Exhibit 10.5
MALLESONS STEPHEN JAQUES
Equitable Mortgage of Shares
Dated: 2/12/07
Armstrong World Industries, Inc. (“Mortgagor”)
Bank of America, N.A. (“Mortgagee”)
Mallesons Stephen Jaques
Level 50
Bourke Place
600 Bourke Street
Melbourne Vic 3000
Australia
T +61 3 9643 4000
F +61 3 9643 5999
DX 101 Melbourne
www.mallesons.com
KCS:AJH

 

 

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Equitable Mortgage of Shares
Contents

         
DETAILS
    1  
GENERAL TERMS
    2  
1. INTERPRETATION
    2  
1.1 Terms defined in the Credit Agreement
    2  
1.2 Definitions
    2  
1.3 References to certain general terms Unless the contrary intention appears,
in this mortgage:
    5  
1.4 Number
    6  
1.5 Headings
    6  
1.6 Designation
    7  
2. MORTGAGOR MUST PAY THE SECURED MONEY
    7  
3. MORTGAGE
    7  
3.1 Mortgage
    7  
3.2 Mandatory action
    7  
3.3 Consideration
    7  
4. OBLIGATIONS TO DEPOSIT DOCUMENTS AND GIVE NOTICES
    8  
4.1 Obligations at signing of mortgage
    8  
4.2 Deposit of Future Security documents
    8  
4.3 Certificated Shares
    8  
4.4 Conversion of Uncertificated Shares to Certificated Shares
    8  
5. DEALINGS — SUCH AS SELLING OR MORTGAGING
    8  
5.1 Restricted dealings
    8  
5.2 Where the law allows for creation of Encumbrance without consent
    9  
6. OTHER ENCUMBRANCES
    9  
6.1 Priority agreement
    9  
6.2 Amount secured by other Encumbrance
    9  
6.3 Obligations under other Encumbrance
    9  
6.4 Mortgagee may rely on third party certificates
    9  
6.5 Prospective liability
    9  
7. DIVIDENDS AND VOTES
    10  
7.1 Before an Event of Default
    10  
7.2 After an Event of Default
    10  
7.3 No obligation on Mortgagee
    10  

 

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8. MAINTAINING THE SECURED PROPERTY
    11  
9. REPRESENTATIONS AND WARRANTIES
    11  
9.1 Representations and warranties
    11  
9.2 Reliance
    12  
10. PAYMENTS
    12  
10.1 Manner of payment
    12  
10.2 Currency of payment
    12  
11. COSTS AND INDEMNITIES
    13  
11.1 Currency conversion on Judgment debt
    13  
12. APPLICATION OF PAYMENTS
    13  
12.1 Application of money
    13  
12.2 Order of payment
    13  
12.3 Suspense account
    13  
12.4 Remaining money
    14  
12.5 Credit from date of receipt
    14  
13. ADMINISTRATIVE MATTERS
    14  
13.1 Deposit of documents
    14  
13.2 Registration of mortgage
    14  
13.3 Further steps
    14  
13.4 Authority to fill in blanks
    15  
13.5 Supply of information
    15  
14. RIGHTS THE MORTGAGEE MAY EXERCISE AT ANY TIME
    15  
14.1 Authority to deal
    15  
14.2 Right to rectify
    15  
15. DEFAULT
    15  
15.1 Events of Default
    15  
15.2 Ensure no default
    15  
15.3 Investigation of default
    15  
15.4 Mortgagee’s powers on default
    16  
15.5 Order of enforcement
    16  
16. EXCLUSION OF TIME PERIODS
    16  
16.1 No notice required unless mandatory
    16  
16.2 Mandatory notice period
    16  

 

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17. RECEIVERS
    17  
17.1 Terms of appointment of Receiver
    17  
17.2 More than one Receiver
    17  
17.3 Receiver is Mortgagor’s agent
    17  
17.4 Receiver’s powers
    17  
18. DISPOSAL OF THE SECURED PROPERTY IS FINAL
    17  
19. POWER OF ATTORNEY
    18  
19.1 Appointment
    18  
19.2 Powers
    18  
20. REINSTATEMENT OF RIGHTS
    18  
21. NOTICES
    19  
22. GENERAL
    19  
22.1 Prompt performance
    19  
22.2 Consents
    19  
22.3 Certificates
    19  
22.4 Set-off
    19  
22.5 Discretion in exercising rights
    19  
22.6 Partial exercising of rights
    19  
22.7 No liability for loss
    20  
22.8 Conflict of interest
    20  
22.9 Remedies cumulative
    20  
22.10 Other Encumbrances or judgments
    20  
22.11 Continuing security
    20  
22.12 Indemnities
    20  
22.13 Rights and obligations are unaffected
    20  
22.14 Inconsistent law
    20  
22.15 Superannuation legislation
    21  
22.16 Supervening legislation
    21  
22.17 Time of the essence
    21  
22.18 Variation and waiver
    21  
22.19 Receipts
    21  
22.20 Each signatory bound
    21  
22.21 Counterparts
    21  
22.22 Governing law
    21  
22.23 Serving documents
    22  
Schedule 1 — Form of Security Notice (clause 4.2(a) (“Future Security”) and
definition of “Security Notice”)
    23  
Signing page
    24  

 

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Equitable Mortgage of Shares
Details

          Parties   Mortgagor and Mortgagee
Mortgagor
  Name   Armstrong World Industries, Inc.
 
