ARMSTRONG
DEFERRED COMPENSATION PLAN
PLAN DOCUMENT
The Armstrong Deferred Compensation Plan (the "Plan") has been authorized by the
Board of Directors of Armstrong World Industries, Inc. to be effective on and
after September 30, 1985 to allow certain directors and management employees of
the Company to defer receipt of a portion of their Compensation and, as a
result, to receive certain supplemental retirement of survivor benefits.
1. DEFINITIONS
1.01 "Company" shall mean Armstrong World Industries, Inc. or any
successor by merger, purchase or otherwise. In addition, the term Company shall
include any subsidiary corporation controlled by Armstrong World Industries,
Inc. that shall have adopted this Plan with the permission of the Board of
Directors of Armstrong World Industries, Inc.
1.02 "Committee" shall mean the Deferred Compensation Committee whose
membership shall include the Chairman of the Board of Directors of the Company
and at least two other employees of the Company selected by the Chairman.
1.03 "Compensation" for an employee Participant shall include salary and
any Management Achievement Plan Award received by the employee for services with
the Company and, in the case of a non-employee director Participant, shall
include payments by the Company to the director in the form of retainer and
meeting fees. Upon the prior approval of the Committee and subject to any
conditions imposed by the Committee, a Participant may elect to include in
"Compensation" an applicable amount of any "severance pay" to be provided to a
Participant under the Employment Protection Plan for Salaried Employees or
Severance Pay Plan for Salaried Employees.
1.04 "Participant" shall be each non-employee director and employee who
has been selected for participation by the Committee, who satisfies all
conditions of eligibility, and who elects to participate by entering into a
Participation Agreement.
1.05 "Participation Agreement" is the contract between the Company and the
Participant covering participation in the Plan.
1.06 "Change in Control" shall occur if and when (i) any person acquires
"beneficial ownership" of more than 28% of the then outstanding "voting stock"
of the Company and, within five years thereafter, "disinterested directors" no
longer constitute at least a majority of the entire Board of Directors, or (ii)
there shall occur a "Business Combination" with an "Interested Shareholder."
For the purpose of this Section, the terms "person," "beneficial ownership,"
"voting stock," "disinterested director," "Business Combination," and
"Interested Shareholder" shall have the meaning given to them in Article 7 of
the Company's Articles of Incorporation as in effect on May 1, 1985.
1.07 "Supplemental Retirement Account Balance" at any date shall mean with
respect to any Participant a lump sum amount equal to the amount actually
deferred under the Plan by the Participant to such date plus interest at a rate
equal to the rate which would be payable if the Participant were eligible for a
supplemental retirement benefit pursuant to Section 4.01, compounded monthly on
each installment from the date of deferral.
1.08 "Termination Account Balance" at any date shall mean with respect to
any Participant a lump sum amount equal to the amount actually deferred
under the Plan by the Participant to such date plus interest at a rate of six
percent (6%) per annum compounded monthly on each installment from the date of
deferral.
2. ELIGIBILITY FOR PARTICIPATION
Participation in the Plan is limited to non-employee directors of the Company
and those management employees who have been selected for participation by the
Committee.
3. DEFERRAL OF COMPENSATION
3.01 Deferral Period: During such period or periods as may, from time to
time, be selected by the Committee (the "Deferral Period") each person eligible
to participate in the Plan shall be given the opportunity to elect to defer a
portion of his or her Compensation. The length of the initial Deferral Period
shall be four years, commencing on January 1, 1986.
3.02 Deferral Rules:
(a) The minimum amount a Participant may defer shall be $5,000 a
year.
(b) The maximum amount an employee Participant may defer for each
year of the Deferral Period shall be 15 percent of the sum of the
Participant's annual base salary and target Management Achievement
Plan Award at the time of the deferral election. The maximum amount
of Compensation deferred by a non-employee director shall be
determined by the director.
(c) The amount deferred by an employee Participant shall be deferred
by means of reductions in the employee's Compensation. Amounts
deferred by a non-employee director shall be made first from
directors' retainer fees and then, if necessary, from directors'
meeting fees.
(d) The decision by a Participant to defer a portion of Compensation
must be made by the December 1 prior to the Deferral Period to which
an election to defer Compensation relates; provided, however, that in
the case of a participant whose eligibility to participate in the
Plan initially commences after January 1 of a year, a decision to
defer a portion of Compensation earned after such a deferral election
and during the remaining part of a Deferral Period must be made no
later than thirty (30) days after the Participant's commencement of
participation.
