<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
American Standard Companies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
LOGO
American Standard Companies Inc.
Notice of Annual Meeting
of Stockholders and
Proxy Statement
May 1, 1997
Embassy Suites Hotel
121 Centennial Avenue
Piscataway, New Jersey
<PAGE> 3
American Standard Logo Corporate Headquarters
- ------------------------------
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
Phone 908.980.6000
EMMANUEL A. KAMPOURIS
Chairman, President and
Chief Executive Officer
March 26, 1997
Dear Stockholder:
The Annual Meeting of Stockholders of American Standard Companies Inc. will
be held on Thursday, May 1, 1997, at 10:00 A.M. (EDT), at the Embassy Suites
Hotel, Embassy Ballroom, 121 Centennial Avenue, Piscataway, New Jersey. We hope
that many of our stockholders will be able to attend.
This meeting is our third meeting of stockholders since becoming a public
company in February 1995. Your attendance at this meeting will provide you the
opportunity to meet with our directors and senior management and hear their
report on your Company's recent performance and vision for its future. We will
also consider the items of business set forth in the attached formal notice of
meeting and proxy statement. Our 1996 Annual Report accompanies this proxy
statement.
If you find you are unable to attend in person, we urge you to participate
in the meeting by voting your stock by proxy. You can do so conveniently by
filling out and returning the enclosed proxy card.
Sincerely,
/s/ Emmanuel A. Kampouris
EMMANUEL A. KAMPOURIS
Chairman, President and
Chief Executive Officer
American Standard Companies Inc.
- --------------------------------------------------------------------------------
Air Conditioning: Trane(R), American Standard(R), Plumbing: American
Standard(R), Ideal Standard(R), Standard(R), Automotive: WABCO(R)
<PAGE> 4
AMERICAN STANDARD COMPANIES INC.
NOTICE OF 1997 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
To The Stockholders of
AMERICAN STANDARD COMPANIES INC.:
The Annual Meeting of Stockholders of American Standard Companies Inc. (the
"Company") will be held at the Embassy Suites Hotel, Embassy Ballroom, 121
Centennial Avenue, Piscataway, New Jersey, on Thursday, May 1, 1997, at 10:00
A.M. (EDT) to consider and act upon the following:
1. The election of three Class II Directors with terms expiring at the
2000 Annual Meeting of Stockholders;
2. Approval of The American Standard Companies Inc. Employee Stock
Purchase Plan.
3. Ratification of the appointment of Ernst & Young LLP as independent
Certified Public Accountants for the year 1997; and
4. Such other business as may properly come before the meeting.
Stockholders of record of the Company's Common Stock as of the close of
business on March 11, 1997 are entitled to notice of, and to vote at, the Annual
Meeting. A complete list of such stockholders will be open to the examination of
any stockholder during ordinary business hours, for a period of ten days prior
to the Annual Meeting, at the offices of the Company at One Centennial Avenue,
Piscataway, New Jersey. On the date of the Annual Meeting, the list of
stockholders will be available at the place of the Annual Meeting.
In order to assure a quorum, it is important that stockholders who do not
expect to attend the meeting fill in, date and sign the enclosed proxy card and
promptly return it in the enclosed envelope, to which no postage need be affixed
if mailed in the United States.
By order of the Board of Directors,
/s/ Richard A. Kalaher
RICHARD A. KALAHER
Vice President, General Counsel
and Secretary
Piscataway, New Jersey
March 26, 1997
<PAGE> 5
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of American Standard Companies Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders of the Company to be held on May 1, 1997 and at any adjournments
thereof. The mailing of this Proxy Statement and proxy card is to commence on or
about March 28, 1997. The 1996 Annual Report of the Company has been sent to all
stockholders together with this Proxy Statement. The time and place of the
Annual Meeting is set forth in the Notice that accompanies this Proxy Statement.
GENERAL
Holders of the Company's common stock, par value $.01 per share (the
"Common Stock"), are entitled to one vote per share on the matters to be
considered at this Annual Meeting. Only stockholders of record at the close of
business on March 11, 1997 will be entitled to vote. At such time, after giving
effect to the repurchase by the Company of approximately 4.6 million shares of
Common Stock as described below under the heading Recent Corporate Developments,
73,820,967 shares of Common Stock were outstanding and entitled to vote. The
holders of record of a majority of the shares of Common Stock outstanding on
March 11, 1997 will constitute a quorum.
All shares represented by properly executed proxy cards received in time
for the meeting will be voted in accordance with the choices indicated or, if no
choice is indicated, will be voted in accordance with the recommendations of the
Board of Directors. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote for the slate of
director nominees proposed by the Board of Directors, for approval of The
American Standard Companies Inc. Employee Stock Purchase Plan and for
ratification of the appointment of Ernst & Young LLP as the Company's
independent accountants for the year 1997. Stockholders may strike out the names
of proxy holders designated by the Board of Directors on the proxy card and
substitute the name of any other person whom they wish to represent them at the
meeting. A stockholder may revoke any proxy by attending the meeting and voting
in person or by filing an instrument in writing revoking the proxy or by filing
another duly executed proxy card bearing a later date with the Secretary of the
Company.
The Company bears the cost of this solicitation. Proxies may be solicited
by mail, telephone, by other means of electronic transmission or personally by
Directors, officers and regular employees of the Company. The Company will
reimburse persons holding stock in their names or in the names of their nominees
for expenses of forwarding proxy material to their principals.
The mailing address of the Company's principal executive office is P.O. Box
6820, One Centennial Avenue, Piscataway, New Jersey 08855-6820.
RECENT CORPORATE DEVELOPMENTS
Pursuant to a Stock Disposition Agreement dated December 16, 1996 (the
"Stock Disposition Agreement"), among the Company, Kelso & Company, L. P.
("Kelso") and Kelso ASI Partners, L. P. ("ASI Partners"), ASI Partners agreed to
dispose of substantially all of its 20,838,656 shares of Common Stock by means
of a secondary public offering of approximately 12.4 million shares of Common
Stock (including 1.6 million shares subject to the underwriters' over-allotment
option), the repurchase by the Company of approximately 4.6 million shares of
Common Stock and distribution by ASI Partners of the remaining shares to its
investors. As of March 11, 1997, ASI Partners had disposed of all but 5,401,598
of such shares and will, therefore, be entitled to vote such shares at the
Annual Meeting. As of the date of this Proxy Statement, ASI Partners has
disposed of all such 5,401,598 by means of the sale of approximately 1.6 million
shares upon exercise of the underwriters' over-allotment option and distribution
of approximately 3.8 million shares to the investors in ASI Partners. As a
result, ASI Partners currently no longer owns any of the Company's Common Stock
and the Company and ASI Partners have terminated the Amended and Restated
Stockholders Agreement among the Company, ASI Partners and certain of the
Company's employees, pursuant to which ASI Partners had the right, among other
things, to designate a certain number of nominees for election to the Company's
Board of Directors.
2
<PAGE> 6
STOCK OWNERSHIP
Set forth below is the number of shares of Common Stock, the only
outstanding voting stock of the Company, beneficially owned as of March 11, 1997
by each director and nominee, each of the executive officers named in the
Summary Compensation Table included elsewhere herein (the "Named Officers"), all
directors and executive officers of the Company as a group, and each 5% holder.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
---------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
FMR Corp.(a).......................................................... 10,133,039 13.7%
Kelso ASI Partners, L.P.(b)........................................... 5,401,598 7.3%
Joseph S. Schuchert(b)(e)............................................. 5,912,777 8.0%
Frank T. Nickell(b)(e)................................................ 5,607,219 7.6%
George E. Matalich(b)(e).............................................. 5,461,645 7.4%
Thomas R. Wall IV(b)(e)............................................... 5,446,672 7.4%
Emmanuel A. Kampouris(c)(d)........................................... 884,640 1.2%
George H. Kerckhove(c)(d)............................................. 352,546 *
Horst Hinrichs(c)(d).................................................. 278,882 *
Fred A. Allardyce(c)(d)............................................... 397,725 *
William A. Klug(c)(d)................................................. 298,796 *
Steven E. Anderson(c)................................................. 5,819 *
Shigeru Mizushima(c).................................................. 6,579 *
Roger W. Parsons(c)................................................... 5,819 *
J. Danforth Quayle(c)................................................. 5,819 *
David M. Roderick(c).................................................. 5,819 *
John Rutledge(c)...................................................... 5,819 *
American-Standard Employee Stock Ownership Plan (the "ESOP")(e)....... 11,301,879 15.3%
All directors and executive officers of the Company as a group (36
persons, including the foregoing)(d)(e)............................. 10,438,497 14.2%
</TABLE>
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* Less than one percent.
