Exhibit 10
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of May 2, 2001 (the
"Agreement") by and among Armstrong World Industries, Inc., a Pennsylvania
corporation (the "Company"), and Chan W. Galbato (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ Executive as President and Chief
Executive Officer of its Armstrong Floor Products Operations and the Executive
desires to serve the Company, in each case, on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the premises and the respective
covenants and agreements of the parties herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. EMPLOYMENT.
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The Company agrees to employ the Executive, and the Executive agrees to
serve the Company on the terms and conditions set forth herein.
2. POSITION AND DUTIES.
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The Executive shall be the chief executive of the Company's floor
products operations and shall have such duties and responsibilities as are
customary for this position and such other duties not inconsistent therewith as
the Company's Chairman may reasonably assign from time to time. As long has he
is employed by the Company, excluding any periods of vacation and sick leave to
which the Executive may be entitled under the Company's policies and practices
(as the same may be modified in the future), the Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Company and its subsidiaries and affiliates. Nothing herein shall be deemed
to constitute an implied term of employment, and the Executive will be an
employee-at-will.
3. COMPENSATION AND RELATED MATTERS.
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3.1 HIRING AND RETENTION COMPENSATION.
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(a) Within two weeks of hire, the Company shall provide the
Executive a cash payment of $200,000. If the Executive voluntarily terminates
his employment within one (1) year of his start date, he must reimburse the
Company the entire amount of this bonus.
(b) In addition to Base Salary and incentive compensation
provided herein, Executive will be eligible to participate in the Court-approved
cash retention program of the Company at the maximum payment level approved by
the Court.
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3.2 BASE SALARY.
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The Company shall pay, or cause to be paid, to the Executive an annual
base salary ("Base Salary") at an initial rate of $450,000 per year. The Base
Salary shall be paid in accordance with the Company's payroll practices for its
senior officers, but not less frequently than monthly, in arrears.
3.3 BENEFIT PLANS.
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During the term of employment, the Executive and his eligible
dependents shall be entitled to participate in and receive benefits under all
"employee benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended from time to time ("ERISA")), and
employee benefit arrangements in which senior officers of the Company generally
participate, including without limitation:
(i)all savings, deferred compensation, Bonus Replacement Retirement Plan
(for bonus payable March 2003), and retirement plans, practices,
policies and programs;
(ii) Executive Personal Financial Planning/Income Tax Preparation Program,
Executive Annual Physical, Employment Protection Plan (with sixteen
(16) years of service credit but subject to the application of a
separate Change in Control Agreement); and
(iii) all welfare benefit plans, practices, policies and programs
(including all medical, prescription, dental, disability, employee life
insurance, group life insurance, group hospitalization, health,
accidental death and travel accident insurance plans and programs) as
are made generally available to senior officers of the Company, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plans, practices, policies and programs,
including provisions which permit such plans, practices, policies and
programs to be modified or terminated.
The Executive's participation in such employee benefit plans, practices,
policies and programs shall be at a level appropriate for his position. For the
purposes of participation in the Company's defined benefit pension plan,
Executive shall be credited with eleven (11) years prior service credit for
pension determination. Executive's benefits under the defined benefit pension
plan will be reduced by the actuarial value of any defined benefit pension
already paid to him or payable in the future by General Electric.
3.4 INCENTIVE COMPENSATION.
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(a) Executive is eligible to participate in the Company's
Management Achievement Plan (the "Plan") and will have a target bonus of sixty
percent (60%) of his actual Base Salary earnings. Executive's bonus payment in
2001 will be based thirty percent (30%) on the Company's parent corporation's
"corporate" operating income results and seventy percent (70%) on Armstrong
Floor Products operating income results (both measures will be adjusted by the
Company or its parent, as applicable, for working capital variance against the
budget). For plan year 2001, Executive's target bonus will be pro-rated for the
length of his employment. Executive is guaranteed for 2001 a minimum bonus of
$270,000, which is payable in March 2002. Executive must be actively employed on
the day of the bonus distribution in order to be eligible for this payment.
