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                                                                EXHIBIT 10(iii)

                              ANNUAL INCENTIVE PLAN

         (As Amended and Restated as of December 5, 1996)



ARTICLE I.        PURPOSE

         The purpose of the Annual Incentive Plan (hereinafter referred to as
the "Plan") is to further the achievement of the corporate financial goals of
American Standard Inc. (sometimes hereinafter referred to as the "Corporation")
by providing bonus awards to key executives which reward the executive in
relation to the performance of the Corporation and its operating units and to
his individual contribution thereto.



ARTICLE II.       CHANGE OF CONTROL DEFINITION

         "Change of Control" shall mean the occurrence of any of the following
events:

                  (i) any person is or becomes the Beneficial Owner, directly or
                  indirectly, of securities of American Standard Companies Inc.
                  ("ASCI") representing 15% or more of the combined voting power
                  of ASCI's then-outstanding securities (a "15% Beneficial
                  Owner"); provided, however, that (a) the term "15% Beneficial
                  Owner" shall not include (1) Kelso ASI Partners, L.P. and
                  Kelso American Standard Partners, L.P. ("Kelso") and their
                  affiliates or their immediate transferees provided that any
                  such transferee holding 15% or more of the combined voting
                  power of ASCI's outstanding securities following any such
                  transfer does not following or concurrently with such transfer
                  acquire any additional shares of such securities except from
                  Kelso or any of their affiliates or (2) any Beneficial Owner
                  who has crossed such 15% threshold solely as a result of an
                  acquisition of securities directly from 
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                  ASCI, or solely as a result of an acquisition by ASCI of
                  ASCI's securities, until such time thereafter as such person
                  acquires additional voting securities other than directly from
                  ASCI and, after giving effect to such acquisition, such person
                  would constitute a 15% Beneficial Owner; and (b) with respect
                  to any person eligible to file a Schedule 13G pursuant to Rule
                  13d-1(b)(1) under the Act with respect to ASCI's securities
                  (an "Institutional Investor"), there shall be excluded from
                  the number of securities deemed to be beneficially owned by
                  such person a number of securities representing not more than
                  10% of the combined voting power of ASCI's then-outstanding
                  securities;

                  (ii) during any period of two consecutive years beginning
                  after December 1, 1996, individuals who at the beginning of
                  such period constitute the Board of Directors of ASCI together
                  with those individuals who first become directors during such
                  period (other than by reason of an agreement with ASCI or the
                  Board of Directors of ASCI in settlement of a proxy contest
                  for the election of directors) and whose election or
                  nomination for election to the Board of Directors of ASCI was
                  approved by a vote of at least two-thirds of the directors
                  then still in office who either were directors at the
                  beginning of the period or whose election or nomination for
                  election was previously so approved (the "Continuing
                  Directors"), cease for any reason to constitute a majority of
                  the Board of Directors of ASCI;

                  (iii) the shareholders of ASCI approve a merger,
                  consolidation, recapitalization or reorganization of ASCI, or
                  a reverse stock split of any class of voting securities of
                  ASCI, or the consummation of any such transaction if
                  shareholder approval is not obtained, 

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                  other than such transaction which would result in at least 75%
                  of the total voting power represented by the voting securities
                  of ASCI or the surviving entity outstanding immediately after
                  such transaction being beneficially owned by persons who
                  together owned at least 75% of the combined voting power of
                  the voting securities of ASCI outstanding immediately prior to
                  such transaction, with the relative voting power of each such
                  continuing holder compared to the voting power of each other
                  continuing holder not substantially altered as a result of the
                  transaction; provided that, for purposes of this paragraph
                  (iii), (a) such continuity of ownership (and preservation of
                  relative voting power) shall be deemed to be satisfied if the
                  failure to meet such 75% threshold (or to preserve such
                  relative voting power) is due solely to the acquisition of
                  voting securities by an employee benefit plan of ASCI or of
                  such surviving entity or of any subsidiary of ASCI or such
                  surviving entity and (b) voting securities beneficially owned
                  by such persons who receive them other than as holders of
                  voting securities of ASCI outstanding immediately prior to
                  such transaction shall not be taken into account for purposes
                  of determining whether such 75% threshold (or such relative
                  voting power) is satisfied;

