INDEMNIFICATION
AGREEMENT
FOR
DIRECTORS AND OFFICERS OF ARMSTRONG WORLD INDUSTRIES,
INC.
This
Agreement is made effective as of the [_______] day of [_______],
[_______], by and between Armstrong World Industries, Inc., a
Pennsylvania corporation (the “Corporation”) and
referred to herein as the “Indemnitor”) and [director
name] (the “Indemnitee”).
WHEREAS,
it is essential to the Corporation that the Corporation retain and
attract as directors and officers the most capable persons
available; and
WHEREAS,
Indemnitee is an officer and/or a member of the Board of Directors
of the Corporation and in that capacity is performing a valuable
service for the Corporation; and
WHEREAS,
the Indemnitor has purchased and maintains one or more policies of
Directors and Officers Liability Insurance (“D & O
Insurance”) covering certain liabilities which may be
incurred by directors and officers in their performance of services
for the Corporation; and
WHEREAS,
there is concern over the continued adequacy and reliability of D
& O Insurance protection available to corporate directors and
officers; and
WHEREAS,
the Corporation has provisions in both its Articles of
Incorporation and its Bylaws (together referred to herein as the
“Bylaw”) which provide for indemnification of and
advancement of expenses to the officers and directors of the
Corporation to the full extent permitted by law, and the Bylaw and
the applicable indemnification statutes of the Commonwealth of
Pennsylvania provide that they are not exclusive; and
WHEREAS,
in recognition of Indemnitee’s need for substantial
protection against personal liability in order to induce and retain
Indemnitee’s service to the Corporation, the increasing
difficulty in obtaining satisfactory D & O Insurance coverage,
and Indemnitee’s reliance on the Bylaw, and in part to
provide Indemnitee with specific contractual assurance that the
protection promised by the Bylaw will be available to Indemnitee
(regardless of, among other things, any amendment to or revocation
of the Bylaw or any change in the composition of the
Corporation’s Board of Directors or acquisition transaction
relating to the Corporation), the Indemnitor wishes to provide in
this Agreement for the indemnification of and the advancing of
expenses to Indemnitee to the fullest extent (whether partial or
complete) permitted by law
on the date
hereof and as set forth in this Agreement, and, to the extent
insurance is maintained, for the continued coverage of Indemnitee
under the Indemnitor’s D & O Insurance
policies.
NOW,
THEREFORE, in consideration of the premises and of Indemnitee
agreeing to serve or continuing to serve the Corporation directly
or, at its request, another enterprise, and intending to be legally
bound hereby, the parties hereto agree as follows:
1.
Indemnity of Indemnitee .
(a) The
Indemnitor shall hold harmless and indemnify the Indemnitee against
any and all reasonable expenses, including attorneys’ fees,
and any and all liability and loss, including judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in
settlement, incurred or paid by Indemnitee in connection with any
threatened, pending or contemplated action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter “a proceeding”) and whether or not by or
in the right of the Corporation or otherwise, to which the
Indemnitee is, was or at any time becomes a party, or is threatened
to be made a party or is involved (as a witness or otherwise) by
reason of the fact that Indemnitee is or was a director or officer
of the Corporation or is or was serving as director, officer,
trustee or representative of another corporation or of a
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans or the Armstrong
Foundation, whether the basis of such proceeding is alleged action
in an official capacity, or in any other capacity while serving, as
a director, officer, trustee or representative, unless the act or
failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or
recklessness; provided, however, that the Indemnitor shall
indemnify the Indemnitee in connection with a proceeding (or part
thereof) initiated by the Indemnitee (other than a proceeding to
enforce the Indemnitee’s rights to indemnification under this
Agreement or otherwise) prior to a Change of Control, as defined in
Section 2(e), only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) Subject
to the foregoing limitation concerning certain proceedings
initiated by the Indemnitee prior to a Change of Control, the
Indemnitor shall pay the expenses (including attorneys’ fees)
incurred by Indemnitee in connection with any proceeding in advance
of the final disposition thereof promptly after receipt by the
Indemnitor of a request therefor stating in reasonable detail the
expenses incurred or to be incurred.
(c) If
a claim under paragraph (a) or (b) of this section is not
paid in full by the Indemnitor within forty-five (45) days
after a written claim has been received by the Corporation, the
Indemnitee may, at any time thereafter, bring suit against the
Indemnitor to recover the unpaid amount of the claim. The burden of
proving that indemnification or advances are not appropriate shall
be on the Indemnitor. The Indemnitee shall also be entitled to be
paid the expenses of prosecuting such claim to the extent he or she
is successful in whole or in part on the merits or otherwise in
establishing his or her right to indemnification or to the
advancement of expenses. The Indemnitor shall pay such fees and
expenses in advance of the final disposition of such action on the
terms and conditions set forth in Section 1(b).
2.
Maintenance of Insurance and Funding .
