<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1997.
REGISTRATION NO. 333-18015
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
Form S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------------
AMERICAN STANDARD COMPANIES INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of
incorporation or organization)
13-3465896
(I.R.S. Employer
Identification Number)
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.
VICE PRESIDENT, GENERAL COUNSEL & 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:
PAUL H. WILSON, JR., ESQ.
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
MICHAEL A. BECKER, ESQ.
CAHILL GORDON & REINDEL
80 PINE STREET
NEW YORK, NEW YORK 10005
(212) 701-3000
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
[ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock ($.01 par value).... 12,362,500 $43 5/8 $539,314,062.50 $163,428.50
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Common Stock Rights(4)........... 12,362,500 NA NA NA
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</TABLE>
(1) Includes up to 1,612,500 shares the Underwriters may purchase to cover
over-allotments, if any.
(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1933 based on
the average trading price of the Common Stock on the New York Stock Exchange
on January 20, 1997 solely for purposes of calculating the registration fee.
(3) $131,682.67 was paid with the initial filing of this Registration Statement.
An additional $31,745.83 has been paid in connection herewith.
(4) Each share of Common Stock will have associated with it one right to
purchase a share of the Company's preferred stock at a stipulated price in
certain circumstances. No separate consideration will be received for the
Common Stock Rights.
------------------------
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.
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<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 and 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). The form of U.S. Prospectus is included
herein and is followed by those pages to be used in the International Prospectus
which differ 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
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 JANUARY 24, 1997
10,750,000 SHARES
AMERICAN STANDARD COMPANIES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 10,750,000 shares of Common Stock offered, 8,600,000 shares are
being offered hereby in the United States and 2,150,000 shares are being offered
in a concurrent international offering outside the United States (collectively,
the "Offerings"). The initial public offering price and the aggregate
underwriting discount per share will be identical for both Offerings. See
"Underwriting". Each share of Common Stock, including the shares offered hereby,
has associated with it one right to purchase a share of the Company's preferred
stock at a stipulated price in certain circumstances relating to changes in
ownership of the Company under the Company's stockholder rights agreement.
All of the shares of Common Stock offered are being sold by Kelso ASI
Partners, L.P. ("ASI Partners" or the "Selling Stockholder"). Concurrently with
the consummation of the Offerings, the Company will repurchase 6,250,000 shares
of Common Stock from ASI Partners at a price per share equal to the initial
public offering price, up to a maximum total purchase price of $300 million. See
"The Selling Stockholder and Stockholder Transactions".
The last reported sale price of the Common Stock, which is listed under the
symbol "ASD", on the New York Stock Exchange on January 23, 1997 was $43 3/8 per
share. See "Price Range of Common Stock and Dividend Policy".
SEE "RISK FACTORS" ON PAGES 11-15 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
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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 SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDER(2)
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<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
</TABLE>
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(1) The Company, American Standard Inc. and the Selling Stockholder have agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933.
(2) Estimated offering expenses of $1,000,000 will be paid by the Company.
(3) ASI Partners has granted the U.S. Underwriters an option for 30 days after
the date of this Prospectus to purchase up to an additional 1,290,000 shares
at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, an over-allotment
option on 322,500 shares has been granted by ASI Partners as part of the
international offering. If such options are exercised in full, the total
initial public offering price, underwriting discount and proceeds to Selling
Stockholder 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 , 1997 against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SBC WARBURG INC.
SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 4
AVAILABLE INFORMATION
American Standard Companies Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's Regional Offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can be obtained upon written request from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such material may also be inspected and copied at
the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street,
New York, New York 10005. The Commission maintains a Website that contains
reports, proxy and information statements and other information regarding
reporting companies under the Exchange Act, including the Company, at
http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as 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 does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. 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. For further information,
reference is hereby made to the Registration Statement.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-11415) with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1995, including portions incorporated therein of the Company's
definitive Proxy Statement dated March 28, 1996.
2. The Company's Quarterly Reports on Form 10-Q/A for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
3. The descriptions of the Common Stock and the common stock rights
associated with each Share of Common Stock contained in the Registration
Statement on Form 8-A dated January 5, 1995, incorporated by reference
from the Company's Registration Statement on Form S-2 under the
Securities Act, Commission File Number 33-56409, under the captions
"Description of Capital Stock -- Common Stock" and "-- Stockholder
Rights Plan".
4. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Shares.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Company, One
Centennial Avenue, P.O. Box 6820, Piscataway, NJ 08855-6820, Attention: Office
of the Secretary, telephone: (908) 980-6000.
------------------------
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
AMERICAN STANDARD(R), IDEAL STANDARD(R), STANDARD(R), TRANE(R) and WABCO(R)
are registered trademarks of American Standard Inc. PERROT(R) and PORCHER(R) are
registered trademarks of Deutsche Perrot-Bremsen GmbH and Porcher S.A.,
respectively, subsidiaries of the Company. DEMAND FLOW(R) is a registered
trademark of J-I-T Institute of Technology, Inc.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY 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.
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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 or incorporated by reference in this Prospectus. American
Standard Companies Inc. (the "Company") 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 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 (57%
of 1995 sales); bathroom and kitchen fixtures and fittings (24% of 1995 sales);
and braking and control systems for medium-sized and heavy trucks, buses,
trailers and utility vehicles (19% of 1995 sales). American Standard is a market
leader in each of these business segments in the principal geographic areas in
which it competes. The Company's brand names include TRANE(R) and AMERICAN
STANDARD(R) for air conditioning systems, AMERICAN STANDARD(R), IDEAL
STANDARD(R), STANDARD(R) and PORCHER(R) for plumbing products and WABCO(R) and
PERROT(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 $5.2 billion and $534
million, respectively, in 1995. Sales in the first nine months of 1996 were $4.4
billion, compared with $3.9 billion in the first nine months of 1995. Operating
income before asset impairment loss was $454 million in the first nine months of
1996, compared with operating income of $428 million in the first nine months of
1995. Including the asset impairment loss, operating income in the first nine
months of 1996 was $219 million. During the first nine months of 1996, sales
from operations outside the United States represented approximately 48% of the
Company's total sales. At September 30, 1996 American Standard had 103
manufacturing facilities in 35 countries.
American Standard's business strategy is to promote growth in sales and
earnings. 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 ("PRC"), 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 continues to apply
principles of DEMAND FLOW(R) technology ("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
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<PAGE> 6
product cycle times, while improving efficiency, reducing working
capital needs and lowering costs. The Company believes that Demand
Flow, which it began to apply in 1990, has resulted in significant
benefits.
The Company is a Delaware corporation formed by Kelso & Company, L.P.
("Kelso") in 1988 to effect the acquisition (the "Acquisition") of American
Standard Inc. American Standard Inc. 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. The Company's
principal executive offices are located at One Centennial Avenue, P.O. Box 6820,
Piscataway, NJ 08855-6820, and its telephone number is (908) 980-6000.
BUSINESS SEGMENTS
American Standard operates three business segments: Air Conditioning
Products, Plumbing Products and Automotive 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) and AMERICAN STANDARD(R) names. Air
Conditioning Products' sales to the commercial and residential markets
represented approximately 75% and 25%, respectively, of Air Conditioning
Products' total sales in 1995 and the first nine months of 1996. Approximately
60% of Air Conditioning Products' sales in these periods was to the replacement,
renovation and repair markets, which have been less cyclical than the new
residential and commercial construction markets. Of Air Conditioning Products'
1995 worldwide sales, approximately 79% was derived from U.S. operations
(including 7% related to export sales) and 21% was derived from operations
outside the United States.
Air Conditioning Products' sales increased to $2,602 million in the first
nine months of 1996, compared with $2,201 million in the first nine months of
1995. This increase was due principally to substantial volume increases and
price gains for applied and unitary commercial systems, higher volumes and
prices for residential products in the U.S. and sales by the new operations in
the PRC. Management believes that Air Conditioning Products is well positioned
for growth because of its high quality, brand-name products, significant
existing market shares, the introduction of new product features such as
electronic controls, the expansion of its broad distribution network and
conversion to products utilizing environmentally-preferred refrigerants.
PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe,
the U.S. and a number of other countries of bathroom and kitchen fixtures and
fittings for the residential and commercial construction markets and retail
sales channels. Plumbing Products manufactures and distributes its products
under the AMERICAN STANDARD(R), IDEAL STANDARD(R), STANDARD(R) and PORCHER(R)
names. Of Plumbing Products' worldwide 1995 sales, approximately 71% was derived
from operations outside the United States and 29% was derived from operations in
the United States.
Plumbing Products' sales increased to $1,079 million in the first nine
months of 1996, compared to $952 million in the first nine months of 1995, due
principally to sales by Porcher, the French manufacturer acquired in the fourth
quarter of 1995, and higher sales in North American and Latin American
operations. 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).
AUTOMOTIVE PRODUCTS. American Standard is a leading manufacturer,
primarily in Europe and Brazil, of braking and related systems for the
commercial and utility vehicle industry. Its most
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<PAGE> 7
important products are pneumatic braking systems and related electronic and
other control systems (including ABS) marketed under the WABCO(R) name for
medium-size and heavy trucks, tractors, buses, trailers and utility vehicles.
American Standard supplies vehicle manufacturers such as Mercedes-Benz, Volvo,
Iveco (Fiat), RVI (Renault) and Rover.
Automotive Products' sales decreased to $687 million in the first nine
months of 1996, compared to $757 million in the first nine months of 1995, due
principally to decreased levels of commercial vehicle production in Europe.
Management believes that Automotive Products is well positioned to benefit from
any future improvement in market conditions in Europe and Brazil and from
increasing demand for ABS and other sophisticated electronic control systems in
a number of markets (including the commercial vehicle market in the United
States, where phase-in of ABS is mandated beginning in 1997), as well as from
the technological advances embodied in the Company's products and its close
relationships with a number of vehicle manufacturers.
See "Business -- Air Conditioning Products Segment"; "-- Plumbing Products
Segment" and "-- Automotive Products Segment".
The Company has recently announced formation of its Medical Systems Group
to pursue initiatives in the medical diagnostics field. See "Business -- Medical
Systems Group".
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. See "Business -- Strategy --
Globalization".
Air Conditioning Products plans to continue to expand its operations in the
Far East, Latin America and Europe. In 1994, it established a joint venture in
Australia. In 1995 and 1996, it established three joint ventures in the PRC to
become an integrated manufacturer, marketer and distributor of a broad range of
air conditioning systems and related products for residential and commercial
applications. Air Conditioning Products also continues to expand its sales
forces in the Far East, Latin America, the Middle East and India.
Plumbing Products has entered new markets through joint ventures in Eastern
Europe, Spain, Portugal and Vietnam and is continuing to expand using this
approach. In 1995, operations were expanded in France through the acquisition of
Porcher S.A. ("Porcher"). Plumbing Products has expanded its operations in the
PRC through its affiliate, A-S China Plumbing Products Limited ("ASPPL"), in
which American Standard has a current ownership position of approximately 28%
and effective control over day-to-day operations. ASPPL has expanded its
operations to Beijing, Tianjin, Shanghai and Guangzhou through seven joint
ventures in order to provide a full product line of fixtures, fittings and
bathtubs throughout the PRC market.
Automotive Products, headquartered in Europe, has since 1993 established a
joint venture in the PRC, acquired a business in Spain, is in the process of
establishing joint ventures in Eastern Europe and is expanding the volume of
business done through its existing joint ventures in the United States and
Japan.
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 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
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<PAGE> 8
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, most of American Standard's approximately 44,000 employees
worldwide have been trained in Demand Flow, which has been implemented in
substantially all of American Standard's production facilities as of September
30, 1996. In addition, American Standard is implementing Demand Flow methods in
its acquired operations such as Perrot, a German brake manufacturer acquired in
January 1994, and Porcher, acquired in 1995. 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 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 tripled since 1990. Principally
as a result of the implementation of Demand Flow, American Standard has reduced
inventories by 49% from December 31, 1989 through December 31, 1995, while
related sales have grown 57% for the same period. American Standard further
believes that as a result of the introduction of Demand Flow employee
productivity has risen significantly, 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.
THE SELLING STOCKHOLDER AND STOCKHOLDER TRANSACTIONS
The Company, ASI Partners and Kelso have entered into an agreement (the
"Stock Disposition Agreement") providing for the sale by ASI Partners of Shares
in the Offerings and the repurchase by the Company from ASI Partners of all
shares of Common Stock to be owned by ASI Partners after giving effect to the
Offerings and the distribution (the "Share Distribution") by ASI Partners of
shares of Common Stock to certain of its partners at their election
(collectively, the "Stockholder Transactions"). Concurrently with the
consummation of the Offerings, the Company will repurchase 6,250,000 shares of
Common Stock from ASI Partners at a price per share equal to the initial public
offering price, up to a maximum total purchase price of $300 million (the "Share
Repurchase"). To the extent the Underwriters' over-allotment options are
exercised, the number of shares that the Company will repurchase will be
reduced. The Company plans to finance the Share Repurchase with borrowings under
the Facilities (as defined).
The Stock Disposition Agreement also provides that the Company will issue
to ASI Partners warrants (the "Warrants") to purchase 3,000,000 shares of Common
Stock at a price per share equal to $10 above the initial public offering price.
If there is a change of control of the Company consummated in a manner specified
in the Stock Disposition Agreement (a "Transaction") prior to January 31, 1998
(or October 1, 1998 in certain cases), the agreement provides that the Company
would be required to make a cash payment to ASI Partners in respect of the
aggregate number of shares sold by ASI Partners in the Offerings and to the
Company pursuant to the Share Repurchase based on the excess, if any, of the
consideration per share received by holders of the Common Stock in the
Transaction over the cash price per share received by ASI Partners in the
Offerings and pursuant to the Share Repurchase. The Warrants would expire if a
Transaction occurs entitling ASI Partners to such a payment, and will not be
exercisable until the possibility of such a payment no longer exists.
Following the Offerings, the Share Repurchase and the Share Distribution,
ASI Partners will own no shares. See "Capitalization", "Pro Forma Financial
Data", "The Selling Stockholder and Stockholder Transactions" and
"Underwriting".
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The unaudited summary pro forma financial data presented below give effect
to the Share Repurchase from ASI Partners for a total cash purchase price of
$269 million (6.25 million shares of Common Stock at an assumed price of $43 per
share) and related proposed borrowings of $269 million under the Facilities to
fund such repurchase, in each case as if such transactions had occurred at the
beginning of each of the periods presented and assuming no exercise of the
Underwriters' over-allotment options. The information presented below should be
read in conjunction with "Summary Historical Financial Data" and "Pro Forma
Financial Data". The pro forma financial data do not give effect to the Medical
Systems Acquisitions (as defined) and related borrowings. See "Business --
Medical Systems Group".
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
-------------------- --------------------
ACTUAL PRO FORMA ACTUAL PRO FORMA
------ --------- ------ ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................................... $5,221 $ 5,221 $4,368 $ 4,368
Cost of sales................................ 3,887 3,887 3,282 3,282
Selling and administrative expenses.......... 854 854 684 684
Asset impairment loss(a)..................... -- -- 235 235
Other expense................................ 40 40 28 28
Interest expense............................. 213 232 151 164
------ ------ ------ ------
Income (loss) before income taxes and
extraordinary item........................... 227 208 (12) (25)
Income taxes.................................... 85 78 80 75
------ ------ ------ ------
Income (loss) before extraordinary item......... $ 142 $ 130 $ (92) $ (100)
====== ====== ====== ======
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item......... $ 1.90 $ 1.90 $(1.18)(a) $ (1.40)(a)
Average number of outstanding common shares..... 74.7 68.5 77.8 71.6
</TABLE>
- ---------------
(a) Income before extraordinary item per share for the nine months ended
September 30, 1996 would have been $1.84 and $1.89 on an actual and pro
forma basis, respectively, if the asset impairment loss were excluded.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 ("FAS 121"), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, resulting in
a non-cash asset impairment charge in 1996 of $235 million, for which there
was no tax benefit.
7
<PAGE> 10
RECENT FINANCIAL RESULTS AND DEVELOPMENTS
RECENT FINANCIAL RESULTS. The Company's consolidated sales for 1996 were
$5.8 billion, an increase of 11% from $5.2 billion in 1995. Income before
extraordinary item (excluding the non-cash asset impairment charge of $235.2
million) was $188.5 million, or $2.42 per share, up 33% and 27%, respectively,
from income before extraordinary item in 1995 of $142 million, or $1.90 per
share. These results include the effects of the Company's restatement of its
financial statements for the first nine months of 1996 relating to the Company's
French subsidiary, Porcher S.A., which restatement increased the after-tax net
loss for such period by $6 million, or $.08 per share. See "Management's
Discussion and Analysis of Financial Position and Results of Operations".
Including the asset impairment charge, the net loss for 1996 was $46.7 million,
or $.60 per share. The information set forth herein for 1996 is unaudited.
The following table sets forth segment sales and operating income for 1995
and 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1995 1996
------ -----------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C>
Sales:
Air Conditioning Products................................... $2,953 $ 3,437
Plumbing Products........................................... 1,270 1,452
Automotive Products......................................... 998 916
------ ------
Total sales................................................. $5,221 $ 5,805
====== ======
Operating income before asset impairment loss:
Air Conditioning Products................................... $ 259 $ 353
Plumbing Products........................................... 120 110
Automotive Products......................................... 155 123
------ ------
534 586
Asset impairment loss:
Air Conditioning Products................................... -- (121)
Plumbing Products........................................... -- (114)
------ ------
-- (235)
------ ------
Total operating income................................... 534 351
Interest expense.............................................. (213) (198)
Corporate and other expenses.................................. (94) (95)
------ ------
Income before income taxes
and extraordinary item...................................... $ 227 $ 58
====== ======
</TABLE>
Sales of Air Conditioning Products increased 16% to $3.4 billion as a
result of strong increases in both commercial and residential businesses in the
U.S., reflecting growth in the market and gains in market share. Sales by the
Company's new operations in the PRC, as well as sales gains elsewhere in the Far
East and in Europe, also contributed to the increase. Sales of Plumbing Products
increased 14% to $1.5 billion primarily as a result of the acquisition of
Porcher in the fourth quarter of 1995. Excluding Porcher, sales declined in
Europe, reflecting continued economic weakness in most markets. However, solid
growth in North America essentially offset the decline in Europe. Sales of
Automotive Products decreased 8% to $916 million, reflecting the decline in
European commercial vehicle production in 1996.