(a) In a Schedule 13G dated February 14, 1997, FMR Corp., a Massachusetts
corporation and parent holding company ("FMR"), 82 Devonshire Street, Boston
Massachusetts, and Edward C. Johnson 3(rd) and Abigail P. Johnson who
together with members of their family and trusts for their benefit may be
deemed to control FMR, reported dispositive power over all of these shares
and voting power over 383,400 of such shares held by FMR and certain of its
wholly-owned Investment Advisors.
(b) The business address for such persons is c/o Kelso & Company, L.P., 24th
Floor, 320 Park Avenue, New York, N.Y. 10022. Pursuant to the Stock
Disposition Agreement, ASI Partners agreed to dispose of substantially all
of its 20,838,656 shares of Common Stock by means of a secondary public
offering of approximately 12.4 million shares of Common Stock (including 1.6
million shares subject to the underwriters' over-allotment option), the
repurchase by the Company of approximately 4.6 million shares of Common
Stock and distribution by ASI Partners of the remaining shares to its
investors. As of March 11, 1997, ASI Partners had completed the secondary
offering and repurchase transactions and owned the number of shares set
forth above in the stock ownership table. As of the date of this Proxy
Statement, ASI Partners has disposed of such 5,401,598 shares by means of
the sale of 1.6 million shares of Common Stock upon exercise of the
underwriters' over-allotment option, and the distribution of all remaining
shares to its investors. As a result, ASI Partners no longer owns any of the
Company's Common Stock.
(c) Mr. Kampouris is Chairman, President and Chief Executive Officer (a Named
Officer) and a director of the Company. Messrs. Hinrichs and Kerckhove are
Named Officers and directors of the Company. Messrs. Allardyce and Klug are
Named Officers of the Company and Messrs. Anderson, Mizushima, Parsons,
Quayle, Roderick and Rutledge are directors of the Company.
3
<PAGE> 7
(d) The business address for the ESOP is c/o American Standard Inc., P.O. Box
6820, One Centennial Avenue, Piscataway, New Jersey 08855-6820. Fidelity
Management Trust Company is the trustee of the ESOP. Its business address is
400 Puritan Way, Mail Zone-M3F, Marlborough, Massachusetts 01752-3070. As of
March 11, 1997, all of the shares held in the ESOP were allocated to ESOP
participants, including 199,608 shares allocated to all executive officers
of the Company as a group. The number of shares shown for executive officers
in the table above includes shares allocated to their accounts in the ESOP.
Shares in the ESOP that have been allocated to participants are voted by the
ESOP trustee in accordance with the instructions of participants and where
no participant instructions are received, such shares are not voted.
Unallocated shares are voted by the ESOP trustee in the same proportion as
the shares for which instructions are received. Currently, there are no
unallocated shares held by the ESOP trustee. Until termination of
employment, a participant cannot dispose of shares in his ESOP account. The
shares allocated to the Named Officers' ESOP accounts as of March 11, 1997
are as follows: Mr. Kampouris, 12,040 shares; Mr. Kerckhove, 11,713 shares;
Mr. Hinrichs, 12,549 shares; Mr. Allardyce, 12,507 shares; and Mr. Klug,
12,463 shares.
The number of shares shown for Named Officers and all current directors and
executive officers as a group includes currently exercisable options to
purchase shares of Common Stock as follows: Mr. Kampouris, 400,000; Mr.
Kerckhove, 113,333; Mr. Hinrichs, 113,333; Mr. Allardyce, 113,333; Mr. Klug,
83,333; and all executive officers, 1,999,923.
The number of shares shown for Named Officers in the table above does not
reflect shares of Common Stock issued as part of payouts under the Long-Term
Incentive Compensation Plan ("LTIP") and the 1994-1995 Supplemental
Incentive Compensation Plan, which shares are held in trust under a trust
agreement (the "Executive Trust"). Shares in the Executive Trust are voted
by the trustee as directed pursuant to the terms of the LTIP. Until
termination of employment, a beneficiary of the Executive Trust cannot
dispose of shares credited to his account. Shares of Common Stock in the
Named Officers' accounts in the Executive Trust are as follows: Mr.
Kampouris, 31,644 shares; Mr. Kerckhove, 14,428 shares; Mr. Hinrichs, 13,830
shares; Mr. Allardyce, 9,750 shares; and Mr. Klug, 9,698 shares. The shares
in Executive Trust accounts for all executive officers as a group total
118,526 shares.
Also not included above are 25,325 shares of Common Stock held in a similar
grantor's trust for the account of certain executive officers earned under
an employee incentive plan prior to their becoming officers.
(e) Of the total shares indicated, 5,401,598 shares represent shares of Common
Stock owned on March 11, 1997 by ASI Partners in which Mr. Schuchert, a
director of the Company, and Messrs. Matelich, Nickell and Wall may be
deemed to share beneficial ownership by virtue of their status as general
partners of Kelso American Standard Partners, L.P., the general partner of
ASI Partners. As of the date of this Proxy Statement, ASI Partners had
disposed of all such shares. Messrs. Schuchert, Nickell, Matelich and Wall
disclaim beneficial ownership of such securities.
OWNERSHIP AND TRANSACTIONS REPORTS
Under Section 16 of the Securities Exchange Act of 1934, the Company's
directors, certain of its officers, and beneficial owners of more than 10% of
the outstanding Common Stock are required to file reports with the Securities
and Exchange Commission (the "Commission") and the New York Stock Exchange
concerning their ownership of and transactions in Common Stock; such persons are
also required to furnish the Company with copies of such reports. Based solely
upon the reports and related information furnished to the Company, the Company
believes that all such filing requirements were complied with in a timely manner
during and with respect to 1996.
1. ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of eleven
directors. The Company's Restated Certificate of Incorporation provides for the
Board to be divided into three classes, as nearly equal in number as possible,
each class to serve for a three-year term, provided that: (i) the initial term
of the Class I Directors
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<PAGE> 8
expired at the 1996 annual meeting of stockholders, (ii) the initial term of the
Class II Directors will expire at the 1997 annual meeting of stockholders, and
(iii) the initial term of the Class III Directors will expire at the 1998 annual
meeting of stockholders. Following the completion of the transactions
contemplated in the Stock Disposition Agreement, Frank T. Nickell, a Class II
Director, resigned as a Director as of March 24, 1997. John Rutledge, also a
Class II Director, has notified the Company that he will not stand for
reelection at the Annual Meeting. The Company's By-laws have, therefore, been
amended to reduce the Board of Directors to nine members, to be divided equally
among the three Classes, effective immediately prior to election of Directors at
the Annual Meeting, and Joseph S. Schuchert, presently a Class III Director,
will resign immediately prior to the election of Directors at the Annual Meeting
and stand for election as a Class II Director. Accordingly, at the Annual
Meeting, the stockholders will vote to elect three Class II Directors for a term
expiring in 2000. All directors are elected for their terms and until their
successors are duly elected and qualified.
The Board of Directors has no reason to believe that any of the nominees
set forth below will not serve if elected, but if any of them should become
unavailable to serve as a director, and if the Board designates a substitute
nominee, the persons named in the proxy card as proxy holders, unless otherwise
instructed, will vote for the substitute nominee designated by the Board.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting, provided a quorum is present. Abstentions (including broker non-votes)
will have no effect on the outcome of the vote.
DIRECTORS(1)
NOMINEES
NOMINEES FOR ELECTION AS CLASS II DIRECTORS -- TERMS EXPIRING AT 2000 ANNUAL
MEETING
SHIGERU MIZUSHIMA -- AGE 53
Mr. Mizushima has been President and Chief Operating Officer of Daido Hoxan
Inc. since the merger in April 1993 of Hoxan Corporation with Daido Sanso
Company (a subsidiary of Air Products and Chemicals Inc.). Prior thereto Mr.
Mizushima was President of Hoxan Corporation, a position he held since 1984. He
is also a director of Daido Hoxan Inc. Daido Hoxan Inc. is the second largest
supplier of industrial gases in Japan and is a non-exclusive distributor of
American Standard Inc. plumbing products in Japan. Mr. Mizushima has served as a
director of the Company since July 1988.