       
 
  Address   2500 Columbia Avenue
Lancaster, Pennsylvania 17603
Attn: Barry Sullivan and Teresa Redcay
 
       
Mortgagee
  Name   Bank of America, N.A. as
Administrative Agent and Collateral
Agent for the Lenders under the
Credit Agreement
 
       
 
  Address   One Independence Center
101 North Tryon St, 15th Floor
Charlotte, NC 28255-0001
Mail Code: NC1-001-15-14
Attn: Anne Brooke Lazorik
 
   
Date of mortgage
  See Signing page    

 

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Equitable Mortgage of Shares
General terms

1.   INTERPRETATION   1.1   Terms defined in the Credit Agreement

A term which has a defined meaning in the Credit Agreement has the same meaning
when used in this mortgage unless it is expressly defined in this mortgage, in
which case the meaning in this mortgage applies.

1.2   Definitions

These meanings apply unless the contrary intention appears:
Attorney means each attorney appointed by the Mortgagor under clause 19 (“Power
of attorney”).
Authorised Officer means:

  (a)   in the case of the Mortgagee, a director or secretary, or an officer
whose title contains the word “director”, “chief’, “head”, “president” or
“manager” or a person performing the functions of any of them, or any other
person appointed by the Mortgagee as an Authorised Officer for the purposes of
this mortgage; and     (b)   in the case of the Mortgagor (if the Mortgagor is a
company), a director or secretary or any other person appointed by the Mortgagor
to act as an Authorised Officer for the purposes of this mortgage.

Beneficiary means:

  (a)   the Mortgagee (for its own account or for the account of the
Administrative Agent or the Collateral Agent or a Lender); and     (b)   the
Administrative Agent (for its own account or for the account of a Lender); and  
  (c)   the Collateral Agent (for its own account or for the account of a
Lender); and     (d)   each Lender.

A reference to the Beneficiary means each of them individually and every two or
more of them jointly.
Certificate means the certificate which evidences title to a Share.
Certificated Share means a Share forming part of the Secured Property, title to
which is evidenced by a Certificate.
Controller has the meaning it has in the Corporations Act.

 

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Credit Agreement means the credit agreement dated 2 October 2006 between, among
others, the Mortgagor as borrower and the Mortgagee as Administrative Agent and
Collateral Agent.
Details means the section of this mortgage headed “Details”.
Encumbrance means any:

  (a)   security for the payment of money or performance of obligations,
including a mortgage, charge, lien, pledge, trust, power or title retention or
flawed deposit arrangement; or     (b)   right, interest or arrangement which
has the effect of giving another person a preference, priority or advantage over
creditors including any right of set-off; or     (c)   third party right or
interest or any right arising as a consequence of the enforcement of a judgment,

or any agreement to create any of them or allow them to exist.
Event of Default means an event so described in clause 15.1 (“Events of
Default”).
Future Security means sixty five percent of the Mortgagor’s interest in the
Shares issued by Armstrong World Industries (Australia) Pty Ltd. which, after
the date of this mortgage, become owned beneficially by the Mortgagor or by
anyone (including a trustee, nominee, broker or agent) for the Mortgagor.
A person is Insolvent if:

  (a)   it is (or states that it is) an insolvent under administration or
insolvent (each as defined in the Corporations Act); or     (b)   it is in
liquidation, in provisional liquidation, under administration or wound up or has
had a Controller appointed to its property; or     (c)   it is subject to any
arrangement, assignment, moratorium or composition, protected from creditors
under any statute, or dissolved (in each case, other than to carry out a
reconstruction or amalgamation while solvent on terms approved by the
Mortgagee); or     (d)   an application or order has been made (and, in the case
of an application, it is not stayed, withdrawn or dismissed within 30 days),
resolution passed, proposal put forward, or any other action taken, in each case
in connection with that person, which is preparatory to or could result in any
of (a), (b) or (c) above; or     (e)   it is taken (under section 459F(l) of the
Corporations Act) to have failed to comply with a statutory demand; or     (f)  
it is the subject of an event described in section 459C(2)(b) or section 585 of
the Corporations Act (or it makes a statement from which the Mortgagee
reasonably deduces it is so subject); or

 

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  (g)   it is otherwise unable to pay its debts when they fall due; or     (h)  
something having a substantially similar effect to (a) to (g) happens in
connection with that person under the law of any jurisdiction,

and any reference to Insolvency shall be construed accordingly.
Issuer means a corporation which has issued Shares included in the Secured
Property.
Mortgagee means the person so described in the Details.
Mortgagor means the person so described in the Details.
New Rights means:

  (a)   the Mortgagor’s interest in all money, dividends, interest, allotments,
offers, benefits, privileges, rights, bonuses, Shares, stock, debentures,
distributions or rights to take up securities; or     (b)   rights of the
Mortgagor consequent on any conversion, redemption, cancellation,
reclassification, forfeiture, consolidation or subdivision; or     (c)   rights
of the Mortgagor consequent on a reduction of capital, liquidation or scheme of
arrangement,

in connection with the Present Security or the Future Security.
Potential Event of Default means an event which, with the giving of notice,
lapse of time or fulfilment of any condition, would be likely to become an Event
of Default.
Present Security means the Mortgagor’s interest in the following Shares,
reflecting sixty five percent of the issued Shares held by the Mortgagor in the
Issuer:

                  Issuer   Identification number   Quantity     Class
Armstrong World Industries (Australia) Pty Ltd. (ABN 77 004 747 942)
  Share certificate number “24”     3,713,336     Ordinary

Receiver includes a receiver or receiver and manager.
Related Entity has the meaning it has in the Corporations Act.
Secured Money means all Obligations and all costs and expenses incurred in
connection with enforcement and collection of the Secured Money, including
Attorney Costs,

 