Operating income for 1996, excluding the asset impairment charge, increased
10% to $586 million from $534 million in 1995. Operating income of Air
Conditioning Products, excluding the asset impairment charge, increased 36% to
$353 million as a result of higher volume and margin
8
<PAGE> 11
improvement in both commercial and residential businesses in the U.S. The margin
improvement reflects higher pricing and cost improvements. Operating income of
Plumbing Products, excluding the asset impairment charge, declined 8% to $110
million, reflecting the effects of continued weakness in European markets,
particularly in Germany and France, which were partially offset by higher volume
and lower manufacturing costs in both North and Latin American operations.
Margins in France were lower than in 1995 due to increased costs primarily at
Porcher. The Company is undertaking actions to better assimilate Porcher into
its European plumbing products operations and to improve operating performance.
Operating income of Automotive Products declined 20% to $123 million due to
lower volumes and start-up costs associated with new product introductions for
customers' 1997 models. Improved levels of new orders late in 1996 are expected
to lead to improving results by the second quarter of 1997.
Corporate and other expense increased slightly from 1995. Increased
spending related to the existing businesses in the newly formed Medical Systems
Group was essentially offset by a gain related to the restructuring of the
Company's Alliance Compressors partnership. Interest expense declined to $198
million from $213 million in 1995, reflecting reduced indebtedness and lower
interest rates.
MEDICAL SYSTEMS GROUP. The Company recently announced formation of its
Medical Systems Group to pursue initiatives in the medical diagnostics field.
The Company has for the last several years had under development two small
medical diagnostic product groups focusing on test instruments using laser
technology and reagents. The Company had invested an aggregate of approximately
$40 million in the development of these businesses through September 30, 1996.
The Company decided to explore acquisitions to accelerate the
commercialization of its technology and expand the number of diagnostic tests
covered by its products. Accordingly, the Company on January 23, 1997 entered
into memoranda of understanding to acquire the European medical diagnostic
business (the "Sorin Business") of Sorin Biomedica S.p.A., an affiliate of the
Fiat Group, and all the outstanding shares of Incstar Corporation ("Incstar"), a
biotechnology company based in Stillwater, Minnesota, 52% of which is owned by
Sorin Biomedica S.p.A. Sales in 1995 were approximately $90 million for the
Sorin Business and approximately $45 million for Incstar. The aggregate cost of
the acquisitions (the "Medical Systems Acquisitions") is expected to be
approximately $220 million (including fees and expenses).
NEW CREDIT FACILITIES. Chase Securities Inc. ("Chase") has, subject to
certain terms and conditions, committed to arrange a syndicate of lenders to
provide the Company with $1.75 billion in amended and restated credit facilities
(the "Amended Credit Facilities"), consisting of $1.375 billion of revolving
credit facilities and a $375 million periodic access facility, to replace the
Company's existing $925 million credit facilities (the "Existing Credit
Facilities" and, together with the Amended Credit Facilities, the "Facilities").
Borrowings under the Facilities would be available to fund the Share Repurchase,
to provide financing for the Medical Systems Acquisitions, to redeem certain
outstanding public debt securities of American Standard Inc. and for other
general corporate purposes. As of January 23, 1997, the Company had obtained
non-binding commitments in excess of the $1.75 billion amount sought. The
Company expects that the closing of the Amended Credit Facilities will occur
prior to the closing of the Offerings. There can be no assurance that the
Amended Credit Facilities will be obtained, and the Offerings are not
conditioned on the arrangement of, or borrowings under, the Amended Credit
Facilities. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources".
TYCO ACQUISITION PROPOSALS; RECENT LITIGATION. The Company received
letters from Tyco International Ltd. ("Tyco") on September 30, October 17, and
December 5, 1996 setting forth proposals for a possible acquisition by Tyco of
all the shares of the Company's Common Stock, in each case for a combination of
cash and Tyco common stock. The final letter included a proposed purchase price
of $50 per share. The Company's Board of Directors reviewed the Tyco proposals,
consulted with its legal counsel and financial advisors and concluded that the
Company's strategies
9
<PAGE> 12
already in place are working and that the best way to increase the Company's
earnings and shareholder value is to focus on implementing these strategies as
an independent company. As a result, the Board of Directors concluded that the
Company would decline any interest in the proposals and Tyco was so informed.
There have been no discussions between the Company and Tyco concerning any of
the proposals and the Company contemplates none.
Two persons claiming to be shareholders of the Company and represented by
the same lawyers have filed separate class action and derivative lawsuits in the
Chancery Court of the State of Delaware against the Company, ASI Partners and
the directors of the Company alleging breaches of fiduciary duties in respect of
the rejection of the Tyco proposals and approval of the Stockholder
Transactions. The lawsuits seek to cause the Company to evaluate alternatives to
maximize value for the Company's public shareholders, to enjoin the Stockholder
Transactions and to recover damages in an unspecified amount. A person claiming
to be a holder of certain public debt securities of American Standard Inc. has
filed a class action lawsuit in New York Supreme Court seeking to enjoin the
Stockholder Transactions or to require the Company to redeem such debt
securities at the election of the securityholders. The Company believes that
these lawsuits are without merit and intends to contest them vigorously.
RISK FACTORS
Prospective purchasers of the Shares should consider carefully the specific
risk factors set forth under "Risk Factors", as well as the other information
set forth or incorporated by reference in this Prospectus.
10
<PAGE> 13
RISK FACTORS
Prospective purchasers of the Shares should consider carefully the
following risk factors, as well as other information set forth or incorporated
by reference in this Prospectus.
SUBSTANTIAL LEVERAGE
In connection with the Acquisition in 1988 of American Standard Inc., the
Company incurred substantial indebtedness, resulting in its highly leveraged
capital structure. At September 30, 1996, the Company's total indebtedness was
approximately $2.0 billion, including short-term debt and the current portion of
long-term debt. See "Capitalization". American Standard Inc. also had the
ability as of September 30, 1996 to incur $347 million of additional
indebtedness under the Existing Credit Facilities and the Company's foreign
subsidiaries had an additional $70 million available under overdraft facilities.
At September 30, 1996, American Standard had scheduled principal payments of $78
million, $82 million and $235 million for the years 1997, 1998 and 1999,
respectively. Prior to the closing of the Offerings, the Company expects to
enter into the $1.75 billion Amended Credit Facilities, consisting of $1.375
billion of revolving credit facilities and a $375 million periodic access
facility, which will replace the Company's $925 million Existing Credit
Facilities.
The Company expects to borrow under the Facilities approximately $269
million (approximately $200 million if the Underwriters exercise their
over-allotment options in full) in connection with the Stockholder Transactions.
Borrowings under the Facilities would also be available to provide financing for
the Medical Systems Acquisitions, to redeem certain outstanding public debt
securities of American Standard Inc. and for other general corporate purposes.
Subject to restrictions in the Facilities and its other debt instruments, the
Company may incur additional indebtedness from time to time to finance capital
expenditures, joint ventures, acquisitions or other expenditures. If the Medical
Systems Acquisitions are consummated, borrowings under the Facilities would
increase by approximately $220 million.
American Standard's substantial leverage could have important consequences,
including: limiting the Company's ability to obtain additional financing; the
need to use substantial portions of operating cash flow to meet interest and
principal repayment obligations; exposure to interest rate fluctuations due to
floating interest rates; increased vulnerability to changes in general economic
conditions, competitive pressures and changes in government regulations; and
potential limitations on its ability to realize some or all of the benefit of
significant business opportunities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources".
HISTORICAL LOSSES
Since the Acquisition in 1988 by Kelso, American Standard has had net
losses (after income taxes, cumulative effects of changes in accounting methods
and extraordinary losses on retirement of debt) of $227 million in 1989, $54
million in 1990, $143 million in 1991, $57 million in 1992, $209 million in 1993
and $86 million in 1994. In 1995 the Company had net income of $112 million and
in the first nine months of 1996 a net loss of $92 million (which includes a
$235 million non-cash asset impairment charge). The Company's results of
operations reflect the effects of purchase accounting and significant interest
expense resulting from its highly leveraged capital structure. Results of
operations in 1991, 1992 and 1993 were also affected by recessions in the
Company's markets. See "Prospectus Summary -- Recent Financial Results and
Developments" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations".
INTERNATIONAL OPERATIONS
The Company conducts significant non-U.S. operations through subsidiaries
in most of the major countries of Western Europe, Brazil, the PRC, Thailand,
Mexico, the Philippines, Central American countries, Canada, Malaysia, South
Korea, Taiwan, Australia and Egypt. In addition, the
11
<PAGE> 14
Company conducts business in these and other countries through affiliated
companies and partnerships in which the Company owns 50% or less of the stock or
partnership interest. The Company has manufacturing operations in 35 countries.
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.
The Company's financial performance on a U.S. dollar denominated basis can
be significantly affected by fluctuations in currency exchange rates. Such
fluctuations have much less effect on local operating results, however, because
the Company for the most part sells its products within the countries in which
they are manufactured. The asset exposure of foreign operations to the effects
of exchange volatility has been partly offset by the denomination in foreign
currencies of a portion of the Company's borrowings. The Company from time to
time enters into agreements in order to reduce its foreign currency exposure.
These agreements have not been and are not expected to be material. 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 it believes to be correct relating to the various tax laws
(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 experience adverse tax and other financial consequences.
In connection with examinations of the tax returns of the Company's German
subsidiaries for the years 1984 through 1990, the German tax authorities have
raised questions regarding the treatment of certain significant matters. In
prior years the Company paid approximately $20 million (at September 30, 1996
exchange rates) of a disputed German income tax. A suit is pending to obtain a
refund of this tax. In March 1996 the Company received an assessment, which it
has appealed, for additional taxes of approximately $71 million (at September
30, 1996 exchange rates) (principally relating to the 1988 to 1990 period), plus
interest, for the tax return years under audit. In addition, significant
transactions similar to those which gave rise to such assessment occurred in
years subsequent to 1990. Having assessed additional taxes for the 1988-1990
period, the German tax authorities might, after future tax audits, propose tax
adjustments for years 1991 to 1993 that could be as much as 50% higher. The
Company, on the basis of the opinion of German legal counsel, Meilicke &
Partner, believes the German tax returns are substantially correct as filed and
any such adjustments would be inappropriate and intends to vigorously contest
any adjustments which have been or may be assessed. Accordingly, the Company has
not recorded any loss contingency at September 30, 1996 with respect to such
matters.
The Company has agreed with the German tax authorities to make a partial
security deposit in respect of the additional taxes and interest assessed in
March 1996. Approximately $13 million will be paid in January 1997 and, in
addition, the Company will apply approximately $7 million of tax refunds due it
to the security deposit. Contingent upon such deposit, the tax authorities have
granted a staying order for the balance of the additional taxes and interest
assessed in March 1996, under which no further payment or other security will be
required from the Company before litigation of the matter or a final resolution.
During litigation, the Company would expect renewal of the staying order. Upon
final resolution, the Company will be obligated to pay any tax liability in
excess of the security deposit or the Company will receive a refund of any
excess security deposit (with
12
<PAGE> 15
interest accruing on the additional tax from the date of assessment or the
refund amount from the date of deposit, respectively).
As a result of German tax legislation, first effective in 1994, the
Company's tax provision in Germany was higher in 1994, 1995 and 1996, and will
continue to be in the future. As a result of this German tax legislation and the
related additional tax provisions, the Company believes its tax exposure to the
major issues under the audit referred to above will be reduced starting in 1994
and continuing thereafter into future years.
GOVERNMENTAL REGULATION 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. The Company
believes that it is in substantial compliance with such laws and regulations. A
number of the Company's plants are undertaking responsive actions to address
soil and groundwater issues. In addition, the Company is a party to a number of
remedial actions under various federal and state environmental laws and
regulations that impose liability on companies to clean up, or contribute to the
cost of cleaning up, sites at which hazardous wastes or materials were disposed
or released, including approximately 30 proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act and similar state
statutes, in which the Company has been named a potentially responsible party or
a third party by a potentially responsible party. Expenditures in 1993, 1994,
1995 and the first nine months of 1996 to evaluate and remediate such sites were
not material. On the basis of the Company's historical experience and
information currently available, the Company believes that these environmental
actions will not have a material adverse effect on its financial condition,
results of operations or liquidity.
Additional sites may be identified for environmental remediation in the
future, including properties previously transferred by the Company and with
respect to which the Company may have contractual indemnification obligations.
The Company cannot estimate at this time the ultimate aggregate costs of all
remedial actions because of (a) uncertainties surrounding the nature and
application of environmental regulations, (b) the Company's lack of information
about additional sites at which it may be listed as a potentially responsible
party, (c) the level of cleanup that may be required at specific sites and
choices concerning the technologies to be applied in corrective actions, (d) the
number of contributors and the financial capacity of others to contribute to the
cost of remediation at specific sites and (e) the time periods over which
remediation may occur.
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 foreign
environmental statutes and regulations.
The Company derived significant revenues in 1996 and prior years from sales
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 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. The Company has been working closely with the
manufacturers of refrigerants that are developing substitutes for the CFCs and
HCFCs to be phased out, so that the Company's products will be compatible with
the substitutes. Although the Company believes that its commercial products
currently in production will
13
<PAGE> 16
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 expected to be reflected in product pricing and
accordingly are not expected to have a material adverse impact on the Company.
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.
CERTAIN PROVISIONS RELATING TO CHANGES IN CONTROL
The Company's Restated Certificate of Incorporation, Amended By-Laws and
stockholder rights agreement (the "Stockholder Rights Agreement"), as well as
the Stock Disposition Agreement, certain benefit plans and debt instruments,
contain provisions that may have the effect of making an acquisition of control
of the Company by means of tender offer, open market purchases, a proxy contest
or otherwise more difficult, discouraging acquisition bids for the Company or
limiting the price that certain acquirors might be willing to pay in the future
for shares of the Company's Common Stock.
The Restated Certificate of Incorporation and Amended By-Laws, among other
things, (i) provide for a classified board of directors, (ii) prohibit
stockholders from taking action by written consent in lieu of an annual or
special meeting, (iii) establish advance notice procedures with regard to
stockholder proposals and the nomination of candidates for election as directors
and (iv) require the affirmative vote of at least 65% of the shares entitled to
vote to amend or repeal certain provisions of the Restated Certificate of
Incorporation and the Amended By-Laws. The Restated Certificate of Incorporation
also provides that a director, in determining what he or she reasonably believes
to be the best interests of the Company, shall consider the interests of the
stockholders and, in his or her discretion, may consider any of the following:
the interests of the Company'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.
The Stock Disposition Agreement provides, that if a change of control
Transaction occurs prior to January 31, 1998 (or October 1, 1998 in certain
circumstances), the Company would be required to make a cash payment to ASI
Partners in respect of the aggregate number of Shares sold by ASI Partners in
the Offerings and to the Company in the Share Repurchase. Any such cash payment
would be based on the excess, if any, of the consideration per share received by
holders of the Common Stock in the Transaction over the cash price per share
received by ASI Partners in the Offerings and pursuant to the Share Repurchase.
Any such amounts payable to ASI Partners could have the effect of lowering the
price that certain prospective acquirors might be willing to pay in the future
for shares of the Company's Common Stock in a Transaction. See "The Selling
Stockholder and Stockholder Transactions".
Under the Stockholder Rights Agreement, each 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 relating to changes in ownership of the Common
Stock. The Company's Stock Incentive Plan provides that upon a change of control
of the Company all options and stock appreciation rights will become immediately
exercisable and restrictions applicable to outstanding restricted units and
restricted stock awards will lapse and the shares in question will fully vest.
Certain of the Company's incentive compensation plans also provide that, in the
event of a change of control of the Company, all performance targets of such
plans then in effect will be deemed to have been met and participants' rights to
14
<PAGE> 17
awards payable under such plans as a result thereof are immediately payable. In
addition, the trust agreement associated with such incentive compensation plans
provides that, in the event of a change of control, plan participants are
entitled to an immediate lump sum distribution of the cash value of their share
award accounts in the trust. American Standard Inc.'s Change of Control
Severance Plan provides that certain designated employees are eligible for
severance payments if such employees are terminated or effect a voluntary
termination under certain circumstances within 12 months after a change of
control.
The Company is subject to Section 203 of the Delaware General Corporation
Law, which limits transactions between a publicly held company and "interested
stockholders" (in general, those stockholders who, together with their
affiliates and associates, own 15% or more of a company's outstanding voting
stock). This provision also may have the effect of deterring certain potential
acquisitions of the Company.
In addition, the terms of the Facilities permit the lenders thereunder, and
the indentures governing certain of American Standard Inc.'s public debt
securities permit 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. The Offerings will
not constitute a change of control under such provisions.
15
<PAGE> 18
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the NYSE under the symbol "ASD".
The following table sets forth the high and low reported sale prices for the
Common Stock as quoted by the NYSE for the periods indicated.
<TABLE>
<CAPTION>
MARKET
PRICE
-----------
CALENDAR PERIOD HIGH LOW
- ------------------------------------------------------------------------------- --- ---
<S> <C> <C>
1995
First Quarter (from February 3, 1995).......................................... $25 $19 5/8
Second Quarter................................................................. 28 1/4 24 1/4
Third Quarter.................................................................. 32 26
Fourth Quarter................................................................. 31 7/8 26 1/4
1996
First Quarter.................................................................. 31 3/8 25 1/2
Second Quarter................................................................. 33 3/8 26 1/2
Third Quarter.................................................................. 35 1/4 28 1/8
Fourth Quarter................................................................. 39 3/4 34 1/4
1997
First Quarter (through January 22, 1997)....................................... 44 5/8 37 3/4
</TABLE>
The last reported sale price for the Common Stock by the NYSE on January
23, 1997 was $43 3/8 per Share.
