AMERICAN STANDARD COMPANIES INC
TRUST AGREEMENT
<DOCUMENT>
<TYPE>EX-10.VII
<SEQUENCE>5
<FILENAME>y46537ex10-vii.txt
<DESCRIPTION>TRUST AGREEMENT
<TEXT>

<PAGE>   1

                                                                     EX 10 (VII)

              TRUST AGREEMENT FOR AMERICAN STANDARD COMPANIES INC.

                    LONG-TERM INCENTIVE COMPENSATION PLAN AND

                        AMERICAN STANDARD COMPANIES INC.

                    SUPPLEMENTAL INCENTIVE COMPENSATION PLAN

           (As Amended and Restated in its Entirety As of May 4, 2000)



         This Trust Agreement dated as of January 1, 1993, and amended and
restated in its entirety as of May 4, 2000, by and between American Standard
Companies Inc., a Delaware corporation, and Robert M. Kennedy, as Trustee,
provides, on the terms and conditions set forth below, for the establishment and
administration of a trust to hold shares of Common Stock issued as payouts under
the American Standard Companies Inc. Long -Term Incentive Compensation Plan and
the American Standard Companies Inc. Supplemental Incentive Compensation Plan.

1.       Definitions.

         For purposes of this Trust Agreement, the following definitions shall
apply:

         1.1.     Beneficiary means any one person or trust appointed by a
Participant in an unrevoked writing filed with the Company directing that, in
the event of such Participant's death, all of such Participant's rights under
and interests in the Plan, as recorded pursuant to this Trust, shall vest in
such person or trust, provided that a Participant's Beneficiary shall be deemed
to be the estate or legal representative of such Participant if such written
appointment is revoked and not replaced by another such written appointment
filed with the Company, or if a Participant's Beneficiary does not survive such
Participant.

         1.2.     Board means the Board of Directors of the Company.

         1.3.     Cash Value means the value of the Shares credited to a
Participant's Share Award Account, which shall be determined as follows: if the
Shares in the Participant's Share



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Award Account

         (A)      are retained in the Trust or sold to the Company or a
                  Subsidiary, based on the Fair Market Value as of the last day
                  of the month in which the Participant's Termination Date
                  occurs or

         (B)      are sold to any person other than the Company or a Subsidiary
                  to effect a distribution in cash, the net proceeds of any such
                  sale; provided that, any sale by the Trustee to effect a
                  distribution hereunder shall be effected as of the last day of
                  the month in which the Participant's Termination Date occurs.

         1.4.     Change of Control means the occurrence of any of the following
                  events:

                  (i) any person is or becomes the Beneficial Owner, directly or
         indirectly, of securities of the Company representing 15% or more of
         the combined voting power of the Company's then-outstanding securities
         (a "15% Beneficial Owner"); provided, however, that (a) the term "15%
         Beneficial Owner" shall not include any Beneficial Owner who has
         crossed such 15% threshold solely as a result of an acquisition of
         securities directly from the Company, or solely as a result of an
         acquisition by the Company of the Company's securities, until such time
         thereafter as such person acquires additional voting securities other
         than directly from the Company 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 Company 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 the Company'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 together with those individuals who first become
         directors during such period (other than by reason of an agreement with
         the Company or the Board in settlement of a proxy contest for the
         election of directors) and whose election or nomination for election to
         the Board 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


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         constitute a majority of the Board;

                  (iii) the shareholders of the Company approve a merger,
         consolidation, recapitalization or reorganization of the Company, or a
         reverse stock split of any class of voting securities of the Company,
         or the consummation of any such transaction if shareholder approval is
         not obtained, other than such transaction which would result in at
         least 75% of the total voting power represented by the voting
         securities of the Company 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 the Company 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 the Company or of such
         surviving entity or of any subsidiary of the Company or such surviving
         entity and (b) voting securities beneficially owned by such persons who
         receive them other than as holders of voting securities of the Company
         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 the Company approve a plan of
         complete liquidation or dissolution of the Company or an agreement for
         the sale or disposition of all or substantially all the assets of the
         Company 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 Committee 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
         Committee determine that the exception set forth in this paragraph (1)
         shall not apply, none of the foregoing


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         conditions would have been satisfied but for one or more of the
         following persons acquiring or otherwise becoming the Beneficial Owner
         of securities of the Company: (A) any person who has entered into a
         binding agreement with the Company, 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 the Company (a "Standstill Agreement"); (B)
         any employee benefit plan, or trustee or other fiduciary thereof,
         maintained by the Company or any subsidiary of the Company; (C) any
         subsidiary of the Company; or (D) the Company.

