<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
[AMERICAN STANDARD COMPANIES LOGO]
American Standard Companies Inc.
Notice of Annual Meeting
of Stockholders and
Proxy Statement
May 7, 1998
Embassy Suites Hotel
121 Centennial Avenue
Piscataway, New Jersey
<PAGE> 3
[AMERICAN STANDARD COMPANIES LOGO]
Corporate Headquarters
------------------------------------------
One Centennial Avenue
P.O. Box 6820
Piscataway, NJ 08855-6820
Phone 732.980.6000
EMMANUEL A. KAMPOURIS
Chairman, President and
Chief Executive Officer
March 26, 1998
Dear Stockholder:
The Annual Meeting of Stockholders of American Standard Companies Inc. will
be held on Thursday, May 7, 1998, 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 will be our fourth Annual Meeting 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 1997 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), Porcher(R);
Automotive: WABCO(R); Medical: LARA(TM), Copalis(R) and DaiSorin(TM)
<PAGE> 4
AMERICAN STANDARD COMPANIES INC.
NOTICE OF 1998 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 7, 1998, at 10:00
A.M. (EDT) to consider and act upon the following:
1. The election of three Class III Directors with terms expiring at the
2001 Annual Meeting of Stockholders;
2. Approval of the 1997-1999 Supplemental Incentive Compensation Plan.
3. Approval to amend and restate the Company's Restated Certificate of
Incorporation to remove certain obsolete provisions and make a
clarifying change conforming to the Company's Amended By-laws.
4. Ratification of the appointment of Ernst & Young LLP as independent
Certified Public Accountants for the year 1998; and
5. 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 12, 1998 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, 1998
<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 7, 1998 and at any adjournments
thereof. The mailing of this Proxy Statement and proxy card is to commence on or
about March 30, 1998. The 1997 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 12, 1998 will be entitled to vote. At such time 72,663,383
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 12, 1998
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
1997-1999 Supplemental Incentive Compensation Plan, for approval to amend the
Company's Restated Certificate of Incorporation to remove certain obsolete
provisions and make a clarifying change conforming to the Company's Amended
By-laws and for ratification of the appointment of Ernst & Young LLP as the
Company's independent accountants for the year 1998. 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.
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 12, 1998
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)................................................ 6,013,185 8.3%
Joseph S. Schuchert(b)(c)................................... 1,286,029 1.8%
Emmanuel A. Kampouris(c)(d)................................. 1,147,669 1.6%
George H. Kerckhove(c)(d)................................... 399,539 *
Horst Hinrichs(c)(d)........................................ 418,522 *
Fred A. Allardyce(c)(d)..................................... 489,723 *
James H. Schultz(c)(d)...................................... 274,647 *
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)........................................ 10,819 *
American-Standard Employee Stock Ownership Plan (the
"ESOP")(d)................................................ 11,047,695 15.2%
All directors and executive officers of the Company as a
group (36 persons, including the foregoing)(d)............ 6,845,330 9.4%
</TABLE>
- ---------------
* Less than one percent.
(a) In a Schedule 13G dated February 14, 1998, FMR Corp., a Massachusetts
corporation and parent holding company ("FMR"), 82 Devonshire Street,
Boston, Massachusetts, certain subsidiaries of FMR, 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 689,785 of such shares
held by FMR and certain of its wholly-owned Investment Advisors.
(b) The business address for Mr. Schuchert is c/o Kelso & Company, L.P.
("Kelso"), 24th Floor, 320 Park Avenue, New York, N.Y. 10022.
(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 Schultz
are Named Officers of the Company and Messrs. Anderson, Mizushima, Parsons,
Quayle, Roderick and Schuchert are directors of the Company.
(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 12, 1998, all but 3,702 of the shares held in the ESOP were allocated
to ESOP participants, including 211,487 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. 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 12, 1998 are as follows: Mr. Kampouris, 12,377 shares; Mr.
Kerckhove, 12,039 shares; Mr. Hinrichs, 12,856 shares; Mr. Allardyce, 12,837
shares; and Mr. Schultz, 12,620 shares.
3
<PAGE> 7
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, 666,666; Mr.
Kerckhove, 180,000; Mr. Hinrichs, 180,666; Mr. Allardyce, 180,000; Mr.
Schultz, 135,666; and all executive officers, 3,183,924.
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. Schultz, 8,795 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.
1. ELECTION OF DIRECTORS
The Board of Directors of the Company presently consists of nine 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 expired at the 1996 annual meeting of stockholders, (ii) the initial
term of the Class II Directors expired 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. Accordingly, at the Annual Meeting,
the stockholders will vote to elect three Class III Directors for a term
expiring in 2001. 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 III DIRECTORS -- TERMS EXPIRING AT 2001 ANNUAL
MEETING
STEVEN E. ANDERSON -- AGE 55
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.
- ---------------
1 All the directors of the Company are also directors of American Standard Inc.
Ages of directors are given as of March 1, 1998
4
<PAGE> 8
EMMANUEL A. KAMPOURIS -- AGE 63
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. Mr. Kampouris has served as a director of the Company since July
1988.
ROGER W. PARSONS -- AGE 56
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.
DIRECTORS CONTINUING IN OFFICE
CLASS I DIRECTORS -- TERMS EXPIRING AT 1999 ANNUAL MEETING
HORST HINRICHS -- AGE 64
Effective January 1, 1998, Mr. Hinrichs assumed the position of Vice
Chairman of the Company and American Standard Inc. Prior thereto he was Senior
Vice President, Automotive Products, of the Company and American Standard Inc.
beginning in December 1990 and 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 60
Effective January 1, 1998, Mr. Kerckhove assumed the position of Vice
President and Chief Financial Officer of the Company and American Standard Inc.