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 Credit Agreement as well as the indentures related to
certain of American Standard Inc.'s public debt securities) prohibit or restrict
the payment of dividends or other distributions by American Standard Inc. to the
Company. The declaration and timing of any dividends in the future will be
determined by the Company's Board of Directors, based on its results of
operations, financial condition, cash requirements, certain corporate law
requirements, applicable restrictive covenants and other factors. After the
Stockholder Transactions, the Company's ability to effect additional repurchases
of shares of Common Stock will be significantly limited under the terms of the
indentures related to certain of American Standard Inc.'s public debt
securities.
USE OF PROCEEDS
All of the Shares of Common Stock offered hereby are being offered by the
Selling Stockholder. The Company will receive no proceeds from the Offerings.
16
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
subsidiaries at September 30, 1996 and at that date as adjusted to give effect
to the financing of the Stockholder Transactions with proposed borrowings of
$269 million under the Facilities (assuming no exercise of the Underwriters'
over-allotment options). See "The Selling Stockholder and Stockholder
Transactions". This table should be read in conjunction with the Company's
consolidated financial statements and notes thereto which have been incorporated
herein by reference. All amounts are translated where applicable using September
30, 1996 currency exchange rates. The table does not give effect to the Medical
Systems Acquisitions and related borrowings. See "Business -- Medical Systems
Group".
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------
ACTUAL ADJUSTED
-------- -----------
(IN MILLIONS)
<S> <C> <C>
Short-Term Debt:
Loans payable to banks............................................ $ 36 $ 36
Existing Revolving Facilities..................................... 145 414(a)
Current maturities of long-term debt.............................. 65 65
-------- ------
Total short-term debt.......................................... 246 515
Long-Term Debt:
Credit Agreement.................................................. 366 366
Other debt obligations............................................ 1,437 1,437
-------- ------
1,803 1,803
Less current maturities........................................... (65) (65)
-------- ------
Total long-term debt........................................... 1,738 1,738
-------- ------
Total Stockholders' Deficit......................................... (440) (709)(a)
-------- ------
Total capitalization.............................................. $ 1,544 $ 1,544
======== ======
</TABLE>
- ---------------
(a) Reflects proposed borrowings of $269 million under the Facilities to
repurchase from the Selling Stockholder approximately 6.25 million shares of
Common Stock at an assumed price of $43 per share in connection with the
Stockholder Transactions (assuming no exercise of the Underwriters'
over-allotment options). If the Underwriters were to exercise their
over-allotment options in full (which would represent approximately 1.6
million Shares), the proposed borrowings under the Facilities would be
approximately $200 million and total stockholders' deficit would be $640
million. As part of the Stockholder Transactions, the Company will issue to
ASI Partners certain Warrants. See "The Selling Stockholder and Stockholder
Transactions". For a discussion of the Facilities, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
If the Medical Systems Acquisitions are consummated, borrowings under the
Facilities would increase by approximately $220 million.
17
<PAGE> 20
SUMMARY HISTORICAL FINANCIAL DATA
The following tables set forth summary historical financial data and
segment financial data of the Company for each of the three years in the period
ended December 31, 1995 and the nine month periods ended September 30, 1995 and
1996. The summary annual historical financial data are derived from the
Company's consolidated financial statements and notes thereto. Information for
the nine months ended September 30, 1995 and 1996 is derived from unaudited
interim financial statements which reflect, in the opinion of the Company, all
adjustments, which include only normal recurring adjustments, necessary for a
fair presentation of the financial data for such periods. Results for interim
periods are not necessarily indicative of results for the full year. This table
should be read in conjunction with the Company's consolidated financial
statements and notes thereto which have been incorporated herein by reference.
The Company has restated its financial statements for the nine months ended
September 30, 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED FINANCIAL DATA:
STATEMENT OF OPERATIONS DATA:
Sales............................................... $3,830 $4,457 $5,221 $3,910 $4,368
Cost of sales..................................... 2,903 3,377 3,887 2,893 3,282
Selling and administrative expenses............... 692 779 854 631 684
Asset impairment loss(a).......................... -- -- -- -- 235
Other expense..................................... 38 57 40 27 28
Interest expense.................................. 278 259 213 162 151
------ ------ ------ ------ ------
Income (loss) before income taxes and extraordinary
item.............................................. (81) (15) 227 197 (12)
Income taxes........................................ 36 62 85 78 80
------ ------ ------ ------ ------
Income(loss) before extraordinary item.............. (117) (77) 142 119 (92)
Extraordinary loss on retirement of debt (b)........ (92) (9) (30) (30) --
------ ------ ------ ------ ------
Net income (loss)................................... (209) (86) 112 89 (92)
Preferred dividend.................................. (8) -- -- -- --
------ ------ ------ ------ ------
Net income (loss) applicable to common shares....... $ (217) $ (86) $ 112 $ 89 $ (92)
====== ====== ====== ====== ======
NET INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item............. $(2.11) $(1.29) $ 1.90 $ 1.61 $(1.18)(a)
Extraordinary loss on retirement of debt............ (1.55) (.15) (.40) (.40) --
------ ------ ------ ------ ------
Net income (loss) per common share.................. $(3.66) $(1.44) $ 1.50 $ 1.21 $(1.18)(a)
====== ====== ====== ====== ======
Average number of outstanding common shares......... 59.3 59.9 74.7 74.0 77.8
OTHER DATA:
Depreciation expense................................ $ 106 $ 123 $ 110 $ 84 $ 91
Amortization of goodwill............................ 31 31 33 25 21
EBIT (c)............................................ 197 244 440 359 139
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital..................................... $ 80 $ (14) $ (12) $ (15) $ 148
Goodwill (net)...................................... 1,026 1,053 1,082 1,071 851
Total assets........................................ 2,987 3,156 3,520 3,434 3,445
Total debt.......................................... 2,336 2,364 2,083 2,070 1,984
Stockholders' deficit............................... (723) (798) (390) (419) (440)
</TABLE>
- ---------------
(a) Effective January 1, 1996 the Company adopted FAS 121, resulting in a
non-cash charge of $235 million, or $3.02 per share, for which there was no
tax benefit. Excluding the asset impairment loss, income before
extraordinary item would have been $1.84 per share.
(b) Reflects redemptions of debt in 1993, 1994 and 1995 which resulted in
extraordinary charges of $92 million, $9 million and $30 million,
respectively, including call premiums, the write-off of deferred debt
issuance costs. In addition, 1993 included a loss of approximately $15
million on cancellation of foreign currency swap contracts. There were no
tax benefits provided on these charges.
(c) EBIT is the sum of (i) income (loss) before income taxes and extraordinary
item and (ii) interest expense.
18
<PAGE> 21
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SEGMENT FINANCIAL DATA:
SALES:
Air Conditioning Products........................ $ 2,100 $ 2,480 $ 2,953 $ 2,201 $ 2,602
Plumbing Products................................ 1,167 1,218 1,270 952 1,079
Automotive Products.............................. 563 759 998 757 687
------- ------- ------- ------- -------
Total Sales........................................ $ 3,830 $ 4,457 $ 5,221 $ 3,910 $ 4,368
======= ======= ======= ======= =======
OPERATING INCOME BEFORE ASSET IMPAIRMENT LOSS AND
SPECIAL CHARGES:
Air Conditioning Products........................ $ 138 $ 189 $ 259 $ 209 $ 284
Plumbing Products................................ 109 130 120 96 79
Automotive Products.............................. 43 76 155 123 91
------- ------- ------- ------- -------
290 395 534 428 454
Asset impairment loss and special charges(a):
Air Conditioning Products........................ (5) (7) -- -- (121)
Plumbing Products................................ (1) (19) -- -- (114)
Automotive Products.............................. (2) (14) -- -- --
------- ------- ------- ------- -------
Total Operating Income............................. $ 282 $ 355 $ 534 $ 428 $ 219
======= ======= ======= ======= =======
</TABLE>
- ---------------
(a) Includes the non-cash charge of $235 million in the first quarter of 1996 as
a result of the adoption of FAS 121, for which there was no tax benefit, and
the special charges incurred in 1993 and 1994 applicable to consolidation of
production facilities, employee severance, other cost reduction actions and
a provision for the early disposition of certain assets.
19
<PAGE> 22
PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data give effect to the Share
Repurchase from the Selling Stockholder of 6.25 million shares of Common Stock
for a total cash purchase price of $269 million (at an assumed price of $43 per
share) and related proposed borrowings of $269 million under the Facilities, in
each case as if such transactions had occurred at the beginning of each of the
periods presented and assuming no exercise of the Underwriters' over-allotment
options. The pro forma financial data are based upon available information and
certain assumptions that management believes are reasonable, including those set
forth in the footnotes thereto. The pro forma financial data do not purport to
represent what the Company's results of operations would actually have been had
the Stockholder Transactions in fact occurred on the assumed date or at the
beginning of the periods indicated or to project the Company's results of
operations for any future period. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "The Selling Stockholder and
Stockholder Transactions". The pro forma financial data do not give effect to
the Medical Systems Acquisitions and related borrowings. See "Business --
Medical Systems Group".
<TABLE>
<CAPTION>
YEAR NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1995 1995 1996
------------ ------------- --------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales........................................ $5,221 $ 3,910 $4,368
Cost of sales............................. 3,887 2,893 3,282
Selling and administrative expenses....... 854 631 684
Asset impairment loss(a).................. -- -- 235
Other expense............................. 40 27 28
Interest expense(b)....................... 232 176 164
------ ------ ------
Income (loss) before income taxes and
extraordinary item........................ 208 183 (25)
Income taxes(b).............................. 78 73 75
------ ------ ------
Income (loss) before extraordinary item...... $ 130 $ 110 $ (100)
====== ====== ======
INCOME (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item...... $ 1.90(a) $ 1.62(a) $(1.40)(a)
Average number of outstanding common
shares(b)................................. 68.5 67.8 71.6
</TABLE>
- ---------------
(a) Income before extraordinary item per share for the nine months ended
September 30, 1996 would have been $1.89 on a pro forma basis if the asset
impairment loss were excluded. Effective January 1, 1996, the Company
adopted FAS 121, resulting in a non-cash charge in 1996 of $235 million, for
which there was no tax benefit. Exercise of the Underwriters' over-allotment
option in full (which would represent approximately 1.6 million Shares)
would have no material effect on income before asset impairment loss and
extraordinary item per share on a pro forma basis for each of the periods
presented.
(b) The adjustment to reflect the repurchase of approximately 6.25 million
shares of Common Stock from the Selling Stockholder for $269 million
increases interest expense by $19 million, $14 million and $13 million and
decreases income taxes by $7 million, $5 million and $5 million for the year
ended December 31, 1995 and the nine months ended September 30, 1995 and
1996, respectively.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 1996
Operating income increased 15% to $161 million in the third quarter of 1996
from $140 million in the third quarter of 1995 on strong growth for Air
Conditioning Products and an improvement by Plumbing Products, offset partly by
a decrease for Automotive Products related to weak markets. Effective January 1,
1996 the Company adopted FAS 121 related to impairment of long-lived assets.
Applying the criteria established by FAS 121, the Company concluded that certain
assets and related goodwill of its Canadian, French and Mexican operating units
were impaired. As a result, the Company recorded a non-cash charge in the first
quarter of 1996 of $235 million, approximately 90% of which represented the
write-down of goodwill, for which there is no tax benefit. This charge included
$121 million for Air Conditioning Products' operations in Canada and France, and
$114 million for Plumbing Products' operations in Canada and Mexico. Excluding
this charge, operating income for the first nine months of 1996 was $454
million, an increase of 6% over the $428 million of operating income in the
first nine months of 1995.
The Company has restated its financial statements for each of the first
three quarters of 1996, reducing operating income by $3 million, $4 million and
$2 million, respectively, to properly record costs and expenses for Porcher
S.A., the French plumbing products manufacturer acquired in the fourth quarter
of 1995. Information provided in this section reflects such restatement. The
restatement had the effect of increasing the after-tax net loss for the nine
months ended September 30, 1996, by $6 million, or $.08 per share. New
management at Porcher has taken corrective action to prevent the recurrence of
similar errors which mainly resulted from implementation of new accounting
systems at Porcher.
SUMMARY SEGMENT AND INCOME DATA
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1995 1996 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales:
Air Conditioning Products.......................... $ 776 $ 920 $2,201 $2,602
Plumbing Products.................................. 307 359 952 1,079
Automotive Products................................ 233 206 757 687
------ ------ ------ ------
Total sales........................................ $1,316 $1,485 $3,910 $4,368
====== ====== ====== ======
Operating income before asset impairment loss:
Air Conditioning Products.......................... $ 81 $ 111 $ 209 $ 284
Plumbing Products.................................. 23 29 96 79
Automotive Products................................ 36 21 123 91
------ ------ ------ ------
140 161 428 454
Asset impairment loss:
Air Conditioning Products.......................... -- -- -- (121)
Plumbing Products.................................. -- -- -- (114)
------ ------ ------ ------
-- -- -- (235)
------ ------ ------ ------
Total operating income.......................... 140 161 428 219
Interest expense..................................... (51) (49) (162) (151)
Corporate and other expenses (a)..................... (22) (27) (69) (80)
------ ------ ------ ------
Income (loss) before income taxes and
extraordinary item................................. $ 67 $ 85 $ 197 $ (12)
====== ====== ====== ======
</TABLE>
- ---------------
(a) Corporate and other expenses includes administrative, general and corporate
development 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.
21
<PAGE> 24
RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 1996
COMPARED WITH THE THIRD QUARTER AND FIRST NINE MONTHS OF 1995
Consolidated sales for the third quarter of 1996 were $1,485 million, an
increase of $169 million, or 13% (14% excluding the unfavorable effects of
foreign exchange), from $1,316 million in the third quarter of 1995. Sales
increased 19% for Air Conditioning Products and 17% for Plumbing Products, while
sales for Automotive Products decreased 12% compared with the third quarter of
1995. Operating income for the third quarter of 1996 was $161 million, an
increase of $21 million, or 15% (16% excluding the unfavorable effects of
foreign exchange), from $140 million in the third quarter of 1995. Operating
income increased 37% for Air Conditioning Products and 26% for Plumbing Products
but decreased 42% for Automotive Products.
Consolidated sales for the first nine months of 1996 were $4,368 million,
an increase of $458 million, or 12% (13% excluding the unfavorable effects of
foreign exchange), from $3,910 million in the first nine months of 1995. Sales
increased 18% for Air Conditioning Products and 13% for Plumbing Products, while
sales for Automotive Products declined 9%. Operating income (excluding the asset
impairment charge previously mentioned) was $454 million for the first nine
months of 1996, an increase of 6% (7% excluding the unfavorable effects of
foreign exchange), compared with $428 million in the first nine months of 1995.
Operating income for the first nine months of 1996 increased 36% for Air
Conditioning Products but declined 18% for Plumbing Products and 26% for
Automotive Products.
Sales of Air Conditioning Products increased 19% (with little effect from
foreign exchange) to $920 million for the third quarter of 1996 from $776
million for the comparable quarter of 1995. This improvement resulted from
substantial volume increases and price gains for applied and unitary commercial
systems; higher volumes and prices and a favorable shift to higher-efficiency,
higher-capacity products for residential products in the U.S.; and sales by the
new operations in the PRC. Sales of commercial products in the U.S. increased
because of improved markets, demand for chiller replacement (due to the ban on
CFC refrigerant production), higher prices and gains in market share.
Residential sales in the U.S. increased because of strong demand (particularly
in the replacement and renovation market), hot weather in some parts of the U.S.
and improved economic conditions. International sales for the third quarter of
1996 increased principally because of sales by the new PRC operations, along
with volume increases in most other businesses. Sales for Air Conditioning
Products for the first nine months of 1996 increased by 18% to $2,602 million
from $2,201 million in the first nine months of 1995, primarily for the reasons
cited for the third quarter increase.
Operating income of Air Conditioning Products increased 37% (with little
effect from foreign exchange) to $111 million in the third quarter of 1996 from
$81 million in the 1995 quarter, primarily reflecting expanded commercial and
residential product sales in the U.S. Despite higher sales (primarily in the
PRC), operating income for international operations was essentially unchanged.
The new PRC operations were at break even, while results in other operations
changed little from levels of the third quarter of 1995. Operating income for
the first nine months of 1996, excluding the asset impairment charge explained
above, increased 36% essentially for the reasons mentioned for the third quarter
increase.
Sales of Plumbing Products increased 17% (18% excluding the unfavorable
effects of foreign exchange) to $359 million in the third quarter of 1996 from
$307 million in the third quarter of 1995 primarily as a result of sales by
Porcher and higher sales in North and Latin American operations. Excluding
Porcher and foreign exchange effects, 1996 third quarter sales increased 3%
compared with the 1995 quarter, as a result of an 8% increase for U.S.
operations, while the international group was essentially flat despite the Latin
American gains. Sales in the U.S. increased as a result of higher volumes
(primarily in the retail market channel) and higher prices. For the
international group, volume gains in Latin American operations (primarily in
Mexico) were offset by a sales decline in Europe, particularly in Germany, Italy
and France which continued to experience weak
22
<PAGE> 25
economic conditions. Sales of Plumbing Products for the first nine months of
1996 increased 13% (14% excluding the unfavorable effects of foreign exchange)
to $1,079 million from $952 million in the first nine months of 1995. Excluding
Porcher and foreign exchange effects, sales decreased by 1% for the first nine
months of 1996 compared with the 1995 period as a result of the same factors
affecting the third quarter results and because of a five-week strike in the
Philippines that occurred in the first quarter of 1996.
Operating income of Plumbing Products increased 26% (27% excluding the
unfavorable effects of foreign exchange) to $29 million for the third quarter of
1996 from $23 million for the third quarter of 1995 as a result of a solid gain
in U.S. operating income, partly offset by a decline in international
operations. In the U.S., operating income improved because of the higher sales,
benefits of lower-cost product sourcing from the Company's Mexican facilities
and manufacturing and operating cost improvements. For international operations,
operating income gains in Latin America were more than offset by declines in the
weak European markets, particularly in Germany and France and, to a lesser
extent, in Italy. In addition, margins in France were lower than in the prior
year due to increased costs. The Company is undertaking actions to better
assimilate Porcher into its European plumbing products operations and to improve
operating performance. Despite a gain for U.S. operations, operating income for
the first nine months of 1996, excluding the aforementioned asset impairment
charge, declined by 18% (17% excluding foreign exchange effects) from the first
nine months of 1995 because of a decline in international operations in the
first half of 1996, including the effects of the first quarter Philippines
strike.