J. DANFORTH QUAYLE -- AGE 50
Mr. Quayle served as Vice President of the United States from January 1989
to January 1993. Since leaving that office Mr. Quayle served as founding
Chairman and is presently a director of Circle Investors, Inc. (an investment
planning and consulting firm). He is a director of Central Newspapers, Inc., and
U.S. Filter Corporation, and served as a director of Amtran Inc. from February
through October of 1996. Mr. Quayle has served as a director of the Company
since September 1993.
JOSEPH S. SCHUCHERT -- AGE 68
Mr. Schuchert has been Chairman, Chief Executive Officer and a director of
Kelso & Companies, Inc., since March 1989. Kelso & Companies, Inc. is the
general partner of Kelso. From 1984 to 1989 Mr. Schuchert was managing general
partner of Kelso. He is also a director of Earle M. Jorgensen Company. Mr.
Schuchert has served as a director of the Company since May 1988.
On December 23, 1992, Kelso & Companies, Inc. and its Chief Executive
Officer, Mr. Schuchert, without admitting or denying the findings contained
therein, consented to an administrative order in respect of a Commission inquiry
relating to the 1990 acquisition of a portfolio company by an affiliate of Kelso
&
- ---------------
1 All the directors of the Company are also directors of American Standard Inc.
Ages of directors are given as of March 1, 1997
5
<PAGE> 9
Companies, Inc. The order found that the tender offer filing by such affiliate
in connection with the acquisition did not comply fully with the Commission's
tender offer reporting requirements, and required Kelso & Companies, Inc. and
Mr. Schuchert to comply with these requirements in the future.
DIRECTORS CONTINUING IN OFFICE
CLASS III DIRECTORS -- TERMS EXPIRING AT 1998 ANNUAL MEETING
STEVEN E. ANDERSON -- AGE 54
Mr. Anderson served as National Partner in Charge -- Industries of KPMG
Peat Marwick and a member of the firm's Management Committee from November 1990
until he retired in June 1994. Prior thereto his responsibilities have included
Partner in Charge of the Boston Audit Department and Managing Partner of the
Seattle office. He became a partner of the firm in 1977, having joined the firm
in 1967. Mr. Anderson has served as a director of the Company since September
1994.
EMMANUEL A. KAMPOURIS -- AGE 62
Mr. Kampouris was elected Chairman in December 1993 and President and Chief
Executive Officer of the Company and American Standard Inc. in February 1989.
Prior thereto he was Senior Vice President, Building Products, from 1984 to
February 1989. He is also a director of Daido Hoxan Inc. Mr. Kampouris has
served as a director of the Company since July 1988.
ROGER W. PARSONS -- AGE 55
Mr. Parsons is Group Managing Director of Rea Brothers Group PLC ("Rea
Brothers Group"), which he joined in 1988 after a career in banking. Rea
Brothers Group is a U.K. holding company of subsidiaries engaged in the
investment banking business. He also holds directorships in several subsidiaries
of Rea Brothers Group. Mr. Parsons has served as a director of the Company since
March 1994.
CLASS I DIRECTORS -- TERMS EXPIRING AT 1999 ANNUAL MEETING
HORST HINRICHS -- AGE 64
Mr. Hinrichs was elected Senior Vice President, Automotive Products, of the
Company and American Standard Inc. in December 1990. Prior thereto he served as
Vice President and Group Executive, Automotive Products, from 1987 to 1990. Mr.
Hinrichs has served as a director of the Company since March 1991.
GEORGE H. KERCKHOVE -- AGE 59
Mr. Kerckhove was elected Senior Vice President, Plumbing Products, of the
Company and American Standard Inc. in June 1990. Prior thereto he was Vice
President and Group Executive of European Plumbing Products from 1988 until June
1990. Mr. Kerckhove has served as a director of the Company since September
1990.
DAVID M. RODERICK -- AGE 72
Mr. Roderick joined USX Corporation (formerly United States Steel
Corporation) in 1959, becoming Chairman of the Board and Chief Executive Officer
in 1979, retiring from the latter position in 1989 and from the USX Board in
1994. He is a director of Kelso & Companies, Inc., Earle M. Jorgensen Company,
and Presbyterian University Hospital. He is also Chairman Emeritus of the U.S.
Korea Business Council. Mr. Roderick has served as a director of the Company
since June 1994.
6
<PAGE> 10
DIRECTORS' FEES AND OTHER ARRANGEMENTS
Each outside director is paid a fee of $6,750 per calendar quarter and in
addition receives a fee of $1,000 for attendance at each meeting and reconvened
meeting of the Board or committee of the Board of either the Company or of
American Standard Inc., except that no separate fees are paid for attendance at
meetings of the Board or committee of the Board of American Standard Inc. that
are held on the same day the Board or corresponding committee of the Board of
the Company meets. The only directors currently eligible for directors' fees are
those who are not employees of the Company, American Standard Inc. or Kelso.
They are Messrs. Anderson, Mizushima, Parsons, Quayle, Roderick and Rutledge.
All directors are reimbursed for reasonable expenses incurred to attend
meetings.
A Supplemental Compensation Plan for Outside Directors ("Supplemental
Compensation Plan") was adopted in June 1989 and amended in March 1996. Prior to
the 1996 amendment, directors were credited with units representing shares of
Common Stock at the date of their election to the Board and paid the value of
such units at the end of their directorships. Under the Supplemental
Compensation Plan, as amended, a plan account is established for each
participating director consisting of shares of restricted Common Stock of the
Company equal in number to the units awarded to each director under the
Supplemental Compensation Plan prior to the 1996 amendment thereof. Directors'
restricted Common Stock may be voted by the director owning such stock but may
not be sold until the director is no longer serving on the Board. The plan
account for Mr. Mizushima, who became a director prior to January 1, 1993,
consists of 6,579 restricted shares and for those participating directors who
became Board members subsequent to January 1, 1993, the plan accounts consist of
5,819 restricted shares each. Persons becoming Board members for the first time
after March 1996 will be granted restricted shares of Common Stock equivalent in
value to $100,000, calculated at the per-share closing price of Common Stock on
the last day such stock is traded on the New York Stock Exchange immediately
preceding the date of such Board member's election. When a participating
director ceases to be a member of the Board, he or his beneficiary will receive
the shares of Common Stock in his plan account. If a participating director is
removed for cause, his entire interest in the Plan is forfeited. Employee
directors and Messrs. Nickell and Schuchert do not participate in the
Supplemental Compensation Plan.
COMMITTEES OF THE BOARD
The Board has standing Executive, Audit and Management Development and
Nominating Committees.
Members of the Executive Committee are Messrs. Kampouris (Chairman),
Hinrichs, Kerckhove and Schuchert.
Members of the Audit Committee are Messrs. Parsons (Chairman), Anderson and
Quayle.
Members of the Management Development and Nominating Committee are Messrs.
Schuchert (Chairman), Anderson, Parsons and Quayle.
The Executive Committee functions when the Board is not in session. It may
declare dividends and authorize the issuance of stock, as well as exercise all
other powers and authority of the Board of Directors in the management of the
business and affairs of the Company. It may not, however, amend the Company's
Restated Certificate of Incorporation or Amended By-Laws, adopt agreements of
merger or consolidation or propose the sale or other disposition of
substantially all of the Company's assets or the dissolution of the Company. The
Executive Committee did not meet in 1996.
The Audit Committee reviews the following: the scope of internal and
independent audits; the Company's annual financial statements and Annual Report
on Form 10-K; the adequacy of internal controls and recommendations regarding
improvements; significant changes in accounting policies; business conduct and
conflicts of interest. In addition, the Committee recommends the engagement of
independent public accountants, subject to stockholder ratification, and reviews
their performance and the reasonableness of their fees. The Committee also
reviews major litigation, compliance with environmental standards and the
investment performance and funding of the Company's retirement plans. The Audit
Committee met three times in 1996.