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This definition applies:

  (i)   irrespective of the capacity in which the Mortgagor or the Beneficiary
became entitled to, or liable in respect of, the amount concerned;

  (ii)   whether the Mortgagor or the Beneficiary is liable as principal debtor,
as surety, or otherwise;

  (iii)   whether the Mortgagor is liable alone, or together with another
person;

  (iv)   even if the Mortgagor owes an amount or obligation to the Beneficiary
because it was assigned to the Beneficiary, whether or not:

  (A)   the assignment was before, at the same time as, or after the date of
this mortgage; or

  (B)   the Mortgagor consented to or was aware of the assignment; or

  (C)   the assigned obligation was secured before the assignment;

  (v)   even if this mortgage was assigned to the Beneficiary, whether or not:

  (A)   the Mortgagor consented to or was aware of the assignment; or

  (B)   any of the Secured Money was previously unsecured; or

  (vi)   if the Mortgagor is a trustee, whether or not it has a right of
indemnity from the trust fund.

Secured Property means the Present Security, the Future Security and the New
Rights.
Security Notice means a notice in the form of schedule 1.
Share means shares, stock units or units in the capital of a corporation.
Taxes means taxes, levies, imposts, charges and duties imposed by any authority
(including stamp and transaction duties) together with any related interest,
penalties, fines and expenses in connection with them, except if imposed on, or
calculated having regard to, the overall net income of the Mortgagee.
Transfer means a transfer of the Secured Property executed by the Mortgagor as
transferor.
Uncertificated Share means a Share forming part of the Secured Property, title
to which is not evidenced by a Certificate.

1.3   References to certain general terms

Unless the contrary intention appears, in this mortgage:

  (a)   a reference to a group of persons or things is a reference to any two or
more of them jointly and to each of them individually;

 

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  (b)   an agreement, representation or warranty in favour of two or more
persons is for the benefit of them jointly and each of them individually;    
(c)   an agreement, representation or warranty by two or more persons binds them
jointly and each of them individually, but an agreement, representation or
warranty by a Mortgagee binds the Mortgagee individually only;     (d)   a
reference to anything (including an amount) is a reference to the whole and each
part of it;     (e)   a reference to a document (including this mortgage)
includes any variation or replacement of it;     (f)   the word “law” includes
common law, principles of equity, and laws made by parliament (and laws made by
parliament include State, Territory and Commonwealth laws and regulations and
other instruments under them, and consolidations, amendments, reenactments or
replacements of any of them);     (g)   a reference to accounting standards is a
reference to the accounting standards as defined in the Corporations Act and a
reference to an accounting term is a reference to that term as it is used in
those accounting standards, or, if not inconsistent with those standards, in
accounting principles and practices generally accepted in Australia;     (h)   a
reference to Australian dollars, dollars, A$ or $ is a reference to the lawful
currency of Australia;     (i)   the word “person” includes an individual, a
firm, a body corporate, an unincorporated association and an authority;     (j)
  a reference to a particular person includes the person’s executors,
administrators, successors, substitutes (including persons taking by novation)
and assigns;     (k)   the words “including”, “for example” or “such as” when
introducing an example, do not limit the meaning of the words to which the
example relates to that example or examples of a similar kind;     (l)   an
Event of Default or Potential Event of Default is “continuing” if it has not
been waived by, or remedied to the satisfaction of, the Mortgagee;     (m)   a
reference to the Corporations Act is a reference to the Corporations Act 2001
(Cwlth).

1.4   Number       The singular includes the plural and vice versa.   1.5  
Headings

Headings (including those in brackets at the beginning of paragraphs) are for
convenience only and do not affect the interpretation of this deed.

 

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1.6   Designation

The parties agree that this mortgage is a Collateral Document for the purposes
of the Credit Agreement.

2.   MORTGAGOR MUST PAY THE SECURED MONEY

The Mortgagor agrees to pay the Secured Money in accordance with the terms of
the Loan Documents. However, if an Event of Default is continuing, the Mortgagee
may declare at any time by notice to the Mortgagor that the Secured Money is
either payable on demand or immediately due for payment.

3.   MORTGAGE   3.1   Mortgage

The Mortgagor:

  (a)   mortgages to the Mortgagee the Present Security by way of equitable
mortgage; and     (b)   mortgages to the Mortgagee the New Rights existing at
the date of this mortgage with respect to the Present Security by way of
equitable mortgage; and     (c)   agrees to mortgage to the Mortgagee, when
acquired by the Mortgagor, the Future Security; and     (d)   agrees to mortgage
to the Mortgagee, when acquired by the Mortgagor, the New Rights which arise
after the date of this mortgage; and     (e)   for the purpose of securing
payment of the Secured Money.

The Mortgagor does this as beneficial owner.

3.2   Mandatory action

To the extent that any law requires that something must be done (such as
obtaining consent) before the Mortgagor may validly mortgage any of the Secured
Property, the mortgage under clause 3.1 (“Mortgage”) only takes effect in
relation to that Secured Property when the thing required is done. The Mortgagor
agrees to do anything reasonably necessary to ensure that it is done.

3.3   Consideration

The Mortgagor acknowledges giving this mortgage and incurring obligations and
giving rights under this deed for valuable consideration received.

 

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4.   OBLIGATIONS TO DEPOSIT DOCUMENTS AND GIVE NOTICES   4.1   Obligations at
signing of mortgage

The Mortgagor agrees to deposit with the Mortgagee or its nominee at the time of
the Mortgagor’s execution of this mortgage:

  (a)   the Certificates (if any) in respect of the Present Security; and    
(b)   the number of Transfers specified by the Mortgagee of the Present Security
with the name of the transferee and the consideration and date left blank.