(e) A Participant's election to defer Compensation shall be
irrevocable, except that the Committee may permit a Participant to
waive the remainder of the deferral commitment upon a finding based
upon uniform standards established by the Committee that the
Participant has suffered a severe financial hardship.
For these purposes, a severe financial hardship includes a sudden and
unexpected illness or accident of the Participant or a dependent (as
defined under Section 152(a) of the Internal Revenue Code of 1986, as
amended), loss of the Participant's property due to casualty, or
other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the Participant, to the
extent not reimbursed by insurance or otherwise, and to the extent
the Participant does not have other funds reasonably available to
alleviate the hardship.
(f) Any Participant receiving a supplemental retirement benefit
under Section 4 shall forfeit his or her right to make further
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deferrals under the Plan.
(g) Notwithstanding the above or Section 3.02(f), any Participant,
after approval of the Committee, may elect to complete the deferral
of Compensation as specified in the current Deferral Election from
any "severance pay" which the employee is eligible to receive under
the Employment Protection Plan for Salaried Employees or Severance
Pay Plan for Salaried Employees following the date of termination.
3.03 Manner of Electing Deferral and Payment of Benefits: A Participant
shall elect to defer compensation by giving written notice to the Company on
forms provided for such purpose, which notice shall include:
(a) The amount and manner of compensation to be deferred in a
specified deferral period.
(b) A Designation of Beneficiary.
(c) The date of commencement of payment of deferred compensation and
interest thereon.
The Designation of the Beneficiary shall continue to be effective until and
unless a new election is filed in writing with the Committee. The designation
of the date of commencement of benefits shall be irrevocable, except as provided
in Section 4.04.
4. SUPPLEMENTAL RETIREMENT BENEFIT
4.01 A Participant who in the case of a non-employee director ceases to be
a director following one year of service on the Board of Directors for any
reason other than death or, in the case of an employee who retires under any
Company Pension Plan, shall be entitled to receive from the Company supplemental
retirement benefits as specified in the Participation Agreement or in any
amendment thereto or as otherwise agreed upon between the Company and the
Participant pursuant to an early retirement opportunity. The normal payment
period for non-employee directors shall be 120 months; for employees 180 months,
provided however that alternative payment schedules may be established by the
Management Development and Compensation Committee of the Board of Directors.
4.02 The Supplemental retirement benefit for a Deferral Period will be
paid, but in a lesser amount, if:
(a) by the end of a Deferral Period the Compensation payable to a
Participant has proved insufficient to accommodate full deferral;
(b) prior to the end of a Deferral Period, a non-employee director
ceases to be a director following one year of service on the Board of
Directors for any reason other than death or, in the case of an
employee who is a Participant, the Participant retires under any
Company Pension Plan;
(c) a Participant ceases to be a Participant within a Deferral Period
because his or her employer ceases to be a part of the Company within
that period;
(d) a Participant discontinues deferrals due to severe financial
hardship.
4.03 If a Participant dies after the commencement of supplemental
retirement benefit payments but before receipt of the last payment, the
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remaining amounts shall be paid, on their respective due dates, to the
Participant's beneficiary designated in the Beneficiary Designation Form
provided for such purpose or, failing such designation, to the Participant's
estate.
4.04 Payment hereunder shall commence in accordance with an election made
by the Participant provided, however, that:
(a) For a Participant who is a non-employee director, payment shall
commence following termination of service as a director, but in no
event earlier than age 65 and not later than the first day of the
month following the Participant's 70th birthday, regardless of whether
service as a director has terminated.
(b) For a Participant who is an employee, payment shall commence
subsequent to retirement but not later than the first day of the month
following such Participant's 65th birthday regardless of whether the
Participant has actually retired.
The Company reserves the right to impose conditions, including with
respect to payment commencement, in connection with early retirement
opportunities or any other severance arrangements which otherwise
enhance an employee Participant's retirement income:
Subject to the concurrence of the Committee, a Participant may change
such election to commence the receipt of supplemental retirement
benefits to a date earlier than the date the Participant had elected
previously for the commencement of such benefits, provided that such
change occurs at least one year prior to the calendar year in which
such payments are to commence.
