Exhibit 10.1


 





Corrective Action Plan


 


This document constitutes the voluntary corrective action plan
(“CAP”) negotiated between the Office of Compliance and Field Operations (“Office of Compliance”) of the
Consumer Product Safety Commission (“CPSC”) and Lumber Liquidators Holdings, Inc. (“LL”) with respect to
the laminate flooring products manufactured in and imported from China and sold in the United States from 2011 to May 2015 (the
“Product”) to address the issue of formaldehyde emissions from the laminate flooring. The submission of this corrective
action plan does not constitute an admission by LL that either reportable information or a substantial product hazard exists. Set
forth below are the remedial actions that LL will voluntarily undertake:


 


		1.	Inventory Control: The parties acknowledge that
                                         LL has voluntarily moved remaining Product to a warehouse located at 99 Motivation Drive,
                                         Lawrenceburg, Tennessee 38464, following LL’s decision to not sell the Product
                                         in its stores and write down the value on its financial statements. LL estimates that
                                         the remaining Product consists of approximately 22 million board feet of lumber (the
                                         “Inventory”). LL has deactivated and blocked all Inventory and all associated
                                         SKUs from sale and from distribution, and it has placed the Inventory in quarantine.
                                         LL shall not activate or allow sale of any Inventory without prior written approval of
                                         CPSC staff. LL agrees that the Inventory will be maintained in quarantine and shall not
                                         be transferred, reconditioned, relabeled, sold, or exported from the U.S. without CPSC
                                         staff approval. All requests to transfer, recondition, relabel, sell, or export the Inventory
                                         will be sent to CPSC sixty (60) days prior to the date that LL intends to take such action.
                                         Should LL decide to destroy or dispose of the Inventory, LL shall provide CPSC with notice
                                         of such destruction or disposal thirty (30) days prior to the date LL intends to take
                                         such action. All requests to transfer, recondition, relabel, sell, or export the Inventory
                                         and all notices of destruction or disposal should be addressed to Mary Toro, Director,
                                         Division of Regulatory Enforcement, Office of Compliance and Field Operations, U.S. Consumer
                                         Product Safety Commission, Room 610, 4330 East West Highway, Bethesda, MD 20814-4408
                                         (mtoro@cpsc.gov).



 


		2.	Remedy: LL has, since May 2015, voluntarily offered passive badge samplers as a screening tool to monitor the concentration
of formaldehyde in the homes of consumers who purchased the Product from February 2012 through May 2015 (referred to herein as
“Consumers”). This service has been provided to Consumers at no cost. LL agrees to continue to offer Consumers voluntary
testing, at no cost to Consumers.









 


Consumers who participated in the program prior to
the date of this CAP will be informed by LL of this CAP through CPSC staff-approved electronic communication; and, depending on
test results obtained during this earlier program, such consumers will be eligible for any subsequent testing and benefits outlined
in the CAP. Consumers who did not participate in the program prior to the date of this CAP will be informed by LL of this CAP
through CPSC staff-approved electronic communication. A notice of the CAP will also be available as a link on LL’s home
page, www.lumberliquidators.com.


 






    -1- 


     


    

 


Under this program, LL will send a CPSC staff-reviewed
passive badge sampler to Consumers within twenty (20) business days of receipt of their request, although LL will seek to provide
samplers to Consumers within ten (10) business days, to the extent feasible. If the volume of requests, the supply of badges, or
other logistics issues are expected to impact the delivery times, LL will notify CPSC via e-mail. With the sampler, Consumers will
receive CPSC staff-reviewed instructions on appropriate passive badge testing conditions (e.g., badge placement, labeling of passive
badge, length of testing, removal of other formaldehyde sources) to promote accurate testing of the rooms of the home. LL will
offer the Consumer one (1) badge per 600 ft2 of installed laminate flooring. LL will instruct the Consumer to mail the
badge, at LL’s expense, to a specified laboratory (accredited to NIOSH 2016 modified or OSHA 1007) for evaluation. If a Consumer’s
badge test result is at or below 80 ppb, LL will notify Consumers via a CPSC staff-reviewed communication that no further remediation
will be offered.


 


		a.	For any Consumer who had any badge test result exceeding 80 ppb of formaldehyde, LL will offer to conduct emission testing
of a sample of their flooring. For those Consumers, LL shall notify the Consumer through a CPSC-staff-approved communication of
the option to receive additional testing of their flooring, within five (5) business days of LL receiving the test result. The
notification will include information on how to improve indoor air quality with increased ventilation and maintenance of temperature
and humidity, as well as a CPSC staff-approved formaldehyde fact sheet.



