AGREEMENT
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THIS AGREEMENT, dated May , 1996, is made by and between Armstrong
World Industries, Inc., a Pennsylvania corporation (the "Company"), and
(the "Executive").
WHEREAS, the Board considers it essential to the best interests of the
Company to foster the continued employment of key management personnel; and
WHEREAS, the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company; and
WHEREAS, the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
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Agreement are provided in the last Section hereof.
2. Term of Agreement. This Agreement shall commence on the date
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hereof and shall continue in effect through December 31, 1998; provided,
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however, that commencing on January 1, 1998 and each January 1 thereafter, the
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term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend this
Agreement or a Change in Control shall have occurred prior to such January 1;
and further provided, however, that if a Change in Control shall have occurred
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during the term of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four (24) months beyond the month in which such
Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the Executive
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to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein. Except as provided in Section 9.1
hereof, no amount or benefit shall be payable under this Agreement unless there
shall have been (or, under the terms of the second sentence of Section 6.1
hereof, there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during the Term of
this Agreement. This Agreement shall not be construed as creating an express or
implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right to
be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
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the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
after the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death or Disability, or (iv) the
termination by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
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5.1 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in
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effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits to which the Executive is
entitled in respect of all periods preceding the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay to the Executive the Executive's normal post-termination compensation
and benefits as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements as in effect immediately prior to the Change in
Control or, if more favorable to the Executive, as in effect immediately prior
to the Date of Termination.
6. Severance and Noncompetition Payments.
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6.1 The Company shall pay the Executive the payments described in
this Section 6.1 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to any payments and benefits to which the Executive is
entitled under Section 5 hereof, unless such termination is (i) by the Company
for Cause, (ii) by reason of death or Disability, or (iii) by the Executive
without Good Reason. For purposes of this Agreement, the Executive's employment
shall be deemed to have been terminated by the Company without Cause or by the
Executive with Good Reason following a Change in Control if (i) the Executive's
employment is terminated without Cause prior to a Change in Control
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which actually occurs during the term of this Agreement and such termination was
at the request or direction of a Person who has entered into an agreement with
the Company the consummation of which would constitute a Change in Control, (ii)
the Executive terminates his employment with Good Reason prior to a Change in
Control which actually occurs during the term of this Agreement and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Executive's employment is terminated
without Cause prior to a Change in Control and the Executive reasonably
demonstrates that such termination is otherwise in connection with or in
anticipation of a Change in Control which actually occurs during the term of
this Agreement.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to two times the sum
of (i) the higher of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or circumstance upon which
the Notice of Termination is based or the Executive's annual base salary in
effect immediately prior to the Change in Control (the "Change in Control
Salary"), and (ii) the higher of the annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by the Company in
respect of the three (3) years immediately preceding that in which the Date
of Termination occurs or the annual bonus so earned in respect of the three
(3) years immediately preceding that in which the Change in Control occurs
(the "Change in Control Bonus").
(B) Notwithstanding any provision of any annual incentive plan
to the contrary, the Company shall pay to the Executive a lump sum amount,
in cash, equal to a pro rata portion to the Date of Termination of the
value of the target incentive award under such plan for the then
uncompleted period under such plan, calculated by multiplying the
Executive's target award by the fraction obtained by dividing the number of
full months and any fractional portion of a month during such performance
award
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period through the Date of Termination by the total number of months
contained in such performance award period.
(C) The Company shall (i) establish an irrevocable grantor trust
holding an amount of assets sufficient to pay all such remaining premiums
owed by the Company (which trust shall be required to pay such premiums),
under any insurance policy insuring the life of the Executive under any
"split dollar" insurance arrangement in effect between the Executive and
the Company, and (ii) assign its interest in such policy or policies to the
grantor trust.
(D) If, as of the Date of Termination, the Executive either (A)
has not attained age 50 or (B) has not completed 10 years of active service
with the Company, then in addition to the retirement benefits to which the
Executive is entitled under each Pension Plan or any successor plan
thereto, the Company shall pay the Executive a lump sum amount, in cash,
equal to the excess of (i) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity commencing
at the date (but in no event earlier than the third anniversary of the Date
of Termination) as of which the actuarial equivalent of such annuity is
greatest) which the Executive would have accrued under the terms of all
Pension Plans (without regard to any amendment to any Pension Plan made
subsequent to a Change in Control and on or prior to the Date of
Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the
Executive were fully vested thereunder and had accumulated (after the Date
of Termination) thirty-six (36) additional months of service credit
thereunder and had been credited under each Pension Plan during such period
with compensation at the higher of (1) the Executive's compensation (as
defined in such Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination or (2) the Executive's compensation (as
defined in such Pension Plan) during the twelve (12) months immediately
preceding the Change in Control, over (ii) the
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actuarial equivalent of the aggregate retirement pension (taking into
account any early retirement subsidies associated therewith and determined
as a straight life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial equivalent of such
annuity is greatest) which the Executive had accrued pursuant to the
provisions of the Pension Plans as of the Date of Termination. For
purposes of this Section 6.1(D), "actuarial equivalent" shall be determined
using the same assumptions utilized under the Company's Retirement Income
Plan immediately prior to the Change in Control.
