LONG-TERM STOCK OPTION PLAN FOR KEY EMPLOYEES
Section 1. Purpose
The purpose of the Plan is to promote the long-term success of the Company
by providing a continuing long-term incentive for officers and key employees of
the Company and its subsidiaries. The Plan is designed to encourage a
stockholder view of the Company and to assist the building of a stock ownership
interest by the key executives whose superior performance is vital to the long-
term success of the Company.
Section 2. Administration
The Plan shall be administered by the Committee which shall consist of not
less than three directors of the Company, none of whom is eligible to
participate in the Plan, who shall be appointed and serve at the pleasure of the
Board of Directors. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by a majority of the Committee, shall be
deemed the acts of the Committee. Subject to the provisions of the Plan and to
directions by the Board of Directors, the Committee is authorized to adopt such
rules, regulations, and guidelines and to take such action in the administration
of the Plan as it shall deem proper.
Section 3. Participants
Officers and key employees of the Company and its subsidiaries (to the
extent permissible by law), including employee directors, shall be eligible to
participate in the Plan. Directors who are not otherwise officers or employees
of the Company or of a subsidiary shall not be eligible. The Committee shall in
its sole discretion from time to time select eligible persons as participants
and determine the extent and manner of their participation.
Section 4. Shares Subject to Plan
There is hereby reserved for the purposes of the Plan 1,000,000 shares of
Common Stock, which may be either authorized and unissued shares or treasury
shares. The number of shares reserved shall be subject to adjustment as
provided in Section 7 of the Plan. In the event that any option expires,
lapses, or otherwise terminates (except in the case of surrender of all or a
portion of an option upon the exercise of a stock appreciation right) prior to
being fully exercised, any unexercised shares covered by such option shall
remain available for the purposes of the Plan.
Section 5. Stock Options
5.1 - Grant of Options
The Committee may from time to time, subject to the provisions of the Plan,
grant options to officers and key employees to purchase shares of Common Stock.
Each option shall be evidenced by a written stock option agreement between the
Company and the participant to whom such option is granted, specifying the
number of shares of Common Stock that may be acquired by its exercise and
containing such terms and conditions consistent with the Plan as the Committee
shall determine.
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5.2 - Types of Options
Options granted pursuant to the Plan may be either Incentive Stock Options
or Nonstatutory Stock Options. The Committee, in its discretion, shall
determine whether and to what extent options granted under the Plan shall be
designated as Incentive Stock Options, or as Nonstatutory Stock Options, and
such options shall be granted separately hereunder. The Committee, in its
discretion, also shall determine whether and to what extent options originally
designated as Incentive Stock Options may remain Incentive Stock Options
pursuant to paragraph (a) of Section 5.3 below, in the event of the acceleration
of the exercisability of any such option. The Committee, in its discretion, may
allow certain optionees holding unexercised Incentive Stock Options to convert
such options to Nonstatutory Stock Options.
5.3 - Option Requirements
Each option granted under the Plan shall be subject to the provisions of
the Plan, to any additional or more restrictive terms and conditions as may be
specified by the Committee in its discretion, and to the following:
(a) The Committee may not grant Incentive Stock Options to any participant
under schedules that would permit the initial exercise in any one
calendar year of Incentive Stock Options to purchase more than $100,000 of
Common Stock of the Company valued at Fair Market Value at the time of the
grant; provided, further, that in the event of any acceleration of the
exercisability of any Incentive Stock Options previously granted to a
participant, such accelerated options shall remain designated as
Incentive Stock Options pursuant to Section 5.2 above, but only to the
extent permitted by Section 422A(b)(7) of the Internal Revenue Code of
1986, as amended (hereinafter the "Code") and regulations thereunder.
(b) The price at which each share covered by the option may be acquired
shall be determined by the Committee at the time the option is granted
and shall not be less than the Fair Market Value of the stock on the
date the option is granted.
(c) No option shall be exercisable until eighteen months from the date of
grant of the option, except in the event of death or disability as set
forth in paragraph (h) below and except in the event of any Change in
Control as set forth in Section 7.3 below.
(d) No Incentive Stock Option granted prior to January 1, 1987, to a
participant who has previously been granted an Incentive Stock Option under
the Plan or under any other stock option plan of the Company or any parent
or subsidiaries may be exercised until after such earlier Incentive Stock
Option has been exercised in full or has expired by reason of lapse of
time. The grant or exercise of any Nonstatutory Option, and the grant or
exercise of any Incentive Stock Option granted after December 31, 1986,
shall not affect the sequence in which Incentive Stock Options granted
prior to 1987 may be exercised.