 


		b.	Should that Consumer request additional testing, LL shall cause a qualified firm, at LL’s expense, to go to the Consumer’s
home within thirty (30) days of receipt of the Consumers’ request and select a plank from a location designated by the Consumer
in the room with the highest formaldehyde levels. LL will replace the removed flooring with similar product from Inventory or from
the consumer (if leftover from initial installation). LL will rely on its previous testing of the Inventory to screen replacement
products to avoid installation of flooring that exceeds a calculated formaldehyde emission rate of 120 μg/m2-h of
formaldehyde.



 


		c.	Concurrently, LL will provide each consumer who requests floor testing with a CPSC staff-reviewed survey that provides information
about the home environment (e.g., its age, any renovations, smokers) and will ask such Consumers to complete the survey. Consumers
will be informed of the consequences of not completing the survey.



 






    -2- 


     


    

 


		d.	LL shall cause a firm to prepare the sample using methods to ensure sample integrity and send the sample to a laboratory that
is ASTM D6007-accredited to perform emission testing. LL shall cause the laboratory to test the prepared sample using the small
chamber test method in accordance with ASTM D6007-14.



 


		i.	Consumers with samples whose test results are less than
a calculated emission rate of 120 μg/m2-h of formaldehyde (“Level 1 Flooring”) will be informed of the
results and given information about remediation of the space with increased ventilation (air flow) and monitoring temperature
and humidity in the home, as well as a CPSC staff-approved formaldehyde fact sheet, within five (5) business days of LL’s
receipt of the test results. No further remediation will be offered to Consumers with Level 1 Flooring.




 


		ii.	Consumers
with samples whose test results are at or above a calculated emission rate of 120 μg/m2-h of formaldehyde (“Level
2 Flooring”) will be given information about remediation of the space with increased ventilation (air flow) and monitoring
temperature and humidity in the home, as well as a CPSC staff-approved formaldehyde fact sheet within two (2) business days of
LL’s receipt of the test results. The remediation information will be tailored according to the information supplied to
LL by the Consumer in the survey. Before deeming a Consumer ineligible for continued benefits as provided in this CAP based on
the failure to complete the survey, Consumers will be given another opportunity to complete the survey and LL
will reach out to Consumers who do not complete the survey to offer individual assistance. Consumers with Level 2 Flooring who
(i) confirm that they have taken steps to remediate their indoor air and (ii) request an additional passive badge sample, will
be offered a second passive badge sampler(s) with instructions. LL shall send the second sampler(s) within five (5) business days
of the consumer’s request. If a Consumer’s badge test result after remediation is at or below 80 ppb, LL will notify
Consumers that no further remediation will be offered.



 


		1.	If the test results do not reflect levels at or below 80 ppb after remediation, LL will offer a consultation with a Certified
Industrial Hygienist (“CIH”), at LL’s expense, to visit the Consumer’s home and develop recommendations
to improve indoor air quality. Consumers who decline to complete the survey after the second notification regarding the survey
requirement will not be eligible for a CIH consultation. The consultation with the CIH shall occur within thirty (30) days of receipt
of the Consumer’s request.







		2.	The CIH will present their recommendations to LL and the CPSC Office of Compliance. Such recommendations may include, without
limitation, increased ventilation, or control of temperature and humidity, or possibly removal and replacement of sources of formaldehyde.







 


		a.	If LL concurs with the recommendations, LL will inform the Consumer of the recommendations and implement the recommendation
at LL’s expense within sixty (60) days from the receipt of the consumer’s consent to implementation.







 


		b.	If LL disagrees with the recommendation, LL will promptly notify and consult with the CPSC Office of Compliance for resolution
of the matter. The Office of Compliance’s decision with respect to remediation shall be final. Following the Office of Compliance’s
decision, LL will inform the Consumer of the recommendations and implement the recommendation at LL’s expense within sixty
(60) days from the receipt of the consumer’s consent to implementation.







 


		c.	In all cases, LL shall notify the CPSC Office of Compliance if implementation within sixty (60) days from the date of consent
is not reasonably feasible.







 






    -3- 


     


    

 


		3.	Test data: LL has provided, and will continue to provide, badge data, small chamber test data, and analysis from the
surveys from the homes surveyed to the Office of Compliance. This includes data from sampling that occurred prior and subsequent
to the CAP agreement, as well as any on-going testing. LL will also submit the customized Monthly Progress Report (“MPR”)
as noted in the CAP acceptance letter. In addition, LL will supplement its report if it becomes aware of information regarding
illness or injury with the subject product that was not provided earlier as required by the Consumer Product Safety Act and its
implementing regulations.