Prior thereto he was Senior Vice President, Plumbing Products, of the Company
and American Standard Inc. beginning in June 1990 and 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 73
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., Chairman and a director of
Earle M. Jorgensen Company, and a director of University of Pittsburgh Medical
Center. 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.
CLASS II DIRECTORS -- TERMS EXPIRING AT 2000 ANNUAL MEETING
SHIGERU MIZUSHIMA -- AGE 54
Since mid 1997, Mr. Mizushima has been self-employed as a business
consultant. Prior thereto he was a director, President and Chief Operating
Officer of Daido Hoxan Inc. beginning in April 1993 after the merger 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. Mr. Mizushima has served as a director of the
Company since July 1988.
5
<PAGE> 9
J. DANFORTH QUAYLE -- AGE 51
Mr. Quayle served as Vice President of the United States from January 1989
to January 1993. Since leaving that office Mr. Quayle has been self employed and
served as founding Chairman and a director of Circle Investors, Inc. (an
investment planning and consulting firm) until December 1997. He is a director
of Central Newspapers, Inc., and U.S. Filter Corporation, served as a director
of Amtran Inc. from February through October of 1996 and, since October 1995,
has been Chairman of Campaign America. Mr. Quayle has served as a director of
the Company since September 1993.
JOSEPH S. SCHUCHERT -- AGE 69
Mr. Schuchert has been Chairman, and until August 1997 also served as Chief
Executive Officer, 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.
DIRECTORS' FEES AND OTHER ARRANGEMENTS
Each outside director is paid a fee of $7,500 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 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 or American Standard Inc. They are Messrs.
Anderson, Mizushima, Parsons, Quayle, Roderick and, since the 1997 disposition
by Kelso ASI Partners, L.P. ("ASI Partners") of its equity investment in the
Company, Mr. Schuchert. 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 and
December 1997. Prior to the 1996 amendment, directors were credited with units
representing shares of Common Stock at the date of their election to the Board.
Under the Supplemental Compensation Plan, as amended in 1996, a plan account is
established for each participating director consisting of shares of Common Stock
equal in number to the units awarded to each director under the Supplemental
Compensation Plan prior to its amendment. Shares of Common Stock awarded to
directors are delivered to a grantor's trust and held for the benefit of each
director, and are voted by the trustee of the trust on behalf of each
participating director in accordance with the director's instructions. 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 eligible 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 or eligibility,
whichever is later. Pursuant to the December 1997 amendment, directors who are
not employees of the Company or any affiliate will have credited to their plan
account annually, on the date prior to the Annual Meeting of Stockholders, 500
shares of Common Stock subject to the same restrictions applicable to shares
credited to their plan accounts upon becoming a director. The first such annual
allocation will be made in May 1998.
When a participating director ceases to be a member of the Board, he or his
beneficiary will receive a distribution from the grantor's trust of the shares
of Common Stock in the director's plan account. Until distributed, assets in the
grantor's trust are subject to the claims of creditors of the Company and
American Standard Inc. If a participating director is removed for cause, his
entire interest in the Plan is forfeited. Employee directors do not participate
in the Supplemental Compensation Plan.
6
<PAGE> 10
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,
Quayle and Roderick.
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 met twice in 1997.
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 1997.
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
of the Company's employee benefit and compensation plans, 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 with
respect to candidates for director 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
concerning 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 1997.
The Board of Directors had eight meetings, including reconvened meetings,
in 1997. All directors attended 75% or more of the combined total number of
meetings of the Board of Directors and its respective committees held in 1997
during the period in which they served as Directors or committee members.
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 1997, 1996 and 1995 of those
persons who were during 1997 the chief executive officer and the other four most
highly compensated executive officers of the Company (collectively, the "Named
Officers").
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- --------------------------------------
OTHER
ANNUAL RESTRICTED ALL OTHER
NAME AND COMPEN- STOCK LTIP COMPEN-
PRESENT POSITION YEAR SALARY(1) BONUS(2) SATION(3) AWARDS($)(4) OPTIONS(#) PAYOUTS(5) SATION(6)
---------------- ---- --------- ---------- --------- ------------ ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris......... 1997 $700,000 $1,700,000 $240,938 $ -- 200,000 $ -- $244,919
Chairman, President & 1996 683,333 1,500,000 233,905 181,428 -- 1,067,222 229,951
Chief Executive Officer 1995 600,000 1,200,000 219,373 529,338 600,000 1,508,113 230,915
George H. Kerckhove........... 1997 $375,000 $ 188,000 $ 12,525 $ -- 30,000 $ -- $ 36,399
Vice President & Chief 1996 375,000 125,000 5,863 80,149 -- 471,467 27,683
Financial Officer 1995 362,500 140,000 6,069 240,837 170,000 686,159 28,271
Horst Hinrichs................ 1997 $322,918 $ 200,000 $ 3,135 $ -- 32,000 $ -- $ 15,580
Vice Chairman 1996 310,284 132,000 3,747 75,394 -- 443,496 21,542
1995 361,044 200,000 3,870 244,968 170,000 697,929 21,350
Fred A. Allardyce............. 1997 $310,000 $ 140,000 $ 75,192 $ -- 30,000 $ -- $ 49,100
Senior Vice President 1996 306,667 132,000 62,815 59,953 -- 352,667 47,012
1995 290,000 130,000 25,574 174,900 170,000 498,300 42,589
James H. Schultz.............. 1997 $265,000 $ 142,000 $ 17,281 $ -- 32,000 $ -- $ 21,880
Vice President 1996 245,000 127,000 11,783 48,688 -- 286,400 20,794
1995 245,000 120,000 13,566 147,764 125,000 420,988 20,578
</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, 1996 and 1997 for Mr. Kampouris include
allocation of $64,127, $50,938 and $41,204, respectively, of tax consultant
fees.