7
<PAGE> 11
The Management Development and Nominating Committee functions both as a
compensation and as a nominating committee. It reviews and makes recommendations
with respect to officers' salaries and employee benefits and administers certain
employee benefit and compensation plans of the Company, including the Company's
incentive compensation and stock incentive plans. It also evaluates the quality
of management and management improvement programs and techniques. This Committee
also considers and makes recommendations to the Board for candidates for
directors proposed by stockholders. Pursuant to the Company's Amended By-Laws,
nominations by stockholders must be made by written notice, mailed by certified
mail, to the Secretary of the Company, and received no later than 50 days prior
to the date of the annual meeting. If less than 50 days' advance notice of a
meeting of stockholders is given to the stockholders, nominations must be made
or delivered not later than the close of business on the seventh day following
the day on which the written notice of such meeting was mailed. Nominations must
be accompanied by information and background of the proposed nominee, including
such information as is required by the Company's Amended By-Laws and the proxy
rules under the Securities Exchange Act of 1934. The Management Development and
Nominating Committee met five times in 1996.
The Board of Directors had seven meetings, including reconvened meetings,
in 1996. All directors attended 75% or more of the combined total of meetings of
the Board of Directors and its respective committees held in 1996 during the
period in which they served as Directors or committee members.
8
<PAGE> 12
EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation (based on the appropriate foreign exchange rates, where applicable)
for services in all capacities to the Company for 1996, 1995 and 1994 of those
persons who were during 1996 the chief executive officer and the other four most
highly compensated executive officers of the Company (herein collectively, the
"Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------
OTHER LONG-TERM COMPENSATION ALL
ANNUAL ----------------------- OTHER
NAME AND COMPEN- LTIP COMPEN-
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) SATION(3) OPTIONS(#) PAYOUTS(4) SATION(5)
- ------------------------------ ---- --------- ---------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris......... 1996 $683,333 $1,500,000 $233,905 -- $1,067,222 $229,951
Chairman, President & 1995 600,000 1,200,000 219,373 600,000 1,508,113 230,915
Chief Executive Officer 1994 600,000 850,000 731,996 -- 919,913 146,073
George H. Kerckhove........... 1996 $375,000 $ 125,000 $ 5,863 -- $ 471,467 $ 27,683
Senior Vice President 1995 362,500 140,000 6,069 170,000 686,159 28,271
1994 350,000 157,000 339,000 -- 437,142 29,261
Horst Hinrichs................ 1996 $310,284 $ 132,000 $ 3,747 -- $ 443,496 $ 21,542
Senior Vice President 1995 361,044 200,000 3,870 170,000 697,929 21,350
1994 342,394 175,000 270,000 -- 406,676 20,838
Fred A. Allardyce............. 1996 $306,667 $ 132,000 $ 62,815 -- $ 352,667 $ 47,012
Vice President & Chief 1995 290,000 130,000 25,574 170,000 498,300 42,589
Financial Officer 1994 285,000 127,000 348,011 -- 298,220 22,427
William A. Klug............... 1996 $250,000 $ 132,000 $ 7,497 -- $ 299,900 $ 27,758
Vice President 1995 250,000 120,000 8,099 125,000 452,789 28,877
1994 233,000 100,000 240,000 -- 288,465 30,945
</TABLE>
- ---------------
(1) Includes amounts deferred by each of the Named Officers under the Savings
Plan of American Standard Inc. and Participating Subsidiary Companies (the
"Savings Plan").
(2) Represents annual bonus earned for the year reported but paid in the
subsequent year. Annual bonuses may be deferred at the election of the
recipient.
(3) The amounts shown in 1995 and 1996 for Mr. Kampouris include allocation of
$64,127 and $50,938, respectively, of tax consultant fees. Amounts shown for
1994 include payments under the Company's 1988 Management Investors' Bonus
Plan, which, following an acceleration of payments due in 1995, was
terminated. The two payments in 1994 were each at the rate of $.60 per share
of Common Stock (giving effect to the 2.5 to 1 stock split effected in
December 1994) owned by Named Officers, that had been previously acquired by
them through stock offerings in 1988.
(4) Amounts for 1996 represent the cash portion of awards to be paid under the
LTIP on the basis of estimated achievement of 119.7% of the 1994-1996
performance goal. LTIP awards applicable to achievement in excess of 100% of
the applicable performance goal are paid in shares of Common Stock, valued
at the average price per share during the month of March in the year
awarded, and held in the Executive Trust. For the 1994-1996 LTIP performance
period, the estimated values of the shares to be awarded to the named
officers are: Mr. Kampouris $210,243; Mr. Kerckhove $92,879; Mr. Hinrichs
$87,369; Mr. Allardyce $69,475; and Mr. Klug $57,760. Amounts for 1995
represent the cash portion of awards paid under both (a) the LTIP, on the
basis of achievement of 102% of the 1993-1995 performance goal, and (b) the
1994-1995 Supplemental Incentive Compensation Plan, on the basis of
achievement of 100% of the applicable performance goal. Amounts for 1994
represent cash payments for the achievement of 96% of the 1992-1994
performance goal. LTIP payouts may be deferred at the election of the
recipient. The portions of LTIP awards applicable to achievement of the
applicable performance goal in excess of 100%, and 50% of the total awards
under the 1994-95 Supplemental Incentive Compensation Plan, were paid to the
participants' accounts in the Executive Trust in the form
9
<PAGE> 13
of shares of Common Stock valued at the time the awards were made at $29.57 per
share, resulting in share allocations to such accounts of the Named Officers as
follows:
<TABLE>
<CAPTION>
SUPPLEMENTAL
LTIP PLAN
ALLOCATION ALLOCATIONS
---------- ------------
<S> <C> <C>
Emmanuel A. Kampouris................................ 675 17,226
George H. Kerckhove.................................. 307 7,837
Horst Hinrichs....................................... 313 7,972
Fred A. Allardyce.................................... 223 5,692
William A. Klug...................................... 203 5,172
</TABLE>
(5) Included in All Other Compensation for 1996 was the following:
<TABLE>
<CAPTION>
PREMIUMS FOR ESOP
TERM LIFE ALLOCATIONS*
INSURANCE $
------------ ------------
<S> <C> <C>
Emmanuel A. Kampouris............................... $216,451 $ 13,500
George H. Kerckhove................................. 14,184 13,500
Horst Hinrichs...................................... 8,043 13,500
Fred A. Allardyce................................... 33,512 13,500
William A. Klug..................................... 14,258 13,500
</TABLE>
* Includes matching contributions related to contributions made by Named
Officers to the Savings Plan.
Stock Options. During 1996 the Company granted a total of 21,000 options,
a portion of which were granted to one executive officer following such
officer's election.
The following table sets forth information concerning the aggregate number
of options held and the value of unexercised "in-the-money" options held at
December 31, 1996 (the difference between the aggregate exercise price of all
such options held and the market value of the shares covered by such options at
December 31, 1996). No options held by the Named Officers were exercised in
1996.
1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
OPTION VALUES AT 12/31/96
-------------------------------------------
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/96 12/31/96
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
--------------------------------------------- ----------------- ---------------------
<S> <C> <C>
Emmanuel A. Kampouris........................ 200,000/400,000 $3,650,000/$7,300,000
George H. Kerckhove.......................... 56,666/113,334 1,034,155/ 2,068,309
Horst Hinrichs............................... 56,666/113,334 1,034,155/ 2,068,309
Fred A. Allardyce............................ 56,666/113,334 1,034,155/ 2,068,309
William A. Klug.............................. 41,666/ 83,334 760,405/ 1,520,809
</TABLE>
10
<PAGE> 14
LONG-TERM INCENTIVE COMPENSATION PLAN AWARDS IN 1996
No LTIP contingent awards were established by the Company during 1996.
As previously reported in the Company's Proxy Statement dated March 28,
1996, the contingent awards shown below for the LTIP 1996-1998 performance
period and for the 1996-1998 Supplemental Incentive Compensation Plan were
established during 1995, and the latter plan was approved by the Company's
stockholders at the May 2, 1996 Annual Meeting.
1996-1998 LONG-TERM INCENTIVE COMPENSATION PERFORMANCE PERIOD
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
SHARES OTHER PERIOD UNDER NON-STOCK-PRICE-BASED PLANS
UNITS OR UNTIL MATURATION ---------------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
- --------------------------- ------------ ---------------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris...... (a) 1/96-12/98 $ 590,278 $1,180,555 $2,361,111
George H. Kerckhove........ (a) 1/96-12/98 243,750 487,500 975,000
Horst Hinrichs............. (a) 1/96-12/98 238,540 477,079 954,158
Fred A. Allardyce.......... (a) 1/96-12/98 185,333 370,667 741,334
William A. Klug............ (a) 1/96-12/98 150,000 300,000 600,000
</TABLE>
- ---------------
(a) Awards are denominated in dollars (based on December 31, 1995 foreign
exchange rates, where applicable).