(E) For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the Executive
(which include the Executive's eligible dependents for purposes of this
paragraph (E)) with life, disability, accident and health insurance
benefits substantially similar to those which the Executive was receiving
immediately prior to the Notice of Termination (without giving effect to
any amendment to such benefits made subsequent to a Change in Control which
amendment adversely affects in any manner the Executive's entitlement to or
the amount of such benefits); provided, however, that, unless the Executive
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consents to a different method, such health insurance benefits shall be
provided through a third-party insurer. Benefits otherwise receivable by
the Executive pursuant to this Section 6.1(E) shall be reduced to the
extent comparable benefits are actually received by or made available to
the Executive by a subsequent employer without cost during the thirty-six
(36) month period following the Executive's termination of employment (and
any such benefits actually received by or made available to the Executive
shall be reported to the Company by the Executive).
(F) If the Executive would have become entitled to benefits
under the Company's post-retirement health care or life insurance plans (as
in effect immediately prior to the Change in Control or, if more favorable
to the Executive, immediately prior to the Date of Termination) had the
Executive's employment terminated at any time during
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the period of thirty-six (36) months after the Date of Termination, the
Company shall provide such post-retirement health care or life insurance
benefits to the Executive (subject to any employee contributions required
under the terms of such plans at the level in effect immediately prior to
the Change in Control or the Date of Termination, whichever is more
favorable to the Executive) commencing on the later of (i) the date that
such coverage would have first become available and (ii) the date that
benefits described in subsection (E) of this Section 6.1 terminate.
6.2 (A) Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by the
Executive, whether pursuant to the terms of this Agreement or otherwise (all
such payments and benefits, including the Severance Payments, being hereinafter
called "Total Payments") would be subject to the Excise Tax, then, the Severance
Payments shall be reduced to the extent necessary so that no portion of the
Total Payments is subject to the Excise Tax, but only if (A) the net amount of
such Total Payments, as so reduced (and after subtracting the net amount of
federal, state and local income taxes on such reduced Total Payments) is greater
than (B) the excess of (i) the net amount of such Total Payments, without
reduction (but after subtracting the net amount of federal, state and local
income taxes on such Total Payments), over (ii) the amount of Excise Tax to
which the Executive would be subject in respect of such unreduced Total
Payments.
(B) For purposes of determining whether and the extent to which
the Total Payments will be subject to the Excise Tax, (i) no portion of the
Total Payments the receipt or enjoyment of which the Executive shall have
effectively waived in writing prior to the delivery of a Notice of Termination
shall be taken into account, (ii) no portion of the Total Payments shall be
taken into account which, in the opinion of tax counsel reasonably acceptable to
the Executive and selected by the Company, does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code (including by
reason of section 280G(b)(4)(A) of the Code), (iii) in calculating the Excise
Tax, no portion of such Total Payments shall be taken into account which
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constitutes reasonable compensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount
allocable to such reasonable compensation, and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total Payments shall
be determined by the Company in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(C) Prior to the payment date set forth in Section 6.3 hereof,
the Company shall provide the Executive with its calculation of the amounts
referred to in this Section and such supporting materials (including, but not
limited to, any opinions or other advice of tax counsel referred to above) as
are reasonably necessary for the Executive to evaluate the Company's
calculations. If the Executive objects to the Company's calculations, the
Company shall pay to the Executive such portion of the Severance Payments (up to
100% thereof) as the Executive determines is necessary to result in the proper
application of subsection A of this Section 6.2.
6.3 The payments provided for in subsections (A), (B), (C) and (D) of
Section 6.1 hereof shall be made not later than the fifth day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
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be finally determined on or before such day, the Company shall pay to the
Executive on such day an estimate, as determined in good faith by the Executive
of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest at
120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth (30th)
day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest
at 120% of the rate provided in section 1274(b)(2)(B) of the Code). In the
event the Company should fail to pay when due the amounts described in
subsections (A), (B), (C) and (D) of Section 6.1 hereof, the Executive shall
also be entitled to receive from the Company an amount representing interest on
any unpaid or untimely paid amounts from the due date, as
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determined under this Section 6.3 (without regard to any extension of the Date
of Termination pursuant to Section 7.3 hereof), to the date of payment at a rate
equal to 120% of the rate provided in section 1274(b)(2)(B) of the Code.