                  (iv) the shareholders of ASCI approve a plan of complete
                  liquidation or dissolution of ASCI or an agreement for the
                  sale or disposition of all or substantially all the assets of
                  ASCI unless following the completion of such liquidation or
                  dissolution, or such sale or disposition, the 75% threshold
                  (and relative voting power) requirements set forth in
                  sub-paragraph (iii) above are satisfied; or

                  (v) any other event which the Management Development and
                  Nominating Committee of ASCI (the "ASCI Committee")

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                  determines shall constitute a Change of Control for purposes
                  of this Plan;

         provided, however, that a Change of Control shall not be deemed to have
         occurred if one of the following exceptions applies:

                  (1)      Unless a majority of the Continuing Directors and of
                           the ASCI Committee determine that the exception set
                           forth in this paragraph (1) shall not apply, none of
                           the foregoing conditions would have been satisfied
                           but for one or more of the following persons
                           acquiring or otherwise becoming the Beneficial Owner
                           of securities of ASCI: (A) any person who has entered
                           into a binding agreement with ASCI, which agreement
                           has been approved by two-thirds of the Continuing
                           Directors, limiting the acquisition of additional
                           voting securities by such person, the solicitation of
                           proxies by such person or proposals by such person
                           concerning a business combination with ASCI (a
                           "Standstill Agreement"); (B) any employee benefit
                           plan, or trustee or other fiduciary thereof,
                           maintained by ASCI or any subsidiary of ASCI; (C) any
                           subsidiary of ASCI; or (D) ASCI.

                  (2)      Unless a majority of the Continuing Directors and of
                           the ASCI Committee determine that the exception set
                           forth in this paragraph (2) shall not apply, none of
                           the foregoing conditions would have been satisfied
                           but for the acquisition by or of ASCI of or by
                           another entity (whether by the merger or
                           consolidation, the acquisition of stock or assets, or
                           otherwise) in exchange, in whole or in part, for
                           securities of ASCI, provided that, immediately
                           following such acquisition, the Continuing Directors
                           constitute a majority of the Board of

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                           Directors of ASCI, or a majority of the board of
                           directors of any other surviving entity, and, in
                           either case, no agreement, arrangement or
                           understanding exists at that time which would cause
                           such Continuing Directors to cease thereafter to
                           constitute a majority of the Board of Directors of
                           ASCI or of such other board of directors.

                  Notwithstanding the foregoing, unless otherwise determined by
         a majority of the Continuing Directors, no Change of Control shall be
         deemed to have occurred with respect to a particular participating
         employee (a "Participant") if the Change of Control results from
         actions or events in which such Participant is involved in a capacity
         other than solely as an officer, employee or director of ASCI.

                  For purposes of the foregoing definition of Change of Control,
         the term "Beneficial Owner," with respect to any securities, shall mean
         any person who, directly or indirectly, has or shares the right to vote
         or dispose of such securities or otherwise has "beneficial ownership"
         of such securities (within the meaning of Rule 13d-3 and Rule 13d-5 (as
         such Rules are in effect on December 1, 1996) under the Act), including
         pursuant to any agreement, arrangement or understanding (whether or not
         in writing); provided, however, that (i) a person shall not be deemed
         the Beneficial Owner of any security as a result of any agreement,
         arrangement or understanding to vote such security (A) arising solely
         from a revocable proxy or consent solicited pursuant to, and in
         accordance with, the applicable provisions of the Act and the rules and
         regulations thereunder or (B) made in connection with, or otherwise to
         participate in, a proxy or consent solicitation made, or to be made,
         pursuant to, and in accordance with, the applicable provisions of the
         Act and the rules and 

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         regulations thereunder, in either case described in clause (A) or
         clause (B) above whether or not such agreement, arrangement or
         understanding is also then reportable by such person on Schedule 13D
         under the Act (or any comparable or successor report), and (ii) a
         person engaged in business as an underwriter of securities shall not be
         deemed to be the Beneficial Owner of any securities acquired through
         such person's participation in good faith in a firm commitment
         underwriting until the expiration of forty days after the date of such
         acquisition.