The above table shows the contingent target awards, based on 1995 salary
levels, established in 1995 for each Named Officer with respect to the 1996-1998
LTIP performance period. The targets set for the 1996-1998 LTIP performance
period are based on the achievement by the end of such performance period of
predetermined company-wide levels of inventory turnover rates and a percentage
of earnings (before interest and taxes) to sales. The thresholds reflect 50% of
the target awards; if the threshold level of inventory turnover or percentage of
earnings to sales for the performance period is not achieved, no payout is made.
The maximum payout is twice the target award and may be realized by achievement
of inventory turnover at a substantially increased rate or by a combination of
an increase in inventory turnover and/or percentage of earnings to sales above
the threshold performance levels.
Contingent awards are based on a participant's average annual base salary
during his participation in the performance period, subject to prorated
adjustment to reflect the duration of participation in the period. At the end of
a performance period a payment in cash, notes or in Common Stock of the Company
or a combination of any of them, is made on the basis of the achievement of the
goal. Termination of employment may result in forfeiture or proration of the
award, depending on the nature of the termination. A plan participant may defer
payment of his award. Payment of awards will not be made or will be deferred if
an event of default under American Standard Inc.'s loan agreements or debt
indentures has occurred or will occur as a result of such payment. In the event
of a Change of Control (as defined in the LTIP) during the performance period,
the performance period shall end and each participant shall be entitled to
receive 100% of his target award in cash.
Shares of Common Stock distributable to plan participants are delivered to
the Executive Trust for their benefit. Distribution of a participant's account
is made on the termination of his employment with the Company, or earlier at the
discretion of the Management Development and Nominating Committee. Cash payments
may be deferred if an event of default under American Standard Inc.'s loan
agreements or debt indentures has occurred or will occur as a result of such
payment. Until distribution, assets of the Executive Trust are subject to the
claims of creditors of the Company or American Standard Inc. Shares of Common
Stock held by the Executive Trust are voted by the trustee in accordance with
the terms of the trust agreement.
11
<PAGE> 15
1996-1998 SUPPLEMENTAL INCENTIVE COMPENSATION PLAN AWARDS IN 1995
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK-PRICE-
PERFORMANCE OR BASED PLANS
OTHER PERIOD -------------------------
NUMBER OF SHARES UNTIL MATURATION A B
NAME UNITS OR OTHER RIGHTS OR PAYOUT THRESHOLD MAXIMUM
- ------------------------------------ --------------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Emmanuel A. Kampouris............... (a) 1/96-12/98 $ 295,139 $ 2,361,111
George H. Kerckhove................. (a) 1/96-12/98 $ 121,875 $ 975,000
Horst Hinrichs...................... (a) 1/96-12/98 $ 119,270 $ 954,158
Fred A. Allardyce................... (a) 1/96-12/98 $ 92,667 $ 741,334
William A. Klug..................... (a) 1/96-12/98 $ 75,000 $ 600,000
All executive officers as a
group(27)......................... (a) 1/96-12/98 $ 2,002,724 $16,021,790
All non-executive officers as a
group............................. (a) 1/96-12/98 $13,019,800 $26,039,600
</TABLE>
- ---------------
(a) Awards are denominated in dollars
The above table reflects estimated threshold and maximum payouts (based on
December 31, 1995 foreign exchange rates where applicable) to Named Officers
under the Supplemental Incentive Plan, contingent on the achievement of a
pre-determined threshold of management reporting operating earnings (before
interest and taxes) of American Standard Inc. in 1998 ("1998 OEBIT"). If the
threshold is reached, each Named Officer will receive under the Supplemental
Incentive Plan a supplemental payment equal to 50% of his LTIP payout for the
1996-1998 performance period ("1998 LTIP payout"). If such threshold of 1998
OEBIT is exceeded by 5%, each Named Officer will instead receive a supplemental
payment equal to 75% of his 1998 LTIP payout, and if the threshold is exceeded
by 16.7% or more, each Named Officer will instead receive 100% of his 1998 LTIP
payout. Subject to meeting the target conditions, Column A represents the
estimated threshold amounts payable to Named Officers and other plan
participants, and Column B represents the estimated maximum amounts payable
under the Supplemental Incentive Plan. In addition, the Supplemental Incentive
Plan requires a participant's continued employment (except in cases of death,
disability or retirement) until December 31, 1998 and a minimum period of
employment during the term of the plan in order to be eligible to receive an
award. The awards, if any, are payable 50% in Common Stock and 50% in cash for
executive officers and non-officer executives, and 100% in cash to management
participants. In the event a Change of Control (as defined in the Supplemental
Incentive Plan) occurs during the plan period, the plan shall end and each
participant shall be entitled to receive 100% of his plan award opportunity in
cash.
RETIREMENT PLANS
TERMINATED PLAN
As a result of the change of control of American Standard Inc. in 1988, the
retirement plan of American Standard Inc. covering its U.S. salaried employees
was terminated as of June 30, 1988. Thereafter, the accrued benefits of all
participants through that date, all of which vested, are provided through
annuities purchased with the assets of the terminated plan (the "Terminated
Plan"). There were no further benefit accruals under the Terminated Plan after
June 30, 1988.
The annual retirement annuities that are payable to Named Officers,
assuming retirement at age 65 and no election of a joint and survivor option and
after giving effect to an offset for Social Security benefits, are as follows:
Mr. Kampouris, $90,662; Mr. Kerckhove, $109,828; Mr. Hinrichs, $72,945; Mr.
Allardyce, $25,764; and Mr. Klug, $73,866.
SUPPLEMENTAL RETIREMENT PLAN
American Standard Inc. currently maintains a supplemental retirement plan
(the "Supplemental Retirement Plan") for most of its executive officers,
including all of the Named Officers, with benefits payable
12
<PAGE> 16
in the form of a single lump sum settlement that supplements, on the basis of a
formula, their annual retirement benefits (if any) under the Terminated Plan.
The table below shows the annualized target Supplemental Retirement Plan
benefit payable to a participant for life from normal retirement date (age 65)
based on years of service and covered compensation. Upon retirement, a
participant in the Supplemental Retirement Plan will receive a single lump sum
payment equal to the present value of the applicable annual amount reflected in
the table below over the life expectancy of the retiree, after taking into
account all of the offsets described below. If a participant dies after his
Supplemental Retirement Plan benefit vests but before he receives such benefit,
his spouse is entitled to Plan benefits, but in a reduced amount.
<TABLE>
<CAPTION>
HIGHEST
3-YEAR
AVERAGE YEARS OF SERVICE
ANNUAL --------------------------------------------------
COMPENSATION 10 20 30 40
- --------------------------------------------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 250,000.................................... $100,000 $ 125,000 $ 150,000 $ 150,000
500,000................................... $200,000 $ 250,000 $ 300,000 $ 300,000
750,000................................... $300,000 $ 375,000 $ 450,000 $ 450,000
1,000,000................................... $400,000 $ 500,000 $ 600,000 $ 600,000
1,250,000................................... $500,000 $ 625,000 $ 750,000 $ 750,000
1,500,000................................... $600,000 $ 750,000 $ 900,000 $ 900,000
1,750,000................................... $700,000 $ 875,000 $1,050,000 $1,050,000
2,000,000................................... $800,000 $1,000,000 $1,200,000 $1,200,000
</TABLE>
The Supplemental Retirement Plan benefits are based on credited years of
service and average annual compensation for the highest three calendar years of
the final ten calendar years of employment (not exceeding 60 percent of average
annual compensation for such years of service) and are reduced by an offset
consisting of certain other retirement benefits, including amounts payable under
the Terminated Plan, two times the value of the cumulative basic Company
contributions to the executive officer's ESOP account, and Social Security
benefits. Benefits under the Supplemental Retirement Plan are vested after five
years of service or employment continuation through age 65. Compensation used in
determining Supplemental Retirement Plan benefits (covered compensation)
includes only salary and bonus reflected in the Summary Compensation Table
above. No covered compensation of any Named Officer differs by more than 10%
from the salary and bonus set forth in the Summary Compensation Table.
As of December 31, 1996 the years of credited service under the
Supplemental Retirement Plan for the Named Officers are as follows: Mr.
Kampouris, 31 years; Mr. Kerckhove, 35 years; Mr. Hinrichs, 38 years; Mr.
Allardyce, 20 years; and Mr. Klug, 35 years.