6.4 Subject to Section 6.4(C) hereof, the Company shall pay the
Executive the payments described in Section 6.4(A) hereof, but only in the event
that the Executive becomes entitled to Severance Payments in accordance with
Section 6.1 hereof.
(A) So long as the Executive complies with the restrictive
provisions of Section 6.4(B) hereof, the Company shall pay to the
Executive, in cash, an aggregate amount equal to the sum of the Change in
Control Salary and the Change in Control Bonus (the "Noncompetition
Payments"), which amount shall be payable in equal monthly installments
over a one year period beginning on the Date of Termination (the
"Noncompetition Period").
(B) During the Noncompetition Period, the Executive shall not,
without the Company's prior written consent, directly or indirectly, own an
interest in, manage, operate, join, control, lend money or render financial
or other assistance to or participate in or be connected with, as an
officer, employee, partner, stockholder, consultant, or otherwise, any
individual, partnership, firm, corporation or other business organization
or entity that, at such time, is engaged in the business of acoustical or
metal ceilings, metal grid suspension systems, resilient flooring, ceramic
tile, elastomeric insulation products, gaskets and gasket materials or
adhesives for any such products, anywhere within the geographical territory
of the United States of America. The foregoing notwithstanding, the
Executive may make such investments that are permitted under the Company's
Corporate Reference Guide covering Conflicts of Interest and Outside Work
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By Employees, as in effect immediately prior to a Change in Control. The
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Executive acknowledges that the foregoing noncompetition provision is
reasonable and necessary in view of the nature of the Company and the
Executive's knowledge thereof in
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order to protect legitimate interests of the Company.
(C) If it is determined that the Executive has not complied with
the restrictive provisions of Section 6.4(B), the sole and exclusive
remedies of the Company shall be its release from the obligation to make
any further Noncompetition Payments to the Executive and the right to
recoup any such payments made to the Executive after the commencement of
the activity which is determined not to comply with Section 6.4(B) (plus
interest on any such payment at the rate set forth in Section 6.3 hereof).
(D) Notwithstanding the foregoing, the Executive shall have the
right, at any time prior to or during the Noncompetition Period, to
irrevocably elect (by providing written notice to Company in accordance
with Section 10 hereof) not to be (or no longer to be) subject to the
restrictive provisions of Section 6.4(B) hereof, in which event the Company
shall be under no obligation to make any further Noncompetition Payments to
the Executive.
6.5 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
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7.1 Notice of Termination. After a Change in Control and during the
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term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other
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party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
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purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days
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after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the date on which the dispute is finally resolved, either by
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mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable
or with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of Termination shall be
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extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs
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following a Change in Control and during the term of this Agreement and the Date
of Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the Date of Termination, as
determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
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employment with the Company terminates during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
hereof or Section 7.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(E) hereof) shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
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9.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
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substantially all of the business and/or assets of the Company 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. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
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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, if to the
Executive, to the address shown for the Executive in the personnel records of
the Company and, if to the Company, to the address 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:
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To the Company:
Armstrong World Industries, Inc.
Liberty and Charlotte Streets
Lancaster, Pennsylvania 17603
Attention: General Counsel
11. Miscellaneous. No provision of this Agreement may be modified,
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waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of 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 supersedes any
other agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof which have been made by either party. The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Pennsylvania. All references to
sections of the Exchange Act or the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder
shall be paid net of any applicable withholding required under federal, state or
local law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under Sections 6 and 7 hereof shall
survive the expiration of the term of this Agreement.
12. Validity. The invalidity or unenforceability of any provision of
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this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
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counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
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for benefits under this Agreement
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shall be directed in writing to and determined by the Committee, which shall
give full consideration to the evidentiary standards set forth in this
Agreement. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement
relied upon. The Committee shall afford a reasonable opportunity to the
Executive for a review of the decision denying a claim and shall further allow
the Executive to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Executive's claim
has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Lancaster, Pennsylvania in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
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set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
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shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
(D) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the deliberate and continued failure by the Executive
to devote substantially all the Executive's business time and best efforts to
the performance of the Executive's duties after a demand for substantial
performance is delivered to the Executive by the Board which specifically
identifies the
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manner in which the Executive has not substantially performed such duties; or
(ii) the deliberate engaging by the Executive 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 Executive. For the
purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be considered "deliberate" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that such
action or omission was in the best interests of the Company. In the event of a
dispute concerning the application of this provision, no claim by the Company
that Cause exists shall be given effect unless the Company establishes to the
Committee by clear and convincing evidence that Cause exists.