4.2   Deposit of Future Security documents

The Mortgagor agrees to deposit with the Mortgagee or its nominee the following
in respect of Future Security promptly after the Mortgagor acquires the Future
Security:

  (a)   a Security Notice; and     (b)   the Certificates (if any); and     (c)
  the number of Transfers specified by the Mortgagee with the name of the
transferee and the consideration and date left blank.

4.3   Certificated Shares

If the Mortgagee asks, the Mortgagor agrees to promptly give to any Issuer,
broker, share registrar or other person specified by the Mortgagee, an
irrevocable direction (in a form approved by the Mortgagee) to deliver to the
Mortgagee or its nominee any Certificates held or issued by that person in
respect of Certificated Shares. The Mortgagor agrees to give to the Mortgagee a
copy of the direction, promptly after giving it.

4.4   Conversion of Uncertificated Shares to Certificated Shares

If a Certificate is issued at any time after the execution of this mortgage in
respect of any Uncertificated Share forming part of the Secured Property, the
Mortgagor agrees to promptly deposit with the Mortgagee or its nominee:

  (a)   that Certificate; and     (b)   the number of replacement Transfers
specified by the Mortgagee in respect of the Shares evidenced by that
Certificate with the name of the transferee and the consideration and date left
blank.

5.   DEALINGS — SUCH AS SELLING OR MORTGAGING   5.1   Restricted dealings

The Mortgagor covenants that so long as any of the Secured Money remains
outstanding and until all of the commitments relating thereto have been
terminated, the Mortgagor shall not sell, exchange, transfer, assign, lease or
otherwise dispose of the Secured Property or any interest therein, except as
permitted under the Credit Agreement and the other Loan Documents.

 

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5.2   Where the law allows for creation of Encumbrance without consent

If a law entitles the Mortgagor to create another Encumbrance over the Secured
Property without the consent of the Mortgagee, this clause 5 does not operate to
require the Mortgagor to obtain the Mortgagee’s consent before creating that
other Encumbrance. However:

  (a)   if the Mortgagor intends to create another Encumbrance, it agrees to
notify the Mortgagee at least seven days before it proposes to do so; and    
(b)   if the Mortgagee requests an agreement under clause 6.1 (“Priority
agreement”) and the Mortgagor has not complied with that request by the time the
Encumbrance is created, financial accommodation need not be made available under
any Loan Document.

6.   OTHER ENCUMBRANCES   6.1   Priority agreement

If the Mortgagee reasonably requests, the Mortgagor agrees to obtain an
agreement acceptable to the Mortgagee regulating priority between this mortgage
and any other Encumbrance over the Secured Property.

6.2   Amount secured by other Encumbrance

The Mortgagor agrees to ensure that the amount secured under any other
Encumbrance over the Secured Property is not increased without the Mortgagee’s
consent.

6.3   Obligations under other Encumbrance

The Mortgagor agrees to comply with all material obligations under any other
Encumbrance over the Secured Property.

6.4   Mortgagee may rely on third party certificates

The Mortgagee may rely on a certificate from any other person with an
Encumbrance over the Secured Property as to the amount that is owed to that
other person.

6.5   Prospective liability

For the purpose only of fixing priorities under section 282 of the Corporations
Act, the prospective liabilities (within the meaning of section 261 of the
Corporations Act) secured by this mortgage include the obligations of the
Mortgagor to pay or repay the Secured Money including all principal and amounts
in the nature of principal, interest and amounts in the nature of interest,
fees, costs, amounts due under indemnities and all other amounts coming within
the definition of Secured Money up to $100,000,000,000 (or, if the principal
amount secured is greater than this amount, a figure which is at least double
the principal amount).

 

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7.   DIVIDENDS AND VOTES   7.1   Before an Event of Default

Until an Event of Default occurs or the Secured Property is registered in the
Mortgagee’s name:

  (a)   the Mortgagor is entitled to retain all dividends or other income in
respect of the Secured Property; and     (b)   the Mortgagor may exercise rights
to take up further Shares in an Issuer; and     (c)   the Mortgagor may exercise
any voting power in respect of the Secured Property as it sees fit; and     (d)
  the Mortgagee may not exercise any voting power in respect of the Secured
Property without the Mortgagor’s consent.

7.2   After an Event of Default

If an Event of Default occurs and is continuing or the Secured Property is
registered in the Mortgagee’s name, then all rights of the Mortgagor under
clause 7.1 (“Before an Event of Default”) shall immediately cease and:

  (a)   the Mortgagor agrees to procure that all dividends or other income in
respect of the Secured Property are paid directly to the Mortgagee; and     (b)
  the Mortgagee is entitled to exercise the rights referred to in clauses 7.1(b)
and 7.1(c) (“Before an Event of Default”).

7.3   No obligation on Mortgagee

The Mortgagee need not:

  (a)   do anything to obtain payment of any dividends or other income in
respect of the Secured Property; or     (b)   vote at any meeting of
shareholders of an Issuer; or     (c)   exercise rights in respect of the
Secured Property; or     (d)   sell the Secured Property,

even if it has reason to believe that the value of the Secured Property may
fall. The Mortgagee is not responsible for loss as a result of such a failure to
act or delay in so acting.