Minimum accrued annual benefits have been established under the
Supplemental Retirement Plan for certain Named Officers which, after giving
effect to offsets, are estimated as follows: Mr. Kampouris, $427,000; Mr.
Kerckhove, $37,000; Mr. Hinrichs, $143,000; and Mr. Klug, $93,000.
CORPORATE OFFICERS SEVERANCE PLAN
A severance plan for executive officers (the "Officers Severance Plan") was
established in 1991. The Officers Severance Plan provides that any participant
whose employment is involuntarily terminated by American Standard Inc. without
"Cause" (as defined in the Officers Severance Plan) or who leaves American
Standard Inc. for "Good Reason" (as defined in the Officers Severance Plan)
shall be paid an amount equal to the sum of two (three, in the case of the Chief
Executive Officer) times such participant's annual base salary at the rate in
effect at the time of termination, a proration of the then Annual Incentive Plan
target award (described below) and one (two, in the case of the Chief Executive
Officer) times such target award. In addition, group life, accident and
disability insurance coverages, as well as group medical coverage, will be
continued for up to 24 months (36 months, in the case of the Chief Executive
Officer) following such officer's termination. The Named Officers are
participants in the Officers Severance Plan.
13
<PAGE> 17
MANAGEMENT DEVELOPMENT AND NOMINATING COMMITTEE REPORT
ON COMPENSATION OF EXECUTIVE OFFICERS OF THE COMPANY
The Company's compensation program for its executive officers is
administered and reviewed by the Management Development and Nominating Committee
(the "Committee") of the Board of Directors. This program, and each of its
components, was developed with the assistance of outside consultants. The
Committee periodically reviews the Company's compensation program in light of
appropriate competitive practices in the United States.
COMPENSATION PHILOSOPHY
In determining the compensation payable to the Company's executive
officers, it is the basic philosophy of the Committee that the total annual
compensation for these individuals should be at a level which is competitive
with the marketplace in companies of similar size for positions of similar scope
and responsibility. In determining the appropriateness of compensation levels,
the Committee annually reviews the Company's compensation policies and
nationally recognized compensation surveys, principally Hewitt Associates
Management Compensation Services Project 777 which is a comparison of fixed and
variable annual compensation based upon a corporation's sales.
The key elements of the total annual compensation for executive officers
consist of fixed compensation in the form of base salary, and variable
compensation in the forms of annual incentive compensation, stock options and
other long-term incentive awards. It is the Committee's objective that a
significant portion of an executive's total annual compensation be contingent
upon the attainment of one or more performance objectives.
COMPONENTS OF EXECUTIVE COMPENSATION
BASE SALARY
The Committee establishes each officer's base salary by comparison to
competitive market levels for the executive's position and responsibilities,
based on the above-referenced compensation surveys. In keeping with its
objective that a significant portion of an executive's compensation be variable
and performance-related in nature, base salaries are generally set below the
average of competitive marketplace rates for each position. While some
exceptions exist, for the most part base salaries for executive officers
(including the Chief Executive Officer) were below the average base salary
reported for similar positions in the above-referenced compensation surveys.
ANNUAL INCENTIVE COMPENSATION
Annual bonuses are based upon various factors, including corporate,
operating unit and individual performance during the preceding calendar year.
For executive officers other than the Chief Executive Officer, the Committee
establishes target awards based on a percentage of salary for each participant,
the total of which determines an initial pool available for bonus payments for
the year. (As is described in greater detail below, the annual bonus paid to the
Chief Executive Officer is determined at the discretion of the Committee
following the end of the fiscal year.) An operating plan is established annually
which sets goals for overall corporate performance relating to earnings (before
interest and taxes) and cash flow. At year end, corporate performance is
compared to these goals to determine the percentage of the established goals
attained. This percentage is then applied to the initial bonus pool to determine
the amount available for annual bonuses. The actual bonus amount paid to each
participant, including the executive officers, from this available pool is based
upon management's and the Committee's subjective evaluation of individual
performance criteria and operating group performance, where appropriate.
For 1996, corporate performance was below the levels of operating
performance targeted in the operating plan. Accordingly, the amount credited by
the Committee to the bonus pool for distribution as annual bonuses for 1996 was
below targeted levels.
14
<PAGE> 18
LONG-TERM INCENTIVE COMPENSATION AWARDS
Executive officers of the Company also participate in the Company's
Long-Term Incentive Compensation Plan ("LTIP") and 1996-1998 Supplemental
Incentive Compensation Plan which provide such individuals with additional
incentive compensation based upon the achievement of various corporate
performance goals.
Incentive payments, the amounts of which have not yet been determined, will
be awarded to executive officers with respect to fiscal year 1996 under the
Company's LTIP for the 1994-1996 performance period based upon the achievement
of company-wide goals relating to inventory turnover rates and operating
earnings margin (as a percent of sales). The target amount ranges from 120% to
170% of an executive's average base salary during the participation period,
based upon the individual's position. If a minimum threshold level of
performance is not reached, no payments are made for the performance period. A
maximum payment of twice the target award may be made for performance
substantially above target levels. The final achievement level has not yet been
determined. The Company expects that actual performance will result in payments
above the target levels.
Effective May 1, 1994 the Company implemented the Supplemental Incentive
Compensation Plan under which executive officers were granted awards contingent
on the Company's achievement of a certain pre-determined threshold of management
reporting operating earnings (before interest and taxes) and threshold targets
established for the LTIP 1993-1995 performance period. Because the Company has
achieved 100% of the earnings target under the Supplemental Incentive
Compensation Plan, payments to executive officers were made in 1996 equal to the
actual award under the LTIP 1993-1995 performance period. The payment of these
awards is 50% in Common Stock and 50% in cash.
Effective January 1, 1996, the Company implemented the 1996-1998
Supplemental Incentive Compensation Plan under which executive officers were
granted awards contingent on the Company's achievement of certain targets. No
payments will be made under the 1996-1998 Supplemental Incentive Compensation
Plan unless the threshold targets established for the LTIP 1996-1998 performance
period are achieved. If those targets are met, payments equal to 50% of the
actual award under the LTIP performance period will be made if a certain
pre-determined threshold of management reporting operating earnings (before
interest and taxes), exclusive of any significant business acquisitions, is
reached. The amount of such payments will be adjusted upward to reflect
performance exceeding the threshold up to a maximum amount equal to the maximum
amount payable under the 1996-1998 LTIP performance period. The payment of these
awards is generally contingent upon continued employment, and will be made, if
at all, 50% in Common Stock and 50% in cash.
Additionally, the Company has established an equity based compensation plan
under which the Committee may award stock options, restricted stock and other
performance based awards to executive officers beginning in fiscal year 1995.
With the exception of one newly elected officer, no stock options were granted
to executive officers during 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
BASE SALARY
Consistent with the above-stated policies, Mr. Kampouris' base salary for
1996 was 13% below the average base salary payable for chief executive officers
for companies having comparable sales. Mr. Kampouris received a 16.7% increase
in base salary during 1996, which was only the second such increase in base
salary since becoming the Chief Executive Officer of the Company in 1989.
ANNUAL INCENTIVE COMPENSATION
Consistent with past practices for paying compensation to the Company's
Chief Executive Officer, Mr. Kampouris received a bonus for 1996 services of
$1,500,000, which was determined based on the Committee's subjective
determination of his performance and that of the Company during 1996.
15
<PAGE> 19
LONG-TERM INCENTIVE COMPENSATION
It is expected that Mr. Kampouris will receive long term incentive payments
under the LTIP for the performance period ended in 1996 based on the same
factors and considerations that apply to executive officers generally.
COMPLIANCE WITH SECTION 162(M)
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly traded company a Federal income tax deduction for compensation
in excess of $1 million paid to certain of its executive officers except to the
extent that such compensation is paid pursuant to a shareholder approved plan
upon the attainment of objective performance criteria. The proposed regulations
under Section 162(m) generally provide an exemption from the provisions of
Section 162(m) for a period following a Company's transition to a public company
with respect to compensation paid under pre-existing plans. Therefore,
compensation payable pursuant to those plans in existence at the time of the
Company's February 1995 initial public offering was not subject to Section
162(m) in 1996. As Section 162(m) will apply to any newly established plans, the
Company sought shareholder approval of the 1996-1998 Supplemental Incentive
Compensation Plan to ensure that any compensation paid thereunder will be
deductible. Such approval was granted at the Company's Annual Meeting on May 2,
1996. The Committee believes that tax deductibility of compensation is an
important factor, but not the sole factor, to be considered in setting executive
compensation policy. Accordingly, the Committee generally intends to take such
reasonable steps as are required to avoid the loss of a tax deduction due to
Section 162(m), but reserves the right to pay amounts which are not deductible
in appropriate circumstances.