(4) 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. Amounts for 1995 and 1996, respectively, include the
portions of LTIP awards applicable to achievement of the applicable
performance goal in excess of 100%. Amounts for 1995 also include 50% of the
total awards under the 1994-95 Supplemental Incentive Compensation Plan.
(5) No LTIP payments were made in 1997 as the 1995-1997 performance goal related
to inventory turnover rates was not achieved. Amounts for 1996 represent the
cash portion of awards paid under the LTIP, on the basis of achievement of
117% of the 1994-1996 performance goal. 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. LTIP payouts may be deferred at the
election of the recipient.
(6) Included in All Other Compensation for 1997 was the following:
<TABLE>
<CAPTION>
PREMIUMS FOR ESOP
TERM LIFE ALLOCATIONS*
INSURANCE $
------------ ------------
<S> <C> <C>
Emmanuel A. Kampouris............................... $20,339 $14,400
George H. Kerckhove................................. 6,476 14,400
Horst Hinrichs...................................... 7,011 14,400
Fred A. Allardyce................................... 7,037 14,400
James H. Schultz.................................... 4,420 14,400
</TABLE>
* Includes matching contributions related to contributions made by Named
Officers to the Savings Plan.
Stock Options. The following table sets forth information concerning stock
options granted in 1997, including the potential realizable value of each grant
assuming that the market value of the Company's
8
<PAGE> 12
Common Stock appreciates from the date of grant to the expiration of the option
at annualized rates of (a) 5% and (b) 10%, in each case compounded annually over
the term of the option. These assumed rates of appreciation have been specified
by the Securities and Exchange Commission for illustrative purposes only and are
not intended to predict future prices of the Company's Common Stock, which will
depend upon various factors, including market conditions and the Company's
future performance and prospects. For example, the option granted to Mr.
Kampouris in 1997 would produce the pretax gain in 2007 of $13,134,000 shown in
the table only if the market price of the Common Stock rises to $106.92 per
share by the time the option is exercised. Based on the number and market price
of shares of Common Stock outstanding at year-end 1997, such an increase in the
price of the Common Stock would produce a corresponding aggregate pretax gain of
more than $4.5 billion for the Company's stockholders. All of the options listed
below have exercise prices equal to the fair market value of the Common Stock at
the date of grant. One-third of the granted options become exercisable annually
in installments beginning one year after the date of grant, subject to
acceleration in the event of a change in control of the Company.
1997 OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NO. OF % OF TOTAL OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED IN 1997* ($/SHARE) DATE 5% 10%
---- ---------- ---------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Emmanuel A. Kampouris.......... 200,000 15.7% $41.25 2/2/07 $5,180,000 $13,134,000
George H. Kerckhove............ 30,000 2.3 41.25 2/2/07 777,000 1,970,100
Horst Hinrichs................. 32,000 2.5 41.25 2/2/07 828,000 2,101,440
Fred A. Allardyce.............. 30,000 2.3 41.25 2/2/07 777,000 1,970,100
James H. Schultz............... 32,000 2.5 41.25 2/2/07 828,000 2,101,440
</TABLE>
- ---------------
* In 1997, options were granted covering 1,273,250 shares of Common Stock.
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, 1997 (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, 1997). No options held by the Named Officers were exercised in
1997.
1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
OPTIONS VALUE AT 12/31/97
-------------------------------------------
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/97 12/31/97
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
---- ----------------- ----------------------
<S> <C> <C>
Emmanuel A. Kampouris....................... 400,000/400,000 $7,325,000/$3,662,500
George H. Kerckhove......................... 113,333/ 86,667 2,075,411/ 1,037,714
Horst Hinrichs.............................. 113,333/ 88,667 2,075,411/ 1,037,714
Fred A. Allardyce........................... 113,333/ 86,667 2,075,411/ 1,037,714
James H. Schultz............................ 83,333/ 73,667 1,526,035/ 763,027
</TABLE>
9
<PAGE> 13
LONG-TERM INCENTIVE COMPENSATION PLAN AWARDS IN 1997
1997-1999 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) 1/97-12/99 $595,000 $1,190,000 $2,380,000
George H. Kerckhove........ (a) 1/97-12/99 243,750 487,500 975,000
Horst Hinrichs............. (a) 1/97-12/99 201,750 403,500 807,000
Fred A. Allardyce.......... (a) 1/97-12/99 207,167 414,333 828,666
James H. Schultz........... (a) 1/97-12/99 173,000 346,000 692,000
</TABLE>
- ---------------
(a) Awards are denominated in dollars (based on December 31, 1997 foreign
exchange rates, where applicable).
The above table shows the contingent target awards, based on 1997 salary
levels, established in 1997 for each Named Officer with respect to the 1997-1999
LTIP performance period. The targets set for the 1997-1999 LTIP performance
period are based on the achievement by the end of such performance period of
predetermined company-wide levels of average 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 average 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 average inventory turnover at a substantially
increased rate or by a combination of an increase in average 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 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 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 LTIP 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. 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 governing trust agreement.
10
<PAGE> 14
1997-1999 SUPPLEMENTAL INCENTIVE COMPENSATION PLAN AWARDS IN 1997
<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) 5/97-12/99 $ 297,500 $ 2,380,000
George H. Kerckhove................. (a) 5/97-12/99 $ 121,875 $ 975,000
Horst Hinrichs...................... (a) 5/97-12/99 $ 100,875 $ 807,000
Fred A. Allardyce................... (a) 5/97-12/99 $ 103,584 $ 828,666
James H. Schultz.................... (a) 5/97-12/99 $ 86,500 $ 692,000
All executive officers as a
group(30)......................... (a) 5/97-12/99 $ 2,115,571 $16,924,566
All non-executive officers as a
group............................. (a) 5/97-12/99 $20,902,000 $41,804,100
</TABLE>
- ---------------
(a) Awards are denominated in dollars.