 


		4.	Supply Chain Control: As set forth in the agreement between the California Air Resources Board (“CARB”)
and LL, dated March 21, 2016 (“Agreement”), LL has agreed to implement a Fabricator Laminate Evaluation and Audit Program
to address compliance with the State of California Air Resources Board (“CARB”) Airborne Toxic Control Measure to Reduce
Formaldehyde Emissions from Composite Wood Products and the proposed future federal requirements. This Agreement requires, among
other things, LL to audit all existing and new fabricators who supply laminate products to LL. LL agrees to share the results of
these audits and testing programs as provided to CARB as required by the Agreement with the CPSC Office of Compliance, as confidential
trade secret information. The Agreement is incorporated herein by reference as Exhibit A.



 


			In addition, in an effort to prevent laminate flooring sold in the U.S. from exceeding a calculated emission rate of 120 μg/m2-h
of formaldehyde, LL will ensure that all fabricators of laminate flooring whose product is sold in the U.S., regardless of where
the fabricators are located, have measures in place to ensure that laminate flooring contains composite wood products that comply
with the emission limits set by CARB for formaldehyde, or any other future federal requirement.



 


CPSC agrees to meet with LL every six months following the date
of execution of this CAP to discuss continuation of the CAP and/or the termination of the MPR requirement.


 


LL hereby acknowledges that CPSC staff may monitor the corrective
action taken by LL pursuant to this CAP and that LL will furnish all requested information. LL agrees that CPSC staff may publicize
the terms of the CAP as set forth in 16 C.F.R. § 1115.20(a)(xi) and as further agreed between LL and CPSC staff. LL acknowledges
that CPSC staff reserves the right to seek broader corrective action if it becomes aware of new facts or if the CAP does not sufficiently
protect the public.


 


 


 


Date: June 15, 2016


 


Signed by:


 


Lumber Liquidators Holdings, Inc.


 


 


 


By: /s/ Jill Witter__________________


 


Name: Jill Witter

Title: Secretary and Chief Compliance and Legal Officer


 






    -4- 


     


    






Exhibit A


 


SETTLEMENT AGREEMENT AND RELEASE


 


This Settlement Agreement and Release (Agreement) is entered
into between the STATE OF CALIFORNIA AIR RESOURCES BOARD (ARB), 1001 I Street, Sacramento, California 95814, and LUMBER LIQUIDATORS
SERVICES LLC, (LL), 3000 John Deere Road, Toano, Virginia 23168.


 


RECITALS


 


		1.	Pursuant to its authority in Health and Safety Code section 39666(a), in 2008 ARB adopted the Airborne Toxic Control Measure
to Reduce Formaldehyde Emissions from Composite Wood Products (ATCM) (Cal. Code Regs., title 17, section 93120 et seq.) that applies
to all manufacturers, distributors, importers, fabricators, and retailers of composite wood products and finished goods that contain
composite wood products.



 


		2.	California Code of Regulations, title 17, section 93120.2 specifies a maximum formaldehyde limit of 0.11 ppm for medium density
fiberboard (MDF) (Emission Standard).



 


		3.	The composite wood products covered by the ATCM apply to MDF.



 


		4.	“Platform,” as defined in California Code of Regulations, title 17, section 93120.1(a)(34), “means the veneer
core, composite core, combination core, lumber core, or special core material used in the manufacture of hardwood plywood or laminated
products.”



 


		5.	California Code of Regulations, title 17, section 93120.1(a)(25) provides, “If the platform consists of a composite wood
product, the platform must comply with the applicable emission standards.”



 


		6.	California Code of Regulations, title 17, section 93120.5(a) provides, “Except as provided in the “sell-through”
provisions of section 93120.12, Appendix 1, all distributors must comply with the requirements of section 93120.2(a) for all composite
wood products and finished goods containing these materials that are sold, supplied, offered for sale, or purchased for sale in
California.”



 


		7.	California Code of Regulations, title 17, section 93120.6(a) provides, “Except as provided in the “sell-through”
provisions of section 93120.12, Appendix 1, all importers must comply with the requirements of section 93120.2(a) for all composite
wood products and finished goods containing these materials that are sold, supplied, offered for sale, or purchased for sale in
California.”



 


		8.	California Code of Regulations, title 17, section 93120.8 provides, “Except as provided in the “sell-through”
provisions of section 93120.12, Appendix 1, all retailers must comply with the requirements of section 93120.2(a) for all composite
wood products and finished goods containing these materials that are sold, supplied, offered for sale, or purchased for sale in
California.”