 

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8.   MAINTAINING THE SECURED PROPERTY

The Mortgagor agrees to:

  (a)   (details of New Rights) provide to the Mortgagee or its nominee,
promptly after becoming aware of the New Rights, particulars of all New Rights
and all documentary or other evidence of New Rights; and

  (b)   (take up New Rights) at the Mortgagee’s request take up New Rights, if,
in the Mortgagee’s opinion, failure to do so could mean that the Secured
Property or this mortgage is or is likely to become materially lessened in value
or prejudicially affected, provided that the aggregate Secured Property will not
exceed sixty five percent of the total number of Shares held by the Mortgagor in
the Issuer; and

  (c)   (notices) give the Mortgagee a copy of any notice and, at the
Mortgagee’s request, any report, given to the shareholders of an Issuer; and

  (d)   (maintain authorisations) obtain, renew on time and comply with the
terms of each authorisation necessary to enter into this mortgage, comply with
obligations under it and allow it to be enforced.

9.   REPRESENTATIONS AND WARRANTIES

9.1   Representations and warranties

The Mortgagor represents and warrants (except in relation to matters disclosed
to the Mortgagee and accepted by the Mortgagee in writing) that:

  (a)   (owner of the Secured Property) it is the beneficial owner of, and has
good title to, the Secured Property free from Encumbrance other than Permitted
Liens; and

  (b)   (incorporation and existence) if the Mortgagor is a company, (i) it has
been incorporated in accordance with the laws of its place of incorporation,
(ii) it is validly existing under those laws, and (iii) it has power and
authority to carry on its business as it is now being conducted, except in the
case referred to in paragraph (iii) to the extent failure to do so could not
reasonably be expected to have a Material Adverse Effect; and     (c)   (fully
paid) the Secured Property is fully paid up; and

  (d)   (all interests in Issuer) it has disclosed to the Mortgagee all of its
interest in Shares in the Issuer; and

  (e)   (power) it has power to enter into this mortgage and comply with its
obligations under it; and

  (f)   (no contravention or exceeding power) this mortgage and the transactions
under it do not (i) contravene its constituent documents (if any),
(ii) contravene any law or obligation by which it is bound or to which any of
its assets are subject, or (iii) cause a limitation on its powers (or, to the
extent applicable, the powers of its directors) to be exceeded, except in each
case referred to in paragraphs (ii) and (iii) to the extent that such
contravention could not reasonably be expected to have a Material Adverse
Effect; and

 

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  (g)   (authorisations) it has in full force and effect the authorisations
necessary for it to enter into this mortgage, to comply with its obligations and
exercise its rights under it and allow it to be enforced; and

  (h)   (validity of obligations) its obligations under this mortgage are valid
and binding and are enforceable against it in accordance with its terms; and

  (i)   (benefit) it benefits by entering into the Loan Documents to which it is
a party; and

  (j)   (Event of Default) no Event of Default or Potential Event of Default is
continuing; and

  (k)   (full disclosure) it has disclosed in writing to the Mortgagee all facts
relating to the Mortgagor, this mortgage, the Secured Property and all things in
connection with them, which are material to the assessment of the nature and
amount of the risk undertaken by the Mortgagee in entering into any transaction
relating to this mortgage and doing anything in connection with this mortgage or
a transaction relating to it.

9.2   Reliance

The Mortgagor acknowledges that the Mortgagee and each Beneficiary has entered
into the Loan Documents to which it is a party in reliance on the
representations and warranties in this clause 9,

10.   PAYMENTS

10.1   Manner of payment

The Mortgagor agrees to make payments under this mortgage:

  (a)   in full without set-off or counterclaim, and without any deduction in
respect of Taxes unless prohibited by law; and

  (b)   if the payment relates to the Secured Money, in the currency in which
the payment is due, and otherwise in Australian dollars in immediately available
funds.

10.2   Currency of payment

The Mortgagor waives any right it has in any jurisdiction to pay an amount other
than in the currency in which it is due. However, if the Mortgagee receives an
amount in a currency other than that in which it is due:

  (a)   it may convert the amount received into the due currency (even though it
may be necessary to convert through a third currency to do so) on the day and at
such rates (including spot rate, same day value rate or value tomorrow rate) as
it reasonably considers appropriate. It may deduct its usual costs in connection
with the conversion; and

 

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  (b)   the Mortgagor satisfies its obligation to pay in the due currency only
to the extent of the amount of the due currency obtained from the conversion
after deducting the costs of the conversion.

11.   COSTS AND INDEMNITIES

11.1   Currency conversion on Judgment debt

If a judgment, order or proof of debt for an amount in connection with this
mortgage is expressed in a currency other than the currency in which the amount
is due under this mortgage, then the Mortgagor indemnifies the Mortgagee
against:

  (a)   any difference arising from converting the other currency if the rate of
exchange used by the Mortgagee under clause 10.2 (“Currency of payment”) for
converting currency when it receives a payment in the other currency is less
favourable to the Mortgagee than the rate of exchange used for the purpose of
the judgment, order or acceptance of proof of debt; and     (b)   the costs of
conversion.

The Mortgagor agrees to pay amounts under this indemnity on demand from the
Mortgagee.

12.   APPLICATION OF PAYMENTS

12.1   Application of money

The Mortgagee must apply money it receives under this mortgage towards paying
the Secured Money in accordance with the Loan Documents unless the Mortgagee is
obliged to pay the money to anyone with a prior claim.

12.2   Order of payment

The Mortgagee may use money received under this mortgage towards paying any part
of the Secured Money the Mortgagee chooses, including by paying a later
instalment before an earlier instalment. This applies even if that part only
falls due after the Mortgagee gives a notice of demand.

12.3   Suspense account

The Mortgagee may place in a suspense account any payment it receives from the
Mortgagor for as long as it considers prudent and need not apply it towards
satisfying the Secured Money.