4.05 If an employee Participant resigns without the written approval of the
Committee or if a Participant who is a non-employee director terminates service
on the Board of Directors prior to the completion of one (1) year of service,
then in lieu of the supplemental retirement benefit there shall be paid to the
Participant a lump sum, as soon as practical following termination, in an amount
equal to the Participant's Termination Account Balance.
4.06 Notwithstanding Section 4.05, an employee Participant shall be
entitled to the supplemental retirement benefit if such Participant is
terminated, or terminates for good reason as set forth in the Employment
Protection Plan for Salaried Employees, within two (2) years following a "Change
in Control." In the event of such termination or termination for good reason,
or in the event an employee retires pursuant to an early retirement opportunity
or any other severance arrangement in which the Participant agrees to commence
payment of the supplemental retirement benefit following the Participant's
sixty-fifth (65th) birthday and a "Change in Control" precedes commencement of
such payments, the Participant shall have the option to be paid a lump sum
amount equal to his Supplemental Retirement Account Balance, less a penalty of
six percent (6%) of such amount. If, however, the termination shall be in
connection with a conviction or admission of dishonesty or fraud, then such
Participant shall only be entitled to the benefit described in Section 4.05.
4.07 Notwithstanding any other provision of the Plan, a Participant at any
time shall be entitled to receive, upon written request to the Committee, a lump
sum distribution of the entire amount owed to the Participant under the Plan
subject to penalties determined by the Participant's status in the Plan as set
forth below:
(a) For a Participant who is a current employee but ineligible to
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retire under the Retirement Income Plan, or for a Participant who is a
non-employee director with less than one (1) year of service, the lump
sum distribution will be equal to ninety percent (90%) of the
Participant's Termination Account Balance.
(b) For a Participant who is a current employee eligible to retire
under the Retirement Income Plan, the lump sum distribution will be
equal to the lesser of (i) ninety percent (90%) of the Participant's
Supplemental Retirement Account Balance or (ii) the Participant's
Termination Account Balance.
(c) For a Participant who is a current non-employee director with at
least one (1) year of service, the lump sum distribution will be equal
to ninety percent (90%) of the Participant's Supplemental Retirement
Account Balance.
(d) For a Participant who is an employee or a non-employee director
who has terminated service with the Company and has either commenced
installment payments or is entitled to such payments in the future,
the lump sum distribution will be equal to ninety percent (90%) of the
Participant's Supplemental Retirement Account Balance.
The remaining balance shall be forfeited by the Participant and the Participant
will not be eligible to recommence deferrals until the first of the year that
follows a one (1) year period commencing on the date of withdrawal, and then
only if otherwise eligible under the terms of the Plan. The amount payable
under this section shall be paid within forty-five (45) days following receipt
of written notice by the committee.
5. SURVIVOR BENEFIT
If a Participant dies prior to commencement of payment of the supplemental
retirement benefit, no supplemental retirement benefit shall be payable, but in
lieu thereof the survivor benefit specified in the Participation Agreement shall
be paid to the Participant's designated beneficiary or, failing such
designation, to the Participant's estate.
6. WITHDRAWAL OF DEFERRED AMOUNTS
6.01 Other than pursuant to Section 4.04, 4.07 or termination, a
Participant may not receive any amount deferred under this Plan, unless the
Committee determines that, based upon uniform, established standards, the
Participant has suffered a severe financial hardship. For these purposes, a
several financial hardship shall have the same meaning as under Section 3.02(e).
6.02 Upon such determination, the Participant will receive an amount
necessary to satisfy the financial hardship but in no event more than the total
of amounts deferred plus interest credited to the Participant's account at the
date of withdrawal.
6.03 A Participant who has made a withdrawal will not be eligible to
recommence deferrals for a new Deferral Period under the Plan until the first of
the year that follows a one-year period commencing on the date of withdrawal.
7. AMOUNTS OF SUPPLEMENTAL RETIREMENT AND SURVIVOR BENEFITS
The supplemental retirement and survivor benefits shall be prescribed in
accordance with a general plan applicable to all Participants which has been
established by the Committee and approved by the Management Development and
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Compensation Committee of the Board of Directors.