The above table reflects estimated threshold and maximum payouts (based on
December 31, 1997 foreign exchange rates where applicable) to Named Officers and
the named groups under the 1997-1999 Supplemental Incentive Compensation Plan.
The threshold target for an award under the 1997-1999 Supplemental Incentive
Compensation Plan is a pre-determined amount of earnings per share for the year
1999. If the threshold is reached, each Named Officer will receive under the
Supplemental Incentive Compensation Plan a supplemental payment equal to 50% of
his LTIP payout for the 1997-1999 performance period ("1999 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 Compensation Plan. In addition, the Supplemental Incentive
Compensation Plan requires a participant's continued employment (except in cases
of death, disability or retirement) until December 31, 1999 and a minimum period
of employment during the term of the plan to be eligible to receive an award.
Awards for executive officers and for non-officer executives are payable 50% in
Common Stock, valued at market value approximately as of the date of payment,
and 50% in cash, and 100% in cash to management participants. In the event a
change of control (as defined in the Supplemental Incentive Compensation Plan)
occurs during the plan period, the plan will terminate and each participant will
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. Schultz, $43,664.
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 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.
11
<PAGE> 15
The table below shows the annualized target Supplemental Retirement Plan
benefit payable for life to a participant 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, 1997 the years of credited service under the
Supplemental Retirement Plan for the Named Officers are as follows: Mr.
Kampouris, 32 years; Mr. Kerckhove, 36 years; Mr. Hinrichs, 39 years; Mr.
Allardyce, 21 years; and Mr. Schultz, 27 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 and Mr. Hinrichs, $143,000.
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.
12
<PAGE> 16
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 1997, 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 1997 was
below targeted levels.
13
<PAGE> 17
LONG-TERM INCENTIVE COMPENSATION AWARDS
Executive officers of the Company also participate in the Company's
Long-Term Incentive Compensation Plan ("LTIP"), the 1996-1998 Supplemental
Incentive Compensation Plan, and the 1997-1999 Supplemental Incentive
Compensation Plan, which provide such individuals with additional incentive
compensation based upon the achievement of various corporate performance goals.
Incentive payments will not be awarded to executive officers with respect
to fiscal year 1997 under the Company's LTIP for the 1995-1997 performance
period because certain company-wide stretch goals relating to inventory turnover
rates for 1997 were not achieved. In periods when the LTIP targets are achieved,
award opportunities range 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.
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 paid under the LTIP for the comparable 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. At present, it does not
appear that the threshold for the stretch targets under this plan will be
achieved, therefore, no payout is anticipated.
Effective May 1, 1997, the Company implemented the 1997-1999 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 1997-1999 Supplemental Incentive Compensation Plan unless the
threshold targets established for the LTIP 1997-1999 performance period are
achieved. If those targets are met, payments equal to 50% of the actual award
under the LTIP 1997-1999 performance period will be made if a certain
pre-determined threshold of earnings per share is reached for the year 1999. The
amount of such payments will be adjusted upward to reflect performance exceeding
the threshold to a maximum amount equal to the maximum amount payable under the
LTIP 1997-1999 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.
During 1997 stock options were granted to each executive officer, the amount of
which was based on the 1996 performance of the individual and his/her business
group.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
BASE SALARY
Consistent with the above-stated policies, Mr. Kampouris' base salary for
1997 was 14% below the average base salary payable for chief executive officers
for companies having comparable sales. Mr. Kampouris received no increase in
base salary during 1997 and, in keeping with the objectives of the Committee to
emphasize variable compensation, he has had only two increases in base salary
since becoming Chief Executive Officer of the Company in 1989.
14
<PAGE> 18
ANNUAL INCENTIVE COMPENSATION
Consistent with past practices for paying compensation to the Company's
Chief Executive Officer, Mr. Kampouris received a bonus for 1997 services of
$1,700,000, which was determined based on the Committee's subjective
determination of his performance and that of the Company during 1997.
LONG-TERM INCENTIVE COMPENSATION
As noted above, the threshold target for inventory turns was not achieved
under the 1995-1997 Long Term Incentive Plan, therefore, Mr. Kampouris will not
receive long-term incentive payments under the 1995-1997 LTIP.
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 regulations under
Section 162(m) generally provided 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 the Company went public
was not subject to Section 162(m). As Section 162(m) will apply to any newly
established plans, the Company did obtain shareholder approval of the 1996-1998
Supplemental Incentive Compensation Plan, and will be seeking shareholder
approval of the 1997-1999 Supplemental Incentive Compensation Plan, in order to
ensure that any compensation paid thereunder will be deductible. 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
15
<PAGE> 19
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, 1997 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>
AMERICAN S&P
STANDARD MANUFACTURING
Measurement Period COMPANIES (DIVERSIFIED
(Fiscal Year Covered) INC S&P 500 INDEX INDUSTRIALS)
<S> <C> <C> <C>
3-Feb-95 100.00 100.00 100.00
Jun-95 136.88 114.84 121.82
Dec-95 140.00 131.43 134.63
Jun-96 165.00 144.70 155.43
Dec-96 191.25 161.61 185.53
Jun-97 223.75 194.91 230.78
Dec-97 191.56 215.52 220.94
</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 of Kelso & Companies, Inc. (the general
partner of Kelso) and until February 28, 1998 was 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, during the first half of 1997
ASI Partners disposed of all of the shares it owned of the Company's Common
Stock. As a result, ASI Partners no longer owns any Common Stock and no longer
has the right to designate any nominees for election to the Company's Board of
Directors. In connection with the Stock Disposition Agreement, ASI Partners
received from the Company warrants (the "Warrants") to purchase three million
shares of Common Stock at a purchase price of $55 per share, expiring February
18, 2002, which Warrants are currently exercisable. Mr. Schuchert, a director of
the Company and American Standard Inc., until February 28, 1998 was a general
partner of Kelso American Standard Partners, L.P., the general partner of ASI
Partners.