(E) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in
the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 20%
or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company's then outstanding
securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i) of paragraph
(III) below; or
(II) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is
in connection with an actual or threatened election contest, including
but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board
or nomination for election by the Company's shareholders was approved
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by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so
approved; or
(III) there is consummated a merger or consolidation of the
Company with any other corporation other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 60% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent
thereof outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the securities
Beneficially Owned by such Person any securities acquired directly
from the Company or its subsidiaries) representing 20% or more of
either the then outstanding shares of common stock of the Company or
the combined voting power of the Company's then outstanding
securities; or
(IV) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 75% of the combined voting
power of the voting securities of which are owned by shareholders of
the Company in substantially the same proportions as their ownership
of the Company immediately prior to such sale.
17
Notwithstanding the foregoing, no "Change in Control" shall be deemed to have
occurred if there is consummated any transaction or series of integrated
transactions immediately following which the record holders of the common stock
of the Company immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
(F) "Change in Control Salary" shall have the meaning stated in
Section 6.1 hereof.
(G) "Change in Control Bonus" shall have the meaning stated in
Section 6.1 hereof.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three
in number) who, on the date six months before a Change in Control, constitute
the Management Development and Compensation Committee of the Board, plus (ii) in
the event that fewer than three individuals are available from the group
specified in clause (i) above for any reason, such individuals as may be
appointed by the individual or individuals so available (including for this
purpose any individual or individuals previously so appointed under this clause
(ii)).
(J) "Company" shall mean Armstrong World Industries, Inc. and, except
in determining under Section 15(E) hereof whether or not any Change in Control
of the Company has occurred, shall include its subsidiaries and any successor to
its business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning stated in Section
7.2 hereof.
(L) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the
18
Executive's duties with the Company for a period of six (6) consecutive months,
the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in clause (ii) of the second sentence of Section 6.1
hereof (treating all references in paragraphs (I) through (VII) below to a
"Change in Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described in paragraph (I),
(V), (VI) or (VII) below, such act or failure to act is corrected prior to the
Date of Termination specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as an executive officer of
the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for (i) across-the-board salary
reductions similarly affecting all salaried employees of the Company
or (ii) across-the-board salary reductions
19
similarly affecting all senior executive officers of the Company and
all senior executives of any Person in control of the Company;
(III) the relocation of the Executive's principal place of
employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based anywhere
other than such principal place of employment (or permitted relocation
thereof) except for required travel on the Company's business to an
extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company, to pay to the Executive
any portion of the Executive's current compensation or to pay to the
Executive any portion of an installment of deferred compensation under
any deferred compensation program of the Company, within seven (7)
days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, including but not limited to the Company's Base
Salary Plan, Management Achievement Plan, 1984 Long-Term Stock Option
Plan for Key Employees, 1993 Long-Term Stock Incentive Plan, Armstrong
Deferred Compensation Plan, Retirement Income Plan and Retirement
Benefit Equity Plan, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Executive's
participation therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the
Executive's participation relative to other participants, as existed
immediately prior to the Change in Control;
20
(VI) the failure by the Company to continue to provide
the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, savings, life
insurance, medical, health and accident, or disability plans in which
the Executive was participating immediately prior to the Change in
Control, the taking of any action by the Company which would directly
or indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit enjoyed by the Executive at
the time of the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation days to which
the Executive is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 9.1 hereof; for purposes of
this Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder. For purposes of any determination regarding
the existence of Good Reason, any claim by the Executive that Good Reason exists
shall be presumed to be correct unless the Company establishes to the Committee
by clear and convincing evidence that Good Reason does not exist.
(Q) "Noncompetition Payments" shall have the meaning stated in
Section 6.4 hereof.
(R) "Noncompetition Period" shall have the meaning stated in Section
6.4 hereof.
21
(S) "Notice of Termination" shall have the meaning stated in Section
7.1 hereof.
(T) "Pension Plan" shall mean any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other agreement
entered into between the Executive and the Company which is designed to provide
the Executive with supplemental retirement benefits.
(U) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its subsidiaries,
(ii) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, (iv) a
corporation owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company,
or (v) an entity or entities which are eligible to file and have filed a
Schedule 13G under Rule 13d-1(b) of the Exchange Act, which Schedule indicates
beneficial ownership of 15% or more of the outstanding shares of common stock of
the Company or the combined voting power of the Company's then outstanding
securities.
(V) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 15% or more of
either the then outstanding shares of common
22
stock of the Company or the combined voting power of the Company's
then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired directly
from the Company or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(W) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(X) "Total Payments" shall mean those payments described in Section
6.2 hereof.
ARMSTRONG WORLD INDUSTRIES, INC.
By:
-----------------------------
Name:
Title:
--------------------------------
[Name of Executive]
23
Schedule to Exhibit No. 10
The Company has entered into substantially similar agreements with each of its
executive officers who are employees of Armstrong World Industries, Inc., other
than Edward R. Case and Bruce A. Leech, Jr.
24