         (2)      Unless a majority of the Continuing Directors and the
         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 the Company 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 the Company, provided that, immediately following such
         acquisition, the Continuing Directors constitute a majority of the
         Board, 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 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 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 the Company.

         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


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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 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.

         1.5. Committee means the Management Development and Nominating
Committee, or such other committee appointed by the Board, consisting of three
or more persons who may or may not be directors or officers of the Company, to
administer this Trust Agreement.

         1.6.     Change of Control Stock Value means the value of a share of
Common Stock determined as follows:

                  (i) if the Change of Control results from an event described
         in clause (iii) of the Change of Control definition, the highest per
         share price paid for shares of Common Stock of the Company in the
         transaction resulting in the Change of Control;

                  (ii) if the Change of Control results from an event described
         in clauses (i), (ii) or (v) of the Change of Control definition and no
         event described in clauses (iii) or (iv) of the Change of Control
         definition has occurred in connection with such Change of Control, the
         highest sale price of a share of Common Stock of the Company on any
         trading day during the 60 consecutive trading days immediately
         preceding and following the date of such Change of Control as reported
         on the New York Stock Exchange Composite Tape, or other national
         securities exchange on which the Common Stock is traded, and published
         in The Wall Street Journal; or

                  (iii) if the Change of Control results from an event described
         in clause (iv) of the Change of Control definition, the price per share
         at which shares of Common Stock are redeemed or exchanged by their
         holders in the transaction described in such clause (iv) or, if there
         has been no such redemption or exchange, the higher of the amounts
         determined in accordance with clause (i) or clause (ii) of this Change
         of Control Stock

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         Value definition.

         1.7.     Common Stock means the common stock, par value $0.01 per
share, of the Company.

         1.8.     Company means American Standard Companies Inc., a Delaware
corporation.

         1.9.     Creditor means a general creditor of the Company or a
Subsidiary, as appropriate, and Judgment Creditor means a Creditor who has
obtained a judgment against the Company or a Subsidiary, as appropriate, from a
court of competent jurisdiction and who has made written demand to the Company
or such Subsidiary for payment on such judgment which has gone unsatisfied for
at least 180 days.

         1.10.    Fair Market Value on any date means the closing price of a
Share on such date as reported on the New York Stock Exchange consolidated
reporting system.

         1.11     Insolvent means the inability to pay debts as they mature or
being subject to proceedings as a debtor under the United States Bankruptcy
Code, and Insolvency means the state of being insolvent.

         1.12.    Participant means an employee of the Company or one of its
Subsidiaries who participates in the Plan.

         1.13.    Plan means either the American Standard Companies Inc. Long
-Term Incentive Compensation Plan or the American Standard Companies Inc.
Supplemental Incentive Plan, as either is in effect from time to time.

         1.14.    Plan Payout means a payment made pursuant to Section 5(a) of
the American Standard Companies Inc. Long -Term Incentive Compensation Plan or
pursuant to the payout provisions of the American Standard Companies Inc.
Supplemental Incentive Compensation Plan.

         1.15.    Prime Rate means the rate of interest publicly announced from
time to time by the New York City office of Citibank N.A. as its prime or
reference rate, adjusted as of the first business day of each calendar quarter.

         1.16.    Share means a share of Common Stock.

         1.17.    Share Award Account means a separate account established under
the Trust


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with respect to which the Participant's interests under the Plan are credited.

         1.18.    Subsidiary means a corporation in which the Company owns,
directly or indirectly, more than 50% of the voting power represented by stock
entitled to vote for the election of directors, or a partnership in which the
Company owns, directly or indirectly, at least 50% of the capital or profits
interests in such partnership.

