SEVERANCE PAY PLAN FOR SALARIED EMPLOYEES
OF
ARMSTRONG WORLD INDUSTRIES, INC.
The Severance Pay Plan for Salaried Employees of Armstrong World Industries,
Inc. (the "Plan") has been authorized by the Executive Committee of the Board of
Directors of Armstrong World Industries, Inc. to be effective on and after May
1, 1989. This Plan supersedes, with the exception of the Armstrong Employment
Protection Plan, all prior separation pay policies, practices, and plans of the
Company whether in writing or otherwise.
1. DEFINITIONS
1.01 "Company" shall mean Armstrong World Industries, Inc., and any
subsidiary corporation of Armstrong World Industries, Inc. that shall have
adopted this Plan.
1.02 "Committee" shall mean the Severance Pay Committee where
membership shall include at least three salaried employees of the Company who
are appointed by the President to administer the Plan.
1.03 "Date of Termination" shall mean the date on which an eligible
Participant terminates service pursuant to Subsection 2.02 hereof.
1.04 "Disability" shall mean such incapacity due to physical or
mental illness or injury as causes an Employee to be absent from employment
duties for 180 consecutive calendar days.
1.05 "Employee" shall mean an individual who is either a Regular
Full-Time or Regular Part-Time Salaried Employee.
1.06 "Incentive Plan Award" shall mean the greater of the actual
incentive payments made to the Employee under any formal incentive compensation
plan of the Company during each of the two most recent calendar years preceding
the Employee's termination of employment; except that the actual incentive
payments for the current calendar year may be used where they are greater than
either such payments made to the Employee in either of the two prior calendar
years.
1.07 "Monthly Compensation" shall mean the sum of the Employee's base
monthly salary plus any pay adjustments. Pay adjustments include the monthly
equivalent of incentive awards, shift differential or other amounts attributable
to pay for time worked.
1.08 "Regular Full-Time Employee" shall mean any individual who is
employed by the Company on a salaried basis as an employee on a continuing basis
and is expected to work the normal number of work hours for the location as
determined by the Company.
1.09 "Years of Service" shall mean the eligible Participant's period
of service with the Company, including partial years. A Participant who is a
key executive as designated by the Board of Directors, or its delegate, will
receive credit for years of service for employment prior to such Participant's
Company employment.
1.10 "Regular Part-Time Employee" shall mean any individual who is
employed by the Company on a salaried basis as an employee on a continuing basis
and is expected to work for the Company less than the normal number of work
hours.
2. PARTICIPATION AND ELIGIBILITY
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2.01 Participants. The participants in the Plan are all Regular
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Full-Time or Regular Part-Time Employees of the Company. Notwithstanding the
foregoing, any Employee who was previously employed by the Company and is
rehired shall not be entitled to any credit for any prior period(s) of
employment for the purpose of calculating Years of Service referenced in Section
1.09 and Section 3.01, in the event that the Employee's reemployment is
terminated under conditions which would otherwise entitle the Employee to
Benefits under this Plan.
2.02 Eligibility.
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(a) Except as otherwise provided in Section 3 of this Plan, any
Participant whose employment with the Company is terminated by the
Company shall be eligible for benefits under Appendix A, Schedule 1,
if the termination occurs prior to July 1, 1994, or under Appendix B,
Schedule 1, if the termination occurs on or after July 2, 1994, unless
the termination is:
(1) because of the death or Disability of the Employee;
(2) by the Company for Cause (as defined in Subsection 2.03);
(3) by the Employee;
(4) by the Company in connection with the sale or transfer of a
plant, unit, division, or subsidiary of the Company to a
successor (whether by reason of a sale of stock or assets), by
means of which the Employee continues employment with the
successor organization or is offered employment with the
successor organization in essentially the same or a similar
position, with comparable compensation, within the same
geographical area, even if not at the same plant or office.
(5) by the Company and the employee was offered essentially the same
or a similar position, with comparable compensation, within the
same geographical area, even if not at the same plant, office or
location.
