EXHIBIT 10.1

AGREEMENT

THIS AGREEMENT is made as of the 13th day of March, 2006 by and between
Armstrong World Industries, Inc., a Pennsylvania corporation (the “Company”),
and Donald A. McCunniff (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 Agreement
are provided in the last Section hereof.

2. Term of Agreement. This Agreement shall commence on the date hereof and shall
continue in effect through September 30, 2008; provided, however, that
commencing on October 1, 2006 and each October 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless, not
later than June 30 of that 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 October 1; and further provided, however, that if a Change in
Control shall have occurred during the term of this Agreement, this Agreement
shall continue in effect for a period of not less than thirty-six (36) months
beyond the month in which such Change in Control occurred.

3. Company’s Covenants Summarized. In order to induce the Executive 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 10.1 hereof, no amount
or benefit shall be payable under this Agreement unless there shall have been
(or, under the terms of

 

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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 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 in 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.

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 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 immediately prior to the Change in Control or at the time the
Notice of Termination is given, whichever is greater, 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.

 

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6. Severance Payments.

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 and 8 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 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,
(iii) the Executive’s employment is terminated by the Company without Cause or
by the Executive for Good Reason 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; provided that any termination of the Executive’s employment by
the Company without Cause or by the Executive for Good Reason within the six
(6) month period immediately preceding a Change in Control which actually occurs
during the term of this Agreement shall be presumed to be a termination by the
Company without Cause or by the Executive for Good Reason following a Change in
Control, or (iv) the Executive’s employment is terminated without Cause after a
Potential Change in Control of the type described in paragraph (I) of the
definition of “Potential Change in Control”.

(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 three (3) 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
highest 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 year in which the Date of Termination occurs or the
highest 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”). If the Executive’s termination occurs prior to December 31, 2007, the
Executive’s Change in Control Bonus shall be the highest of his current and any
previous target annualized incentive award and any actual award received.

 

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(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 period through the Date of Termination by the
total number of months contained in such performance award period.

(C) For the thirty-six (36) month period immediately following the Date of
Termination, the Company shall arrange to provide the Executive (which includes
the Executive’s eligible dependents for purposes of this paragraph (C)) 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 the earlier of a Potential Change in Control or 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 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(C) shall be reduced to the extent
comparable benefits (including continued coverage for any preexisting medical
condition of any person covered by the benefits provided to the Executive and
his eligible dependents immediately prior to the Notice of Termination) 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).

(D) 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 a Potential Change in Control, the Change in Control or the Date of
Termination, whichever is most favorable to the Executive) had the Executive’s
employment terminated at any time during 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 or (ii) the date that benefits
described in subsection (C) of this Section 6.1 terminate.

(E) The Company will pay the Executive, at a daily salary rate calculated from
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

 

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based or the Executive’s annual base salary in effect immediately prior to the
Change in Control, an amount equal to all unused vacation days which would have
been earned had the Executive continued employment through December 31 of the
year in which the Date of Termination occurs.

(F) The Company shall pay the reasonable fees and expenses of a full service
nationally recognized executive outplacement firm until the earlier of the date
the Executive secures new employment or the date which is thirty-six (36) months
following the Executive’s Date of Termination; provided, that in no event shall
the aggregate amount of such payment be greater than 20% of the Executive’s
Change in Control Salary.

6.2. (A) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise) (a
“Payment”) would be subject to the excise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with respect to
the excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the “Excise Tax”), then the
Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

(B) Subject to the provisions of Section 6.2(C), all determinations required to
be made under this Section 6.2, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall be made by a qualified
accounting firm designated by the Company (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days after there has been a Payment, or such
earlier time as requested by the Company. In the event that the Accounting Firm
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Company shall appoint another qualified
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 6, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm’s determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial

 

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determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company that should have been made
(“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 6.2(C) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

(C) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment or Underpayment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:

(i) give the Company any information reasonably requested by the Company
relating to such claim;

(ii) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney reasonably selected by the Company;

(iii) cooperate with the Company in good faith in order effectively to contest
such claim; and

(iv) permit the Company to participate in any proceedings relating to such
claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 6.2(C), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a

 

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determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment or
Underpayment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.

(D) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 6.2(C), the Executive becomes entitled to receive any refund
with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Section 6.2(C)) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 6.2(C), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

6.3. The payments provided for in subsections (A), (B) and (E) of Section 6.1
hereof shall be made not later than the thirtieth (30th) day following the Date
of Termination; provided, however, that if the amounts of such payments cannot
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 ninetieth
(90th) day after the Date of Termination; provided, however, that in the event
the Executive becomes entitled to Severance Payments pursuant to the second
sentence of Section 6.1 (except for a termination occurring with respect to
clause (iv) of such sentence, which shall be paid as set forth above) such
payments shall be due and payable within thirty (30) days following the actual
Change in Control that triggered the Severance Payments. In the event that the
amount of the estimated payments

 

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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) and (E) 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 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. 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.

7.1. Notice of Termination. After a Potential Change in Control or, if there is
no Potential Change in Control, after a Change in Control and during the 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 party hereto in accordance with Section 11
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 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

 

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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 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 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 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 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. Acceleration of Certain Stock-Based Benefits.