         1.19.    Restatement Date means February 3, 1995.

         1.20.    Termination Date of a Participant means the date on which such
Participant's employment with the Company and each of its Subsidiaries
terminates for any reason, including death.

         1.21.    Trust means the trust fund established under this Trust
Agreement.

         1.22.    Trustee means Robert M. Kennedy or such successor trustee as
shall be appointed by the Committee pursuant to Section 19 hereof.

2.       Establishment and Duration of Trust; Trustees Powers.

         The Trust is hereby established under the Plan to fulfill certain
obligations thereunder of the Company and the Company's Subsidiaries to
Participants. The Company and the Subsidiaries shall remain primarily
responsible to fulfill payment obligations under the Plans, and may make
payments directly to Participants as they become due. Such employers shall
notify the Trustee of any decisions to pay benefits directly. To the extent
payments are made from the Trust, the employer's liability to make payments
shall be reduced correspondingly. The Trust shall continue in effect until
terminated by action of the Board; provided that the Trust shall in any event
terminate when all amounts owed to Participants have been paid or the Trust has
been exhausted. The Trust is intended to be a grantor trust within the meaning
of Sections 671 through 679 of the Internal Revenue Code of 1986, as needed (the
"Code").

         The Trustee shall invest and reinvest the assets of the Trust without
distinction between principal and income; provided, however, that the Trustee
shall hold in the Trust all Shares that it receives, and the Trustee shall
distribute such Shares to the Participants (or to their Beneficiaries) entitled
to such distributions when and as directed by the Committee in accordance with
the terms of the Plan. The Committee shall direct the investment of any cash


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contributions to the Trust in its discretion. Pending investment of any such
cash contributions, the Trustee may temporarily invest and reinvest such
contributions in any marketable short- and medium-term fixed income securities,
United States Treasury Bills, other short- and medium-term government
obligations, commercial paper, other money market instruments and part interests
in any one or more of the foregoing, or may maintain cash balances consistent
with the liquidity needs of the Trust as determined by the Trustee. The
Committee may direct the Trustee to maintain separate investment funds, allocate
contributions among such funds, and make transfers among such funds.

         Subject to the provisions hereof, the Trustee shall be authorized and
empowered to exercise any and all of the following rights, powers and privileges
with respect to any cash, securities or other properties held by the Trustee in
trust hereunder:

         1.       To sell, exchange, mortgage or lease any such property and to
convey, transfer or dispose of any such property on such terms and conditions as
the Trustee deems appropriate.

         2.       To grant options for the sale, transfer, exchange or disposal
of any such property and to exercise any subscription rights or conversion
privileges with respect to any securities held in the Trust Fund.

         3.       To exercise all voting rights pertaining to any securities; to
consent to or request any action on the part of the issuer of any such
securities; and to give general or special proxies or powers of attorney with or
without power of substitution.

         4.       To collect and receive any and all money and other property of
whatsoever kind or nature due or owing or belonging to the Trust Fund and to
give full discharge and acquaintance therefor; and to extend the time of payment
of any obligation at any time owing to the Trust Fund, as long as such extension
is for a reasonable period and continues reasonable interest.

         5.       To cause any securities or other property to be registered in,
or transferred to, the individual name of the Trustee or in the name of one or
more of its nominees, or one or more nominees of any system for the centralized
handling of securities, or to retain such investments unregistered and in form
permitting transferability by delivery (provided that the books and records of
the Trust at all times show that all such investments are a part of the Trust
Fund).


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         6.       To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust; to commence or defend suits
or legal proceedings whenever, in its judgment, any interest of the Trust
requires it; and to represent the Trust in all suits or legal proceedings in any
court of law or equity or before any other body or tribunal, insofar as such
suits or proceedings relate to any property forming part of the Trust Fund or to
the administration of the Trust Fund.

         7.       Generally, to do all acts, whether or not expressly
authorized, which are necessary or appropriate to carry out the intent of this
Trust Agreement.