(e) No shares of stock may be acquired by exercise of an option after a maximum
of ten years from the date the option was granted.
(f) The option shall be exercisable by the participant only while an employee
of the Company or any of its subsidiaries, or within three months after the
participant ceases to be employed by any of such corporations, for any
reason other than retirement, Disability, or death.
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(g) In the event of the retirement of the participant, commencing with the date
of retirement, and prior to its expiration date, an option must be
exercised during a period of three years (although an unexercised Incentive
Stock Option will cease to be treated as such and will become a
Nonstatutory Stock Option after three months). However, an Incentive Stock
Option granted prior to February 26, 1990 must be exercised within three
months commencing with the date of retirement.
(h) In the event of death of the participant, the option must be exercised
prior to its expiration and within eighteen months from the date of death.
In the event of the Disability of the participant, the option must be
exercised prior to its expiration and within twelve months from the date of
termination of employment due to such Disability. Each such option may be
exercised as to all or any portion thereof without regard to the limitation
contained in paragraph (c) of this Section.
(i) The option shall not be transferable by the participant otherwise than by
will or by the laws of descent and distribution. The option may be
exercised only during the participant's lifetime by the participant.
(j) The option may be exercised in whole or in part from time to time by
written request received by the Treasurer of the Company. The option price
of each share acquired pursuant to an option shall be paid in full at the
time of each exercise of the option either in cash, or in the discretion of
the Committee, by delivering to the Company shares of the Company's Common
Stock or any combination of such shares and cash, having an aggregate Fair
Market Value equal to the option price of the shares being acquired.
However, shares of the Company's Common Stock previously acquired by the
participant under the Plan or any other stock option plan of the Company
shall not be utilized for purposes of payment upon the exercise of an
option unless those shares have been owned by the participant for a twelve-
month period or such longer period as the Committee may determine.
(k) Exercise of an option in any manner shall result in a decrease in the
number of shares which thereafter may be available for the purposes of the
Plan by the number of shares as to which the option is exercised.
Section 5.4. Share Tax Withholding
At the discretion of the Committee, share tax withholding may be granted to
any participant with an outstanding Nonstatutory Stock Option granted prior to
November 25, 1991 and may be included as a term of any grant of any stock option
after that date. Share tax withholding shall entitle the participant to elect
to satisfy, in whole or in part, any withholding obligations in connection with
the exercise of a stock option by requesting that the Company either (i)
withhold shares of Common Stock otherwise issuable to the participant upon such
exercise or (ii) by accepting delivery of shares of Common Stock previously
owned by participant. In either case, the Fair Market Value of such shares of
Common Stock will generally be determined on the date of exercise. Shares of
Common Stock previously acquired by the participant under the Plan or any other
stock option plan of the Company shall not be utilized for satisfaction of any
withholding obligation upon the exercise of an option unless those shares have
been owned by the participant for a twelve-month period or such longer period as
the Committee may determine. Notwithstanding any other provision hereof to the
contrary, the Committee, in its sole discretion, may at any time suspend,
terminate, or disallow any or all entitlements to share tax withholding
previously granted or extended to any participant.
Section 6. Stock Appreciation Rights
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(a) The Committee may, in its discretion, grant stock appreciation rights in
connection with all or any part of an option granted under the Plan. Any
stock appreciation rights granted in connection with an option shall be
governed by the terms of the option agreement and the Plan. Stock
appreciation rights shall not be transferable or assignable separately from
the options to which they relate. Stock appreciation rights shall be
exercisable only when the Fair Market Value of the shares subject thereto
exceeds the option price of the related option and to the extent that the
option to which they relate is exercisable.
(b) Stock appreciation rights shall permit the participant, upon exercise of
such rights, to surrender the related option, or any portion thereof, and
to receive, without payment to the Company (except for applicable
withholding taxes), an amount equal to the excess of the Fair Market Value,
on the date of such exercise, of the stock covered by such option or
portion thereof over the option price of such stock as provided in such
option. Such amount shall be paid in shares of Common Stock valued at Fair
Market Value on the date of exercise. No fractional shares shall be issued
as a result of exercising a stock appreciation right. In the Committee's
sole discretion, share tax withholding, as described and limited by Section
5.4 hereof, may be awarded to or otherwise considered a term of any stock
appreciation right whenever granted.