In April 1996, American Standard Inc. acquired the 30% of Alimenterics
Inc., a New Jersey corporation engaged in research, development and sales of
certain medical diagnostic equipment and technology
16
<PAGE> 20
("Alimenterics"), not already owned by it from Diagnostics & Devices, 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 (i) such initially issued shares at the end of 2000 with
(ii) 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. 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
systems and technology ("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 and former executive officers of American Standard Inc., who
had agreed in April 1995 to invest in SW Investment Associates. Mr. Schuchert is
a general partner of SW Associates and owns approximately a 33% interest
therein. American Standard Inc. has agreed to invest $4,435,000 in SW Investment
Associates, and Mr. Kampouris and 14 other officers and former officers of
American Standard have invested $120,000 and, collectively $195,000,
respectively; which will constitute an aggregate ownership interest therein of
approximately 32%.
Fidelity Management Trust Company ("Fidelity") is the owner of record of
the shares of Common Stock held by the ESOP, a 15.2% beneficial owner of the
Company's shares. Fidelity was paid by the Company approximately $322,025 in
1997 for services in connection with administering the Company's ESOP and
American Standard Inc.'s Savings Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 1997, except that Mr. Schiller, a former executive
officer, exercised incentive stock options to acquire 5,000 shares of Common
Stock, but did not sell the shares acquired, and reported such exercise three
days late in February 1997; Mr. Kampouris purchased 10,000 shares of Common
Stock on September 23, 1997 and 5,000 shares of Common Stock on October 29,
1997, which purchases were reported on November 13, 1997; and Mr. Lunghi
purchased 500 shares of Common Stock on September 11, 1997, which purchase was
reported on December 5, 1997.
2. APPROVAL OF 1997-1999 SUPPLEMENTAL
INCENTIVE COMPENSATION PLAN
On the recommendation of the Management Development and Nominating
Committee, the Board has approved the 1997-1999 Supplemental Incentive
Compensation Plan (the "Supplemental Incentive Plan") and is currently seeking
stockholder approval of the Supplemental Incentive Plan to permit award payments
to Named Officers under the plan to be deductible by the Company for federal
income tax purposes pursuant to Section 162(m) of the Internal Revenue Code. The
Supplemental Incentive Plan is intended to provide to certain key employees, as
well as executive officers, an opportunity to earn incentive compensation, in
the form of cash and Common Stock, upon achievement by the Company of
pre-established performance goals established by the Supplemental Incentive
Plan.
17
<PAGE> 21
A description of the basis on which awards are payable to the Company's
executive officers under the Supplemental Incentive Plan and a table showing
awards made in 1997 are set forth in this Proxy Statement under the heading
"Executive Compensation -- Long-Term Incentive Compensation Plan Awards in
1997 -- 1997-1999 Supplemental Incentive Compensation Plan Awards in 1997." In
addition to the Company's 30 executive officers who may participate in the
Supplemental Incentive Plan, 180 current non-officer executives and 900
non-officer management employees are eligible to participate in the plan.
Non-employee directors are ineligible to participate in the Supplemental
Incentive Plan. Non-officer executives and management employees will participate
in the Supplemental Incentive Plan subject to the same Company performance
criteria as executive officers, except that the maximum award payable to a
participating non-officer executive is equal to three times the executive's 1999
annual incentive plan payment and the maximum award payable to a participating
non-officer management employee is equal to a specified dollar amount, rather
than an amount based on 1999 LTIP payouts as in the case of executive officers.
Approval of the Supplemental Incentive Plan requires the affirmative vote
of a majority of the shares of Common Stock represented in person or by proxy at
the Annual Meeting, provided a quorum is present (a majority of the shares
entitled to vote at the meeting). Abstentions may be counted as votes against
the proposal; broker non-votes will not affect the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1997-1999
SUPPLEMENTAL INCENTIVE COMPENSATION PLAN.
3. APPROVAL OF PROPOSED AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors at its regular meeting held on March 5, 1998 adopted
a resolution (the "Resolution") that there be submitted to stockholders for
approval at the Company's 1998 Annual Meeting of Stockholders the Board's
proposal to amend and restate the Company's Restated Certificate of
Incorporation to delete certain obsolete provisions and to make a clarifying
change conforming to the Company's Amended By-laws. The Company's Certificate of
Incorporation was last amended in January 1995 and contains certain obsolete
provisions related, among other things, to providing ASI Partners certain rights
granted under the Amended and Restated Stockholders Agreement ("Stockholders
Agreement") dated December 2, 1994 among the Company, ASI Partners and certain
employee stockholders. Such obsolete provisions include, principally, special
rights of ASI Partners to remove directors with or without cause, to vote by
written action for election of Director nominees designated by ASI Partners and
for removal of Directors designated for nomination by ASI Partners or, under
certain circumstances, to call special meetings of stockholders. In conjunction
with the Stock Disposition Agreement, during the first half of 1997, ASI
Partners disposed of all shares of Common Stock it owned and the Stockholders
Agreement was terminated. Consequently, the provisions of the Restated
Certificate of Incorporation relating to ASI Partners are no longer effective.
Additionally, the Resolution proposes amending Article SEVENTH of the Restated
Certificate of Incorporation to conform with the provisions of the Company's
Amended By-laws to clarify that, in the event of any change in the number of
directorships comprising the Board of Directors, the total number of resulting
directorships be apportioned among the classes of the Board so as to maintain or
attain a number of Directors in each class as nearly equal as reasonably
possible.