3.       Contribution of Shares to Trust.

         As of the date any Plan Payout authorized under the Plan which consists
in whole or in part of Shares is made, the Company shall contribute to the
Trust, for credit to the Share Award Account of each Participant who is granted
such a Plan Payout, that number of whole and fractional Shares, valued at their
Fair Market Value on such date, equal to the percentage of such Plan Payout
consisting of Shares.

4.       Share Award Accounts.

         Each Participant's Share Award Account shall record the number of
Shares and fractions thereof credited to such Share Award Account as a Plan
Payout and the date as of which each such Plan Payout was made.

5.       Voting Rights.

         Shares credited to each Participant's Share Award Account shall be
voted by the Trustee as recommended by the Board on its proxy voting card.

6.       Distributions from Trust.

         The Committee may at any time prior to a Change of Control direct that
the Shares and


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any other property ("Non-Share Interests") credited to a Participant's Share
Award Account be distributed from the Trust. If not earlier distributed in
accordance with the foregoing sentence, upon the termination of a Participant's
employment prior to a Change of Control, such Participant (or, in the event of
his death, his Beneficiary) shall be entitled to a distribution from the Trust
of all Shares and Non-Share Interests credited to his Share Award Account;
provided that, so long as such direction shall not cause the Company or its
Subsidiaries to breach any covenant or otherwise incur a default under any
credit or other financing agreement to which it is a party, the Company may
direct the Trustee to pay the Participant (or his Beneficiary) the Cash Value of
such Shares in lieu of a distribution in Shares. Notwithstanding the foregoing,
in the case of any Participant whose employment terminated prior to the
Restatement Date and, as of the Restatement Date, whose Share Award Account is
credited with Shares, such Shares and Non-Share Interests credited to such
Account shall be distributed to such Participant as soon as administratively
practicable following the Restatement Date, but in any event, no later than one
year from such Date.

7.       Change of Control.

         Upon a Change of Control, each Participant shall be entitled to receive
a lump sum cash payment equal to the sum of (i) the Change of Control Stock
Value of all Shares credited to his Share Award Account and (ii) the value of
any Non-Share Interests credited to his Share Award Account (unless within one
(1) business day following such a Change of Control, such Participant has
delivered written notice to the Trustee pursuant to Section 10 hereof requesting
a distribution from the Trust of all Shares and/or Non-Share Interests credited
to such Participant's Share Award Account in the event of a Change of Control,
in lieu of a cash payment equal to the Change of Control Stock Value of such
Shares and/or the value of Non-Share Interests, in which case such Participant
shall be entitled to receive a distribution of all Shares and/or Non-Share
Interests credited to such Participant's Share Award Account) as soon as
practicable. Upon a Change of Control, the Trustee shall determine as promptly
as practicable the Change of Control Stock Value of the Shares in the Trust and
shall promptly thereafter deliver a written notice (the "Trustee Notice") to the
Company setting forth such Change of Control Stock Value and the manner of its
determination and requesting that the Company purchase all Shares in the Trust
(except for Shares credited to Participants' Share Award Accounts as to which
Participants have requested a distribution in the event of a Change


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of Control in lieu of a cash payment equal to the Change of Control Value
therefor). A copy of such Trustee Notice shall be sent to each Participant.
Following the receipt of the Trustee Notice, the Company shall, within three (3)
business days following the Company's receipt of such Trustee Notice, make a
cash payment to the Trustee equal to the Change of Control Stock Value of such
Shares against delivery of such Shares by the Trustee to the Company. In the
event that the Company shall not have made such cash payment to the Trustee
within such (3) business day period, interest on the amount owing to the Trustee
will accrue at a rate per annum equal to the Prime Rate plus 4% and shall be
compounded monthly until paid. Upon a Change of Control, the Trustee shall sell
as promptly as practicable the Non-Share Interests (other than cash) of the
Trust (except for such Non-Share Interests credited to Participants' Share Award
Accounts as to which Participants have requested a distribution in-kind in the
event of a Change of Control in lieu of a cash payment equal to the value
therefor). Upon receipt by the Trustee of (i) the cash payment from the Company
for the Shares and (ii) the proceeds from the sale of the Non-Share Interests
(other than cash), the Trustee shall make to each Participant the lump-sum cash
payment contemplated by the first sentence of this Section 7 with interest, if
any, accrued pursuant to this Section 7, plus a cash payment equal to the cash,
if any, credited to such Participant's Share Award Account. For purposes of this
Section 7, the Trustee's determination of the Change of Control Stock Value of a
Participant in the Trust shall be binding and conclusive.