 

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12.4   Remaining money

The Mortgagee agrees to pay any money remaining after the Secured Money is paid
either to the Mortgagor (which the Mortgagee may do by paying it into an account
in the Mortgagor’s name) or to another person entitled to it (such as another
person with an Encumbrance over the Secured Property). In doing so, it does not
incur any liability to the Mortgagor. The Mortgagee is not required to pay the
Mortgagor interest on any money remaining after the Secured Money is paid.

12.5   Credit from date of receipt

The Mortgagor is only credited with money from the date the Mortgagee actually
receives it (including, where the Mortgagee has appointed a Receiver, the date
the Receiver pays money to the Mortgagee).

13.   ADMINISTRATIVE MATTERS

13.1   Deposit of documents

In addition to the Mortgagor’s obligations under clause 4 (“Obligations to
deposit documents and give notices”) the Mortgagor agrees to deposit with the
Mortgagee all other documents the Mortgagee reasonably requests relating to the
Secured Property.
However, the Mortgagor need not deposit them if another person is holding them
under a Permitted Lien which has priority over this mortgage.

13.2   Registration of mortgage

The Mortgagee may register this mortgage at the Mortgagor’s expense.

13.3   Further steps

The Mortgagor agrees to do anything the Mortgagee reasonably requests (such as
obtaining consents, signing and producing documents, producing receipts and
getting documents completed and signed):

  (a)   to provide more effective security over the Secured Property for payment
of the Secured Money; or

  (b)   to enable the Mortgagee to register this mortgage with the priority
required by the Mortgagee; or

  (c)   to enable the Mortgagee to exercise the Mortgagee’s rights in connection
with the Secured Property; or

  (d)   to bind the Mortgagor and any other person intended to be bound under
this mortgage; or

  (e)   to enable the Mortgagee to register the power of attorney in clause 19
(“Power of attorney”) or a similar power; or

  (f)   to show whether the Mortgagor is complying with this mortgage.

 

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13.4   Authority to fill in blanks

The Mortgagor agrees that the Mortgagee may fill in any blanks in this mortgage
or a document connected with it (such as Corporations Act forms or transfers for
the Secured Property).

13.5   Supply of information

If the Mortgagee reasonably requests, the Mortgagor agrees to supply the
Mortgagee with any information about or documents affecting:

  (a)   the Secured Property; or

  (b)   this mortgage.

14.   RIGHTS THE MORTGAGEE MAY EXERCISE AT ANY TIME

14.1   Authority to deal

The Mortgagee may assign or otherwise deal with its rights under this mortgage
in any way it considers appropriate. If the Mortgagee does this, the Mortgagor
may not claim against any assignee (or any other person who has an interest in
this mortgage) any right of set-off or other rights the Mortgagor has against
the Mortgagee.

14.2   Right to rectify

The Mortgagee may do anything which the Mortgagor should have done under this
mortgage but which the Mortgagor either has not done or, in the Mortgagee’s
opinion, has not done properly. If the Mortgagee does so, the Mortgagor agrees
to pay the Mortgagee’s costs on demand.

15.   DEFAULT

15.1   Events of Default

It is an Event of Default if an “event of default” as defined in the Credit
Agreement occurs.

15.2   Ensure no default

The Mortgagor agrees to ensure that no Event of Default occurs.

15.3   Investigation of default

If the Mortgagee reasonably believes that an Event of Default is, or may be,
continuing the Mortgagee may appoint a person to investigate this. The Mortgagor
agrees to co-operate with the person and comply with every reasonable request
they make. If there is or was an Event of Default, the Mortgagor agrees to pay
the Mortgagee all costs in connection with the investigation.

 

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15.4   Mortgagee’s powers on default

If an Event of Default is continuing, the Mortgagee may do one or more of the
following in addition to anything else the law allows the Mortgagee to do as
mortgagee:

  (a)   sue the Mortgagor for the Secured Money; or

  (b)   appoint one or more Receivers; or

  (c)   do anything that a Receiver could do under clause 17.4 (“Receiver’s
powers”).

15.5   Order of enforcement

The Mortgagee may enforce this mortgage before it enforces other rights or
remedies:

  (a)   against any other person; or

  (b)   under another document, such as another Encumbrance.

If the Mortgagee has more than one Encumbrance, it may enforce them in any order
it chooses.

16.   EXCLUSION OF TIME PERIODS

16.1   No notice required unless mandatory

Neither the Mortgagee nor any Receiver need give the Mortgagor any notice or
demand or allow time to elapse before exercising a right under this mortgage or
conferred by law (including a right to sell) unless the notice, demand or lapse
of time is required by law and cannot be excluded.

16.2   Mandatory notice period

If the law requires that a period of notice must be given or a lapse of time
must occur or be permitted before a right under this mortgage or conferred by
law may be exercised, then:

  (a)   when a period of notice or lapse of time is mandatory, that period of
notice must be given or that lapse of time must occur or be permitted by the
Mortgagee; or

  (b)   when the law provides that a period of notice or lapse of time maybe
stipulated or fixed by this mortgage, then one day is stipulated and fixed as
that period of notice or lapse of time including, if applicable, as the period
of notice or lapse of time during which:

  (i)   an Event of Default must continue, before a notice is given or
requirement otherwise made for payment of the Secured Money or the observance of
other obligations under this mortgage; and

 

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  (ii)   a notice or request for payment of the Secured Money or the observance
of other obligations under this mortgage must remain not complied with before
the Mortgagee or a Receiver may exercise rights.