Joseph S. Schuchert, Chairman
Steven E. Anderson
Roger W. Parsons
J. Danforth Quayle
16
<PAGE> 20
PERFORMANCE GRAPH
Performance Comparison. The following graph and table compare the
cumulative total stockholder return on the Company's Common Stock from February
3, 1995, the date of the initial public offering of the Common Stock, through
December 31, 1996 with the Standard & Poor's 500 Stock Index and the Standard &
Poor's Manufacturing (Diversified Industrials) Index (neither of which include
the Company), using data supplied by the Compustat Services unit of Standard &
Poor's Corporation. The comparisons reflected in the graph and table, however,
are not intended to forecast the future performance of the Common Stock and may
not be indicative of such future performance. The graph and table assume an
investment of $100 in the Common Stock and each index on February 3, 1995 and
the reinvestment of all dividends.
<TABLE>
<CAPTION>
S&P MANUFACTURING
MEASUREMENT PERIOD AMERICAN STANDARD (DIVERSIFIED
(FISCAL YEAR COVERED) COMPANIES INC. S&P 500 INDEX INDUSTRIALS)
<S> <C> <C> <C>
INDEXED RETURNS 3FEB95 100 100 100
INDEXED RETURNS 31DEC95 140.88 131.43 134.63
INDEXED RETURNS 31DEC96 192.45 161.61 185.53
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Schuchert, a director of the Company and American Standard Inc., is a
member of the Management Development and Nominating Committee of the Company's
Board of Directors. He is Chairman and Chief Executive Officer of Kelso &
Companies, Inc. (the general partner of Kelso) and a general partner of Kelso
American Standard Partners, L.P., the general partner of ASI Partners.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Pursuant to the Stock Disposition Agreement, ASI Partners agreed to dispose
of substantially all of its 20,838,656 shares of Common Stock by means of a
secondary public offering of approximately 12.4 million shares of Common Stock
(including 1.6 million shares subject to the underwriters' over-allotment
option), the repurchase by the Company of approximately 4.6 million shares of
Common Stock and distribution by ASI Partners of the remaining shares to its
investors. As of the date of this Proxy Statement, ASI Partners had disposed of
all of such 20,838,656 shares. As a result, ASI Partners currently no longer
owns any of the Company's Common Stock and the Company and ASI Partners have
terminated the Amended and Restated Stockholders Agreement among the Company,
ASI Partners and certain of the Company's employees, pursuant to which ASI
Partners had the right, among other things, to designate a certain number of
nominees for election to the Company's Board of Directors. In connection with
the offering and repurchase transactions,
17
<PAGE> 21
ASI Partners received from the Company warrants (the "Warrants") to purchase
three million shares of the Company's Common Stock at a purchase price of $55
per share, expiring February 18, 2002. 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 31, 1998 for a Transaction
proposed prior to January 31, 1998 but not consummated or withdrawn as of
January 31, 1998), the Company would be required to make a cash payment to ASI
Partners based upon the excess, if any, of the consideration per share received
by holders of the Company's Common Stock in the Transaction over the $45 per
share received by ASI Partners in respect of all shares sold by it in such
offering and repurchase 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 and will in any event not be
exercisable until the possibility of such a payment no longer exists.
In April 1996, American Standard Inc. acquired the 30% of Alimenterics
Inc., a New Jersey corporation engaged in research, development and sale of
certain medical diagnostic equipment and technology ("Alimenterics"), not
already owned by it from Devices and Diagnostics, Inc., a New Jersey corporation
wholly-owned by Dr. Janet George Murnick. The purchase price was $5.4 million,
plus an additional $2.0 million payable upon achievement by Alimenterics of
certain financial goals, payable in shares of the Company's Common Stock at an
average price per share of $26.675, plus such additional shares of Common Stock,
if any, as may be determined pursuant to a formula comparing the value of such
initially issued shares at the end of 2000 with the initial cash equivalents
thereof plus interest deemed to have accrued thereon at a rate equal to the
compound annual internal rate of return on invested capital in Alimenterics from
the date of such acquisition, to be calculated based upon an appraisal of the
fair market value of Alimenterics at the end of the year 2000. Following
completion of the transaction, Dr. Murnick was elected a Vice President of the
Company.
Mr. Nickell, a director of the Company and American Standard Inc. until his
resignations on March 24, 1997, is President of Kelso & Companies, Inc. (the
general partner of Kelso) and a general partner of Kelso American Standard
Partners, L.P., the general partner of ASI Partners.
Mr. Schuchert, a director of the Company, formed a general partnership, SW
Investment Associates ("SW Associates"), for the purpose of acquiring a 75%
equity interest in BSG Laboratories Inc., a company developing audio speaker and
noise abatement systems ("BSG"), for $6 million and commitments to provide,
arrange for or guarantee certain aggregate indebtedness of BSG up to $9 million.
Among the investors in SW Associates is a limited partnership of which American
Standard Inc. is the general partner and the limited partners are certain
executive officers of American Standard Inc., who had agreed in April 1995 to
invest in SW Investment Associates. Mr. Schuchert, a general partner in Kelso
American Standard Partners, L.P. (the general partner of ASI Partners), is a
general partner of SW Associates and owns approximately a 33% interest therein.
American Standard Inc., Mr. Kampouris and 14 other officers of American Standard
Inc. have agreed to invest $4,060,000, $120,000 and $195,000, respectively, in
SW Investment Associates, which will constitute an aggregate ownership interest
therein of approximately 32%.
The Company has invested in three Cayman Islands corporations, A-S China
Plumbing Products, Limited ("ASPPL"), Wabco Automotive Products, Limited and A-S
Air Conditioning Products Limited ("ASAP"), used for the establishment of
various joint ventures in the People's Republic of China. In 1994 and 1995,
respectively, shares in ASPPL and ASAP were sold to certain institutions and
other investors. Certain executive officers, including Messrs. Kampouris,
Kerckhove and Allardyce, and other employees of the Company and its
subsidiaries, purchased indirect interests of less than 1% in ASPPL and, also
including Mr. Klug, in ASAP.
Mr. Mizushima, a director of American Standard Inc. and the Company, is
President and Chief Operating Officer of Daido Hoxan Inc., a Japanese
corporation which had an approximately 13% limited partnership interest in ASI
Partners. Daido Hoxan Inc. and Kelso and its affiliates have engaged in certain
transactions, including transfers of limited partnership interests in ASI
Partners and the provision by Daido Hoxan Inc. of consulting services. Daido
Hoxan Inc. is a non-exclusive distributor of the Company's plumbing products in
Japan. Its transactions as a distributor with American Standard Inc. and its
subsidiaries, which
18
<PAGE> 22
were on customary terms and in the ordinary course of business, have not been
material to either the Company or Daido Hoxan Inc. American Standard Inc. also
entered into leasing transactions with an affiliate of Daido Hoxan Inc. whereby
it has leased certain machinery and equipment on financial terms that were
comparable to those available from other leasing companies. The leasing
transactions were not material to either the Company or Daido Hoxan Inc.
Fidelity Management Trust Company ("Fidelity") is the owner of record of
the shares of Common Stock held by the ESOP, a 15.3% beneficial owner of the
Company's shares. Fidelity was paid by the Company approximately $351,292 in
1996 for services in connection with administering the Company's ESOP and
American Standard Inc.'s Savings Plan.
Mr. Nickell's father is an officer and owns more than 10 percent of AC
Corporation, a contracting company which purchases air conditioning products
from the Company's Trane Division. Such purchases in 1995 were on customary
terms and in the ordinary course of business and were not material to either the
Company or AC Corporation.
2. APPROVAL OF THE AMERICAN STANDARD COMPANIES INC.
EMPLOYEE STOCK PURCHASE PLAN
On March 6, 1997, upon recommendation of the Committee, the Board of
Directors approved a management proposal to offer to employees of the Company
and its subsidiaries, on a worldwide basis, The American Standard Companies Inc.
Employee Stock Purchase Plan (the "Plan") on the terms presented to the meeting.