(b) Executive is eligible to receive an annual long-term
incentive award with a target present value of two hundred percent (200%) of
annualized Base Salary, based on
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authorized Plan terms and provisions for the current year, and based on
Company-authorized terms applicable to executives in future years.
3.5 EXECUTIVE SEVERANCE BENEFITS/
CHANGE IN CONTROL AGREEMENT.
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In its Chapter 11 proceedings, the Company received authorization that
covers Executive's participation in (i) an enhanced severance benefit program,
in which Executive shall participate at the maximum level, and which will apply
during the period of Chapter 11 reorganization, and (ii) an individual change in
control agreement (the "Change in Control Agreement"). Benefits provided to
Executive pursuant to this enhanced severance benefit program shall be offset by
severance payments made under the Change in Control Agreement.
Following emergence from the Chapter 11 reorganization, the Company
will provide severance pay at one and one-half times (1 1/2) the sum of Base
Salary and target bonus. In the event Executive is not selected to succeed
Michael D. Lockhart as Chief Executive Officer of the Company's parent
corporation, Executive may elect within sixty days (60) of such non-selection to
terminate employment and receive severance pay at one and one-half times (1 1/2)
the sum of Base Salary and target bonus.
3.6 FRINGE BENEFITS AND RELOCATION.
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During the term of employment, the Executive shall be entitled to
receive all perquisites and fringe benefits, including relocation reimbursement
and/or benefits, which the Company makes available to senior officers of the
Company generally, including, but not limited to, all perquisites and fringe
benefits provided to the Executive on the date of this Agreement.
4. SUCCESSORS AND ASSIGNS; BINDING AGREEMENT.
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In addition to any obligations imposed by law upon any successor to the
Company, the Company will assign to and require any successor (whether direct or
indirect, by purchase, merger, consolidation, bankruptcy or otherwise) to all or
substantially all of the business and/or assets of the Company, or all or
substantially all of the assets of the Company's line of business in which the
Executive is then employed, as the case may be, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
The Executive consents to any such assignment.
This Agreement shall inure to the benefit of and be enforceable by the
Company's successors (whether direct or indirect, by purchase, merger,
consolidation, bankruptcy or otherwise) to all or substantially all of the
business and/or assets of the Company, or all or substantially all of the assets
of the Company's line of business in which the Executive is employed, as the
case may be. Executive expressly agrees to such assignment of this Agreement by
the Company in favor of its successors in interest, if any.
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5. NOTICES.
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For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to the respective
addressees set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
Armstrong World Industries, Inc.
2500 Columbia Avenue
Lancaster, PA 17603
Attention: Vice President, Compensation and Benefits
Telecopy: 717-396-6119
To the Executive:
At the Executive's residence address as maintained by the
Company in the regular course of its business for payroll
purposes.
6. MISCELLANEOUS.
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If the Executive, in his capacity as an officer effects or approves, or
if the Executive is elected as a director, votes for, any action that will
adversely affect the Executive's rights under this Agreement, such action shall
be deemed to constitute the Executive's consent to such action under this
Agreement; otherwise, no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and the Company. No waiver by any party hereto at
any time of any breach by any other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement, plus the Company's
standard employee confidentiality agreement, set forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and canceled, except as otherwise provided in this Agreement.
Nothing in this Section shall affect the Executive's rights under a Change in
Control Agreement and an Indemnification Agreement to be executed between the
Company and the Executive. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania, without giving effect to choice of law principles.
There shall be withheld from any payments provided for hereunder any
amounts required to be withheld under federal, state or local law and any
additional withholding amounts to which the Executive has agreed.
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7. VALIDITY.
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This Agreement is subject to approval of the Court in the Company's
Chapter 11 case. The Company will pursue such an approval expeditiously, and
Executive will cooperate as may be necessary in this regard.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
8. COUNTERPARTS.
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This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
ARMSTRONG WORLD INDUSTRIES, INC.
By:
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Title: Chairman
EXECUTIVE
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Chan W. Galbato
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