Sales of Automotive Products for the third quarter of 1996 decreased 12%
(10% excluding the unfavorable effects of foreign exchange) to $206 million from
$233 million in the third quarter of 1995, primarily because of a decline in
European commercial vehicle production as a result of market weakness and order
delays at several large customers in anticipation of new truck model
introductions. Unit volume of truck and bus production in Western Europe
decreased from the third quarter of 1995, especially in Germany and France.
Trailer, export and Brazilian markets also decreased, contributing to the sales
decline. Sales of Automotive Products for the first nine months of 1996
decreased 9% (7% excluding the unfavorable effects of foreign exchange) to $687
million from $757 million in the first nine months of 1995, primarily for the
reasons which caused declines in the third quarter.
Operating income for Automotive Products for the third quarter of 1996 was
$21 million, a decrease of 42% (39% excluding the unfavorable effects of foreign
exchange) from $36 million in the third quarter of 1995. This reflected the
lower sales and start-up costs associated with new product introductions on 1997
truck models, offset partly by productivity improvements. Operating income for
Automotive Products for the first nine months of 1996 decreased by 26% (24%
excluding the unfavorable effects of foreign exchange) to $91 million from $123
million in the first nine months of 1995, principally for the same reasons
described with respect to the third quarter.
FINANCIAL REVIEW
Interest expense decreased in the third quarter and first nine months of
1996 compared to the year-earlier periods, primarily as a result of reduced debt
together with lower overall interest rates under the Company's existing bank
credit agreement. The increase in corporate and other expenses for the third
quarter and first nine months of 1996 is primarily attributable to spending for
corporate development and lower equity in the net results of unconsolidated
joint ventures.
Income tax provisions for the three months and nine months ended September
30, 1996 were $29 million and $80 million, respectively, compared with
provisions of $24 million and $78 million in the corresponding periods of 1995.
Effective income tax rates for the third quarter and first nine months of 1996
were 34.5% and 35.6% of pretax income (excluding the asset impairment charge in
the nine month period on which there was no tax benefit), compared with rates of
35.2% and 39.5% in the corresponding year-earlier periods. Both third quarter
periods reflect reductions in the
23
<PAGE> 26
estimated full year tax rates. The lower effective tax rates resulted from
increased levels of U.S. income (enabling the Company to recognize previously
unrecognized tax benefits in both 1995 and 1996) and, in 1996, from
proportionately greater pretax income earned in the U.S. (at a lower effective
rate) compared to that earned in higher-rate jurisdictions in Europe and
elsewhere.
As a result of the redemption of debt in the first quarter of 1995 upon
completion of a refinancing, the first nine months of 1995 included an
extraordinary charge of $30 million attributable to the write-off of unamortized
debt issuance costs, for which no tax benefit was available.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities, after cash interest paid of $87
million, was $200 million for the first nine months of 1996, compared with $202
million for the first nine months of 1995. Higher income before extraordinary
item (excluding the non-cash asset impairment loss of $235 million) along with
improved working capital utilization were offset primarily by higher payments of
income taxes. Inventory turnover as of September 30, 1996 improved one full turn
from September 30, 1995, and working capital as a percent of sales improved
nearly one percentage point. The Company made capital expenditures of $135
million for the first nine months of 1996, including $12 million of investments
in affiliated companies, compared with capital expenditures of $115 million in
the first nine months of 1995, which included $19 million of investments in
affiliated companies (see "-- Capital Expenditures"). Scheduled debt repayments
of $50 million were made during the first nine months of 1996.
At September 30, 1996, the Company's total indebtedness was $1,984 million
and the Company had scheduled debt maturities of $78 million, $82 million, and
$235 million for the years 1997, 1998 and 1999, respectively. Chase has, subject
to certain terms and conditions, committed to arrange for a syndicate of lenders
to provide the Company with the $1.75 billion Amended Credit Facilities to
replace the Company's $925 million Existing Credit Facilities. Borrowings under
the Amended Credit Facilities would be available to fund the Share Repurchase,
to provide financing for the Medical Systems Acquisitions, to redeem certain
outstanding public debt securities of American Standard Inc. and for other
general corporate purposes. As of January 23, 1997, the Company had obtained
non-binding commitments in excess of the $1.75 billion amount sought. The
Company expects that the closing of the Amended Credit Facilities will occur
prior to the closing of the Offerings. The Company's existing credit agreement
will be amended and restated to provide for the Amended Credit Facilities. There
can be no assurance that the Amended Credit Facilities will be obtained, and the
Offerings are not conditioned on the arrangement of, or borrowings under, the
Amended Credit Facilities.
The Company believes that the amounts available from operating cash flows,
funds available under the Facilities and future borrowings will be sufficient to
meet its expected operating needs and planned capital expenditures for the
foreseeable future.
The Existing Credit Facilities currently provide American Standard Inc. and
certain subsidiaries with secured credit facilities aggregating $925 million
including revolving credit facilities (the "Existing Revolving Facilities")
which provide for aggregate revolving borrowings of up to $550 million. Upon
achieving certain financial ratios in mid-1995, the Company obtained an interest
rate reduction of .25% and in March 1996 achieved an additional interest rate
reduction of .25%. At September 30, 1996 the Company had outstanding borrowings
of $145 million under the Existing Revolving Facilities. There was $347 million
available under the Existing Revolving Facilities after reduction for borrowings
and $58 million of outstanding letters of credit. In addition, at September 30,
1996, the Company's foreign subsidiaries had $70 million available under
overdraft facilities which can be withdrawn by the banks at any time. Borrowings
under the Existing Revolving Facilities are short-term by their terms. Because a
significant portion of the long-term debt under the Company's previous bank
credit agreement was replaced with borrowings under the Existing Revolving
Facilities, a significantly larger portion of the Company's debt is classified
as short-term.
24
<PAGE> 27
The Amended Credit Facilities are expected to provide American Standard
Inc. and certain subsidiaries (the "Borrowers") with senior secured credit
facilities aggregating $1.75 billion to all Borrowers as follows: (a) a $750
million U.S. dollar revolving credit facility and a $625 million multi-currency
revolving credit facility and (b) a $375 million multi-currency periodic access
credit facility. Borrowings under the Amended Credit Facilities are expected to
bear interest at rates lower than those currently in effect under the Existing
Credit Facilities. There would be no scheduled principal payments under any of
the facilities prior to 2002. Borrowings under the amended revolving credit
facilities would be short-term by their terms.
All obligations of the Borrowers under the Amended Credit Facilities would
be guaranteed by the Company, American Standard Inc. and the subsidiaries of
American Standard Inc. that are guarantors under the Existing Credit Facilities.
The Amended Credit Facilities would be secured by pledges of the capital stock
of American Standard Inc.'s domestic and foreign subsidiaries to the same extent
as under the Existing Credit Facilities. Unlike the Existing Credit Facilities,
the Amended Credit Facilities would not be secured by mortgages or liens on any
of the other properties or assets of the Company or any of its domestic and
foreign subsidiaries.
The Company expects that the Amended Credit Facilities will contain various
covenants that limit, among other things, mergers and asset sales, indebtedness,
dividends on and redemption of capital stock of the Company, voluntary
prepayment of certain other indebtedness, rental expense, liens, capital
expenditures, investments or acquisitions, the use of proceeds from asset sales,
intercompany transactions and transactions with affiliates and certain other
business activities. The covenants also would require the Company to meet
certain financial tests. Certain other American Standard Inc. debt instruments
also contain financial and other covenants. The Company believes it is currently
in compliance with the covenants under the Existing Credit Facilities and its
other debt instruments and, upon the closing under the Amended Credit
Facilities, expects to be in compliance with the covenants to be contained
therein.
In addition, the terms of the Facilities permit the lenders thereunder and
the indentures related to certain of American Standard Inc.'s public debt
securities permit the holders of such debt securities, respectively, to
accelerate payment or require redemption upon certain events which constitute a
change of control of the Company or American Standard Inc.
At September 30, 1996, the Company held swap agreements to hedge the
redemption value of a portion of its long-term debt and effectively change such
debt from a fixed interest rate of 10 1/2% to an average fixed rate of
approximately 7%. The redemption value hedged by the swaps is the fair value of
the debt at the commencement of the swaps. The swaps mature in June 1998 and
have a notional debt value of $147 million. These swap agreements are with major
financial institutions. The Company does not anticipate non-performance by such
counterparties.
The Company from time to time enters into agreements in order to reduce its
foreign currency exposure. These agreements have not been and are not expected
to be material.
In August 1996, the Company entered into a financial services partnership,
American Standard Financial Services, with Transamerica Commercial Finance
Corporation, a subsidiary of Transamerica Corporation, to provide a wide range
of financial services to support sales of the Company's products while reducing
cash requirements to expand its business. The partnership will offer inventory
and consumer financing, commercial leasing and asset-based lending programs,
which are expected to enhance the Company's cash flow.
In connection with examinations of the tax returns of the Company's German
subsidiaries for the years 1984 through 1990, the German tax authorities have
raised questions regarding the treatment of certain significant matters. In
prior years the Company paid approximately $20 million (at September 30, 1996
exchange rates) of a disputed German income tax. A suit is pending to obtain a
refund of this tax. In March 1996 the Company received an assessment, which it
has appealed, for additional taxes of approximately $71 million (at September
30, 1996 exchange rates)
25
<PAGE> 28
(principally relating to the 1988 to 1990 period), plus interest, for the tax
return years under audit. In addition, significant transactions similar to those
which gave rise to such assessment occurred in years subsequent to 1990. Having
assessed additional taxes for the 1988-1990 period, the German tax authorities
might, after future tax audits, propose tax adjustments for years 1991 to 1993
that could be as much as 50% higher. The Company, on the basis of the opinion of
German legal counsel, Meilicke & Partner, believes the German tax returns are
substantially correct as filed and any such adjustments would be inappropriate
and intends to vigorously contest any adjustments which have been or may be
assessed. Accordingly, the Company has not recorded any loss contingency at
September 30, 1996 with respect to such matters.
The Company has agreed with the German tax authorities to make a partial
security deposit in respect of the additional taxes and interest assessed in
March 1996. Approximately $13 million will be paid in January 1997 and, in
addition, the Company will apply approximately $7 million of tax refunds due it
to the security deposit. Contingent upon such deposit, the tax authorities have
granted a staying order for the balance of the additional taxes and interest
assessed in March 1996, under which no further payment or other security will be
required from the Company before litigation of the matter or a final resolution.
During litigation, the Company would expect renewal of the staying order. Upon
final resolution, the Company will be obligated to pay any tax liability in
excess of the security deposit or the Company will receive a refund of any
excess security deposit (with interest accruing on the additional tax from the
date of assessment or the refund amount from the date of deposit, respectively).
As a result of German tax legislation, first effective in 1994, the
Company's tax provision in Germany was higher in 1994, 1995 and 1996, and will
continue to be in the future. As a result of this German tax legislation and the
related additional tax provisions, the Company believes its tax exposure to the
major issues under the audit referred to above will be reduced starting in 1994
and continuing thereafter into future years.
American Standard Inc. makes substantial interest payments to its indirect
wholly owned Netherlands subsidiary. These interest payments had been exempt
from U.S. withholding tax under an income tax treaty between the United States
and the Netherlands. Under a provision in a new treaty such payments would have
become subject to 15% U.S. withholding tax, except that the Company received a
ruling in 1996 from the IRS making a determination that no U.S. withholding tax
will be imposed for a fifteen-year period.
CAPITAL EXPENDITURES
American Standard from time to time has invested in the expansion and
modernization of its existing facilities and affiliated companies and considers
entering into and increasing investments in joint ventures and making
complementary acquisitions. Capital expenditures have been financed out of
operating cash flow and through borrowings under the Existing Credit Facilities.
The Company's capital expenditures for the first nine months of 1996 were
$135 million, including $12 million of investments in affiliated companies,
compared with $115 million (including $19 million of investments in affiliated
companies) for the first nine months of 1995. The increase for 1996 relates
primarily to investments in affiliated companies, lower-cost product sourcing,
expansion in newer operations, new products, expansion to meet market demand and
the continuing implementation of Demand Flow.
The Company's capital expenditures for the year 1995 were $207 million
compared with $130 million for 1994, an increase of 59%. The increase for 1995
relates primarily to investments in affiliated companies ($42 million in 1995
compared to $24 million in 1994), modernization of recent acquisitions, new
products and the continuing implementation of Demand Flow. The Company expects
that capital expenditures (including investments in affiliates) will increase
approximately 10% for 1996 compared with 1995 and by approximately 15% in 1997.
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Capital expenditures for Air Conditioning Products for 1995 were $70
million, including $11 million of investments in affiliates, an increase of 56%
over the $45 million of capital spending in 1994. Major expenditures included
investments in affiliates in the PRC and projects related to the expansion of
manufacturing capacity for large chillers, implementation of Demand Flow and new
products.
Plumbing Products' capital expenditures for the year 1995 were $93 million,
including $31 million of investments in affiliated companies (primarily
Porcher), compared with capital expenditures of $55 million in 1994 (including
investments of $10 million in affiliated companies), an increase of 69% (75%
excluding the effects of foreign exchange). Expenditures for 1995 included cash
investments in Porcher and affiliates in the PRC, expansion of capacity in
Mexico, expansion in Far East operations and modernization of the Czech Republic
operations.
Capital expenditures for Automotive Products for 1995 were $44 million,
compared with 1994 capital expenditures of $30 million, an increase of 47% (38%
excluding the effects of foreign exchange). Major projects included completion
of a test track in Germany, continued implementation of Demand Flow and
cost-reduction projects.
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
replacement, renovation and repair markets (approximately 60% of their 1995
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 1995 sales).
Automotive Products' sales are highly dependent on production levels of
medium-sized and heavy trucks and buses, particularly in Europe, which have also
been cyclical. Western European truck and bus production declined significantly
from its historical high in 1989 of approximately 395,000 trucks and buses in
excess of six tons to a recent low of approximately 227,000 units in 1993. While
production recovered in 1994 and 1995, to approximately 351,000 units in 1995,
it declined again in 1996 to an estimated 319,000 units on an annualized basis.
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.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this Prospectus and in documents
incorporated herein by reference (other than the historical financial data and
other statements of historical fact), including, without limitation, statements
as to management's expectations and belief presented in "Prospectus Summary --
Recent Financial Results and Developments" and in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations," are
forward-looking statements. Forward-looking statements are made based upon
management's expectations and belief concerning future developments and their
potential effect upon the Company. There can be no assurance that future
developments will be in accordance with management's expectations or that the
effect of future developments on the Company will be those anticipated by
management. There are certain important factors that could cause actual results
to differ materially from estimates reflected in such forward-looking
statements, including the level of new construction activity in the Company's
Air Conditioning Products' and Plumbing Products' markets; production levels of
trucks and buses in the Company's Automotive Products' markets, particularly in
Western Europe; changes in U.S. or international economic conditions, such as
inflation, interest rate fluctuations or recessions in the Company's markets;
pricing changes to the Company's products or those of its competitors, and other
competitive pressures on pricing and sales; changes in the markets for
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medical diagnostic products; integration of acquired businesses; risks generally
relating to the Company's international operations (see "Risk
Factors -- International Operations" and "-- Tax Matters"); and transactions or
other events affecting the need for, timing and extent of the Company's capital
expenditures. See "Risk Factors" and "-- Results of Operations For the Third
Quarter and First Nine Months of 1996 Compared with the Third Quarter and First
Nine Months of 1995".
While the Company periodically reassesses material trends and uncertainties
affecting the Company's financial condition and results of operations in
connection with its preparation of management's discussion and analysis of
financial condition and results of operations contained in its quarterly and
annual reports, the Company does not intend to review or revise any particular
forward-looking statement referenced in this Prospectus or incorporated herein
by reference in light of future events.
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BUSINESS
American Standard is a globally-oriented manufacturer of high quality,
brand-name products in three major product groups: air conditioning systems (57%
of 1995 sales); bathroom and kitchen fixtures and fittings (24% of 1995 sales);
and braking and control systems for medium-sized and heavy trucks, buses,
trailers and utility vehicles (19% of 1995 sales). American Standard is a market
leader in each of these business segments in the principal geographic areas in
which it competes. The Company's brand names include TRANE(R) and AMERICAN
STANDARD(R) for air conditioning systems, AMERICAN STANDARD(R), IDEAL
STANDARD(R), STANDARD(R) and PORCHER(R) for plumbing products and WABCO(R) and
PERROT(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, 1996,
American Standard had 103 manufacturing facilities in 35 countries.
American Standard's business strategy is to promote growth in sales and
earnings. 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 PRC, 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 continues 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. The
Company believes that Demand Flow, which it 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 Automotive 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) and AMERICAN STANDARD(R) names. Air
Conditioning Products' sales to the commercial and residential markets
represented approximately 75% and 25%, respectively, of Air Conditioning
Products' total sales in 1995 and the first nine months of 1996. Approximately
60% of Air Conditioning Products' sales in these periods was to the replacement,
renovation and repair markets, which have been less cyclical than the new
residential and commercial construction markets. Of Air Conditioning Products'
1995 worldwide sales, approximately 79% was derived from U.S. operations
(including 7% related to export sales) and 21% was derived from operations
outside the United States. Management believes that Air Conditioning Products is
well positioned for growth because of its high quality, brand-name products,
significant existing market shares, the introduction of new product features
such as electronic controls, the
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expansion of its broad distribution network and conversion to products utilizing
environmentally-preferred refrigerants.