 


 



    	 	- 1 -	 



     


    

 


California Code of Regulations, title 17, section
93120.2(a) provides:


 


“Except as provided in section 93120.2(b), Exemptions,
and the ’sell-through provisions of section 93120.12, Appendix 1, no person shall sell, supply, offer for sale, or manufacture
for sale in California any composite wood product which, at the time of sale or manufacture, does not comply with the emission
standards in Table 1 on or after the effective dates specified in Table 1 if:


 


* * *


 


“A product ‘does not comply with the emission
standards in Table 1’ if;


 


* * *


 


“(5) A finished good is found to contain any
composite wood product that does not comply with the applicable emission standards in Table 1 using the enforcement test method
for finished goods specified in section 93120.9(c).”


 


		9.	California Code of Regulations, title 17, section 93120.9(c) provides: “Emission testing of samples of . . . MDF contained
in finished goods shall be conducted by ARB or local air district personnel . . . .”



 


		10.	California Code of Regulations, title 17, section 93120.6(b) provides, “Importers must take reasonable prudent precautions
to ensure that the composite wood products and composite wood products contained in finished goods that they purchase comply with
the emission standards specified in section 93120.2(a). ‘Reasonable prudent precautions’ include, at a minimum, instructing
each supplier that the goods they supply to an importer must comply with the applicable emission standards, and obtaining written
documentation from each supplier that this is so.”



 


		11.	California Code of Regulations, title 17, section 93120.8(b) provides, “Retailers must take reasonable prudent precautions
to ensure that the composite wood products and composite wood products contained in finished goods that they purchase comply with
the emission standards specified in section 93120.2(a). ‘Reasonable prudent precautions’ include, at a minimum, instructing
each supplier that the goods they supply to the retailer must comply with the applicable emission standards, and obtaining written
documentation from each supplier that this is so.”



 


		12.	LL and/or its affiliates imports and sells, at retail, laminate flooring that contains composite wood products subject to the
ATCM.



 






    	 	- 2 -	 



     


    




 


		13.	On September 19, 2013, ARB posted the Standard Operating Procedure for Finished Good Test Specimen Preparation Prior to Analysis
of Formaldehyde Emissions from Composite Wood Products (“SOP” or “deconstructive testing”) on its website.
LL alleges that neither the ATCM, the SOP, nor any ARB regulation requires that LL deconstruct products for testing that a fabricator
represents as complying with the ATCM. The SOP is a means of sampling the core in a finished product. Test results using the SOP
sample preparation method may differ from the test results that would have resulted from testing the unfinished MDF core. Although
the ATCM does not require testing by retailers or importers, if non-compliant product is found by ARB, then manufacturers, distributors,
importers, fabricators, and retailers may be liable for the violation.



 


		14.	Beginning on September 4, 2013, ARB obtained samples of MDF products from LL stores in California. Boxes of the flooring were
labeled “CARB Phase 2.” ARB conducted testing of these products for formaldehyde using the SOP sample preparation method.



 


		15.	By letter dated October 8, 2013, based on this testing, ARB notified LL that deconstructed samples of the following products
had tested above the Emission Standard: Dream Home KM Glacier Peak Poplar 12 mm; St. James Vintner’s Reserve 12mm; Dream
Home KM Warm Springs Chestnut 12mm; and Dream Home ISPIRI African Thuya Burlwood 12mm. By letter dated May 7, 2015, ARB
notified LL that additional deconstructed samples of the following products had tested above the Emission Standard: Km Glacier
Peak Poplar 12 mm; and St. James Vintners Reserve 12 mm. By letter dated July 2, 2015, ARB notified LL that deconstructed samples
of the following products had tested above the Emission Standard: ISPIRI Poplar Forest Oak 12 mm; St. James Nantucket Beech 12
mm; St. James Vintners Reserve 12 mm; INSPIRI African Thuya Burlwood 12 mm; KM Warm Springs Chestnut 12 mm; and St. James Golden
Acacia 12mm (collectively, the “Subject Products”).



 


		16.	After LL received notification from ARB of the testing results of the Subject Products, LL initiated communications with ARB,
and LL alleges that it: disputed the validity of the SOP testing method; initiated an investigation of the Subject Product suppliers;
continued to monitor internal testing results of its products and, on or before May 7, 2015, stopped selling the Subject Products
in California.



 


		17.	ARB alleges that on each of approximately 250 days between September 4, 2013 and May 7, 2015, LL sold, supplied, offered for
sale, and/or purchased the Subject Products for sale in California without taking reasonable prudent precautions to ensure that
the Subject Products complied with the Emission Standard. LL disputes this allegation.



 


		18.	LL alleges that it took reasonable prudent precautions as defined in the ATCM and related ARB guidance documents to ensure
that the Subject Products complied with the ATCM. ARB disputes the allegation that LL took reasonable prudent precautions.