(a) The
Indemnitor represents that as of the present date, it has in force
and effect one or more policies of D & O Insurance (the
“Insurance Policies”), providing a minimum of
$75,000,000 in coverage. Subject only to the provisions of Section
2(b) hereof, the Indemnitor agrees that, so long as Indemnitee
shall continue to serve as an officer or director of the
Corporation (or shall continue to serve as a director, officer,
trustee or representative of another Armstrong corporation,
partnership, joint venture, trust, foundation or other enterprise,
including service with respect to an employee benefit plan) and
thereafter so long as Indemnitee shall be subject to any possible
claim or threatened, pending or contemplated action, suit or
proceeding, whether civil, criminal or investigative, by reason of
the fact that Indemnitee was a director or officer of the
Corporation (or served in any of said other capacities), except as
indicated in (b) below, the Indemnitor shall purchase and
maintain in effect for the benefit of Indemnitee a binding and
enforceable policy or policies of D & O Insurance providing
coverage at least comparable to that provided pursuant to the
Insurance Policies.
(b) The
Corporation shall not be required to maintain said policy or
policies of D & O Insurance in effect if, in the reasonable
business judgment of the then directors of the Corporation
(i) the premium cost for such insurance is substantially
disproportionate to the amount of coverage, (ii) the coverage
provided by such insurance is so limited by exclusions that there
is insufficient benefit from such insurance or (iii) said
insurance is not otherwise reasonably available; provided however,
that in the event those directors make such a judgment, the
Indemnitor shall purchase and maintain in force a policy or
policies of D & O Insurance in the amount and with such
coverage as such directors determine to be reasonably
available.
Notwithstanding
the general provisions of this Section 2(b), following a
Change of Control, any decision not to maintain any policy or
policies of D & O Insurance or to reduce the amount or coverage
under any such policy or policies shall be effective only if there
are “disinterested directors” (as defined in Section
2(e) hereof) and shall require the concurrence of a majority of
such “disinterested directors.”
(c) If
and to the extent the Indemnitor, acting under Section 2(b),
does not purchase and maintain in effect the policy or policies of
D & O Insurance described in Section 2(a), the Indemnitor
shall indemnify and hold harmless the Indemnitee to the full extent
of the coverage which would otherwise have been provided by such
policies. The rights of the Indemnitee hereunder shall be in
addition to all other rights of Indemnitee under the remaining
provisions of this Agreement.
(d) In
the event of a Potential Change of Control or if and to the extent
the Indemnitor is not required to maintain in effect the policy or
policies of D & O Insurance described in Section 2(a) pursuant
to the provisions of Section 2(b), the Indemnitor shall, upon
written request by Indemnitee, create a “Trust” for the
benefit of Indemnitee and from time to time, upon written request
by Indemnitee, shall fund such Trust in an amount sufficient to pay
any and all expenses, including attorneys’ fees, and any and
all liability and loss, including judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement
actually and reasonably incurred by Indemnitee or on his or her
behalf for which the Indemnitee is entitled to indemnification or
with respect to which indemnification is claimed, reasonably
anticipated or proposed to be paid in accordance with the terms of
this Agreement or otherwise; provided that in no event shall more
than $100,000 be required to be deposited in any Trust created
hereunder in excess of the amounts deposited in respect of
reasonably anticipated expenses, including attorneys’ fees.
The amounts to be deposited in the Trust pursuant to the foregoing
funding obligation shall be determined by the Reviewing Person
whose determination shall be final and conclusive. The Reviewing
Person shall have no liability to the Indemnitee for his or her
decisions hereunder. The terms of the Trust shall provide that upon
a Change of Control (i) the Trust shall not be revoked or the
principal thereof invaded, without the written consent of the
Indemnitee, (ii) the Trust shall advance, within two business
days of a request by the Indemnitee, any and all expenses,
including attorneys’ fees, to the Indemnitee (and the
Indemnitee hereby agrees to reimburse the Trust under the
circumstances under which the Indemnitee would be required to
reimburse the Indemnitor under Section 5 of this Agreement),
(iii) the Trust shall continue to
be funded
by the Indemnitor in accordance with the funding obligation set
forth above, (iv) the Trustee shall promptly pay to the
Indemnitee all amounts for which the Indemnitee shall be entitled
to indemnification pursuant to this Agreement or otherwise, and
(v) all unexpended funds in such Trust shall revert to the
Indemnitor upon a final determination by the Reviewing Party or a
court of competent jurisdiction, as the case may be, that the
Indemnitee has been fully indemnified under the terms of this
Agreement. The Trustee shall be a bank or trust company or other
individual or entity chosen by the Indemnitee and acceptable to and
approved of by the Indemnitor.
(e) For
the purposes of this Agreement:
(i) a
“Change of Control” shall occur if, after the date
hereof, (A) any person acquires “beneficial
ownership” of more than 28% of the then outstanding
“voting stock” of the Corporation and within five years
thereafter, “disinterested directors” no longer
constitute at least a majority of its entire Board of Directors or
(B) there shall occur a “business combination”
with an “interested shareholder” not approved by a
majority of the “disinterested directors”.
(ii) a
“Potential Change of Control” shall occur if
(A) the Corporation enters into an agreement or arrangement,
the consummation of which would result in the occurrence of a
Change in Control; (B) any person publicly announces a tender
offer or comparable action which if consummated would constitute a
Change of Control; (C) any person (other than the Armstrong
Asbestos Personal Injury Trust, a trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation acting in such capacity or a corporation owned,
directly or indirectly, by the shareholders of the Corporation in
substantially the same proportions as their ownership of stock of
the Corporation), who is or becomes the beneficial owner, directly
or indirectly, of securities of the Corporation representing 10% or
more of
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