PLUMBING PRODUCTS. American Standard is a leading manufacturer in Europe,
the U.S. and a number of other countries of bathroom and kitchen fixtures and
fittings for the residential and commercial construction markets and retail
sales channels. Plumbing Products manufactures and distributes its products
under the AMERICAN STANDARD(R), IDEAL STANDARD(R), STANDARD(R) and PORCHER(R)
names. Of Plumbing Products' worldwide 1995 sales, approximately 71% was derived
from operations outside the United States and 29% was derived from operations in
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).
AUTOMOTIVE PRODUCTS. American Standard is a leading manufacturer,
primarily in Europe and Brazil, of braking and related systems for the
commercial and utility vehicle industry. Its most important products are
pneumatic braking systems and related electronic and other control systems
(including ABS) marketed under the WABCO(R) name for medium-size and heavy
trucks, tractors, buses, trailers and utility vehicles. American Standard
supplies vehicle manufacturers such as Mercedes-Benz, Volvo, Iveco (Fiat), RVI
(Renault) and Rover. Management believes that Automotive Products is well
positioned to benefit from any future improvement in market conditions in Europe
and Brazil and increasing demand for ABS and other sophisticated electronic
control systems in a number of markets (including the commercial vehicle market
in the United States, where phase-in of ABS is mandated beginning in 1997), as
well as from the technological advances embodied in the Company's products and
its close relationships with a number of vehicle manufacturers.
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 continues to expand its operations in the Far
East, Latin America and Europe. In 1994, it established a joint venture in
Australia and continues to expand its sales forces in the Far East, Latin
America, the Middle East and India. In December 1995 the Company completed
arrangements for the development and expansion of its air conditioning business
in the PRC, to become an integrated manufacturer, marketer and distributor of a
broad range of air conditioning systems and related products for residential and
commercial applications. The Company and a minority investor established ASI
China Holdings Limited ("ASI China"), in which the Company has an initial
ownership interest of 64.4%, and formed A-S Air Conditioning Products Limited
("ASAP"), owned 50.4% by ASI China, to establish or acquire majority ownership
in up to five manufacturing joint ventures as well as sales and service
businesses in the PRC. The Company contributed to ASAP its 50% interest (valued
at $10 million) in a Hong Kong joint venture (which imports and distributes air
conditioning products) and has committed to contribute $20 million in cash, $8
million of which had been contributed as of December 31, 1995. The minority
investor in ASI China and third-party investors in ASAP have committed to
contribute a total of $62 million, $26 million of which had been contributed as
of December 31, 1995. As of December 31, 1995, ASAP had acquired majority
ownership in three manufacturing joint ventures and in conjunction therewith
assumed debt of $21 million.
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Plumbing Products has entered new markets through joint ventures in Eastern
Europe, Spain, Portugal and Vietnam and is continuing to expand using this
approach. In 1995, operations were expanded in France through the acquisition of
Porcher (see "--Plumbing Products Segment"). Plumbing Products continues to
expand its operations in the PRC through its affiliate, A-S China Plumbing
Products Limited ("ASPPL"), in which American Standard has a current ownership
position of approximately 28% and effective control over day-to-day operations.
ASPPL, which had total assets of approximately $125 million at September 30,
1996, has expanded 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 seven joint ventures with
local business concerns which, together with one wholly-owned operation, have
received business licenses from Chinese government authorities. These include
two recently constructed chinaware manufacturing facilities, an existing
chinaware manufacturing facility being expanded, two operating fittings plants
and two operating steel tub factories. The Company's ownership interest in ASPPL
is expected to increase over time to up to 51% of the equity of ASPPL through
reinvestment of royalties and management fees and through additional stock
purchases.
Automotive Products, headquartered in Europe, has since 1993 established a
joint venture in the PRC, acquired a business in Spain, is in the process of
establishing joint ventures in Eastern Europe and is expanding the volume of
business done through its existing joint ventures in the United States and
Japan.
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 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, most of American Standard's approximately 44,000 employees
worldwide have been trained in Demand Flow which has been implemented in
substantially all of American Standard's production facilities as of September
30, 1996. In addition, American Standard is implementing Demand Flow in its
acquired operations such as Perrot, a German brake manufacturer acquired in
January 1994, and Porcher, acquired in 1995. American Standard is also applying
Demand Flow to administrative functions and is reengineering its organizational
structure to manage its businesses based on processes instead of functions.
American Standard believes that its implementation of Demand Flow 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 tripled since 1990. Principally
as a result of the implementation of Demand Flow, American Standard has reduced
inventories by 49% from December 31, 1989 through December 31, 1995, while
related sales have grown 57% for the same period. American Standard further
believes that as a result of the introduction of Demand Flow, employee
productivity has risen significantly, 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
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products are sold primarily under the TRANE(R) and AMERICAN STANDARD(R) names.
In 1995 Air Conditioning Products, with revenues of $2,953 million, accounted
for approximately 57% of the Company's sales and 49% of its operating income.
Outside the United States, Air Conditioning Products derived 21% of its sales in
1995 from manufacturing operations and 7% from U.S. exports. Approximately 60%
of Air Conditioning Products sales in 1995 was from the replacement, renovation
and repair markets, which in general are less cyclical than the new residential
and commercial construction markets.
Air Conditioning Products manufactures three general types of air
conditioning systems. The first, called "unitary," which is sold for residential
and commercial applications, is a factory-assembled central air conditioning
system which generally encloses in one or two units all the components to cool
or heat, clean, humidify or dehumidify, 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, renovation and repair
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 arrangements for a partnership, Alliance Compressors ("Alliance"),
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. On December 31, 1996, Alliance was
restructured to admit a new partner, Copesub, Inc., a subsidiary of Emerson
Electric Co. Following the restructuring, Standard Compressors Inc. and
Heatcraft Technologies Inc. each own a 24.5% interest in Alliance and Copesub,
Inc. owns a 51% interest. Alliance plans to develop, manufacture, market and
sell, primarily to companies related to Standard Compressors Inc. and Heatcraft
Technologies Inc., scroll compressors utilized mainly in residential central air
conditioning applications. Alliance will operate principally from a newly
constructed facility in Natchitoches, Louisiana.
Many of the products manufactured by Air Conditioning Products utilize
HCFCs and in the past utilized CFCs 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 conditioning equipment already installed, which
management believes has created 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 being 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.
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
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date, stricter standards in the future could require substantial research and
development expense and capital expenditures to maintain compliance.
At September 30, 1996 Air Conditioning Products had 31 manufacturing plants
in 9 countries, employing approximately 20,300 people.
Air Conditioning Products comprises three operating groups: Unitary
Products, North American Commercial, and International.
UNITARY PRODUCTS GROUP
Unitary Products, which accounted for approximately 37% of Air Conditioning
Products' 1995 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, Rheem, Lennox, Goodman Industries and Inter-City Products.
Commercial unitary products range from 2 to 120 tons and 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 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 and 1995 the Unitary Products Group successfully introduced
several new products, including a new line of outdoor condensing units for the
AMERICAN STANDARD(R) brand; a very high efficiency residential air conditioner;
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 commercial unitary business also
concentrated on enhancements and new capabilities for existing products.
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.
NORTH AMERICAN COMMERCIAL GROUP
North American Commercial Group, which accounted for 42% of Air
Conditioning Products' 1995 sales, manufactures and distributes products in the
United States for sale in the United States and Canada for air conditioning
applications in larger commercial, industrial, and institutional buildings.
Other major suppliers of commercial systems are Carrier, McQuay and York.
North American Commercial Group distributes its products through 95 sales
offices. Thirty-four of these offices are Company-owned and 61 are franchised.
The Company acquired the Toronto, Canada, and St. Louis, Missouri offices in
1994 and the Albany, New York and Nashville, Tennessee offices in 1995. In 1996,
the Company acquired the Grand Rapids, Michigan; Pittsburgh, Pennsylvania; and
New Haven, Connecticut offices and expects to continue to acquire major sales
offices from its franchisees.
Over the last few years the North American Commercial Group 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 1994 and 1995 the Company continued its introduction of a number of
new products such as the high-efficiency centrifugal chiller, an expanded air
cooled series R chiller line, and the
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new fan coil line. Integrated Comfort Systems continues 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 Trane's
1995 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 North American
Commercial Groups. Like the North American Commercial 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.
Trane expects to continue the expansion of its presence outside the U.S. In
the Asia-Pacific region Trane recently established a joint venture in Australia
as well as three manufacturing joint ventures in the PRC (see "-- Strategy --
Globalization") and expanded its operations in Malaysia. In the early 1990's it
purchased an air conditioning manufacturing and distribution firm in Taiwan, and
entered into a sales and manufacturing joint venture in Thailand. In Europe, in
addition to its plants in Epinal and Charmes, France, the group opened plants in
Mirecourt and in Colchester, U.K., in 1992. A joint venture in Egypt commenced
operations in 1992 to serve markets in the Middle East.
PLUMBING PRODUCTS SEGMENT
Plumbing Products manufactures and distributes bathroom and kitchen
fixtures and fittings primarily under the IDEAL STANDARD(R), AMERICAN
STANDARD(R), STANDARD(R) and PORCHER(R) names. In 1995 Plumbing Products, with
revenues of $1,270 million, accounted for 24% of the Company's sales and 22% of
its operating income. Plumbing Products derived approximately 71% of its total
1995 sales from operations outside the United States.
Of Plumbing Products' sales, 53% 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 total the residential market accounts for
approximately 75% of Plumbing Products' sales, with the commercial and
industrial markets providing the remaining 25%.
Plumbing Products operates through four primary geographic groups: European
Plumbing Products, U.S. Plumbing Products, Americas International and the Far
East Group. Plumbing Products' fittings operations are organized as the
Worldwide Fittings Group, which has primary responsibility for faucet
technology, product development and manufacturing, with manufacturing facilities
in Germany, Bulgaria, the U.S., and Mexico. Worldwide Fittings sales and
operating results are reported in the four primary geographic groups within
which it operates.
European Plumbing Products, which sells products primarily under the brand
names IDEAL STANDARD(R) and PORCHER(R), manufactures and distributes bathroom
and kitchen fixtures and fittings through subsidiaries or joint ventures in
Germany, Italy, France, England, Greece, the Czech Republic, Spain, Portugal,
and Egypt. In November 1995 the Company acquired substantially all of the
remaining outstanding common shares and convertible bonds of Porcher, a French
manufacturer and distributor of plumbing products in which the Company
previously had an ownership interest of 32.88%. The $25 million cost of the
acquisition was funded with a borrowing under the Company's revolving credit
facilities. In addition $31 million of Porcher debt was assumed. In 1995 Porcher
had sales of $216 million.
U.S. Plumbing Products manufactures bathroom and kitchen fixtures and
fittings, selling under the brand names AMERICAN STANDARD(R) and STANDARD(R) in
the United States. Americas
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International manufactures bathroom and kitchen fixtures and fittings, selling
under the names AMERICAN STANDARD(R), IDEAL STANDARD(R), and STANDARD(R) through
its wholly owned operations in Mexico, Canada, and Brazil and its majority-owned
subsidiaries in Central America.
The Far East Group manufactures bathroom and kitchen fixtures and fittings,
selling under the names AMERICAN STANDARD(R), IDEAL STANDARD(R), and STANDARD(R)
through its wholly owned operations in South Korea, its majority-owned
operations in Thailand and the Philippines, and its manufacturing joint venture
in Indonesia and is developing a new joint venture in Vietnam. The Company is
also significantly expanding its operations in the PRC. See "-- Strategy --
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.
In 1995 the new construction market in Europe declined slightly, especially in
Germany and France, after recovering somewhat in 1994 and 1993. In the U.S. the
new construction market hit its recent low in 1992 but had some recovery through
1995. 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.
U.S. Plumbing Products is focusing 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 26% of U.S. Plumbing Products' sales in 1995, 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.
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 since 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 the early 1990's.
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At September 30, 1996, Plumbing Products employed approximately 18,000
people and, including affiliated companies, had 58 manufacturing plants in 25
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.
AUTOMOTIVE PRODUCTS SEGMENT
Operating under the WABCO(R) name, Automotive Products manufactures air
brake and related systems for the commercial vehicle industry in Europe and
Brazil. WABCO's 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
1995 WABCO, with sales of $998 million, accounted for 19% of the Company's sales
and 29% of its operating income. The Company believes that WABCO is a worldwide
technological leader in the heavy truck and bus braking industry. Electronic
controls, first introduced in ABS in the early 1980's, are increasingly applied
in other systems sold to the commercial vehicle industry.
WABCO's products are sold directly to vehicle and component manufacturers.
Spare parts are sold through both original equipment manufacturers and an
independent distribution network. Although the business is not dependent on a
single or related group of customers, sales of truck braking systems are
dependent on the demand for heavy trucks. Some of the Company's important
customers are Mercedes-Benz, Volvo, Iveco (Fiat), RVI (Renault) and Rover.
Principal competitors are Knorr, Robert Bosch, and Bendix.
The European market for new trucks, buses, trailers, and replacement parts
recovered in 1994 and 1995 after significant declines in 1992 and 1993, before
declining again in 1996. 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 has experienced a significant decline in 1996.
Through 1995 the WABCO(R) ABS system, which the Company believes leads the
market, has been installed in approximately one million heavy trucks, buses, and
trailers worldwide since 1981. Annual sales volume in Europe has significantly
increased in recent years to approximately 175,000 units in 1995 and to 56,000
units annually in other markets, primarily the United States and Japan. In
addition, WABCO has developed electronically controlled pneumatic gear shifting
systems, electronically controlled air suspension systems, and automatic
climate-control and door-control systems for the commercial vehicle industry.
These systems have resulted in greater sales per vehicle for WABCO. Significant
progress was made in recent years 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, WABCO has developed and implemented an electronic data interchange
system, which links certain customers directly to WABCO's information systems,
providing timely, accurate information and just-in-time delivery to the
customer.
At September 30, 1996 WABCO and affiliated companies employed approximately
5,700 people and had 14 manufacturing facilities and 7 sales organizations
operating in 17 countries. Principal manufacturing operations are in Germany,
France, the United Kingdom, and Brazil. WABCO has joint ventures in the United
States with Rockwell International (Rockwell WABCO) and with Cummins Engine Co.
Inc., in Japan with Sanwa Seiki (SANWAB), in India with TVS Group (Clayton
Sundaram) and in the PRC. There is also a licensee in the PRC.
In January 1994 the Company acquired Perrot, a German brake manufacturer.
Through this acquisition the Company is able to offer complete brake systems for
trucks, buses and trailers, especially in the important and growing air-disc
brake business.
Since 1991 ABS for commercial vehicles has been gaining acceptance in the
United States and Japan, where WABCO participates through its joint venture
operations. Rockwell WABCO is now a
36
<PAGE> 39
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. In March 1995, the U.S. Department of
Transportation, National Highway Traffic Safety Administration, adopted amended
federal regulations which require that new medium and heavy vehicles be equipped
with antilock brake systems (ABS). These amended regulations will be phased in
over a two-year period beginning in March 1997. WABCO believes it is in a good
position to take advantage of this opportunity.
MEDICAL SYSTEMS GROUP
The Company recently announced formation of its Medical Systems Group to
pursue initiatives in the medical diagnostics field. The Company has for the
last several years had under development two small medical diagnostic product
groups focusing on test instruments using laser technology and reagents. The
Company had invested an aggregate of approximately $40 million in the
development of these businesses through September 30, 1996.
The Company decided to explore acquisitions to accelerate the
commercialization of its technology and expand the number of diagnostic tests
covered by its products. Accordingly, the Company on January 23, 1997 entered
into memoranda of understanding to acquire the European medical diagnostic
business of Sorin Biomedica S.p.A., an affiliate of the Fiat Group, and all the
outstanding shares of Incstar Corporation, a biotechnology company based in
Stillwater, Minnesota, 52% of which is owned by Sorin Biomedica S.p.A.
The Sorin Business both develops and produces reagents to identify the
presence in blood of diseases and other substances that are indicative of a
medical patient's condition, and distributes equipment used to perform
diagnostic tests. The Sorin Business is headquartered in Saluggia, Italy, where
its manufacturing facility is located. The principal markets for the products of
the Sorin Business are Western Europe and the United States. Its sales in 1995
were approximately $90 million.
Incstar develops, manufactures and markets individual test reagents, test
kits and related products used by major hospitals, clinical reference
laboratories and researchers involved in diagnosing and treating immunological
conditions. Incstar also produces and markets histochemical antisera and natural
and synthetic peptides used in clinical diagnostic and medical research. Its
products focus on diagnostic tests for autoimmune, infectious disease,
endocrinology and bone and mineral metabolism product segments, utilizing a
variety of technologies. Incstar's sales in 1995 were approximately $45 million.
The Sorin Business and Incstar will be acquired in two transactions: (a)
the acquisition from Sorin of the Sorin Business and (b) the merger of a wholly
owned subsidiary of the Company with Incstar. The aggregate cost of the
acquisitions is expected to be approximately $220 million (including fees and
expenses). The transactions are subject to the negotiation of definitive
agreements as well as customary conditions, including regulatory consents and
approvals. The Incstar board of directors has approved the signing of a
memorandum of understanding of Incstar with the Company. The Sorin and the
Incstar transactions are each conditioned upon the closing of the other, which
closings are expected to occur in the first half of 1997.
The focus of the Company's existing medical businesses is on instruments
for obstetrical/gynecological and gastrointestinal tests. The products of its
subsidiary Sienna Biotech, Inc. are based on a core technology named Copalis(TM)
for Coupled Particle Light Scattering. Several of Sienna's products have
received clearance from the U.S. Food and Drug Administration ("FDA").
The Company's subsidiary Alimenterics, Inc. is developing certain clinical
laboratory systems for non-invasive diagnostics of gastrointestinal disorders
using an automated Laser Assisted Ratio Analyzer ("LARA(TM)") for the
measurement of stable isotopes in breath. Initial applications for
37
<PAGE> 40
regulatory approvals of Alimenterics products have been made in Europe and are
planned to be made to the FDA in 1997.
The Company believes that the Medical System Acquisitions will position it
to develop its medical products more quickly and effectively than would
otherwise have been possible. The Company may build this group further through
acquisitions of businesses that are complementary and would permit further
acceleration of development and distribution of its products as well as through
further research and development investments. There can be no assurance that the
Company will be successful in completing the Medical Systems Acquisitions.