8.       Issuance of Share Certificates.

         If a Participant (or, in the event of his death, his Beneficiary)
receives a distribution of Shares pursuant to Section 6 or 7, the Trustee shall
deliver to such Participant or Beneficiary a certificate or certificates
evidencing the Shares credited to such Participant's Share Award Account, as
soon as administratively practicable after the Participant's Termination Date or
a Change of Control, as the case may be.

9.       Changes in Capital Structure.

         In the event of the payment of any dividend payable in, or the making
of any distribution of, Shares to holders of record of Shares during the period
any Shares awarded under the Plan are credited to a Participant's Share Award
Account; or in the event of any stock split,


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<PAGE>   12


combination of Shares, recapitalization or other similar change in the
authorized capital stock of the Company during such period; or in the event of
the merger or consolidation of the Company into or with any other corporation or
the reorganization, dissolution or liquidation of the Company during such
period; there shall be credited to such Participant's Share Award Account such
new, additional or other shares of capital stock of any class, or other property
(including cash), as such Participant would be entitled to receive as a matter
of law if such Participant were a shareholder of the Company at the time of such
event.

10.      Administration.

         This Trust Agreement shall be administered by the Committee, which
shall have full power and authority (to the extent not inconsistent with the
terms and purposes of the Plan and this Trust Agreement) prior to a Change of
Control to interpret and carry out the terms of, and to establish, amend or
rescind rules and regulations relating to, this Trust Agreement; to appoint a
recordkeeper for this Trust Agreement and to rescind any such appointment; and
to take such other actions and to make such other determinations relating to
this Trust Agreement as may be necessary or advisable in connection with the
Plan. The Board or the Committee may, by resolution or written direction,
delegate to any agent or agents it shall appoint, including any officer or
employee of the Company, the authority to exercise any of its administrative
duties and responsibilities hereunder.

         All forms required to be filed hereunder and all other communications
with respect hereto shall be addressed to the Committee, the Company or the
Trustee, as the case may be, in care of the Secretary, American Standard
Companies Inc., One Centennial Avenue, Piscataway, New Jersey, 088556820, or to
such other address as the Committee, the Company or the Trustee, as the case may
be, may designate from time to time.

11.      Trust Subject to Creditor Claims.

         Notwithstanding any other provision of this Trust Agreement or the
Plan, the Trustee shall hold the assets of the Trust for the benefit of
Creditors to the extent provided in Sections 12 and 13 hereof. No Participant or
Beneficiary shall have any rights greater than the rights of


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<PAGE>   13


any other unsecured Creditor, and no Participant or Beneficiary shall have any
right against or security interest in the Trust. The Chief Executive Officer or
Chief Financial Officer of the Company or each Subsidiary shall have the duty to
inform the Trustee in writing of the Insolvency of the Company or any such
Subsidiary, as the case may be.

12.      Effects of Insolvency.

         Upon receipt prior to a Change of Control of any written allegation of
the Insolvency of the Company or any Subsidiary which has an interest in the
Trust, the Trustee shall suspend the making of any distribution from the Trust
and shall immediately notify the Company and any affected Subsidiary in writing
of such allegation. Within 30 days of receipt of such an allegation, the Trustee
shall determine whether the Company or the relevant Subsidiary is Insolvent. If
the Trustee determines the Company or the relevant Subsidiary to be Insolvent,
or if the Trustee otherwise has actual knowledge that the Company or the
relevant Subsidiary is Insolvent, the Trustee shall cease making distributions
hereunder and shall hold the portion of the Trust held for the benefit of such
entity for the benefit of its Creditors until otherwise instructed by a court of
competent jurisdiction. If the Trustee determines that the Company or the
relevant Subsidiary is not Insolvent, the Trustee shall resume making
appropriate distributions from the Trust to Participants and Beneficiaries in
accordance with this Agreement. Notwithstanding the foregoing, if the Board, the
Chief Executive Officer or the Chief Financial Officer of the Company or the
relevant Subsidiary delivers to the Trustee a sworn statement that the Company
or such Subsidiary is Insolvent, the Trustee shall make distributions from the
portion of the Trust held for the benefit of such entity only as directed by a
court of competent jurisdiction, until such time as the Trustee determines that
the Company or the relevant Subsidiary, as the case may be, is not Insolvent.