A copy of the Resolution and of the Restated Certificate of Incorporation,
marked to show the changes proposed and recommended by the Directors to the
stockholders for approval, is printed in Appendix A to this Proxy Statement.
Approval of the proposed amendment and restatement of the Restated
Certificate of Incorporation requires the affirmative vote of the holders of at
least sixty-five percent of the outstanding stock entitled to vote generally in
the election of Directors. Abstentions and broker non-votes, therefore, will
have the same effect as votes against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
18
<PAGE> 22
4. 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 1998 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.
1999 STOCKHOLDER PROPOSALS
Any proposal a stockholder wishes to submit in accordance with the proxy
rules of the Commission for inclusion in the Company's 1999 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 7, 1998. 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 1999 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 1999 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.
5. 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, 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, 1998
19
<PAGE> 23
APPENDIX A
WITNESSETH:
WHEREAS, in connection with that certain Stock Disposition Agreement, dated
December 16, 1996 (the "Stock Disposition Agreement"), among American Standard
Companies Inc., (the "Corporation"), Kelso & Company, L. P. ("Kelso") and Kelso
ASI Partners, L. P. ("ASI Partners"), ASI Partners disposed of all shares of the
Corporation's common stock, par value $.01 per share ("Common Stock"),
previously owned by ASI Partners, and
WHEREAS, the Corporation's Restated Certificate of Incorporation contains
numerous provisions granting ASI Partners special rights to control the election
of directors, the calling of special meetings and other matters while ASI
Partners continues to be a stockholder, which provisions are obsolete now that
ASI Partners has disposed of its Common Stock, and
WHEREAS, in addition to the foregoing, a clarification of the Corporation's
Restated Certificate of Incorporation is desirable and in conformity with the
provisions of the Corporation's Amended By-laws relating to apportionment of
directorships among the classes of the Board in the event of any change in the
number of directorships.
NOW THEREFORE BE IT
RESOLVED, that the Directors of the Corporation hereby declare it to be
advisable and in the best interest of the Corporation that the Corporation's
Restated Certificate of Incorporation be amended and restated at the earliest
practicable date (a) to remove obsolete provisions thereof relating to rights
formerly granted to Kelso ASI Partners, L. P., which rights have terminated, and
(b) to amend Article SEVENTH of the Restated Certificate of Incorporation to
conform the terms thereof with the provisions of Section 2.2 of the
Corporation's Amended By-laws to the effect that, in the event of any change in
the number of directorships comprising the Corporation's Board of Directors, the
total number of resulting directorships be apportioned among the classes of the
Board so as to maintain or attain in each class a number of directors as nearly
equal as reasonably possible, and be it further
RESOLVED, that the draft text of the proposed amendment and restatement of
the Restated Certificate of Incorporation, in the form attached hereto
incorporating the terms of the amendments referred to in the foregoing
Resolution (the "Proposed Restatement"), be and the same hereby is approved, and
be it further
RESOLVED, that the Proposed Restatement be presented in the Corporation's
1998 Proxy Statement and submitted to the Corporation's stockholders for
approval at the Corporation's 1998 Annual Meeting of Stockholders on May 7,
1998, and be it further
RESOLVED, that subject to and upon approval of the Proposed Restatement by
the Corporation's stockholders, the proper officers of the Corporation be and
they hereby are authorized and directed to certify, file or cause to be filed
with the Secretary of State of the State of Delaware and such other authorities
as may be required or appropriate, all such certificates, instruments and other
documents as shall be necessary or desirable to give effect to the foregoing
Resolutions.
A-1
<PAGE> 24
[TEXT OF PROPOSED AMENDED CERTIFICATE OF INCORPORATION]
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN STANDARD COMPANIES INC.
FIRST: The name of the Corporation is American Standard Companies Inc.
SECOND: The Corporation's registered office in the State of Delaware is at
Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The nature of the business of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of stock which the Corporation
shall have authority to issue is 200,000,000 shares of common stock, par value
$.01 per share (the "Common Stock"), and 2,000,000 shares of preferred stock,
par value $.01 per share (the "Preferred Stock").
(b) Each holder of Common Stock shall be entitled to one vote for each
share of Common Stock held of record by such holder and shall be entitled to
vote with respect to all matters as to which a stockholder of a Delaware
corporation would be entitled to vote.
(c) The Preferred Stock may be issued at any time and from time to time in
one or more series. The Board of Directors is hereby authorized to provide for
the issuance of shares of Preferred Stock in series and, by filing a certificate
of designation pursuant to the applicable provisions of the General Corporation
Law of the State of Delaware (hereinafter referred to as a "Preferred Stock
Certificate of Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of shares of each such series and the qualifications,
limitations and restrictions thereof.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determination of the
following:
(i) the designation of the series, which may be by distinguishing
number, letter or title;
(ii) the number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the applicable
Preferred Stock Certificate of Designation) increase or decrease (but not
below the number of shares thereof then outstanding);
(iii) whether dividends, if any, shall be cumulative or noncumulative
and the dividend rate of the series;
(iv) the dates on which dividends, if any, shall be payable;
(v) the redemption rights and price or prices, if any, for shares of
the series;
(vi) the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
(vii) the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
affairs of the Corporation;
(viii) whether the shares of the series shall be convertible or
exchangeable into shares of any other class or series, or any other
security, of the Corporation or any other corporation, and, if so, the
specification of such other class or series or such other security, the
conversion or exchange price or prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible or
exchangeable and all other terms and conditions upon which such conversion
or exchange may be made;
(ix) restrictions on the issuance of shares of the same series or of
any other class or series; and
(x) the voting rights, if any, of the holders of shares of the series.
A-2
<PAGE> 25
(d) The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof.