The development, testing and distribution of medical products are subject
to extensive regulation, including in the United States by the FDA. Moreover,
the medical test market is competitive and many companies with such products
have substantially greater resources and experience than the Company. There is
no assurance that the Company's products will be successfully developed or
marketed.
38
<PAGE> 41
THE SELLING STOCKHOLDER AND STOCKHOLDER TRANSACTIONS
THE SELLING STOCKHOLDER
Prior to the Stockholder Transactions, ASI Partners owns 20,838,656 shares
of Common Stock, representing approximately 27% of the Company's Common Stock.
In the Offerings and the Share Repurchase, it is expected that ASI Partners will
sell an aggregate of 17,000,000 shares (10,750,000 Shares in the Offerings,
assuming no exercise of the Underwriters' over-allotment options, and assuming a
Share Repurchase of 6,250,000 shares). As promptly as practicable following the
closing of the Offerings, ASI Partners expects to distribute in the Share
Distribution to certain of its partners, at their election, up to 4,000,000
shares of Common Stock that it currently owns, which number of shares is subject
to change by agreement among the Company, ASI Partners and Kelso. Following
these transactions, ASI Partners will own no Common Stock and will not be
entitled to designate any of the Company's directors. As part of the Stockholder
Transactions, the Company will issue the Warrants. See "--The Stockholder
Transactions".
THE STOCKHOLDER TRANSACTIONS
The Company, ASI Partners and Kelso have entered into the Stock Disposition
Agreement providing for the sale by ASI Partners of shares in the Offerings and
the repurchase by the Company from ASI Partners of all shares of Common Stock to
be owned by ASI Partners after giving effect to the Offerings and the Share
Distribution. Concurrently with the consummation of the Offerings, the Company
will repurchase 6,250,000 shares of Common Stock from ASI Partners at a price
per share equal to the initial public offering price, up to a maximum total
purchase price of $300 million. To the extent the Underwriters' over-allotment
options are exercised, the number of shares that the Company will repurchase
will be reduced. The Company plans to finance the Share Repurchase with
borrowings under the Facilities.
The Stock Disposition Agreement also provides that the Company will issue
to ASI Partners 3,000,000 Warrants to purchase Common Stock at a price equal to
$10 above the initial public offering price (the "Exercise Price"). The Warrants
will entitle holders to purchase 3,000,000 shares of Common Stock at the
Exercise Price or, at the Company's election, to receive an amount in cash or a
designated number of shares based on the difference between the then market
value of the Company's Common Stock and the Exercise Price. The Company has
agreed that, upon exercise of any Warrant by ASI Partners or its direct or
indirect partners, the Company will exercise such election. In that case, the
Company may make payment in cash or shares, at its option. The Warrants will be
exercisable after the time that it is no longer possible for any cash payment to
be made to ASI Partners in respect of a Transaction and prior to the fifth
anniversary of the closing date of the Offerings.
If a Transaction occurs after the closing of the Offerings and prior to
January 31, 1998 (or October 1, 1998 in the case of certain Transactions
proposed prior to January 31, 1998), the Stock Disposition Agreement provides
that the Company would be required to make a cash payment to ASI Partners in
respect of the aggregate number of shares sold by ASI Partners in the Offerings
and to the Company pursuant to the Share Repurchase. A Transaction is specified
in the agreement to include the sale of all or substantially all of the shares
of capital stock or all or substantially all of the assets of the Company or the
acquisition of majority control of the Company by any person or group. The total
cash payment would be equal to the excess, if any, of the consideration per
share received by holders of the Common Stock in the Transaction over the cash
price per share received by ASI Partners in the Offerings and pursuant to the
Share Repurchase, respectively, multiplied by the number of Shares sold by ASI
Partners in the Stockholder Transactions. If a Transaction occurs entitling ASI
Partners to such a payment, the Warrants would not be exercisable and would
expire upon the consummation of such Transaction. See "Capitalization", "Pro
Forma Financial Data" and "Underwriting". The Stock Disposition Agreement
includes such provisions in order to preserve for ASI Partners the stock price
premium that it would otherwise have received in such a Transaction if it were
to occur within the time periods specified above.
39
<PAGE> 42
The Company entered into the Stock Disposition Agreement to facilitate the
sale by ASI Partners of its entire investment in the Company now, rather than
over an extended period of time, thereby enabling the Company to repurchase a
substantial number of its shares in one transaction while also increasing the
size and depth of the trading market for the Company's Common Stock. ASI
Partners is an investment partnership with an investment goal to realize
long-term capital gains for its investors. ASI Partners, which acquired its
investment in the Company in 1988, began the process of realizing on its
investment in the Company by selling shares in a registered secondary offering
in September 1995. ASI Partners entered into the Stock Disposition Agreement to
complete the realization of its investment in the Company and to provide for
distributions of the proceeds to its partners. Kelso advises ASI Partners with
respect to its investments generally and has advised ASI Partners in connection
with the Stockholder Transactions.
Two persons claiming to be shareholders of the Company and represented by
the same lawyers have filed separate class action and derivative lawsuits in the
Chancery Court of the State of Delaware against the Company, ASI Partners and
the directors of the Company alleging breaches of fiduciary duties in respect of
the rejection of the Tyco proposals and approval of the Stockholder
Transactions. The lawsuits seek to cause the Company to evaluate alternatives to
maximize value for the Company's public shareholders, to enjoin the Stockholder
Transactions and to recover damages in an unspecified amount. A person claiming
to be a holder of certain public debt securities of American Standard Inc. has
filed a class action lawsuit in New York Supreme Court seeking to enjoin the
Stockholder Transactions or to require the Company to redeem such debt
securities at the election of the securityholders. The Company believes that
these lawsuits are without merit and intends to contest them vigorously.
40
<PAGE> 43
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Selling Stockholder has agreed to sell to each of the U.S. Underwriters named
below, and each of such U.S. Underwriters has severally agreed to purchase from
the Selling Stockholder, the respective number of Shares set forth opposite its
name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
-------------------------------------------------------------- ------------
<S> <C>
Goldman, Sachs & Co...........................................
Morgan Stanley & Co. Incorporated.............................
SBC Warburg Inc...............................................
Smith Barney Inc..............................................
---------
Total.......................................... 8,600,000
=========
</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 offered hereby,
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 U.S.
Underwriters.
The Company and the Selling Stockholder have 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 2,150,000 Shares in an international offering
outside the United States. The initial public offering price and aggregate
underwriting discount 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 International Underwriters are Goldman Sachs
International, Morgan Stanley & Co. International Limited, Smith Barney Inc. and
Swiss Bank Corporation.
An affiliate of Smith Barney Inc. owns indirect equity interests in ASI
Partners and will receive a portion of the proceeds from the Offerings. In
addition, an affiliate of Smith Barney Inc. is an investor 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 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 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 50 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.
41
<PAGE> 44
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.
ASI Partners 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
1,290,000 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. ASI Partners has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 322,500 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.
The Company has agreed not to offer, sell or otherwise dispose of any
shares of Common Stock (other than pursuant to employee stock option plans,
other employee benefit plans or the Stockholder Rights Agreement) for a period
of 90 days after the date of this Prospectus without the prior written consent
of Goldman, Sachs & Co. In addition, ASI Partners expects to distribute not more
than 4,000,000 additional shares to certain of its partners as promptly as
practicable following the closing of the Offerings. See "The Selling Stockholder
and Stockholder Transactions". The recipients of such distributions have agreed
with ASI Partners and the Underwriters not to offer, sell or otherwise dispose
of such shares for a period of 180 days after the date of this Prospectus
without the prior written consent of ASI Partners and Goldman, Sachs & Co. Such
consents may be provided without prior notice to holders of the shares or to the
markets where such securities are traded.
The Common Stock is traded on the New York Stock Exchange.
The Underwriters have in the past provided and may continue to provide
investment banking services to the Company and Kelso.
The Company, American Standard Inc. and the Selling Stockholder 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, and has
acted as counsel to Kelso and ASI Partners in connection with the Stockholder
Transactions, in which the Company and its independent directors have been
separately advised by other counsel. 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,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, incorporated by reference in this Prospectus from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
incorporated herein by reference, and have been so incorporated by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Certain information with respect to German tax matters has been included
herein in reliance upon the authority of Meilicke & Partner as experts in German
tax matters.
42
<PAGE> 45
- ------------------------------------------------------
- ------------------------------------------------------
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>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Prospectus Summary..................... 3
Risk Factors........................... 11
Price Range of Common Stock and
Dividend Policy...................... 16
Use of Proceeds........................ 16
Capitalization......................... 17
Summary Historical Financial Data...... 18
Pro Forma Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 21
Business............................... 29
The Selling Stockholder and
Stockholder Transactions............. 39
Underwriting........................... 41
Legal Matters.......................... 42
Experts................................ 42
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
10,750,000 SHARES
AMERICAN STANDARD
COMPANIES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------------
AMERICAN STANDARD COMPANIES LOGO
------------------------------
GOLDMAN, SACHS & CO.
MORGAN STANLEY & CO.
INCORPORATED
SBC WARBURG INC.
SMITH BARNEY INC.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 46
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.
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JANUARY 24, 1997
10,750,000 SHARES
AMERICAN STANDARD COMPANIES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
-------------------
Of the 10,750,000 shares of Common Stock offered, 2,150,000 shares are
being offered hereby in an international offering outside the United States and
8,600,000 shares are being offered in a concurrent U.S. offering (collectively,
the "Offerings"). The initial public offering price and the aggregate
underwriting discount per share will be identical for both Offerings. See
"Underwriting". Each share of Common Stock, including the shares offered hereby,
has associated with it one right to purchase a share of the Company's preferred
stock at a stipulated price in certain circumstances relating to changes in
ownership of the Company under the Company's stockholder rights agreement.
All of the shares of Common Stock offered are being sold by Kelso ASI
Partners, L.P. ("ASI Partners" or the "Selling Stockholder"). Concurrently with
the consummation of the Offerings, the Company will repurchase 6,250,000 shares
of Common Stock from ASI Partners at a price per share equal to the initial
public offering price, up to a maximum total purchase price of $300 million. See
"The Selling Stockholder and Stockholder Transactions".
The last reported sale price of the Common Stock, which is listed under the
symbol "ASD", on the New York Stock Exchange on January 23, 1997 was $43 3/8 per
share. See "Price Range of Common Stock and Dividend Policy".
SEE "RISK FACTORS" ON PAGES 11-15 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
-------------------
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 SELLING
OFFERING PRICE DISCOUNT(1) STOCKHOLDER(2)
---------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total(3)............................. $ $ $
</TABLE>
- ------------
(1) The Company, American Standard Inc. and the Selling Stockholder have agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933.
(2) Estimated offering expenses of $1,000,000 will be paid by the Company.
(3) ASI Partners has granted the International Underwriters an option for 30
days after the date of this Prospectus to purchase up to an additional
322,500 shares at the initial public offering price per share, less the
underwriting discount, solely to cover over-allotments. Additionally, an
over-allotment option on 1,290,000 shares has been granted by ASI Partners
as part of the U.S. offering. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Selling Stockholder 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 , 1997 against payment therefor in immediately
available funds.
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INCORPORATED
SBC WARBURG
A DIVISION OF
SWISS BANK
CORPORATION
SMITH BARNEY INC.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 47
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
AVAILABLE INFORMATION
American Standard Companies Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's Regional Offices located at Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60611 and
7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
materials can be obtained upon written request from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such material may also be inspected and copied at
the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad Street,
New York, New York 10005. The Commission maintains a Website that contains
reports, proxy and information statements and other information regarding
reporting companies under the Exchange Act, including the Company, at
http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as 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 $.01 per share (the "Common Stock"), offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain items of which are contained in schedules and
exhibits to the Registration Statement as permitted by the rules and regulations
of the Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete;
with respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. For further information,
reference is hereby made to the Registration Statement.
------------------------
This Prospectus does not constitute an offer to sell or the solicitation of
an offer to buy the Shares in any jurisdiction in which such offer or
solicitation is unlawful. There are restrictions on the offer and sale of the
Shares in the United Kingdom. All applicable provisions of the Public Offers of
Securities Regulations 1995, the Financial Services Act 1986 and the Companies
Act 1985 with respect to anything done by any person in relation to the Shares
in, from, or otherwise involving the United Kingdom must be complied with. See
"Underwriting".
In this Prospectus, reference to "dollars", "U.S.$" and $ are United States
dollars.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company (File No. 1-11415) with the
Commission pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1995, including portions incorporated therein of the Company's
definitive Proxy Statement dated March 28, 1996.
2. The Company's Quarterly Reports on Form 10-Q/A for the quarters ended
March 31, 1996, June 30, 1996 and September 30, 1996.
3. The descriptions of the Common Stock and the common stock rights
associated with each Share of Common Stock contained in the Registration
Statement on Form 8-A dated January 5, 1995, incorporated by reference
from the Company's Registration Statement on Form S-2 under the
Securities Act, Commission File Number 33-56409, under the captions
"Description of Capital Stock -- Common Stock" and "-- Stockholder
Rights Plan".
4. All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Shares.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents which are incorporated herein by reference, other than exhibits to
such information (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to the Company, One
Centennial Avenue, P.O. Box 6820, Piscataway, NJ 08855-6820, Attention: Office
of the Secretary, telephone: (908) 980-6000.
------------------------
Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified shall not be deemed to
constitute a part of this Prospectus except as so modified, and any statement so
superseded shall not be deemed to constitute part of this Prospectus.
------------------------
AMERICAN STANDARD(R), IDEAL STANDARD(R), STANDARD(R), TRANE(R) and WABCO(R)
are registered trademarks of American Standard Inc. PERROT(R) and PORCHER(R) are
registered trademarks of Deutsche Perrot-Bremsen GmbH and Porcher S.A.,
respectively, subsidiaries of the Company. DEMAND FLOW(R) is a registered
trademark of J-I-T Institute of Technology, Inc.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY 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.
X-2
<PAGE> 48
[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 treated as a domestic estate or trust for United States Federal
income tax purposes (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.
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.
X-3
<PAGE> 49
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
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. The Company must report annually to the Internal Revenue
Service and to each non-U.S. holder the amount of dividends paid to, and the
U.S. federal income tax withheld, if any, with respect to, such holder. These
information reporting requirements apply regardless of whether withholding was
reduced by an applicable tax treaty. Backup withholding generally will not apply
to dividends paid on shares of Common Stock to a non-U.S. holder at an address
outside the United States. Certain recently proposed regulations will, if
adopted, provide certain presumptions, however, under which non-U.S. holders may
be subject to backup withholding in the absence of required certifications.
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.
X-4
<PAGE> 50
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the International Underwriting
Agreement, the Selling Stockholder has agreed to sell to each of the
International Underwriters named below, and each of such International
Underwriters has severally agreed to purchase from the Selling Stockholder, the
respective number of Shares set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL UNDERWRITERS COMMON STOCK
----------------------------------------------------------- ------------
<S> <C>
Goldman Sachs International................................
Morgan Stanley & Co. International Limited.................
SBC Warburg................................................
Smith Barney Inc...........................................
------------
Total............................................ 2,150,000
============
</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 offered hereby, 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 International Underwriters.
The Company and the Selling Stockholder have 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 8,600,000 shares in an offering in the United States. The initial public
offering price and aggregate underwriting discount per share for the two
Offerings are identical. The closing of the offering made hereby is a condition
to the closing of the U.S. offering, and vice versa. The U.S. Underwriters are
Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, SBC Warburg Inc. and
Smith Barney Inc.
An affiliate of Smith Barney Inc. owns indirect equity interests in ASI
Partners and will receive a portion of the proceeds from the Offerings. In
addition, an affiliate of Smith Barney Inc. is an investor 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 or will agree pursuant to the Agreement Between
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 50
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.
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
X-5
<PAGE> 51
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
agreed. The price of any shares so sold shall be the initial public offering
price, less an amount not greater than the selling concession.
ASI Partners has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 322,500 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. ASI Partners 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 1,290,000 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.
The Company has agreed not to offer, sell or otherwise dispose of any
shares of Common Stock (other than pursuant to employee stock option plans,
other employee benefit plans or the Stockholder Rights Agreement) for a period
of 90 days after the date of this Prospectus without the prior written consent
of Goldman, Sachs & Co. In addition, ASI Partners expects to distribute not more
than 4,000,000 additional Shares to certain of its partners as promptly as
practicable following the closing of the Offerings. See "The Selling Stockholder
and Stockholder Transactions". The recipients of such distributions have agreed
with ASI Partners and the Underwriters not to offer, sell or otherwise dispose
of such Shares for a period of 180 days after the date of this Prospectus
without the prior written consent of ASI Partners and Goldman, Sachs & Co. Such
consents may be provided without prior notice to holders of the Shares or to the
markets where such securities are traded.
The Common Stock is traded on the New York Stock Exchange.
The Underwriters have in the past provided and may continue to provide
investment banking services to the Company and Kelso.
The Company, American Standard Inc. and the Selling Stockholder 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, and has
acted as counsel to Kelso and ASI Partners in connection with the Stockholder
Transactions, in which the Company and its independent directors have been
separately advised by other counsel. 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,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, incorporated by reference in this Prospectus from the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
incorporated herein by reference, and have been so incorporated by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
Certain information with respect to German tax matters has been included
herein in reliance upon the authority of Meilicke & Partner as experts in German
tax matters.
X-6
<PAGE> 52
[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- ------------------------------------------------------
- ------------------------------------------------------
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>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
Prospectus Summary..................... 3
Risk Factors........................... 11
Price Range of Common Stock and
Dividend Policy...................... 16
Use of Proceeds........................ 16
Capitalization......................... 17
Summary Historical Financial Data...... 18
Pro Forma Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 21
Business............................... 29
The Selling Stockholder and
Stockholder Transactions............. 39
Certain United States Tax Consequences
to Non-U.S. Holders.................. 41
Underwriting........................... 43
Legal Matters.......................... 44
Experts................................ 44
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
10,750,000 SHARES
AMERICAN STANDARD
COMPANIES INC.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------------
AMERICAN STANDARD COMPANIES LOGO
------------------------------
GOLDMAN SACHS INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL
SBC WARBURG
A DIVISION OF SWISS BANK CORPORATION
SMITH BARNEY INC.
