/ RICHARD A. KALAHER
--------------------------
Name: Richard A. Kalaher
Title: Acting General Counsel & Secretary

KELSO & COMPANY, L.P.

By: Kelso & Companies, Inc.,
its general partner

By: /s/ FRANK T. NICKELL
----------------------
Name: Frank T. Nickell
Title: President

<PAGE> 1
EXHIBIT 23(i)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 14, 1994 in this Amendment No. 1 to the
Registration Statement (Form S-2, No. 33-56409) and related Prospectus of
American Standard Companies Inc. for the registration of 15,525,000
shares of its common stock.

We also consent to the use of our report dated March 14, 1994 with respect to
the financial schedules of American Standard Companies Inc. for the years ended
December 31, 1992 and 1993 in this Amendment No. 1 to the Registration
Statement.

ERNST & YOUNG LLP

New York, New York
December 19, 1994