 






    	 	- 3 -	 



     


    




 


		19.	In reaching this Agreement, ARB considered a variety of circumstances, including the nature and duration of LL’s conduct
and the actions taken by LL to ensure compliance and the lack of evidence of actual harm to public health, safety and welfare caused
by the alleged failure to take reasonable prudent precautions with regard to the Subject Products.



 


		20.	LL has promptly and fully cooperated with ARB throughout its investigation.



 


		21.	LL has no prior enforcement record with ARB.



 


		22.	LL has taken, or agreed to take, the actions enumerated in Exhibits A and B attached hereto.



 


		23.	ARB alleges that if the facts and allegations described in Recital paragraphs 1 through 17 were proven, civil penalties could
be imposed against LL as provided in Health and Safety Code section 39674.



 


		24.	LL admits the facts in Recital paragraphs 1 through 16, but LL denies any liability arising under any of the Recitals.



 


		25.	The Parties are willing to enter into this Agreement solely for the purpose of settlement and resolution of this matter. ARB
accepts this Agreement in termination of this matter. Accordingly, the parties agree to resolve this matter completely by means
of this Agreement, without the need for formal litigation.



 


TERMS AND RELEASE


 


In settlement of any and all claims that ARB has against LL
under the facts as alleged above, and in consideration of ARB not filing a legal action as well as the other terms set out below,
ARB and LL agree as follows:


 


		1.	As a condition of this Agreement, LL shall pay the total sum of $2,500,000 by cashier’s check payable to the California
Air Pollution Control Fund upon the execution of this Agreement.



 


		2.	The above check shall be mailed to the following address along with the attached Settlement Agreement Payment Transmittal Form:



 


California Air Resources Board


Accounting Branch


P.O. Box 1436


Sacramento, California 95812-1436


 


 



    	 	- 4 -	 



     


    




 


		3.	LL agrees to and shall implement the Fabricator Laminate Evaluation and Audit Program (“LEAP”) described in Exhibit
A. LL alleges that the LEAP goes well beyond the minimum reasonable prudent precautions outlined by ARB in the ATCM and ARB’s
guidance to retailers by requiring a ten-step audit of fabricators before accepting any product for sale in California. Compliance
with the LEAP or any other provision contained in Exhibit A does not affect the liability of any third party for any violation
of the ATCM.



 


		4.	LL agrees to and shall implement the Composite Core Testing Research Program described in Exhibit A.



 


		5.	LL agrees to and shall implement the Finished Goods Testing Research Program described in Exhibit A.



 


		6.	LL agrees that, for the period described in Exhibit A hereof, it will not ship to California any Product that fails testing
using the SOP sample preparation method or does not comply with the ATCM.



 


		7.	LL shall not sell, supply, offer for sale, and/or purchase for sale in California laminate flooring products that violate the
ATCM and shall comply with all other provisions of the ATCM.



 


		8.	This Agreement shall apply to and be binding upon LL, and its principals, officers, directors, agents, receivers, trustees,
employees, successors and assignees, affiliates, subsidiaries and parent corporations and upon ARB and any successor agency that
may have responsibility for and jurisdiction over the subject matter of this Agreement.



 


		9.	Now, therefore, in consideration of the payment by LL to the California Air Pollution Control Fund in the amount specified
above, ARB hereby releases LL and its principals, officers, directors, agents, receivers, trustees, employees, successors and assignees,
affiliates, subsidiary and parent corporations, and predecessors from any and all claims that ARB may have relating to the Subject
Products.



 


		10.	This Agreement constitutes the entire agreement and understanding between ARB and LL concerning the subject matter hereof,
and supersedes and replaces all prior negotiations and agreements between ARB and LL concerning the subject matter hereof.



 


		11.	This Agreement does not constitute an admission by LL or any other entity of any violation of any federal, state or local law,
ordinance or regulation. The Parties intend that neither this Agreement nor anything in this Agreement shall be admissible by any
third party against LL or its principals, officers, directors, agents, receivers, trustees, employees, successors or assignees,
affiliates, subsidiary or parent corporations, or predecessors in any proceeding as evidence of any liability or wrongdoing.



 






    	 	- 5 -	 



     


    

  


		12.	No agreement to modify, amend, extend, supersede, terminate, or discharge this Agreement, or any portion thereof, is valid
or enforceable unless it is in writing and signed by all parties to this Agreement.



 


		13.	Each Party to this Agreement has reviewed the Agreement independently, has had the opportunity to consult counsel, is fully
informed of the terms and effect of this Agreement, and has not relied in any way on any inducement, representation, or advice
of any other Party in deciding to enter into this Agreement.