- ------------------------------------------------------
- ------------------------------------------------------
X-7
<PAGE> 53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fee........................................................ $ 163,429
NASD fee................................................................ 30,500
Blue Sky fees and expenses.............................................. 5,000
Transfer agent's fees................................................... 5,000
Printing and engraving expenses......................................... 270,000
Legal fees and expenses................................................. 250,000
Accounting fees and expenses............................................ 150,000
Miscellaneous........................................................... 126,071
----------
Total......................................................... $1,000,000
=========
None of the expenses will be borne by the Selling Stockholder.
</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 Corporation as a Director or officer of another corporation,
partnership, joint venture, trust or other
II-1
<PAGE> 54
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
6.1 hereof or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 6.3. Determination That Indemnification Is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.1
hereof (unless ordered by a court) shall be made by the Corporation unless a
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 a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such Directors, or if such Directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 6.4. Advance Payment of Expenses. Expenses (including attorneys'
fees) incurred by a Director or officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding
II-2
<PAGE> 55
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 General Corporation Law of the State of Delaware are in
effect. Any repeal or modification of these indemnification provisions shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in whole or in part upon any such state
of facts. Such a "contract right" may not be modified retroactively without the
consent of such Director, officer, employee or agent.
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 6.7. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
Director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him or on his behalf in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article,
provided that such insurance is available on acceptable terms, which
determination shall be made by a vote of a majority of the entire Board of
Directors.
II-3
<PAGE> 56
Section 6.8. Severability. If this Article VI or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article that shall not have been invalidated and to the fullest
extent permitted by applicable law.
ITEM 16. EXHIBITS.
The File Number of American Standard Companies Inc., the Registrant (the
"Company"), and for all Exhibits incorporated by reference is 1-11415, except
those Exhibits incorporated by reference in filings made by American Standard
Inc. ("American Standard Inc.") whose File Number is 33-64450 (formerly 1-470).
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------
<C> <C> <S>
(1) Form of U.S. Underwriting Agreement.
(4) (i) Form of Common Stock Certificate; previously filed as Exhibit 4(i) in
Amendment No. 3 to Registration Statement No. 33-56409 of the Company under
the Securities Act of 1933, as amended, filed January 5, 1995, and herein
incorporated by reference.
(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.
(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.
</TABLE>
II-4
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------
<C> <S>
(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 February 9, 1995, among the
Company, American Standard Inc., certain subsidiaries of American Standard
Inc., and the financial institutions listed in Schedule I thereto (the
Original Lenders); the financial institutions listed in Schedule II thereto
(the Continuing Lenders), including Chemical Bank as Administrative Agent for
the Original Lenders and Continuing Lenders and as Collateral Agent for the
Original Lenders and Continuing Lenders; previously filed as Exhibit 4(xvi)
by the Company in its Form 10-K for the fiscal year ended December 31, 1994,
and herein incorporated by reference.
(xiii) Amended and Restated Credit Agreement, dated as of February 9, 1995, among
the Company, American Standard Inc., certain subsidiaries of American
Standard Inc. and the lending institutions listed therein, Chemical Bank, as
Administrative Agent; Citibank, N.A. and NationsBank, N.A. (Carolinas), as
Senior Managing Agents; Bank of America Illinois, The Bank of Nova Scotia,
Bankers Trust Company, The Chase Manhattan Bank, N.A., Compagnie Financiere
de CIC et de L'Union Europeenne, Credit Suisse, Deutsche Bank AG, The
Industrial Bank of Japan Trust Company, The Long-Term Credit Bank of Japan,
Limited and The Sumitomo Bank, Ltd., as Managing Agents; and The Bank of New
York, Canadian Imperial Bank of Commerce, The Fuji Bank, Limited and The
Sanwa Bank Limited, as Co-Agents, with exhibits but without schedules;
previously filed as Exhibit 4 (xvii) by the Company in its Form 10-K for the
fiscal year ended December 31, 1994 (Schedules I, II, and III previously
filed by the Company in its Form 10-Q for the quarter ended March 31, 1995),
and herein incorporated by reference.
(xiv) Credit Documents Amendment Agreement dated as of February 9, 1995, among the
Company, American Standard Inc., certain domestic and foreign subsidiaries of
American Standard Inc., and Chemical Bank, as Administrative Agent and as
Collateral Agent for the Lenders under the Amended and Restated Credit
Agreement dated as of February 9, 1995, described in Exhibit 4 (xvii) above;
previously filed as Exhibit 4 (xviii) by the Company in its Form 10-K for the
fiscal year ended December 31, 1994, and herein incorporated by reference.
(xv) First Amendment, dated as of March 15, 1995, to the Amended and Restated
Credit Agreement referred to in 4(xiii) above; previously filed as Exhibit
4(vi) by the Company in its Form 10-Q for the quarter ended March 31, 1995,
and herein incorporated by reference.
(xvi) 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; previously filed as Exhibit 4(xxi) in Amendment No. 1 to
Registration Statement No. 33-56409 of the Company under the Securities Act
of 1933, as amended, filed December 20, 1994, and herein incorporated by
reference.
(xvii) Rights Agreement, dated as of January 5, 1995 between the Company and
Citibank, N.A. as Rights Agent; previously filed as Exhibit 4(xxv) by the
Company in its Form 10-K for the year ended December 31, 1994, and herein
incorporated by reference.
</TABLE>
II-5
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- --------------- -----------------------------------------------------------------------------
<C> <C> <S>
(5) Opinion of Debevoise & Plimpton regarding the legality of the securities
being registered.
(10) (i) Stock Disposition Agreement, dated as of December 16, 1996, among the
Company, Kelso & Company, L.P. and Kelso ASI Partners, L.P.++
(ii) Form of Warrant Agreement between the Company and Citibank, N.A. as Warrant
Agent, included as Annex A to the Stock Disposition Agreement filed as
Exhibit 10(i).++
(23) (i) Consent of Ernst & Young LLP.
(ii) Consent of Debevoise & Plimpton, included in the opinion of Debevoise &
Plimpton filed as Exhibit (5).
(iii) Consent of Meilicke & Partner.
(24) Powers of Attorney.++
(27) Financial Data Schedule; previously filed as Exhibit 27 by the Company in its
Form 10-Q/A for the quarter ended September 30, 1996, and herein incorporated
by reference.
</TABLE>
- ---------------
++ Previously filed.
ITEM 17. UNDERTAKINGS.
(A) 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.
(B) The undersigned registrant hereby undertakes that:
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.
(C) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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-6
<PAGE> 59
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-3 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 Township of Piscataway, State of New Jersey on
January 24, 1997.
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 January 24, 1997.
<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-7
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- -------------- ---------------------------------------------------------------------------------
<C> <C> <S> <C>
(1) Form of U.S. Underwriting Agreement.
(4) (i) Form of Common Stock Certificate; previously filed as Exhibit
4(i) in Amendment No. 3 to Registration Statement No. 33-56409 of
the Company under the Securities Act of 1933, as amended, filed
January 5, 1995, and herein incorporated by reference.
(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.
(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.
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- -------------- ---------------------------------------------------------------------------------
<C> <C> <S> <C>
(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 February 9, 1995,
among the Company, American Standard Inc., certain subsidiaries
of American Standard Inc., and the financial institutions listed
in Schedule I thereto (the Original Lenders); the financial
institutions listed in Schedule II thereto (the Continuing
Lenders), including Chemical Bank as Administrative Agent for the
Original Lenders and Continuing Lenders and as Collateral Agent
for the Original Lenders and Continuing Lenders; previously filed
as Exhibit 4(xvi) by the Company in its Form 10-K for the fiscal
year ended December 31, 1994, and herein incorporated by
reference.
(xiii) Amended and Restated Credit Agreement, dated as of February 9,
1995, among the Company, American Standard Inc., certain
subsidiaries of American Standard Inc. and the lending
institutions listed therein, Chemical Bank, as Administrative
Agent; Citibank, N.A. and NationsBank, N.A. (Carolinas), as
Senior Managing Agents; Bank of America Illinois, The Bank of
Nova Scotia, Bankers Trust Company, The Chase Manhattan Bank,
N.A., Compagnie Financiere de CIC et de L'Union Europeenne,
Credit Suisse, Deutsche Bank AG, The Industrial Bank of Japan
Trust Company, The Long-Term Credit Bank of Japan, Limited and
The Sumitomo Bank, Ltd., as Managing Agents; and The Bank of New
York, Canadian Imperial Bank of Commerce, The Fuji Bank, Limited
and The Sanwa Bank Limited, as Co-Agents, with exhibits but
without schedules; previously filed as Exhibit 4 (xvii) by the
Company in its Form 10-K for the fiscal year ended December 31,
1994 (Schedules I, II, and III previously filed by the Company in
its Form 10-Q for the quarter ended March 31, 1995), and herein
incorporated by reference.
(xiv) Credit Documents Amendment Agreement dated as of February 9,
1995, among the Company, American Standard Inc., certain domestic
and foreign subsidiaries of American Standard Inc., and Chemical
Bank, as Administrative Agent and as Collateral Agent for the
Lenders under the Amended and Restated Credit Agreement dated as
of February 9, 1995, described in Exhibit 4 (xvii) above;
previously filed as Exhibit 4 (xviii) by the Company in its Form
10-K for the fiscal year ended December 31, 1994, and herein
incorporated by reference.
(xv) First Amendment, dated as of March 15, 1995, to the Amended and
Restated Credit Agreement referred to in 4(xiii) above;
previously filed as Exhibit 4(vi) by the Company in its Form 10-Q
for the quarter ended March 31, 1995, and herein incorporated by
reference.
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- -------------- ---------------------------------------------------------------------------------
<C> <C> <S> <C>
(xvi) 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; previously filed as
Exhibit 4(xxi) in Amendment No. 1 to Registration Statement No.
33-56409 of the Company under the Securities Act of 1933, as
amended, filed December 20, 1994, and herein incorporated by
reference.
(xvii) Rights Agreement, dated as of January 5, 1995 between the Company
and Citibank, N.A. as Rights Agent; previously filed as Exhibit
4(xxv) by the Company in its Form 10-K for the year ended
December 31, 1994, and herein incorporated by reference.
(5) Opinion of Debevoise & Plimpton regarding the legality of the
securities being registered.
(10) (i) Stock Disposition Agreement, dated as of December 16, 1996, among
the Company, Kelso & Company, L.P. and Kelso ASI Partners, L.P.++
(ii) Form of Warrant Agreement between the Company and Citibank, N.A.
as Warrant Agent, included as Annex A to the Stock Disposition
Agreement filed as Exhibit 10(i).++
(23) (i) Consent of Ernst & Young LLP.
(ii) Consent of Debevoise & Plimpton, included in the opinion of
Debevoise & Plimpton filed as Exhibit (5).
(iii) Consent of Meilicke & Partner.
(24) Powers of Attorney.++
(27) Financial Data Schedule; previously filed as Exhibit 27 by the
Company in its Form 10-Q/A for the quarter ended September 30,
1996, and herein incorporated by reference.
</TABLE>
- ---------------
++ Previously filed.
<PAGE> 1
DRAFT DATED JANUARY 24, 1997
AMERICAN STANDARD COMPANIES INC.
8,600,000 SHARES
COMMON STOCK
($.01 PAR VALUE)
------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
------------------------
February , 1997
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
SBC Warburg Inc.
Smith Barney Inc.
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Kelso ASI Partners, L.P. ("ASI Partners" or the "Selling Stockholder"), a
stockholder of American Standard Companies Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated herein, to sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 8,600,000 shares (the "Firm Shares") and, at the election of the
Underwriters, up to 1,290,000 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 Selling Stockholder,
the Company and ASI are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Selling
Stockholders of up to a total of 2,472,500 shares of Stock (the "International
Shares"), including the overallotment option thereunder, through arrangements
with Goldman Sachs International, Morgan Stanley & Co. International Limited,
SBC Warburg, a division of Swiss Bank Corporation, and Smith Barney Inc.
(collectively, the "International Underwriters"). 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 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
<PAGE> 2
thereof. All terms used but not otherwise defined herein shall have the meanings
ascribed to such terms in the Prospectus (as hereinafter defined).
1. (a) The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(i) A registration statement on Form S-3 (File No. 333-18015) 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, delivered 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 (x) 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 (y) 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
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-3
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; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; and any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any annual or quarterly
report of the Company and any other documents filed by this Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement);
(ii) 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;
(iii) 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 Act or
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the Exchange Act, as applicable, 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; and any further documents so filed and incorporated by
reference in the Prospectus or any further amendment or supplement thereto,
when such documents are filed with the Commission, will comply as to form
in all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will 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 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;
(iv) 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 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;
(v) 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, as contemplated by the
Registration Statement or the Prospectus, or 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 Facilities);
(vi) The Company and its principal subsidiaries listed on Exhibit A
hereto (the "Principal Subsidiaries") have good title (or a comparable
interest with respect to foreign real property) with respect to their real
properties (other than liens, encumbrances, equities or claims existing
under or permitted by the Existing Credit Facilities or to be created under
the Amended Credit Facilities) and good and sufficient title (other than
liens, encumbrances, equities or claims existing under or permitted by the
Existing Credit Facilities or the Amended Credit Facilities) to all of
their other respective properties and assets reflected in the most recent
consolidated balance sheet contained in the Prospectus, in each case except
for (w) 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, (x) assets acquired or disposed of since the date of such
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<PAGE> 4
consolidated balance sheet in accordance with this Agreement, (y) assets
held under capital leases and (z) defects that in the aggregate do not
result in a Material Adverse Effect;
(vii) 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 has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation;
(viii) 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, and 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 or permitted by the
Existing Credit Facilities or to be created or permitted under the Amended
Credit Facilities);
(ix) 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, including
the Share Repurchase and the issuance of the Warrants, 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 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;
(x) 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;
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<PAGE> 5
(xi) 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;
(xii) 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;
(xiii) 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");
(xiv) 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
(xv) Except as referenced in the Prospectus, there are no contracts,
agreements or understandings between 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.
(b) The Selling Stockholder represents and warrants to, and agrees with,
each of the Underwriters and the Company that:
(i) All consents, approvals, authorizations and orders necessary for
the execution and delivery by the Selling Stockholder of this Agreement and
the International Underwriting Agreement, and for the sale and delivery of
the Shares to be sold by the Selling Stockholder hereunder, have been
obtained; and the Selling Stockholder has full right, power and authority
to enter into this Agreement and the International Underwriting Agreement,
and to sell, assign, transfer and deliver the Shares to be sold by the
Selling Stockholder hereunder.
(ii) The sale of the Shares to be sold by the Selling Stockholder
hereunder and under the International Underwriting Agreement and the
compliance by the Selling Stockholder with all of the provisions of this
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
statute, indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Selling Stockholder is a party or by
which the Selling Stockholder is bound or to which any of the property or
assets of the Selling Stockholder is subject, nor will such action result
in any violation of the provisions of the Partnership Agreement of the
Selling Stockholder or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Selling
Stockholder or the property of the Selling Stockholder;
(iii) The Selling Stockholder has, and immediately prior to each Time
of Delivery (as defined in Section 4 hereof) the Selling Stockholder will
have, good and valid title to the Shares to be sold by the Selling
Stockholder hereunder, free and clear of all liens, encumbrances, equities
or claims, and, upon delivery of such Shares and payment therefor pursuant
hereto and pursuant to the International Underwriting Agreement, good and
valid title to such Shares, free and clear of all
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<PAGE> 6
liens, encumbrances, equities or claims, will pass to the several
Underwriters and the several International Underwriters (assuming that the
several Underwriters and the several International Underwriters are without
notice of any adverse claim, as defined in the Uniform Commercial Code as
adopted in the State of New York (the "Code") and are otherwise bona fide
purchasers for the purposes of the Code and that such Underwriters' and
International Underwriters' rights are not limited by subsection (4) of
Section 8-302 of the Code);
(iv) The Selling Stockholder will distribute not more than 4,000,000
shares of Common Stock to its partners as soon as practicable after the
First Time of Delivery (as hereinafter defined in Section 4(a); and it will
receive a written agreement of each such partners that they will not offer,
sell or otherwise dispose of such shares and any other shares of Stock they
own during the period beginning from the date hereof and continuing to
, 1997, without the prior written consent of ASI Partners
and Goldman Sachs & Co.
(v) The Selling Stockholder has not taken and will not take, directly
or indirectly, any action which is designed to or which has constituted or
which might reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares;
(vi) The Preliminary Prospectus and the Registration Statement did,
and the Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus, when they become effective or
are filed with the Commission, as the case may be, will conform in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and will not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading provided that, with respect to the Selling Stockholder, this
clause (vii) shall apply only to the extent that any statements or
omissions made in the Registration Statement, any Preliminary Prospectus,
the Prospectus or any amendment or supplement thereto are made in reliance
upon and in conformity with written information furnished to the Company
by, or on behalf of, the Selling Stockholder expressly for use therein;
provided further that, for all purposes of this Agreement and the
International Underwriting Agreement, the only information furnished to the
Company by the Selling Stockholder expressly for use in any Preliminary
Prospectus, the Registration Statement, the Prospectus or any amendment or
supplement thereto, are the statements pertaining to the number of shares
owned and the number of shares proposed to be sold by ASI Partners under
the caption "Principal and Selling Stockholders"; and
(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, the Selling Stockholder will deliver to you prior to or at
the First Time of Delivery (as hereinafter defined) a properly completed
and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
2. Subject to the terms and conditions herein set forth, (a) the Selling
Stockholder agrees to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Selling
Stockholder, at a purchase price per share of $ , the number of Firm Shares
(to be adjusted by you so as to eliminate fractional shares) determined by
multiplying the aggregate number of Firm Shares to be sold by the Selling
Stockholder by a fraction, the numerator of which is the aggregate number of
Firm Shares to be purchased by such Underwriter as set forth opposite the name
of such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Selling Stockholder hereunder, (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as provided
below, the Selling Stockholder agrees to sell each of the Underwriters, and each
of the Underwriters agrees, severally and not jointly, to purchase from the
Selling Stockholder, at the purchase price per share set forth in clause (a) of
this Section 2, that
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<PAGE> 7
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.