(b) For the period May 1, 1989 to July 1, 1994, any Participant who is
involuntarily terminated, or notified in writing before July 1, 1994,
that the Participant will be involuntarily terminated on or after July
1, 1994, as determined by the Committee, due to a reduction in the
workforce of the office or manufacturing location at which the
Participant is employed, will be eligible for severance benefits set
forth in Appendix A, Schedule 2 in lieu of benefits under Schedule 1,
provided that the Participant is not otherwise excluded from receiving
benefits under paragraph (a) above. This benefit is provided out of
concern for employees who lose their jobs during this time of
significant technological change and restructuring of the workforce.
(c) For the period from September 28, 1993 to July 1, 1994, any
Participant who is involuntarily terminated, or notified in writing
before July 1, 1994, that the Participant will be involuntarily
terminated on or after July 1, 1994, as determined by the Committee,
due to a finding of the Executive Committee of the Board of Directors
that the requirements of the Participant's position have been
fundamentally altered, will be eligible for severance benefits set
forth in Appendix A, Schedule 2 in lieu of benefits under Schedule 1,
provided that the Participant is not otherwise excluded from receiving
benefits under paragraph (a) above. This benefit is provided out of
concern for employees who
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lose their jobs because the requirements of their positions have been
fundamentally altered due to economic conditions, or present or
anticipated structural, procedural or technological change.
(d) For the period July 2, 1994, to January 1, 1996, any Participant who
is involuntarily terminated, as determined by the Committee, due to a
reduction in the workforce of the office or manufacturing location at
which the Participant is employed, will be eligible for severance
benefits set forth in Appendix B, Schedule 2 in lieu of benefits under
Schedule 1, provided that the Participant is not otherwise excluded
from receiving benefits under paragraph (a) above. This benefit is
provided out of concern for employees who lose their jobs during this
time of significant technological change and restructuring of the
workforce.
(e) For the period July 2, 1994, to January 1, 1996, any Participant who
is involuntarily terminated, as determined by the Committee, due to a
finding of the Executive Committee of the Board of Directors that the
requirements of the Participant's position have been fundamentally
altered, will be eligible for severance benefits set forth in Appendix
B, Schedule 2 in lieu of benefits under Schedule 1, provided that the
Participant is not otherwise excluded from receiving benefits under
paragraph (a) above. This benefit is provided out of concern for
employees who lose their jobs because the requirements of their
positions have been fundamentally altered due to economic conditions,
or present or anticipated structural, procedural or technological
change.
2.03 Termination for Cause. Termination of a Participant's employment for
---------------------
Cause shall be deemed to have occurred if the Participant's employment is
terminated by the Company due to the Participant's deliberately engaging in
gross misconduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise, including but not limited to fraud or embezzlement by
the Employee.
For purposes of this Section 2.03, no act, or failure to act, on the part of the
Participant shall be considered "deliberate" unless done, or omitted to be done,
by the Participant not in good faith and without reasonable belief that such
action or omission was in the best interests of the Company.
2.04 Effect of Participant's Eligibility to Retire. No eligible
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Participant will be denied severance benefits solely because such Participant is
also eligible for retirement benefits under another plan of the Company.
2.05 Reservation of Rights. The Company reserves the right for the
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Committee to depart from Appendix A or Appendix B, Schedules 1 and 2, where the
eligible Participant's attendance, job performance, or other job-related conduct
appears to the Company to justify an upward or downward adjustment in benefits.
However, in no event shall the maximum benefit payable under the Plan exceed
twice such Participant's annual compensation, as defined in 29 C.F.R. Section
2510.3-2(b)(2); nor shall the maximum payment period exceed 24 months after the
termination of the Participant's employment.
2.06 Classification of Employees to Whom the Plan Does Not Relate. The
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severance policies and procedures contained in this Plan do not apply to
employees classified by the Company as temporary or hourly paid employees.
3. BENEFITS
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3.01 Amount and Schedule of Benefit Payments. The Company will provide
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severance pay and benefits, as described in paragraphs (a) through (e) below, to
a Participant eligible for benefits under this Plan.