(c) Upon the exercise of a stock appreciation right and surrender of the
related option, or portion thereof, such option, to the extent surrendered,
shall be terminated, and the shares covered by the option so surrendered
shall no longer be available for purposes of the Plan.
Section 7. General Provisions
7.1 - Definitions
The capitalized terms as used in the Plan shall have the meanings set forth
in this Section 7.1.
(a) Committee - Committee appointed pursuant to Section 2 to administer the
Plan.
(b) Common Stock - Common Stock of the Company of the par value of $1.00 per
share.
(c) Company - Armstrong World Industries, Inc.
(d) Disability - Total and permanent disability within the meaning of Section
22(e)(3) of the Code.
(e) Fair Market Value - The closing price of the Common Stock on the New York
Stock Exchange (Composite Tape) on the applicable date or, if no sales were
made on such date, on the next preceding date on which sales of the Common
Stock were made.
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(f) Incentive Stock Options - Stock options meeting the qualifications for
incentive stock options under Section 422A of the Code.
(g) Nonstatutory Stock Options - Stock options which are not Incentive Stock
Options.
(h) Plan - The Long Term Stock Option Plan for Key Employees as set forth
herein.
7.2 - Adjustment in Numbers of Shares and Option Prices
The number of shares specified in Section 4 to be reserved for the pur-
poses of the Plan, the number of shares subject to any option granted under the
Plan, the option price specified in any such option, and the class of shares to
be sold under options shall be adjusted by the Board of Directors at such times
and in such amounts as the Board, in its discretion, may determine to be
appropriate to give effect to any subdivision or combination of the outstanding
Common Stock into a greater or lesser number of shares, stock dividend,
reclassification of shares, reorganization, merger, consolidation, exchange of
shares, or other change in the capitalization or organization of the Company.
If the Common Stock shall be changed into or exchanged for a different number or
kind of shares of stock or other securities of the Company or of another
corporation, there shall be substituted for the shares covered by each
outstanding option under the Plan, the number and kinds of shares of stock or
other securities which would have been substituted therefor if such shares had
been outstanding on the date fixed for determining the shareholders entitled to
receive such changed or substituted stock or other securities.
7.3 - Option Exercise Acceleration
In the event of any Change in Control as such term is defined in
Section 1.01 of the Employment Protection Plan for Salaried Employees as then in
effect, the exercise period set forth in Section 5.3(c) shall be reduced to six
months. Any prior option granted under this Plan shall have the benefit of this
Section.
7.4 - No Right to Employment
Nothing contained in the Plan, nor in any option granted pursuant to the
Plan, shall confer upon any participant any right with respect to continuance of
employment by the Company or its subsidiaries, nor interfere in any way with the
right of the Company or its subsidiaries to terminate the employment or change
the compensation of any employee at any time.
7.5 - Compliance with Government Regulations
The Company shall not be required to issue or deliver shares or make
payments upon any option or related stock appreciation right granted under the
Plan prior to complying with the requirements of any governmental authority in
connection with the authorization, issuance, or sale of such shares.
7.6 - Amendment and Discontinuance
The Board of Directors may alter, suspend, or discontinue the Plan,
provided that no such action shall affect or impair rights already granted to a
participant without that person's consent, and provided further, that except as
provided in Section 7.2, no action of the Board of Directors may increase the
number of shares subject to the Plan or reduce the option price below Fair
Market Value on the date of grant, materially modify the requirements for
participant eligibility, or increase the term of any option beyond the maximum
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term permitted by the Plan. Except with respect to matters as to which amend-
ments are prohibited by this Section, the Board of Directors is authorized and
directed to make such amendments to the Plan or to the agreements entered into
under the Plan as may be necessary to make Incentive Stock Options granted under
the Plan qualify for most favorable Federal tax treatment accorded to stock
options by the Code as the same may be amended from time to time.
7.7 - Effective Date and Duration of Plan
The Plan shall become effective immediately upon the approval and adoption
thereof at the annual meeting of the stockholders on April 30, 1984. All
options granted under the Plan must be granted within ten years from its
adoption date by the stockholders of the Company. Any options outstanding ten
years after the adoption of the Plan may be exercised within the periods
prescribed under or pursuant to the Plan.
Revised 5/8/92