ASI Partners hereby grants to the Underwriters the right to purchase at
their election up to 1,290,000 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 ASI
Partners, 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 ASI Partners 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 ASI Partners, shall be delivered by or on behalf of ASI Partners 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 wire transfer to
the account specified by the Selling Stockholder in Federal (same-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 thereto at the office of
Goldman, Sachs & Co., 85 Broad Street, New York, New York 1004 (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 February , 1997 or such
other time and date as Goldman, Sachs & Co. and ASI Partners 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 ASI Partners 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(1) 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,
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<PAGE> 8
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 prior to the last Time of Delivery 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 copies thereof; to file promptly all reports and any
definitive proxy or information statements required to be filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of the Prospectus and for so
long as the delivery of a prospectus is required in connection with the
offering or sale of the Shares; 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) Prior to 1:00 p.m., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may 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 such 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 or to
file under the Exchange Act any document to be incorporated by reference in
the Prospectus in order to comply with the Act or the Exchange Act, to
notify you and upon your request to file such document and 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 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);
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(e) During the period beginning from the date hereof and continuing to
and including the date 90 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 Stock or
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 the prior written consent of Goldman, Sachs & Co.;
(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; and
(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 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).
6. The Company and ASI covenant and agree with the several Underwriters
that (a) 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
and the Selling Stockholders' 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) the filing fees incident to, and the reasonable 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; (v) the cost of preparing stock certificates; (vi) the cost and
charges of any transfer agent or registrar; (vii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section; and (viii) all expenses and taxes
incident to the sale and delivery of the Shares to be sold by the Selling
Stockholder to the Underwriters hereunder. Goldman, Sachs & Co. agrees to pay
New York State stock transfer tax, and the Company and ASI, jointly and
severally, agree to reimburse Goldman, Sachs & Co. for associated carrying costs
if such tax payment is not rebated on the day of payment and for any portion of
such tax payment not rebated. 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
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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.
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 and the Selling Stockholder herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Stockholder shall have performed in all material respects all of their
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 description of the Stock contained in the Prospectus),
(iii), and the first clause of (vii) 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 issued concurrently with the consummation of the Acquisition
have been duly authorized, validly issued and are fully paid and
non-assessable and conform as to legal matters in all material respects
to the description of the Stock incorporated by reference 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 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 International Prospectus under
the caption "Certain United States Tax Consequences To Non-U.S.
Holders," insofar as they purport
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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 documents incorporated by reference
therein and other than the financial statements and related schedules
and other financial 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 Underwriters 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 information contained or
incorporated by reference 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
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
such opinion may not be furnished or referred to, or quoted from to, any other
person;
(d) Richard A. Kalaher, Esq., 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;
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<PAGE> 12
(ii) All shares of the issued capital stock of the Company (other that
shares issued concurrently with the consummation of the Acquisition) have
been duly authorized, validly issued and are fully paid and non-assessable;
(iii) 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 or permitted by the
Existing Credit Facilities or the Amended Credit Facilities) (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 he
believes that both you and he are justified in relying upon such opinions
and certificates);
(iv) 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;
(v) 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;
(vi) 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, including
the Share Repurchase and the issuance of the Warrants, 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 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 statue 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
(vii) The documents incorporated by reference in the Prospectus (other
than the financial statements and related schedules and other financial
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.
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<PAGE> 13
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, 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 Underwriters 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 information contained or
incorporated by reference 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
information contained or incorporated by the 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 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 Underwriters 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 (other than
liens, encumbrances, equities and claims existing under or permitted by the
Credit Agreement), 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 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
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<PAGE> 14
respect to such Certificate of Incorporation or By-laws or other
organizational documents) for such defaults which would not have a Material
Adverse Effect;
(f) The counsel for the Selling Stockholder shall have furnished to you
their written opinion with respect to the Selling Stockholder, dated such Time
of Delivery, in form and substance satisfactory to you, to the effect that:
(i) This Agreement has been duly executed and delivered by or on
behalf of the Selling Stockholder; and the sale of the Shares to be sold by
the Selling Stockholder hereunder and the compliance by the Selling
Stockholder with all of the provisions of this Agreement, and the
consummation of the transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any terms or provisions
of, or constitute a default under any statute, indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument known to such
counsel to which the Selling Stockholder is a party or by which the Selling
Stockholder is bound or to which any of the property or assets of the
Selling Stockholder is subject, nor will such action result in any
violation of the provisions of the Partnership Agreement of the Selling
Stockholder or any order, rule or regulation known to such counsel and
applicable to the transactions contemplated by this Agreement of any court
or governmental agency or body having jurisdiction over the Selling
Stockholder or the property of the Selling Stockholder (where the
consequences of such conflict, breach, violation or default would affect
the ability of the Selling Stockholder to sell its Shares to the
Underwriters pursuant to this Agreement or materially affect the ability of
the Selling Stockholder to perform its other obligations under this
Agreement, except that such counsel shall not express any opinion as to
compliance with the registration or filing requirements or disclosure
provisions of the securities laws of the United States or the securities or
Blue Sky laws of any other jurisdiction, such counsel shall not express any
opinion as to the enforceability of the indemnification or contribution
provisions of Article 8 of this Agreement and such counsel shall not
express any opinion as to the accuracy or completeness of the Registration
Statement or Prospectus);
(ii) No consent, approval, authorization or order of any court or
governmental agency or body is required to be obtained by the Selling
Stockholder for the consummation of the transactions contemplated by this
Agreement in connection with the Shares to be sold by the Selling
Stockholder hereunder, except such consents, approvals, authorizations or
orders as have been obtained under the Act and such as may be required
under state securities or Blue Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters;
(iii) Upon due delivery and payment for the Shares to be sold by the
Selling Stockholder at the First Time of Delivery as provided for in this
Agreement, the Underwriters will have good and valid title to the Shares so
transferred, free and clear of any liens, encumbrances, equities or claims
(assuming that the Underwriters are without notice of any adverse claim, as
defined in the Code and are otherwise bona fide purchasers for the purposes
of the Code and that such Underwriters' rights are not limited by
subsection (4) of Section 8-302 of the Code).
In rendering the opinion in paragraph (iii), such counsel may rely upon a
certificate of the Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
the Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate,
and such counsel's opinion shall be limited 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;
(g) 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;
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(h) (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, otherwise than as set forth or
contemplated in the Prospectus (including, without limitations, borrowings in
the ordinary course of business under the Facilities), the effect of which, in
any such case described in clause (i) or (ii), is in the judgment of the
Underwriters 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;
(i) 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 possible
negative implications, its rating of any of the Company's debt securities;
(j) 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 of war, if the effect of any such event
specified in this clause (iv) in the judgment of the Underwriters 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;
(k) The Shares to be sold at such Time of Delivery shall have been duly
listed on the Exchange;
(l) ASI Partners has obtained and delivered to the Underwriters executed
copies of an agreement from each of its partners who is to receive a
distribution of shares of Stock, substantially to the effect set forth in
Subsection 1(b)(v) hereof in form and substance reasonably satisfactory to you;
(m) The Company shall have complied with the provisions of Section 5(c)
hereof with respect to the furnishing of prospectuses on the New York Business
Day next succeeding the date of this Agreement; and
(n) The Company and the Selling Stockholder shall have furnished or caused
to be furnished to you at such Time of Delivery certificates of officers of the
Company, ASI and the Selling Stockholder satisfactory to you as to the accuracy
of the representations and warranties of the Company, ASI and the Selling
Stockholder herein at and as of such Time of Delivery, as to the performance by
the Company, ASI and the Selling Stockholder of all of their obligations
hereunder to be performed at or prior to such Time of Delivery, and of officers
of the Company as to the matters set forth in subsections (a) and (h) 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
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<PAGE> 16
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 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) The Selling Stockholder 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, 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 the
Selling Stockholder expressly for use therein; and will reimburse each
Underwriter for any legal or other expenses reasonably incurred in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the amount of each indemnity under this
subsection (b) shall be limited to an amount equal to the total net proceeds
received by the Selling Stockholder from the offering of the Shares purchased
under this Agreement.
(c) The Company and ASI will, jointly and severally, indemnify and hold
harmless the Selling Stockholder against any losses, claims, damages or
liabilities to which the Selling Stockholder 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 the
Selling Stockholder for any legal or other expenses reasonably incurred by the
Selling Stockholder in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
Company and ASI shall not be liable 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
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<PAGE> 17
conformity with written information furnished to the Company by the Selling
Stockholder expressly for use therein.
(d) Each Underwriter will, severally and not jointly, indemnify and hold
harmless the Company, ASI and the Selling Stockholder against any losses,
claims, damages or liabilities to which the Company, ASI or the Selling
Stockholder 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, ASI and the Selling Stockholder for any legal or other expenses
reasonably incurred by the Company, ASI or the Selling Stockholder in connection
with investigating or defending any such action or claim as such expenses are
incurred.
(e) Promptly after receipt by an indemnified party under subsection (a),
(b), (c) or (d) 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 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 indemnifying 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.
(f) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a), (b),
(c) or (d) 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, ASI and the Selling Stockholder 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 (e) 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
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also the relative fault of the Company, ASI and the Selling Stockholder 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
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company, ASI and the
Selling Stockholder 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 Selling Stockholder 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, ASI or the Selling Stockholder 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. Notwithstanding the foregoing, the Selling Stockholder
shall not be obligated to make contributions hereunder which are on a basis
other than as specified in subsection (b) of this Section 8 or in the aggregate
exceed the amount for which it would have been liable pursuant to subsection (b)
of this Section 8 had indemnification been available thereunder.
The Company, ASI, the Selling Stockholder and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this subsection
(f) 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 (f). 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 (f) 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 (f), 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. Notwithstanding the provisions of
this subsection (f), the Selling Stockholder shall not be required to contribute
any amount in excess of the amount of total net proceeds received by the Selling
Stockholder from the offerings of the Shares purchased under this Agreement. 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 (f) to contribute are several in proportion to their respective
underwriting obligations and not joint. Each Selling Stockholder's obligations
in this subsection (f) to contribute are several and not joint.
(g) The obligations of the Company, ASI and the Selling Stockholder under
this Section 8 shall be in addition to any liability which the Company, ASI and
the Selling Stockholder 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 each person, if any, who controls the
Company or the Selling Stockholder 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 Selling Stockholder shall be entitled to a further period of thirty-six
hours within
18
<PAGE> 19
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 Selling Stockholder that you have so arranged for the
purchase of such Shares, or the Selling Stockholder notifies you that it has so
arranged for the purchase of such Shares, you or the Selling Stockholder 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 Selling
Stockholder 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
Selling Stockholder 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 Selling
Stockholder 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 Selling
Stockholder shall not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase 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
Selling Stockholder to sell the Optional Shares) shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter, the Company or
the Selling Stockholder, 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, the Selling Stockholder 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, ASI or the Selling Stockholder, or any officer or
director or controlling person of the Company, ASI or the Selling Stockholder,
and shall survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
none of the Company, ASI or the Selling Stockholder shall 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
Selling Stockholder 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.
19
<PAGE> 20
12. In all dealings hereunder (other than as provided in Section 1(b)(iv)),
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 any Underwriter, and in all
dealings with the Selling Stockholder hereunder, you and the Company shall be
entitled to act and rely upon any statement, request, notice or agreement on
behalf of the Selling Stockholder made or given by the Selling Stockholder.
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 the Underwriters 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 to or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; and if to the Selling Stockholder
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Selling Stockholder set forth on Schedule II; provided, however,
that any notice to an Underwriter pursuant to Section 8(e) 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
or the Selling Stockholder 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, the Selling Stockholder 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, the Selling
Stockholder 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.
20
<PAGE> 21
If the foregoing is in accordance with your understanding, please sign and
return to us counterparts hereof, one for the Company, one for ASI, one for ASI
Partners and for each of the Underwriters plus one for each counsel, and upon
the acceptance hereof by you, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters, the Company,
ASI and the Selling Stockholder.
Very truly yours,
American Standard Companies Inc.
By /s/
------------------------------------------
Name:
Title:
American Standard Inc.
By /s/
------------------------------------------
Name:
Title:
Kelso ASI Partners, L.P.,
by Kelso American Standard Partners, L.P.,
its general partner
By
------------------------------------------
Name:
Title: General Partner
By
------------------------------------------
Name: James J. Connors, II
Title: General Counsel and Attorney-in-
Fact for the partners of Kelso ASI
Partners, L.P., attesting as to the
due authorization and approval of
the partners
21
<PAGE> 22
Accepted as of the date hereof:
Goldman, Sachs & Co.
Morgan Stanley & Co. Incorporated
SBC Warburg Inc.
Smith Barney Inc.
By:
----------------------------------
(Goldman Sachs & Co.)
22
<PAGE> 23
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
- ---------------------------------------------------------- --------------- ------------------
<S> <C> <C>
Goldman, Sachs & Co. .....................................
Morgan Stanley & Co. Incorporated.........................
SBC Warburg Inc. .........................................
Smith Barney Inc. ........................................
--------- -------
Total........................................... 8,600,000 1,290,000
========= =======
</TABLE>
<PAGE> 24
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
--------------- ------------------
<S> <C> <C>
ASI Partners............................................ 8,600,000 1,290,000
</TABLE>
Address for Notices:
Kelso ASI Partners, L.P.
c/o Kelso & Company
350 Park Avenue, 21st Floor
New York, NY 10022
<PAGE> 25
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;
(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 (iv)(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 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 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;
<PAGE> 26
(C) as of , 1996, 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 Underwriters, or any increases or decreases
in any items specified by the Underwriters, 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
(D) 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 (C) there were any decreases in consolidated
net revenues or consolidated net income or other items specified by the
Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length
specified by the Underwriters, 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 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
Underwriters 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 Underwriters or
in documents incorporated by reference in the Prospectus specified by the
Underwriters, 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> 27
EXHIBIT A
PRINCIPAL SUBSIDIARIES*
<TABLE>
<CAPTION>
JURISDICTION
NAME OF INCORPORATION
- ----------------------------------------------------------------------- -----------------
<S> <C>
American Standard Inc.................................................. Delaware
Wabco Standard Trane Inc............................................... Canada (Ontario)
Wabco Westinghouse Equipments Automobiles SNC.......................... France
Societe Trane.......................................................... France
Wabco Standard GmbH.................................................... Germany
Wabco GmbH (formerly Wabco Westinghouse Fahrzeugbremsen)............... Germany
Ideal Standard GmbH.................................................... Germany
Ideal Standard SPA..................................................... Italy
Wabco Standard Trane BV................................................ Netherlands
American Standard Sanitaryware Thailand................................ Thailand
American Standard UK Ltd............................................... United Kingdom
</TABLE>
- ---------------
* To be updated
<PAGE> 1
EXHIBIT 5
January 24, 1997
American Standard Companies Inc.
One Centennial Avenue
P.O. Box 6820
Piscataway, New Jersey 08855-6820
American Standard Companies Inc.
Registration Statement on Form S-3
Dear Sirs:
We have acted as counsel to American Standard Companies Inc., a
Delaware corporation (the "Registrant"), in connection with a Registration
Statement on Form S-3 (File No. 333-18015) (the "Registration Statement") filed
by the Registrant with the Securities and Exchange Commission (the
"Commission") pursuant to the Securities Act of 1933, as amended (the "Act"),
relating to an offering (the "Offering") of shares of the Registrant's Common
Stock, par value $.01 per share (the "Common Stock"), by certain stockholders
of the Registrant (such shares of Common Stock, including any shares that may
be sold upon exercise of underwriters' over-allotment options and any
additional shares that may be registered in accordance with Rule 462(b) under
the Act for sale in the Offering, the "Selling Stockholder Shares").
In so acting, we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
documents, certificates
<PAGE> 2
American Standard 2 January 22, 1997
Companies Inc.
and other instruments as in our judgment are necessary or appropriate to enable
us to render the opinion expressed below.
We are of the opinion that the Selling Stockholder Shares are duly
authorized, validly issued, fully paid and non-assessable under the laws of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to our firm under the caption "Legal
Matters" in the Prospectus forming a part thereof and to the incorporation by
reference of this opinion and consent as exhibits to any registration statement
filed in accordance with Rule 462(b) under the Act relating to the Offering. In
giving such consent, we do not thereby concede that we are within the category
of persons whose consent is required under Section 7 of the Act or the rules
and regulations of the Commission thereunder.
Very truly yours,
Debevoise & Plimpton
<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 February 26, 1996 in the Registration Statement
(Form S-3, No. 333-18015) and related Prospectus of American Standard Companies
Inc. for the registration of common stock and common stock rights.
We also consent to the incorporation by reference therein of our report
with respect to the financial statement schedules of American Standard Companies
Inc. for the years ended December 31, 1995, 1994 and 1993 included in the Annual
Report on Form 10-K for 1995 filed with the Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
January 24, 1997
<PAGE> 1
Exhibit 23(iii)
CONSENT
MEILICKE & PARTNER
Poppelsdorfer Allee 106
Bonn 53115 Germany
January 24, 1997
The undersigned is the German tax counsel identified in this
Registration Statement on Form S-3 filed with respect to an offering of shares
of American Standard Companies Inc. (the "Company") common stock, par value
$.01 per share, by certain of the Company's stockholders, and hereby consents
to the references to our firm as experts in German tax matters under the
headings "Risk Factors -- Tax Matters", "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Experts", contained in the prospectus constituting a part of
such Registration Statement, and to the incorporation by reference of this
consent into any registration statement filed pursuant to Rule 462(b) under the
Securities Act of 1933 for the purpose of registering additional shares of
Common Stock for sale in connection with the offering.
Yours truly,
Meilicke & Partner
/s/ W. Meilicke
- --------------------
Dr. W. Meilicke