8. FINANCING
The Company may finance obligations under this Plan by the purchase of one or
more policies of life insurance upon the lives of Participants, with the Company
as owner of and beneficiary under such policies. No Participant shall have any
right or interest in any such policy or the proceeds thereof or in any other
specific fund or asset of the Company as a result of the Plan. The rights of
Participants to benefit payments hereunder shall be no greater than those of an
unsecured creditor. Each Participant shall cooperate fully in the application
for, and in the maintenance of, any such policy or policies of insurance upon
the Participant's life.
9. AMENDMENT OR TERMINATION
9.01 The Board of Directors of the Company may terminate or amend this Plan
at any time. However, the Committee may amend this Plan, retroactively if
necessary, to bring this Plan into conformity with any law or governmental
regulation relating to plans or trusts of this character. The rights of any
Participant under a Participation Agreement shall not be impaired by such
termination or amendment except as provided under Section 9.02.
9.02 If the reason for termination or amendment is a change in the tax
laws adversely affecting the financing of the supplemental retirement benefit or
survivor benefit under the Plan, then the Board of Directors of the Company may
terminate all (but not less than all) of the then existing Participation
Agreements except any under which benefits are then being paid.
(a) Each Participant with a terminated Agreement will be paid in lieu
of any and all other benefits hereunder an amount equal to the amount
actually deferred under such Agreement plus interest credited to the
Participant's Supplemental Retirement Account balance to the date of
termination.
(b) Such amount resulting from termination may be paid in a lump sum
within 45 days of the date of such termination or in such other manner
and at such other time or times as the Committee may reasonably
determine.
10. ADMINISTRATION
10.01 Responsibility for establishing the requirements for participation
and for administration of the Plan shall be vested in the Committee, which shall
be responsible for any interpretation of the Plan or the Participation Agreement
that may be required. The Committee may delegate administrative tasks as
necessary to persons who are not Committee members.
10.02 The 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.
10.03 The Company shall indemnify and hold harmless the members of the
Committee against any and all claims, loss, damage, expense or liability arising
from any action or failure to act with respect to this Plan, except in the case
of gross negligence or willful misconduct.
11. CLAIMS PROCEDURE
11.01 Claim. Any person claiming a benefit, requesting an
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interpretation or ruling under the Plan, or requesting information under the
Plan shall present the request in writing to the Committee which shall respond
in writing as soon as practicable.
11.02 Denial of Claim. If the claim or request is denied, the written
notice of denial shall state:
(a) The reasons for denial, with specific reference to the Plan
provisions on which the denial is based.
(b) A description of any additional material or information required
and an explanation of why it is necessary.
(c) An explanation of the Plan's claim review procedure.
11.03 Review of Claim. Any person whose claim or request is denied or who
has not received a response within thirty (30) days may request review by notice
given in writing to the Committee. The claim or request shall be reviewed by
the Committee who may, but shall not be required to, grant the claimant a
hearing. On review, the claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
11.04 Final Decision. The decision on review shall normally be made
within sixty (60) days. If an extension of time is required for a hearing or
other special circumstances, the claimant shall be notified and the time limit
shall be one hundred twenty (120) days. The decision shall be in writing and
shall state the reasons and the relevant Plan provisions. All decisions on
review shall be final and bind all parties concerned.
12. MISCELLANEOUS
12.01 No amount payable under the Plan or any Participation Agreement
shall be subject to assignment, transfer, sale, pledge, encumbrance, alienation
or charge by a Participant or the beneficiary of a Participant except as may be
required by law.
12.02 Neither the Plan nor any action taken hereunder shall be construed
as giving any employee who is a Participant or who becomes a Participant any
right to be retained in the employ of the Company.
12.03 "Retirement" under the Company Pension Plan shall mean retirement
under the Retirement Income Plan. However, in the event of any retirement
arising by reason of a "Change in Control" and which, as set forth in the
Retirement Income Plan, results in an enhancement of an employee Participant's
retirement income then: (a) "retirement" for purposes of this Plan shall mean
the Participant's 65th birthday; or (b) a Participant may elect to treat
retirement as "retirement" under the Plan subject to the penalties imposed in an
early retirement opportunity.
12.04 The Management Development and Compensation Committee of the Board
of Directors may at any time direct the Company to establish an Umbrella Trust
to secure part or all of the obligations of the Company with respect to payments
and benefits to be paid to Participants under this Plan. Funding of the
Umbrella Trust shall be at the direction of the Board of Directors and shall be
irrevocable in nature.