17.   RECEIVERS

17.1   Terms of appointment of Receiver

In exercising its power to appoint a Receiver, the Mortgagee may:

  (a)   appoint a Receiver to all or any part of the Secured Property or its
income; and

  (b)   set a Receiver’s remuneration at any figure the Mortgagee determines
appropriate, remove a Receiver and appoint a new or additional Receiver.

17.2   More than one Receiver

If the Mortgagee appoints more than one Receiver, the Mortgagee may specify
whether they may act individually or jointly.

17.3   Receiver is Mortgagor’s agent

Any Receiver appointed under this mortgage is the Mortgagor’s agent unless the
Mortgagee notifies the Mortgagor that the Receiver is to act as the Mortgagee’s
agent. The Mortgagor is solely responsible for anything done, or not done, by a
Receiver and for the Receiver’s remuneration and costs.

17.4   Receiver’s powers

Unless the terms of appointment restrict a Receiver’s powers, the Receiver may
do one or more of the following:

  (a)   sell, transfer or otherwise dispose of the Secured Property;

  (b)   obtain registration of the Secured Property in the Mortgagee’s or its
nominee’s name;

  (c)   do everything necessary to enable the Mortgagee or its nominee to
receive any New Rights;

  (d)   do anything else the law allows an owner or a Receiver of the Secured
Property to do.

18.   DISPOSAL OF THE SECURED PROPERTY IS FINAL

The Mortgagor agrees that if the Mortgagee or a Receiver sells or otherwise
disposes of the Secured Property:

  (a)   the Mortgagor will not challenge the acquirer’s right to acquire the
Secured Property (including on the ground that the Mortgagee or the Receiver was
not entitled to dispose of the Secured Property or that the Mortgagor did not
receive notice of the intended disposal) and the Mortgagor will not seek to
reclaim that property; and

 

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  (b)   the person who acquires the Secured Property need not check whether the
Mortgagee or the Receiver has the right to dispose of the Secured Property or
whether the Mortgagee or the Receiver exercises that right properly.

19.   POWER OF ATTORNEY

19.1   Appointment

The Mortgagor irrevocably appoints the Mortgagee, each Authorised Officer of the
Mortgagee, and each Receiver individually as the Mortgagor’s attorney and agrees
to ratify anything an Attorney does under clause 19.2 (“Powers”).

19.2   Powers

If an Event of Default has occurred or is continuing an Attorney may:

  (a)   do anything which the Mortgagor can lawfully authorise an attorney to do
in connection with this mortgage, the Secured Property, or which the Attorney
believes is expedient to give effect to any of the Mortgagee’s or a Receiver’s
rights (these things may be done in the Mortgagor’s name or the Attorney’s name,
and they include signing and delivering documents, selling or transferring the
Secured Property, starting, conducting and defending legal proceedings); and

  (b)   delegate their powers (including this power) and revoke a delegation;
and

  (c)   exercise their powers even if this involves a conflict of duty or they
have a personal interest in doing so.

20.   REINSTATEMENT OF RIGHTS

Under law relating to Insolvency, a person may claim that a transaction
(including a payment) in connection with the Secured Money is void or voidable.
If a claim is made and upheld, conceded or compromised, then:

  (a)   the Mortgagee is immediately entitled as against the Mortgagor to the
rights in respect of the Secured Money to which it was entitled immediately
before the transaction; and

  (b)   on request from the Mortgagee, the Mortgagor agrees to do anything
(including signing any document) to restore to the Mortgagee any Encumbrance
(including this mortgage) it held from the Mortgagor immediately before the
transaction.

The Mortgagor’s obligations under this clause are continuing obligations,
independent of the Mortgagor’s other obligations under this mortgage and
continue after this mortgage ends.

 

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21.   NOTICES

Clause 11.02 of the Credit Agreement applies to this mortgage as if set out in
full in this mortgage (with any necessary amendments).

22.   GENERAL

22.1   Prompt performance

Subject to clause 22.17 (“Time of the essence”):

  (a)   if this mortgage specifies when the Mortgagor agrees to perform an
obligation, the Mortgagor agrees to perform it by the time specified; and

  (b)   the Mortgagor agrees to perform all other obligations promptly.

22.2   Consents

The Mortgagor agrees to comply with all conditions in any consent the Mortgagee
gives in connection with this mortgage.

22.3   Certificates

The Mortgagee may give the Mortgagor a certificate about an amount payable or
other matter in connection with this mortgage. The certificate is sufficient
evidence of the amount or matter, unless it is proved to be incorrect.

22.4   Set-off

The Mortgagee may set off any amount owing by the Mortgagee to the Mortgagor
(whether or not due for payment) against any amount due for payment by the
Mortgagor to the Mortgagee under this mortgage.
The Mortgagee may do anything necessary to effect any set-off under this clause
(including varying the date for payment of any amount owing by the Mortgagee to
the Mortgagor and making currency exchanges). This clause applies despite any
other agreement between the Mortgagor and the Mortgagee.

22.5   Discretion in exercising rights

The Mortgagee or a Receiver may exercise a right or remedy or give or refuse its
consent in any way it considers appropriate (including by imposing conditions),
unless this mortgage expressly states otherwise.

22.6   Partial exercising of rights

If the Mortgagee or a Receiver does not exercise a right or remedy fully or at a
given time, the Mortgagee or the Receiver may still exercise it later.

 

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22.7   No liability for loss

Neither the Mortgagee nor a Receiver is liable for loss caused by the exercise
or attempted exercise of, failure to exercise, or delay in exercising, a right
or remedy except as a result of that Mortgagee’s or Receiver’s gross negligence
or wilful misconduct (as determined by a court of competent jurisdiction by
final and non-appealable judgment).