(a) Accrued Salary. Any accrued salary not yet paid to the Participant
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for services performed prior to the Date of Termination shall be paid
in compliance with state law, but not later than 20 calendar days
following the Date of Termination.
(b) Vacation Pay. The Participant will be reimbursed for vacation pay to
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the Date of Termination in accordance with Company policy.
(c) Severance Pay. The Participant shall be paid a severance payment
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related to the Participant's Years of Service and Monthly
Compensation. The amount of severance payment shall be calculated
using either Schedule 1 or Schedule 2 of the appropriate Appendix A or
Appendix B as determined under Sections 2.02 and 2.05. Weeks of
Severance for partial years of service will be calculated
proportionately. A week's pay shall be 12 times the Monthly
Compensation divided by 52.
(d) Mode of Payment. After the eligible Participant has satisfied all
---------------
conditions precedent to receive severance benefits, such benefits will
be paid to the Participant by salary continuation until the severance
allowance is exhausted, unless the Plan Administrator approves a lump
sum payment or some combination of periodic or lump sum payments.
(e) Insurance Benefits. An eligible Participant's insurance benefits
------------------
shall be determined in accordance with the applicable insurance
benefit plan.
3.02 Other Circumstances That can Result in Disqualification, Forfeiture,
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Reduction or Suspension of Severance Benefits.
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(a) Elective Deductions. An eligible Participant may elect to have
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insurance premiums for Company-sponsored insurance plans deducted from
severance payments.
(b) Legally Required Deductions. Appropriate federal, state and local
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taxes will be withheld from all severance payments.
(c) Effect of Rehire or Reinstatement (Or An Offer of Same). If an
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eligible Participant is granted severance benefits and the Participant
is either rehired or reinstated as a regular salaried employee on a
regular full-time basis by the Company (or is offered rehire or
reinstatement on a full-time basis by the Company) before the end of
the pay continuation period, then the Participant forfeits any unpaid
severance payments for the periods following rehire or reinstatement
(or the date of offer of same).
(d) Effect of Sale of Portion of Business Assets. Any Participant whose
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employment with the Company is terminated during or in anticipation of
a sale of some, but not all, assets of the Company is not entitled to
severance benefits if the purchaser of such assets offers to employ
the Participant for substantially the same or greater compensation as
the Participant was receiving immediately prior to the Date of
Termination, and such offer of employment is made by the purchaser
within no later than eight (8)
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weeks after the termination of the Participant's employment by the
Company.
(e) Effect of Participant Misconduct. Any Participant who accepts
--------------------------------
severance benefits is obligated to reimburse the Company for the full
amount of such payments if the Participant subsequently discloses any
of the Company's trade secrets, violates any written covenants between
the Participant and the Company, or otherwise engages in conduct that
may adversely affect the Company's reputation or business relations.
Likewise, a Participant who engages in such conduct shall forfeit any
right to any unpaid severance payments.
(f) Effect of Adverse Economic Conditions. The Company may permanently
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suspend benefits under severance allowances in pay status (1) in the
event of the Company's insolvency, liquidation, or bankruptcy
reorganization or (2) in the event the cost of providing such benefits
would lead to the Company's insolvency, liquidation, or bankruptcy
reorganization.
(g) Effect of Other Severance Pay Laws. Any severance benefits provided
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by the Company under this Plan shall be reduced dollar-for-dollar by
any severance, separation, or any other termination pay benefit that
the Company or any of its subsidiaries is required to pay to an
eligible Participant under any federal or state law.
(h) Effect of Catastrophes and Other Extraordinary Events. Severance
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payments will not be made if the Participant's employment is
terminated because of fire, flood, explosion, bombing, earthquake or
other disaster causing damage to the location facilities or when
strikes, work stoppages or civil disturbances prevent continued
operations.
(i) Effect of Temporary Layoffs. Severance payments will not be made if a
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layoff is deemed to be temporary and of limited duration, e.g., a need
for inventory reduction in a production facility or activities closely
aligned with it. During such periods, Participants are encouraged to
take any available vacation to which they may be entitled.