(e) Except as may be required by law or as provided in this Restated
Certificate of Incorporation or in a Preferred Stock Certificate of Designation,
the Common Stock shall have the exclusive right to vote for the election of
Directors and for all other purposes, and holders of Preferred Stock shall not
be entitled to vote on any matter or receive notice of any meeting of
stockholders.
(f) The Corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the Corporation shall have
notice thereof, except as expressly provided by applicable law.
FIFTH: The Board of Directors is hereby authorized to create and issue,
whether or not in connection with the issuance and sale of any of its stock or
other securities or property, and to retain outstanding, rights entitling the
holders thereof to purchase from the Corporation shares of stock or other
securities of the Corporation or any other corporation. The times at which and
the terms upon which such rights are to be issued will be determined by the
Board of Directors and set forth in the contracts or instruments that evidence
such rights. The authority of the Board of Directors with respect to such rights
shall include, but not be limited to, determination of the following:
(a) The initial purchase price per share or other unit of the stock or
other securities or property to be purchased upon exercise of such rights.
(b) Provisions relating to the times at which and the circumstances under
which such rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other stock or other securities of the
Corporation.
(c) Provisions which adjust the number or exercise price of such rights, or
amount or nature of the stock or other securities or property receivable upon
exercise of such rights, in the event of a combination, split or
recapitalization of any stock of the Corporation, a change in ownership of the
Corporation's stock or other securities or any portion thereof or a
reorganization, merger, consolidation, sale of assets or other occurrence
relating to the Corporation or any stock of the Corporation, and provisions
restricting the ability of the Corporation to enter into any such transaction
absent an assumption by the other party or parties thereto of the obligations of
the Corporation under such rights.
(d) Provisions which deny the holder of a specified percentage of the
outstanding stock or other securities of the Corporation, or having other
specified characteristics or status, the right to exercise such rights and/or
cause the rights held by such holder to become void.
(e) Provisions which permit the Corporation to redeem and exchange such
rights.
(f) The appointment of a rights agent with respect to such rights.
SIXTH: In furtherance and not in limitation of the powers conferred upon
it by law, the Board of Directors shall have the power without the assent or
vote of the stockholders to adopt, amend, alter or repeal the Amended By-Laws of
the Corporation, except to the extent that the Amended By-Laws or this Restated
Certificate of Incorporation otherwise provide.
SEVENTH: (a) The business and affairs of the Corporation shall be managed
by or under the direction of its Board of Directors, which may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
law or by this Restated Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
(b) The number of Directors constituting the initial Board of Directors
shall be eleven (11) and thereafter the number of Directors shall be as set
forth in or pursuant to the Amended By-Laws of the Corporation, but shall not be
more than twenty-one (21).
A-3
<PAGE> 26
DELETE THE FOLLOWING:
The Board of Directors shall be divided at the annual meeting of
stockholders to be held in 1995 into three classes, designated Classes I, II and
III, which shall be as nearly equal in number as possible.
REPLACE WITH:
The Board of Directors shall be divided into three classes, designated
Classes I, II and III, the number of directorships in each of which Classes
shall be equal or as nearly equal in number as possible.
DELETE THE FOLLOWING:
At the annual meeting of stockholders to be held in 1995, Directors of
Class I shall be elected to hold office for a term expiring at the annual
meeting of stockholders to be held in 1996, Directors of Class II shall be
elected to hold office for a term expiring at the annual meeting of stockholders
to be held in 1997 and Directors of Class III shall be elected to hold office
for a term expiring at the annual meeting of stockholders to be held in 1998. At
each succeeding annual meeting of stockholders following such initial
classification and election, the respective successors of the Directors whose
terms are expiring shall be elected for terms expiring at the annual meeting of
stockholders held in the third succeeding year. Vacancies in the Board of
Directors and newly created Directorships resulting from any increase in the
authorized number of Directors may be filled as provided in the Amended By-Laws.
REPLACE WITH:
At the annual meeting of stockholders in 1995, Directors of Class I were
elected for a term expiring at the 1996 annual meeting of stockholders,
Directors of Class II were elected for a term expiring at the 1997 annual
meeting of stockholders and Directors of Class III were elected for a term
expiring at the 1998 annual meeting of stockholders. At each succeeding annual
meeting of stockholders, the respective successors of the Directors whose terms
are then expiring shall be elected for terms expiring at the annual meeting of
stockholders held in the third succeeding year. Vacancies in the Board of
Directors may be filled as provided in the Amended By-Laws. If the number of
Directors is changed, any increase or decrease shall be apportioned among the
Classes so as to attain or maintain in each Class a number of directors as
nearly equal as reasonably possible.
RESUME ORIGINAL TEXT:
The holders of a majority of the shares then entitled to vote at an
election of Directors may remove any Director or the entire Board of Directors,
but only for cause[.]
DELETE THE FOLLOWING:
; provided, however, that so long as Kelso ASI Partners, L.P. ("ASI
Partners"), together with its Affiliates (as defined in the Amended and Restated
Stockholders Agreement, dated as of December 2, 1994 (the "Amended and Restated
Stockholders Agreement"), among the Corporation, ASI Partners and the other
stockholders of the Corporation parties thereto), owns at least 35% of the
outstanding Common Stock, Directors may be removed upon receipt of such
requisite vote of stockholders with or without cause.
RESUME ORIGINAL TEXT:
Notwithstanding the foregoing, the election, term, removal and filling of
vacancies with respect to Directors elected separately by the holders of one or
more series of Preferred Stock shall not be governed by this Article SEVENTH,
but rather shall be as provided for in the Preferred Stock Certificate of
Designation creating and establishing such series of Preferred Stock.
(c) Advance notice of nominations by stockholders for the election of
Directors, and of stockholder proposals regarding action to be taken at any
meeting of stockholders, shall be given in the manner and to the extent provided
in the Amended By-Laws of the Corporation.