ARTICLE III.      ADMINISTRATION

         The Plan shall be administered by a Committee of the Board of Directors
of the Corporation (hereinafter referred to as the "ASI Committee") appointed by
the Board, no member of which ASI Committee shall be eligible to participate in
the Plan. The ASI Committee shall interpret the Plan, establish administrative
rules and take any other action necessary to the proper operation of the Plan,
which action shall, prior to a Change of Control, be final and binding upon all
Participants.



ARTICLE IV.       ELIGIBILITY FOR PARTICIPATION

         Any key employee of the Corporation or a subsidiary or affiliated
company acting in a managerial, administrative or professional capacity shall be
eligible to participate in the Plan.



ARTICLE V.        OPERATION

         (1) Management shall select from eligible employees those who
participate in the Plan each year ("plan year") and assign a tentative "target
award" to each Participant. For all years after 1988, designation of
Participants and the assignment of

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target awards shall be made before the beginning of a plan year or as soon
thereafter as practicable, but Management shall have the right to designate
additional Participants and assign them target awards at any time. Target awards
assigned to Participants in 1988 under the "Predecessor Plan" (as hereinafter
defined) shall be deemed to constitute the target awards under the Plan for 1988
and are adopted for such purpose.

         (2) Following the end of a plan year, the aggregate of the target
awards for such plan year will be modified by the ASI Committee based on the
Corporation's overall performance. Each target award will then be adjusted based
on the performance of the group or other unit in which the individual worked and
the extent to which the individual met the personal objectives set for him. The
final payments shall be as approved by the ASI Committee or the Board of
Directors of the Corporation. As adjusted, a final cash payment may be more or
less than the original target award.

         (3) A Participant will forfeit his right to any cash payment if his
employment with the Corporation is terminated for any reason prior to the end of
a plan year; provided, however, that if such employee dies or retires (within
the meaning of the retirement plan of the Participant's employer), or if the ASI
Committee decides it is not in the best interest of the Corporation to have a
terminating employee forfeit such payment, such employee, or in the case of the
employee's death his designated beneficiary, legal representatives or
distributees, shall receive after the end of the plan year a pro rata portion of
any cash payment that would otherwise have been paid to him had he remained an
employee for the full year, based on the length of his actual service with the
Corporation during such plan year.

          (4) Notwithstanding any other provision of this Plan, in the event of
a Change of Control, the plan year shall terminate, all targets used in
determining each Participant's target award

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shall be deemed to have been achieved and each Participant shall receive, within
ten (10) days of such Change of Control, his entire target award.

         (5) In the event the total amount authorized by the Board of Directors
of the Corporation to be distributed to Participants for any year is
insufficient to fully satisfy cash awards otherwise payable under the Plan, such
awards shall be equitably reduced by the ASI Committee to reflect such
insufficiency.



ARTICLE VI.       NON-ASSIGNABILITY OF PLAN RIGHTS

         Any assignment or transfer by any Participant of any right or interest
or entitlement under this Plan, without the written consent of the Corporation,
shall be null and void.



ARTICLE VII.      GENERAL PROVISIONS

         (1) Nothing contained herein shall require the Corporation to segregate
any money from its general funds, or to create any trusts, or to make any
special deposits in connection with any awards granted or payments to be made to
any Participant for any year.

         (2) Participation in the Plan shall not affect the Corporation's right
to discharge a Participant.

         (3) Payments under the Plan shall be included as compensation for the
purposes of computing employee benefits.

         (4) The Board of Directors of the Corporation may suspend, terminate or
amend the Plan at any time; however, no such action of the Board of Directors of
the Corporation shall diminish, reduce, alter, or impair a Participant's rights
with respect to any target award assigned to him before the date of such
suspension, termination or amendment of the Plan without the consent of such
Participant.

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         (5) The Plan supersedes all previous Annual Incentive Plans of the
Corporation, including the Annual Plan of the American Standard Incentive
Program adopted in 1975, as thereafter amended (the "Predecessor Plan").




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