The Board is seeking stockholder approval of the Plan to satisfy the
requirements of Section 423 of the Internal Revenue Code ("Section 423") and
thereby obtain certain tax benefits for the Plan and those employees who choose
to participate in the Plan. The purpose of the Plan is to offer substantially
all such employees an opportunity to purchase shares of Common Stock on
attractive terms so they may directly share in the responsibility for and
participate in the Company's performance.
As of the date of this Proxy Statement, the complete terms and conditions
of the Plan have not been finalized because of the need to incorporate into the
Plan certain provisions necessary to permit the Plan to be offered to employees
located in certain countries outside the United States. The Board of Directors
has delegated authority to the Management Development and Nominating Committee
to adopt such additional terms and conditions, not inconsistent with the terms
of the Plan as approved by the Board, to implement and operate the Plan and
permit it to be offered to the largest number of Company employees on a cost and
tax efficient basis.
The Plan will offer employees the opportunity periodically to purchase
shares of Common Stock from the Company at a per share price equal to 85 percent
of the per share market price for Common Stock on the date of purchase. By
structuring the Plan to comply with Section 423, which requires stockholder
approval, employees who purchase Common Stock under the Plan will not be deemed
to receive income in respect of the 15 percent discount from the market price.
The Board of Directors has authorized 1 million shares of Common Stock to
be issued under the Plan, and purchases of shares under the Plan will be limited
to $25,000 per employee, per year. As of the date of this Proxy Statement, the
Company had approximately 44,000 employees located in 40 countries. Shares
purchased under the Plan may not be sold prior to the first anniversary of their
date of purchase. The shares to be offered under the Plan will be listed on the
New York Stock Exchange and registered with the Commission, as well as under the
laws of certain other jurisdictions as required to permit the Plan to be offered
to employees located in such jurisdictions. Subject to stockholder approval, it
is anticipated that the offering of Common Stock under the Plan will commence in
the United States as early as the third quarter of 1997 and be expanded to
include employees located outside the United States as soon as practicable
thereafter, subject to satisfaction of applicable local legal requirements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMERICAN
STANDARD COMPANIES INC. EMPLOYEE STOCK PURCHASE PLAN.
19
<PAGE> 23
3. RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has re-appointed, in accordance with the
recommendations of its Audit Committee, the names of whose members appear on
page 7, Ernst & Young LLP as independent Certified Public Accountants to examine
the consolidated financial statements of the Company for the year 1997 upon such
terms as are fixed by the Board of Directors. The Board of Directors recommends
that such appointment be ratified by the stockholders. If the appointment of
Ernst & Young LLP is not ratified by stockholders, the Board of Directors and
the Audit Committee will give consideration to the appointment of other
independent certified public accountants. A representative of Ernst & Young LLP
is expected to be present at the Annual Meeting and will have the opportunity to
make a statement, if desired, and will also be available to respond to
appropriate questions.
1998 STOCKHOLDER PROPOSALS
Any proposal a stockholder wishes to submit in accordance with the proxy
rules of the Commission for inclusion in the Company's 1998 proxy statement must
be received by the Company at its executive offices at the same address set
forth on page 2 of this Proxy Statement no later than December 1, 1997. In
addition, proposals by stockholders are subject to the provisions of the
Company's Amended By-Laws, which may not be read to shorten the time period set
forth in the proxy rules for inclusion of stockholder proposals in proxy
materials prepared by the Company under the Securities Exchange Act of 1934. In
accordance with the Company's Amended By-Laws, stockholder proposals intended
for presentation at the 1998 Annual Meeting of Stockholders that are not
intended to be considered for inclusion in the Company's proxy statement must be
made by written notice, mailed by certified mail, to the Secretary of the
Company, and received no later than 50 days prior to the date of the 1998 Annual
Meeting. If less than 50 days' advance notice of a meeting of stockholders is
given to the stockholders, proposals must be made or delivered not later than
the close of business on the seventh day following the day on which the written
notice of such meeting was mailed.
4. OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors of the Company is not aware of any other matters to
be presented for action at the meeting. However, if any such other matters are
presented for action, it is the intention of the proxy holders named in the
enclosed form of proxy to vote on such matters in accordance with their
discretion.
By order of the Board of Directors,
/s/ Richard A. Kalaher
RICHARD A. KALAHER
Vice President, General Counsel
and Secretary
March 26, 1997
20
<PAGE> 24
American Standard Companies Inc.
One Centennial Avenue
Piscataway, New Jersey 08854
<PAGE> 25
AMERICAN STANDARD COMPANIES INC. PROXY/VOTING INSTRUCTION CARD
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON MAY 1, 1997.
The undersigned hereby appoints Emmanuel A. Kampouris, Fred A. Allardyce and
Richard A. Kalaher, and each of them, proxies, with full power of substitution,
to vote all the shares of Common Stock of the undersigned at the Annual Meeting
of Stockholders to be held on Thursday, May 1, 1997, at 10:00 A.M. (EDT), at the
Embassy Suites Hotel, Embassy Ballroom, 121 Centennial Avenue, Piscataway, New
Jersey, and at any adjournment thereof, upon all subjects that may properly come
before the meeting, including the matters described in the proxy statement
furnished herewith, subject to any directions indicated on the reverse side of
this card. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR THE ELECTION OF
ALL LISTED NOMINEES, IN ACCORDANCE WITH THE DIRECTORS' RECOMMENDATIONS ON THE
OTHER MATTERS LISTED BELOW AND ON THE REVERSE SIDE OF THIS CARD AND IN THEIR
DISCRETION ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING. NO
MATTER TO BE VOTED UPON IS RELATED TO OR CONDITIONED ON THE APPROVAL OF ANY
OTHER MATTER.
YOUR VOTE FOR THE ELECTION OF DIRECTORS SHOULD BE INDICATED ON THE REVERSE SIDE
OF THIS CARD. Nominees for Class II Directors (to serve until the 2000 Annual
Meeting) are: Shigeru Mizushima, J. Danforth Quayle and Joseph S. Schuchert.
YOUR VOTE ON THE APPROVAL OF THE AMERICAN STANDARD COMPANIES INC. EMPLOYEE STOCK
PURCHASE PLAN SHOULD BE INDICATED ON THE REVERSE SIDE OF THIS CARD. YOUR VOTE ON
THE RATIFICATION OF AUDITORS SHOULD ALSO BE INDICATED.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE AND RETURN PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO CITICORP-WWSS-INVESTOR
SERVICES, C/O CORPORATE ELECTION SERVICES, P.O. BOX 3230, PITTSBURGH, PENNA.
15230, SO THAT YOUR SHARES CAN BE REPRESENTED AT THE MEETING.
<PAGE> 26
[ ]X PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
TO VOTE FOR ALL DIRECTOR NOMINEES, MARK THE "FOR" BOX ON ITEM "1". TO
WITHHOLD VOTING FOR ALL NOMINEES, MARK THE "WITHHOLD" BOX. TO WITHHOLD VOTING
FOR A PARTICULAR NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND ENTER NAME(S) OF THE
EXCEPTION(S) IN THE SPACE PROVIDED; YOUR SHARES WILL BE VOTED FOR THE REMAINING
NOMINEES.
DIRECTORS RECOMMEND A VOTE "FOR" ON 1, 2 AND 3 BELOW
<TABLE>
<S> <C> <C> <C> <C>
1. Election of All Class II Director Nominees. FOR WITHHELD FOR ALL EXCEPT
Exceptions _______________________________________________ [ ] [ ] [ ]
2. Approval of The American Standard Companies Inc. Employee FOR AGAINST ABSTAIN
Stock Purchase Plan. [ ] [ ] [ ]
3. Proposal to ratify the appointment of Ernst & Young LLP as FOR AGAINST ABSTAIN
Independent Certified Public Accountants for 1997. [ ] [ ] [ ]
</TABLE>
SIGN HERE AS NAME(S) APPEAR ABOVE.
__________________________________
__________________________________
PLEASE SIGN THIS PROXY AND RETURN
IT PROMPTLY WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING. IF
SIGNING FOR A CORPORATION OR
PARTNERSHIP OR AS AGENT, ATTORNEY
OR FIDUCIARY, INDICATE THE
CAPACITY IN WHICH YOU ARE SIGNING.
IF YOU DO ATTEND THE MEETING AND
DECIDE TO VOTE BY BALLOT, SUCH
VOTE WILL SUPERSEDE THIS PROXY.
DATE _______________________, 1997