13.      Judgment Creditor Claims.

         In addition to the rights of Creditors set forth in Section 12 hereof,
and notwithstanding any other provision of this Trust Agreement, the assets of
the Trust shall at all times prior to a Change of Control be available to
satisfy claims of Judgment Creditors. Upon receipt by the Trustee of proof
satisfactory to the Trustee that a Creditor is a Judgment Creditor, the Trustee
shall satisfy the claim of such Judgment Creditor, to the extent possible, from
the assets of the


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<PAGE>   14


Trust, and the Trustee shall be fully indemnified hereunder in satisfying such
claim.

14.      Distributions Due to Certain Tax Consequences.

         Notwithstanding any provision of this Trust Agreement other than
Sections 12 and 13 hereof, if a Participant (or Beneficiary) is determined to be
subject to United States federal income tax on any portion of his interest in
the Trust prior to the time of distribution of such interest that portion of
such interest shall be distributed by the Trustee to such Participant or
Beneficiary. A portion of a Participant's (or Beneficiary's) interest in the
Trust shall be determined to be subject to United States federal income tax upon
the earliest of (i) receipt by the Participant (or Beneficiary) of a notice of
deficiency from the United States Internal Revenue Service with respect to such
interest which is not contested by such Participant (or Beneficiary); (ii)
execution of a closing agreement between the Participant (or Beneficiary) and
the Internal Revenue Service which provides that such interest is includible in
the Participant's (or Beneficiary's) gross income; and (iii) a final
determination by the United States Tax Court or any other federal court which
holds that such interest is includible in the Participant's (or Beneficiary's)
gross income.

15.      Reports and Records.

         The Trustee shall:

         15.1. keep accurate and detailed accounts of all investments, receipts,
disbursements and other transactions in the Trust as he shall deem necessary and
proper with respect to his administration of the Trust, and permit inspection of
such accounts, records and assets of the Trust by any duly authorized
representative of the Company at any time during usual business hours;

         15.2. make such periodic reports to the Company as it shall reasonably
request;

         15.3. prepare and timely file such tax returns and other reports,
together with supporting data and schedules, as may be required of the Trustee
by law, with any taxing authority or any other government authority, whether
local, state or federal.

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16.      Taxes.

          The Company and each participating Subsidiary agree that their
respective share of all income, deductions and credits of the Trust belong to
them as owners for income tax purposes and shall, as appropriate, be included on
their tax returns. The Company or a Subsidiary of the Company shall from time to
time pay taxes (references in this Trust Agreement to the payment of taxes shall
include interest and applicable penalties) of any and all kinds whatsoever which
at any time are lawfully levied or assessed upon or become payable in respect of
the Trust, the income or any property forming a part thereof, or any security
transaction pertaining thereto. Any amounts distributed from the Trust shall be
reduced by the amount of any withholding taxes required by law, and the Trustee
shall have the responsibility to withhold and pay such amounts to the
appropriate governmental authorities. The Trustee shall inform the Company in
writing of all amounts withheld and of all distributions hereunder to a
Participant or Beneficiary. The Trustee shall be entitled to satisfy such
withholding tax obligations and payments to a Participant or Beneficiary by
retaining an appropriate number of Shares and selling such Shares.

17.      For the Benefit of the Trustee.

         17.1. Expenses of the Trustee. The Company shall reimburse the Trustee
for any expenses incurred by the Trustee including, but not limited to, all
proper charges and disbursements of the Trustee, and reasonable fees for legal
services rendered to the Trustee (whether or not rendered in connection with a
judicial or administrative proceeding). The Trustee's entitlement to
reimbursement hereunder shall not be affected by the resignation or removal of
the Trustee or by the termination of the Trust.