(A) Upon the occurrence of a Change in Control, all unvested options with
respect to the Company’s stock held by the Executive shall vest and become
immediately exercisable and will be exercisable for a period ending on the later
of (i) the fifth anniversary of such Change in Control or (ii) the last date
that such option would otherwise be exercisable under the terms of the option
agreement or the plan pursuant to which such option was granted; provided, that
in no event shall any option be exercisable after the expiration of the original
term of the option.

(B) Upon the occurrence of a Change in Control, all unearned performance
restricted shares held by the Executive under the Company’s Stock Plan shall be
deemed to have been earned to the maximum extent permitted under the Stock Plan
for any performance period not then completed and all earned but unvested
performance restricted shares, including those deemed to be earned pursuant to
this sentence, and all

 

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unvested restricted stock awards shall immediately vest and the restrictions on
all shares subject to restriction shall lapse.

(C) For purposes of the Stock Plan and any stock option plan pursuant to which
any stock options, performance restricted shares or restricted stock awards have
been issued, this Agreement, which has been approved by the Management
Development and Compensation Committee of the Board, shall constitute an
amendment of the agreement or other instruments pursuant to which such stock
options, performance restricted shares and restricted stock awards were issued
in accordance with the terms of such plans. Notwithstanding the foregoing, in
the event that this Section 8(C) is determined for any reason to be inconsistent
with the terms of any plan pursuant to which such stock options, performance
restricted shares and restricted stock awards were issued, the terms of this
Agreement shall supersede the terms of such plan.

9. No Mitigation. The Company agrees that, if the Executive’s 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(C) 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.

10. Successors; Binding Agreement.

10.1. 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 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.

10.2. 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

 

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terms of this Agreement to the executors, personal representatives or
administrators of the Executive’s estate.

11. Notices. For the purpose of this Agreement, notices and all 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:

 

To the Company:

   Armstrong World Industries, Inc.    2500 Columbia Avenue    Lancaster,
Pennsylvania 17603    Attention: General Counsel

12. Miscellaneous. No provision of this Agreement may be modified, 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 Commonwealth 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. If the Executive elects not to enter
into this Agreement, he will continue to be eligible for such change in control
benefits as may be provided at the time of his termination under the Company’s
plans. The Executive agrees that this Agreement replaces the severance benefits
to which he may otherwise be entitled to under such plans, the Executive’s
employment agreement and the Company’s Severance Pay Plan for salaried
employees. The Company agrees that it will not argue in any form for any purpose
that this Agreement constitutes an “employee benefit plan” within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended.

 

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13. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.

14. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

15. Settlement of Disputes; Arbitration. All claims by the Executive for
benefits under this Agreement 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
Allegheny County, Pennsylvania in accordance with the rules of the American
Arbitration Association then in effect; provided, however, that the evidentiary
standards 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.

16. Definitions. For purposes of this Agreement, the following terms shall have
the meanings indicated below:

(A) “Accounting Firm” shall have the meaning stated in Section 6.2(B) hereof.

(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
manner in which the Executive has not substantially performed such duties;
(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; or
(iii) the Executive’s

 

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conviction (or entering into a plea bargain admitting guilt) of any felony. 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) with
respect to the Company, or (ii) with respect to Armstrong Holdings, Inc. (“AHI”)
except in the event that, following the Company’s emergence from its Chapter 11
bankruptcy case filed December 6, 2000 (the “Chapter 11 case”), the Company is
no longer a wholly-owned subsidiary of AHI and the event occurs after such
emergence. For purposes of the proceeding clause (ii), the terms “Potential
Change in Control”, “Beneficial Owner”, “Board”, “Committee”, and “Stock Plan”
used in this Agreement shall be construed with respect to AHI. Notwithstanding
anything to the contrary herein, the Company’s emergence from the Chapter 11
case shall not constitute a Change in Control under this Agreement.

(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
(During the period prior to the entry of an order confirming a plan of
reorganization in the Company’s Chapter 11 Case, an event described under this
Section 16 (E) (I) will not constitute a Change in Control); 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 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 (including a
triangular merger to which the Company is a party) with any

 

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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 66 2/3% 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. 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 (6) 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

 

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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 16(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 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 have the meaning stated in Section 6.2(A) hereof.

(O) “Executive” shall mean the individual named in the first paragraph.

(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 clauses (ii) or (iii) 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
similarly affecting all senior executive officers of the Company and all senior
executives of any Person in control of the Company;

 

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(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 (unless such relocation is closer to
the Executive’s principal residence) 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, Stock
Plan, savings plans and nonqualified deferred compensation 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;

(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 7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.

 

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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) “Gross-Up Payment” shall have the meaning stated in Section 6.2(A) hereof.

(R) “Notice of Termination” shall have the meaning stated in Section 7.1 hereof.

(S) “Payment” shall have the meaning stated in Section 6.2(A) hereof.

(T) “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-l(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.

(U) “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; or

(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 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).

(V) “Severance Payments” shall mean those payments described in Section 6.1.

 

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(W) “Stock Plan” shall mean the Company’s Long-Term Incentive Plan, as the same
may be amended from time to time, and any subsequent or additional plan.

(X) “Underpayment” shall have the meaning stated in Section 6.2(B) hereof.

 

ARMSTRONG WORLD INDUSTRIES, INC.

By:      

Name: 

 

Walter T. Gangl, Deputy General Counsel,

Corporate and Assistant Secretary

 

EXECUTIVE

   

Donald A. McCunniff

 

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