 


		14.	Each provision of this Agreement is severable, and in the event that any provision of this Agreement is held to be invalid
or unenforceable, the remainder of this Agreement remains in full force and effect.



 


		15.	This Agreement shall be interpreted and enforced in accordance with the laws of the State of California, without regard to
California’s choice-of-law rules.



 


		16.	This Agreement is deemed to have been drafted equally by the ARB and LL; it will not be interpreted for or against either party
on the ground that said party drafted it.



 


		17.	The failure of any Party to enforce any provision of this Agreement shall not be construed as a waiver of any such provision,
nor prevent such Party thereafter from enforcing such provision or any other provision of this Agreement. The rights and remedies
granted all Parties herein are cumulative and the election of one right or remedy by a Party shall not constitute a waiver of such
Party’s right to assert all other legal remedies available under this Agreement or otherwise provided by law.



 


		18.	The Parties agree that this Settlement Agreement may be executed by facsimile and in counterparts by the Parties and their
representatives, and the counterparts shall collectively constitute a single, original document, notwithstanding the fact that
the signatures may not appear on the same page.



 


		19.	The undersigned represent that they have the authority to enter into this Agreement.



 


SB 1402 STATEMENT


 


Senate Bill 1402 (Dutton, Chapter 413, statutes of 2010, Health
and Safety Code section 39619.7) requires the ARB to provide information on the basis for the penalties it seeks. .
ARB alleges that:


 


		1.	The information required under SB 1402, which is provided throughout this settlement agreement, is summarized here.



 


The manner in which the penalty amount was
determined, including a per unit or per vehicle penalty.


 






    	 	- 6 -	 



     


    

 


 


ARB determined the settlement amount in consideration
of all relevant circumstances, including the eight factors specified in Health and Safety Code section 43024.


 


The settlement amount in this case is based on Health
and Safety Code section 39674 in the amount of $10,000 per day for each of approximately 250 days on which the Subject Products
were sold or offered for sale in California without taking reasonable prudent precautions.


 


The provision of law the penalty is being assessed
under and why that provision is most appropriate for that violation.


 


ARB alleges that Health and Safety Code section 39674
provides an appropriate basis for settlement because LL is alleged to have sold the Subject Products without taking reasonable
prudent precautions in violation of the ATCM.


 


Is the penalty being assessed under a provision
of law that prohibits the emission of pollution at a specified level, and, if so a quantification of excess emissions, if it is
practicable to do so.


 


The provisions cited above do not prohibit emissions
above a specified level. It is not practicable to quantify these emissions, because the information necessary to do so, such as
emission rates and time of use, is not available. ARB has conducted no testing that would indicate whether emissions increased
as a result of the use of the Subject Products. In the interests of settlement and because of the time and expense involved, the
parties elected not to do additional testing.


 


		2.	LL acknowledges that ARB has complied with SB 1402 in prosecuting and settling this case. ARB has considered all relevant facts,
including those listed at Health and Safety Code section 43024, has explained the manner in which the settlement amount was calculated,
has identified the provision of law under which the settlement amount was determined, and has considered and determined that this
settlement is not being entered under a provision of law that prohibits the emission of pollutants at a specified level.



 


		3.	The settlement amount was determined based on the unique circumstances of this matter, considered together with the need to
remove any economic benefit from noncompliance, the goal of deterring future violations and obtaining swift compliance, the consideration
of past settlements in similar case negotiation, and the potential costs and risk associated with litigating these particular violations.
The settlement reflects conduct extending over a certain period of time, considered together with the complete circumstances of
this case. Penalties in future cases might be smaller or larger on a per unit basis.



 


		4.	The settlement in this case was based in part on confidential business information provided by LL that is not retained by ARB
in the ordinary course of business. The settlement in this case was also based on confidential settlement communications between
ARB and LL that ARB does not retain in the ordinary course of business either. The settlement also reflects ARB's assessment of
the relative strength of its case against LL, the desire to avoid the uncertainty, burden and expense of litigation.



 


 


 






    	 	- 7 -	 



     


    

 


 


	California
    Air Resources Board	 
	 	 	 
	By:	/s/
    Richard Corey	 
	 	Richard Corey	 
	 	Executive Officer	 
	 	 	 
	Date:	March 21, 2016	 




 


Lumber Liquidators Services LLC


 


	By:	/s/
    John M. Presley	 
	 	 	 
	Name:	John
    M. Presley	 
	 	 	 
	Title:	President
    and Chief Executive Officer	 
	 	 	 
	Date:	March
    18, 2016	 




 





 






    	 	- 8 -	 



     


    

 


 


EXHIBIT A


 


 


VOLUNTARY MEASURES


AND RESEARCH PROGRAMS 


for 


FORMALDEHYDE EMISSIONS FROM


COMPOSITE WOOD FLOORING PRODUCTS


 


 


This Exhibit sets forth the actions Lumber Liquidators Services,
LLC, independently or through its parents, subsidiaries and affiliates (LL), agrees to undertake pursuant to the Agreement. The
capitalized terms used herein shall, unless otherwise noted, have the same meaning as set forth in Air Resources Board’s
(ARB) Airborne Toxic Control Measure for formaldehyde (Title 17 California Code of Regulations, Section 93120 et seq.)(“ATCM”).