(j) Non-Compete Agreement. The Participant who has been involuntarily
---------------------
terminated because the requirements of the position have been
fundamentally altered shall be required to execute a Non-Compete
Agreement when the Committee determines that such an Agreement is
required to protect the Company. The Non-Compete Agreement must be
signed and returned to the Company within 60 days after the
Participant's termination date in order for the Participant to receive
benefits under this Plan.
3.03 Condition Precedent to Severance Payments. For the Employee who
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becomes eligible for severance payments under Section 2.02 of the Plan because
the Company eliminates the Participant's position or because the Participant's
position has been fundamentally altered, severance payments will not be paid
under any circumstances until the eligible Participant executes a Company
approved release of the Participant's then existing rights and claims against
the Company. The release must be signed and re-turned to the Company within 60
days after the Participant's Date of Termination in order for the Participant to
receive benefits under this Plan. For the Employee who becomes
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eligible for benefits under the Plan for any other reason, the Committee may but
is not required to obtain the release mentioned above.
3.04 Impact of Armstrong Employment Protection Plan. Notwithstanding
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anything to the contrary in this Plan, in the event the Participant's Date of
Termination coincides with or follows a change in control, as defined in the
Armstrong Employment Protection Plan, no benefits will be paid under this Plan.
This Plan applies only in the case of an eligible Participant whose employment
has been terminated by the Company prior to the change in control and who is
otherwise eligible to receive a benefit hereunder.
4. AMENDMENT OR TERMINATION.
The Executive Committee of the Board of Directors of the Company may by
written resolution terminate or amend this Plan at any time. Notwithstanding
the foregoing, no amendment or termination of the Plan may adversely affect the
amount, type, or timing of payment of benefits accrued and due and payable
hereunder, except as provided in Section 3.02 of this Plan.
5. ADMINISTRATION
5.01 Responsibility for administration of the Plan shall be vested in the
Committee, which shall have the sole and exclusive discretionary authority to
determine conclusively all questions arising in connection with the
administration, interpretation and application of the Plan, either by general
rules or by particular decisions, including (but not limited to) questions
regarding eligibility for benefits hereunder and the amount, form and timing of
payments thereof, and any other matter (including any question of fact) raised
by a claimant or identified by the Committee. Any such determination by the
Committee shall be binding and conclusive upon all persons. The Committee may
correct any defect, supply any information, or reconcile any inconsistency in
such manner and to such extent as shall be deemed necessary or advisable by it
to carry out the purpose of this Plan. The Committee may delegate
administrative tasks as necessary to persons who are not Committee members.
5.02 All expenses of administering the Plan shall be borne by the Company.
No member of the Committee shall receive any remuneration for service in such
capacity. However, expenses of the Committee or its members paid or incurred in
connection with administering the Plan shall be reimbursed by the Company.
5.03 The Company may purchase insurance to cover potential liability of the
Plan's fiduciaries. The Plan may purchase insurance for its fiduciaries and/or
for itself to cover liability and losses occurring by reason of the act or
omission of a fiduciary.
5.04 The Plan is unfunded and all severance payments under the Plan shall
be made from the general assets of the Company.
6. SUCCESSORS; BINDING AGREEMENT
6.01 In the event of a sale or transfer of a plant, unit, division, or
subsidiary of the Company to a successor (whether by reason of a sale of stock
or assets) by means of which any Employee continues employment with the
successor organization or is offered employment with the successor organization,
the Company shall not be obliged to negotiate with the successor organization
over whether to establish any severance pay plan, policy, or practice with
respect to such Employees or whether to cover such Employees
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under any existing severance pay plan, policy, or practice already maintained by
the successor organization.
6.02 All rights of an eligible Employee hereunder shall inure to the
benefit of and be enforceable by such Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If an eligible Employee should die after having
satisfied all conditions precedent to the receipt of such benefits, but prior to
receiving all amounts of benefits payable hereunder, all such amounts, unless
otherwise provided herein, shall be paid in a lump sum accordance with the terms
of this Plan to the Employee's devisee, legatee, or other designee or, if there
be no such designee, to the Employee's estate.