         17.2. Indemnification of Trustee. The Company shall indemnify, defend
and hold the Trustee harmless from and against any claim, liability, cost or
expense (including reasonable attorneys' fees) asserted against, imposed on or
suffered or incurred by the Trustee in the good-faith carrying out of his duties
and responsibilities hereunder and in his good-faith compliance with any written
instructions delivered to him by the Company with respect thereto.

18.      Resignation and Removal of Trustee.


                                     - 15 -



<PAGE>   16


         The Trustee may be removed by the Committee at any time with the
approval of Participants whose Share Award Accounts comprise 75% or more of the
Shares held by the Trust. The Trustee may resign at any time upon notice in
writing to the Company .

19.      Successor Trustee.

         Upon the removal or resignation of the Trustee, the Committee may
designate a successor Trustee to act hereunder, which shall have the same powers
and duties as those conferred upon the Trustee. Upon such designation, and upon
the written acceptance of the successor Trustee, the former Trustee shall, if
necessary, assign, transfer and pay over to such successor Trustee the assets
then constituting the Trust. A successor Trustee shall have all the rights and
powers under this Trust Agreement as an original Trustee.

20.      Amendment of Trust.

         All contributions made by the Company or any Subsidiary shall be
irrevocable unless the benefits payable hereunder have been otherwise paid to
the Participants by the Company or a Subsidiary; provided that, the Company may
amend, in whole or in part, any or all of the provisions of this Trust
Agreement, provided that no such amendment may affect the rights, protections,
duties or responsibilities of the Trustee without his consent and, provided
further, that no such amendment may (a) permit any part of the corpus or income
of the Trust to be returned or diverted to the Company or (b) diminish, reduce,
alter, or impair any Participant's Share Award Account without such
Participant's consent.

21.      No Right of Alienation or Employment.

         Except as required in Sections 11 through 13 hereof, at no time prior
to the satisfaction of all liabilities with respect to Participants and their
Beneficiaries shall any part of the corpus and/or income of the Trust be used
for, or diverted to purposes other than for the exclusive purpose of providing
benefits to Participants and their Beneficiary. No Participant or Beneficiary
shall have any right or interest in the assets of the Trust which is greater
than the rights of any Creditor. The assets of the Trust shall not be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge. This Trust Agreement does not give any Participant a right to continued
employment with the Company or any Subsidiary.


                                     - 16 -


<PAGE>   17




22.      Headings.

         Section headings in this Trust Agreement are for reference only. In the
event of a conflict between a heading and the content of a Section, the content
of the Section shall control.

23.      Construction.

         This Trust Agreement shall be construed and regulated by the laws of
the State of New York except where such laws are superseded by federal laws.

24.      Successors.

         This Trust Agreement shall be binding upon, and the powers herein
granted to the Committee, the Company and the Trustee, respectively, shall be
exercisable by, the respective successors and assigns of the Committee, the
Company and the Trustee.

25.      Separability.

         If any part of this Trust Agreement shall be found to be invalid or
unenforceable, such invalidity or unenforceability shall not affect the
remaining provisions hereof. Such invalid or unenforceable part shall be fully
separable and this Trust Agreement shall be construed and enforced as if such
part had not been inserted herein.

26.      Gender and Number.

         Whenever used herein, the masculine shall be interpreted to include the
feminine and neuter, the neuter to include the masculine and feminine, the
singular to include the plural and the plural to include the singular, in each
case unless the context requires otherwise.

27.      Assignment.

         The benefits payable under this Trust Agreement may not be assigned,
alienated,


                                     - 17 -


<PAGE>   18


pledged, attached or garnished.







         IN WITNESS WHEREOF, each of the parties hereto has executed or caused
to be executed this Trust Agreement as of the date and year first written above.



                         AMERICAN STANDARD COMPANIES INC.

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

                         By: J. Paul McGrath

                         Its: Senior Vice President, General Counsel & Secretary











                         THE TRUSTEE:

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

                         ROBERT M. KENNEDY



                                     - 18 -
</TEXT>
</DOCUMENT>