 


		1.	Fabricator Laminate Evaluation and Audit Program (LEAP)






 


		a.	Applicability: This audit program shall apply to existing and new Fabricators supplying laminate products to LL.






 


		b.	Timing: Audits of existing Fabricators supplying products to LL shall be completed within one year following the execution
of the Agreement. Audits of Fabricators not supplying laminate flooring to LL as of the date of the Agreement shall be completed
prior to the date on which LL first accepts a Finished Good from such Fabricator.






 


		c.	Qualified Auditors: LL shall perform or cause to be performed by a qualified person, an audit of such Fabricator.






 


		d.	Scope of Audit: The audit shall:






 


		i.	Ensure that the Fabricator understands and agrees by contract to provide LL only products that meet the emission standards
set forth in Title 17 California Code of Regulations, Section 93120.2 (the Emission Standard);






 


		ii.	Examine the Fabricator’s compliance history, including records relating to the supplier’s purchases of Composite
Core used in manufacturing finished products;






 


		iii.	Evaluate the Fabricator’s employee training and awareness programs relating to the ATCM;



 






    	 	- 9 -	 



     


    







 


		iv.	Evaluate any available testing of Composite Core materials for purposes of determining compliance with the ATCM, including:






 


		1.	whether any such testing was performed by an independent third party laboratories accredited by a body that is a signatory
to the International Laboratory Accreditation Cooperation Mutual Recognition Arrangement (ILAC, 2000)(Third Party Laboratory);
and



 


		2.	whether such testing was performed on samples using one of the test methods set forth in title 17, California Code of Regulations,
Section 93120.9;






 


		v.	Identify the Fabricator’s suppliers of Composite Core materials;






 


		vi.	Verify that such suppliers of Composite Cores are certified by an ARB-approved Third Party Certifier (TPC);






 


		vii.	Examine TPC qualifications for each Fabricator it selects, including a review of the ARB TPC certification assessments provided
to LL by ARB;






 


		viii.	Evaluate the Fabricator’s experience in the industry;






 


		ix.	Determine whether the Fabricator is also manufacturing products that do not meet the Emission Standards;






 


		x.	If the Fabricator is also manufacturing products that do not meet the Emission Standards, the auditor shall examine the procedures
by which the Fabricator ensures that such production is kept separate from products fabricated for LL.






 


		xi.	If LL decides to proceed with such Fabricator as a supplier, LL will notify such Fabricator of any identified deficiencies,
and establish a schedule for the Fabricator to correct each such deficiency and to provide verification to LL.



 





		e.	Fabricator audits will be repeated on a periodic basis. The frequency for individual Fabricators will be based on:






 


		i.	Audit results






 


		ii.	Compliance history






 


		iii.	History of relationship with LL






 


		iv.	Experience in industry



 






    	 	- 10 -	 



     


    







 


		v.	Overall strength of compliance program






 


		f.	In addition to such audits, LL shall routinely monitor the performance of its Fabricators, including their compliance with
the Emission Standard.






 


		g.	Based on the findings of the LEAP, including the results of any audit, the type of product the Fabricator is manufacturing,
the type and level of formaldehyde used in products supplied the Fabricator, and such other factors as may be appropriate, LL shall
identify Fabricators with the lowest scores and shall classify such suppliers as “Priority Fabricators.” Priority Fabricators
shall be subject to more frequent and extensive audits.






 


		h.	This Fabricator Audit Program will continue for a period of 12 months following the date on which LL first accepts a Finished
Good from a Priority Fabricator.






 


		2.	Testing Research Programs 






 


		a.	Applicability: The Composite Core Testing Research Program and the Finished Goods Testing Program (the “Testing
Research Programs”) shall apply to Priority Fabricators supplying laminate flooring products to LL. Within 20 days following
LL’s identification of a Fabricator supplying Finished Goods to LL as a Priority Fabricator, LL shall provide ARB with the
name and address of such Priority Fabricator.






 


		b.	Timing/Duration: The Testing Research Programs shall commence on the date any Priority Fabricator first manufactures
a Finished Good for LL (the Start Date), and shall terminate 12 months thereafter (the Termination Date). The period between the
Start Date and the Termination Date shall be the Term.