22.8   Conflict of interest

The Mortgagee’s and any Receiver’s rights and remedies under this mortgage may
be exercised even if this involves a conflict of duty or the Mortgagee or
Receiver has a personal interest in their exercise.

22.9   Remedies cumulative

The rights and remedies of the Mortgagee or a Receiver under this mortgage are
in addition to other rights and remedies given by law independently of this
mortgage.

22.10   Other Encumbrances or judgments

This mortgage does not merge with or adversely affect, and is not adversely
affected by, any of the following:

  (a)   any Encumbrance or other right or remedy to which the Mortgagee is
entitled; or

  (b)   a judgment which the Mortgagee obtains against the Mortgagor in
connection with the Secured Money,

The Mortgagee may still exercise its rights under this mortgage as well as under
the judgment, other Encumbrance or the right or remedy.

22.11   Continuing security

This mortgage is a continuing security despite any intervening payment,
settlement or other thing until the Mortgagee releases the Secured Property from
this mortgage.

22.12   Indemnities

The indemnities in this mortgage are continuing obligations, independent of the
Mortgagor’s other obligations under this mortgage, and continue after this
mortgage ends. It is not necessary for the Mortgagee to incur expense or make
payment before enforcing a right of indemnity under this mortgage.

22.13   Rights and obligations are unaffected

Rights given to the Mortgagee or any Receiver under this mortgage and the
Mortgagor’s liabilities under it are not affected by anything which might
otherwise affect them at law.

22.14   Inconsistent law

To the extent permitted by law, this mortgage prevails to the extent it is
inconsistent with any law.

 

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22.15   Superannuation legislation

If the Superannuation Industry (Supervision) Act 1993 (Cwlth) prohibits the
Mortgagor from mortgaging any of the Secured Property, this mortgage does not
extend to that Secured Property.

22.16   Supervening legislation

Any present or future legislation which operates to vary the obligations of the
Mortgagor in connection with this mortgage with the result that the Mortgagee’s
rights, powers or remedies are adversely affected (including by way of delay or
postponement) is excluded except to the extent that its exclusion is prohibited
or rendered ineffective by law.

22.17   Time of the essence

Time is of the essence in this mortgage in respect of an obligation of the
Mortgagor to pay money.

22.18   Variation and waiver

Unless this mortgage expressly states otherwise, a provision of this mortgage,
or right created under it, may not be waived or varied except in writing signed
by the party or parties to be bound.

22.19   Receipts

The receipt of a Receiver, the Mortgagee or an Authorised Officer of the
Mortgagee releases the person paying money to the Receiver or the Mortgagee in
connection with this mortgage from:

  (a)   liability to enquire whether the Secured Money has become payable; and  
  (b)   liability for the money paid or expressed to be received; and

  (c)   being concerned to see to its application or being answerable or
accountable for its loss or misapplication.

22.20   Each signatory bound

This mortgage binds each person who signs as Mortgagor even if another person
who was intended to sign does not sign it or is not bound by it.

22.21   Counterparts

This mortgage may consist of a number of copies, each signed by one or more
parties to the mortgage. If so, the signed copies are treated as making up the
one document.

22.22   Governing law

This mortgage is governed by the law in force in Victoria, Australia. The
Mortgagor and the Mortgagee submit to the non-exclusive jurisdiction of the
courts of that place.

 

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22.23   Serving documents

Without preventing any other method of service any document in a court action
may be served on a party by being delivered or left at that party’s address for
service of notice under clause 21 (“Notices”).
EXECUTED as a deed

 

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Equitable Mortgage of Shares
Schedule 1 — Form of Security Notice (clause 4.2(a) (“Future Security”) and
definition of “Security Notice”)
[Date]

     
To:
  Bank of America, N.A. (“Mortgagee”)
Address:
  One Independence Center
101 North Tryon St, 15th Floor
Charlotte, NC 28255-0001
Mail Code: NC1-001-15-14
Attn: Anne Brooke Lazorik

SECURITY NOTICE
Under the mortgage (“Mortgage”) dated [______] between Armstrong World
Industries, Inc. (“Mortgagor”) and Bank of America, N.A. (“Mortgagee”) the
Mortgagor notifies the Mortgagee and represents and warrants that:

1.   The following Shares constitute Future Security.

                  Share         Name of Company   Certificate No*   No of Shares
  Class
 
           
Armstrong World Industries (Australia) Pty Ltd.
           

2.   All the Shares are fully paid up.

We enclose:

  (a)   the Certificates in respect of the Shares; and

  (b)   the number of Transfers specified by you in respect of the Shares
completed with the name of the Mortgagee as transferee and the consideration and
date left blank.

If any of the above are not enclosed we undertake to forward them to you.
A term which has a defined meaning in the Mortgage has the same meaning as in
the Mortgage when used in this Security Notice.

          **** 
 
for Armstrong World Industries, Inc,
   

      ****   Care! Before signing obtain stamp duty advice on the stamp duty
implications of execution for the relevant jurisdiction.

 

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Signing page
DATED: February 12, 2007
Each of the parties hereto has caused a counterpart of this mortgage to be duly
executed and delivered as of the date above

          ARMSTRONG WORLD
INDUSTRIES, INC., a
Pennsylvania corporation    
 
       
By:
  /s/ Walter T. Gangl
 
Name: Walter T. Gangl    
 
  Title:   Assistant Secretary    
 
        BANK OF AMERICA, N.A., as
Administrative Agent and
Collateral Agent By:    
 
       
By:
  /s/ Anne B. Lazorik    
 
       
 
  Name: Anne B. Lazorik    
 
  Title:   Vice President    

 

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