A-4
<PAGE> 27
EIGHTH: (a) A Director shall not be personally liable to the Corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
Director; provided that this provision shall not eliminate or limit the
liability of a Director (i) for any breach of his duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the General Corporation Law of the State of Delaware, or
(iv) for any transaction from which the Director derives an improper personal
benefit. If the General Corporation Law of the State of Delaware is amended
after the filing of this Restated Certificate of Incorporation to authorize
corporate action further eliminating or limiting the personal liability of
Directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall not adversely affect any right or protection of a
Director of the Corporation existing in respect of any act or omission occurring
prior to the time of such repeal or modification.
(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
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.
NINTH: A Director of the Corporation, in determining what he reasonably
believes to be in the best interests of the Corporation, shall consider the
interests of the Corporation's stockholders and, in his discretion, may consider
any of the following:
(a) The interests of the Corporation's employees, suppliers, creditors and
customers;
(b) The state of the U.S. and global economy;
(c) Community and societal interests; and
(d) The long-term as well as short-term interests of the Corporation and
its stockholders, including the possibility that these interests may be best
served by the continued independence of the Corporation.
TENTH: Election of Directors at an annual or special meeting of
stockholders need not be by written ballot unless the Amended By-Laws of the
Corporation shall so provide.
ELEVENTH: Cumulative voting for the election of Directors shall not be
permitted.
TWELFTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders of the Corporation, and the ability of the stockholders to
consent in writing to the taking of any action is hereby specifically denied[.]
DELETE THE FOLLOWING:
, provided, however, that so long as ASI Partners, together with its
Affiliates, owns at least 10% of the outstanding shares of the Common Stock,
stockholder action may be taken by written consent in order to vote on Director
nominees designated by ASI Partners pursuant to the Amended and Restated
Stockholders Agreement and to remove Directors designated for nomination by ASI
Partners pursuant to the Amended and Restated Stockholders Agreement. The
preceding sentence shall take effect on the day following the closing date of
the Corporation's initial underwritten public offering of Common Stock.
A-5
<PAGE> 28
RESUME ORIGINAL TEXT:
Except as otherwise required by law, special meetings of stockholders of
the Corporation may be called only by (i) the Chief Executive Officer of the
Corporation or (ii) the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized Directors[.]
DELETE THE FOLLOWING:
or (iii) for purposes of voting on Director nominees designated by ASI
Partners pursuant to the Amended and Restated Stockholders Agreement or the
removal of Directors designated for nomination by ASI Partners pursuant to the
Amended and Restated Stockholders Agreement, ASI Partners, so long as ASI
Partners, together with its Affiliates, owns at least 10% of the outstanding
Common Stock.
RESUME ORIGINAL TEXT:
THIRTEENTH: The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provision contained in this
Restated Certificate of Incorporation, and any other provisions authorized by
the laws of the State of Delaware at the time in force may be added or inserted,
in the manner now or hereafter prescribed herein or by applicable law, and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, Directors or any other persons whomsoever by and pursuant to this
Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the right reserved in this Article THIRTEENTH;
provided, however, that any amendment or repeal of Article EIGHTH of this
Restated Certificate of Incorporation shall not adversely affect any right or
protection existing hereunder immediately prior to such amendment or repeal; and
provided, further, that Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH, ELEVENTH,
TWELFTH and THIRTEENTH of this Restated Certificate of Incorporation shall not
be amended, altered, changed or repealed without the affirmative vote of the
holders of at least 65% of the then outstanding stock of the Corporation
entitled to vote generally in the election of Directors.
* * * *
A-6
<PAGE> 29
American Standard Companies Inc.
One Centennial Avenue
Piscataway, New Jersey 08854
<PAGE> 30
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 7, 1998.
The undersigned hereby appoints Emmanuel A. Kampouris, George H. Kerckhove 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 7, 1998 at 10:00 A.M. (EDT) at the
Embassy Suites Hotel, Embassy Ballroom, 121 Centennial Avenue, Piscataway, New
Jersey, and at any adjournments or postponements 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 III Directors (to serve until the 2001 Annual
Meeting) are: Steven E. Anderson, Emmanuel A. Kampouris and Roger W. Parsons.
YOUR VOTE ON THE APPROVAL OF THE 1997-1999 SUPPLEMENTAL INCENTIVE COMPENSATION
PLAN, ON APPROVAL OF AMENDMENT AND RESTATEMENT OF THE RESTATED CERTIFICATE OF
INCORPORATION AND ON THE RATIFICATION OF AUDITORS SHOULD ALSO BE INDICATED ON
THE REVERSE SIDE OF THIS CARD.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR OTHERWISE TO CORPORATE
ELECTION SERVICES, P.O. BOX 3230, PITTSBURGH, PA 15230, SO THAT YOUR SHARES CAN
BE REPRESENTED AT THE MEETING.
<PAGE> 31
[X]X PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
PLEASE SIGN, DATE AND RETURN THIS PROXY/VOTING INSTRUCTION CARD PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ALL NOMINEES AND FOR PROPOSALS 2, 3 AND 4. IF NO DIRECTIONS ARE GIVEN ON ANY
ITEM, THE PROXIES WILL VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS. 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.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of All Class III Director Nominees. FOR WITHHELD FOR ALL EXCEPT
Exceptions [ ] [ ] [ ]
2. Approval of 1997-1999 Supplemental Incentive Compensation FOR AGAINST ABSTAIN
Plan. [ ] [ ] [ ]
3. Approval to amend and restate the Restated Certificate of FOR AGAINST ABSTAIN
Incorporation. [ ] [ ] [ ]
4. Proposal to ratify the appointment of Ernst & Young LLP as FOR AGAINST ABSTAIN
Independent Certified Public Accountants for 1998. [ ] [ ] [ ]
</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 , 1998