7. ARBITRATION.
Any dispute or controversy arising under or in connection with this Plan
shall be settled exclusively by arbitration in Lancaster County, Pennsylvania,
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
8. MISCELLANEOUS
8.01 No amount payable under the Plan shall be subject to assignment,
transfer, sale, pledge, encumbrance, alienation or change by an eligible
Employee or the beneficiary of such Employee except as may be required by law.
8.02 Neither the Plan nor any action taken hereunder shall be construed
either (1) as giving any individual employed by the Company any right to receive
severance benefits of a type or in any amount similar to the benefits described
in Section 3.01 above, unless the individual qualifies for benefits under this
Plan; or (2) as giving any Employee any right to be retained in the employ of
the Company.
8.03 Payments of benefits under this Plan shall be made in lieu of payments
of any severance benefits of a type similar to the benefits described in Section
3.01 above that may be offered under any written or unwritten severance pay
policy maintained by the Company and there shall be no duplication of benefits
previously paid under any such policy.
8.04 This Plan shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania except to the extent pre-empted by the
Employee Retirement Income Security Act or any other federal law.
8.05 The invalidity or unenforceability of any provision of this Plan shall
not affect the validity or enforceability of any other provision of this Plan,
which shall remain in full force and effect.
8.06 Any notice or other communication provided for in this Plan shall be
in writing and, unless otherwise expressly stated herein, shall be deemed to
have been duly given if mailed by United States registered mail, return receipt
requested, postage prepaid addressed in the case of an Employee to the
Employee's office at the Company with a copy to the Employee's residence and in
the case of the Company to its principal executive offices, attention of the
Severance Plan Administrator.
As Amended Through 12/19/94
APPENDIX A
Severance Pay Schedules
Years of Number of Weeks
Service Schedule 1 Schedule 2
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1 or less 2.0 2.0
2 2.0 2.0
3 3.0 3.0
4 4.0 4.0
5 5.0 5.0
6 7.0 7.0
7 9.0 9.0
8 10.0 11.0
9 12.0 13.0
10 14.0 15.0
11 15.5 18.0
12 17.5 21.0
13 19.5 24.0
14 21.5 27.0
15 23.5 30.0
16 25.5 34.0
17 27.5 38.0
18 30.0 42.0
19 32.0 46.0
20 34.5 50.0
21 36.5 55.0
22 39.0 60.0
23 41.5 65.0
24 44.0 70.0
25 46.5 75.0
26 49.0 80.0
27 51.5 85.0
28 54.5 90.0
29 57.0 95.0
30 59.5 100.0
31 62.5 104.0
32 65.0 104.0
33 68.0 104.0
34 71.0 104.0
35 74.0 104.0
36 76.5 104.0
37 & over 78.0 104.0
APPENDIX B
Severance Pay Schedules
Effective July 2, 1994
Years of Number of Weeks
Service Schedule 1 Schedule 2
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1 or less 2.0 2.0
2 2.0 2.0
3 3.0 3.0
4 4.0 4.0
5 5.0 5.0
6 6.0 7.0
7 7.0 9.0
8 8.0 10.0
9 9.0 12.0
10 10.0 14.0
11 11.0 15.5
12 12.0 17.5
13 13.0 19.5
14 14.0 21.5
15 16.0 23.5
16 18.0 25.5
17 20.0 27.5
18 22.0 30.0
19 24.0 32.0
20 26.0 34.5
21 28.0 36.5
22 30.0 39.0
23 32.0 41.5
24 34.0 44.0
25 36.0 46.5
26 38.0 49.0
27 40.0 51.5
28 44.0 54.5
29 48.0 57.0
30 52.0 59.5
31 52.0 62.5
32 52.0 65.0
33 52.0 68.0
34 52.0 71.0
35 52.0 74.0
36 52.0 76.5
37 & over 52.0 78.0