 


		c.	Scope of Composite Core Testing Research Program: Following the identification of the first Priority Fabricator, it
and such other Priority Fabricators after the Start Date shall be subject to the following Composite Core Testing Program for the
Term of the program (i.e., until the Termination Date).






 


		i.	On each day during which a Priority Fabricator operates its hot press in the fabrication of Finished Goods for LL, LL shall
collect a sample of Composite Core material as it is entering the hot press production phase of fabrication of a specific Finished
Good. Each Finished Good shall be identified by a separate Stock Keeping Unit (SKU) number, and the daily production of a specific
SKU in the hot press shall be considered a Production Lot.






 


		ii.	Such Composite Core samples shall be identified in a manner that, at a minimum, includes the date, time and location the sample
was collected, the supplier of the Composite Core stock from which it was drawn and the finished product for which it was intended,
including the SKU number for such finished product.






 






    	 	- 11 -	 



     


    




 


		iii.	LL shall submit each such Composite Core sample to an independent Third Party Laboratory for analysis to determine whether
it meets the Emission Standard.






 


		iv.	In the event testing results provided by the Third Party Laboratory indicate that the Composite Core sample complies with the
Emission Standard, LL will conduct additional testing under the Finished Goods Testing Research Program as described in paragraph
2(d) of this Exhibit.






 


		v.	In the event a testing result provided by the Third Party Laboratory indicates that the Composite Core sample does not comply
with the Emission Standard, LL will not accept any product from that production run until the failing test result is resolved through
additional sampling and testing determined to be representative of the entire production run.






 


		d.	Scope of Finished Goods Testing Research Program: Priority Fabricators shall be subject to the following Finished Goods
Testing Research Program:






 


		i.	LL will collect a sample of each Production Lot of Finished Goods tested in the Composite Core Testing Research Program for
testing before shipment for sale or distribution in California.






 


		ii.	Such Finished Goods samples shall be identified in a manner that, at a minimum, includes the date, time and location the sample
was collected, the supplier of the product from which it was drawn and the finished product from which it was collected and the
stock keeping unit (SKU) number for such finished product.






 


		iii.	LL will provide such samples to a Third Party Laboratory.



  


		iv.	LL will instruct the Third Party Laboratory to prepare the samples as described in “Standard Operating Procedure for
Finished Good Test Specimen Preparation Prior to Analysis of Formaldehyde Emissions from Composite Wood Products” dated
September 13, 2013 and posted on ARB’s website on September 19, 2013 (SOP) or such other amended SOP, if applicable.






 


		v.	LL will instruct the Third Party Laboratory to test the samples prepared in accordance with the SOP.



 






    	 	- 12 -	 



     


    




 


		3.	Enhanced Regulatory Collaboration






 


		a.	Upon commencement of the
Term of
the Composite Core Testing Research Program, LL shall provide ARB with a list of the suppliers that will be subject to the Testing
Research Programs. LL may add suppliers to the list from time to time during the Term.



 


		b.	During the Term of the Composite Core Testing Research Program, LL will provide to ARB on a quarterly basis, within 30 days
following the end of such quarter, Testing Research Program results obtained from the
suppliers identified in paragraph 3(a) above.



 





		c.	LL and ARB may confer about the results of the Testing Research Programs in order to discuss:






 


		i.	Whether the results are consistent, reliable and repeatable;






 


		ii.	If the results are inconsistent, whether the cause of the inconsistency can be identified;



 


		iii.	If the cause of the inconsistency can be identified, whether it can be accounted for by modifying the deconstructive testing
methodology.



 


		d.	LL and ARB may meet as necessary to discuss data and effectiveness of the TPC Program and the Testing Research Programs.



 


		e.	LL may recommend possible modifications in deconstructive testing methodology, the TPC certification process or other segments
of the manufacturing process.



 


 




    	 	- 13 -	 



     


    

 


 


EXHIBIT B


 


INTERNAL MANAGEMENT AUDITING PROGRAM



for 


FORMALDEHYDE EMISSIONS FROM


COMPOSITE WOOD FLOORING PRODUCTS


 


 


Lumber Liquidators Services, LLC, independently or through its
parents, subsidiaries and affiliates (LL), agrees to take the following internal management auditing measures, listed with the
expected cost of each such measure:


 


		1.	Approximately every six months for a period of two years, a member of senior management shall travel to review the compliance
of suppliers.



 


 


		2.	LL shall retain a Quality Control/Quality Assurance Director solely responsible for its products.






 


 


		3.	LL shall retain on-site inspectors for one year.






 


 


 



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