Document:

Filed by Bowne Pure Compliance

Exhibit No. 10.38

SCHEDULE OF PARTICIPATING EXECUTIVES

Armstrong World Industries, Inc. has entered into substantially similar agreements with certain of
its executives, including F. Nicholas Grasberger, Donald F. Martin, Donald. A. McCunniff, Frank J.
Ready, William C. Rodruan, Stephen J. Senkowski, and R. Scott Webster. With respect to the
severance payments referenced in Section 6.1(A), the agreements with Mr. Grasberger, Mr. McCunniff,
Mr. Ready, and Mr. Senkowski provide for a 3X multiplier, while the agreements with Mr. Martin, Mr.
Rodruan, and Mr. Webster provide for a 2X multiplier. The agreements with Mr. Martin, Mr. Rodruan
and Mr. Webster do not provide for the “modified single trigger” referenced in Section 16(Q). The
agreements with Mr. Grasberger and Mr. McCunniff do not provide that a “Change of Control” of
either Armstrong World Industries, Inc. or Armstrong Holdings, Inc. occurred as a result of the
Plan of Reorganization of Armstrong World Industries, Inc. that was confirmed by the U.S.
Bankruptcy Court for the District of Delaware on October 2, 2006 (and therefore do not contain such
reference at the end of Section 16(F)), provide for a term ending on September 30, 2010, and do not
provide for additional severance payments referenced in Section 6.1(C) consisting of lump sum
payment of the actuarial present value of three additional years of age and service credit for the
purpose of determining pension benefits.Filed by Bowne Pure Compliance

Exhibit No. 10.39

CHANGE IN CONTROL AGREEMENT

THIS AGREEMENT, (“this Agreement”), dated as of October 27, 2008 (the “Effective Date”), is
made by and between, Armstrong World Industries, Inc., a Pennsylvania corporation (the
“Company”), and Michael D. Lockhart (the “Executive”).

WHEREAS, the Executive and Armstrong Holdings, Inc. (“AHI”) are parties to that certain
Agreement dated as of August 7, 2000, (as amended, the “Original Agreement”), which was assumed by
the Company upon its emergence from its Chapter 11 case under the Bankruptcy Code; and

WHEREAS, the Company’s emergence from its Chapter 11 case on October 2, 2006, constituted a
“Change in Control” of the Company on such date for purposes of the Original Agreement; and

WHEREAS, the Board desires to supersede the Original Agreement with a change in control
severance agreement upon the terms set forth herein; and

WHEREAS, the Board recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company; and

WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management, including
the Executive, to their assigned duties without undue concern for their personal financial and
employment security arising from the possibility of a Change in Control;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
and intending to be legally bound hereby, the Company and the Executive hereby agree as follows:

1. Defined Terms. The definitions of capitalized terms used in this Agreement are
provided in the Last Section hereof.

2. Term of Agreement. This Agreement shall commence on October 27, 2008 and shall
continue in effect through October 31, 2009. Notwithstanding the foregoing, if a Change in Control
shall have occurred after the Effective Date and during the term of this Agreement, this Agreement
shall continue in effect for a period of not less than thirty-six (36) months beyond the month in
which the first such Change in Control occurred.

3. Company’s Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to pay the Executive the
Severance Payments and the other payments and benefits described herein. Except as provided in
Section 10.1 hereof, no amount or benefit shall be payable under this Agreement unless there shall
have been (or, under the terms of the second sentence of Section 6.1 hereof, there shall be deemed
to have been) a termination of the Executive’s employment with the Company following a Change in
Control and during the term of this Agreement. This Agreement shall not be construed as creating
an express or implied contract of employment and, except as otherwise agreed in writing between the
Executive and the Company, the Executive shall not have any right to be retained in the employ of
the Company.

4. The Executive’s Covenants. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control during the term of this
Agreement, the Executive will remain in the employ of the Company until the earliest of (i) a date
which is six (6) months after the date of such Potential Change in Control, (ii) the date of a
Change in Control, (iii)

 

 

 

the date of termination by the Executive of the Executive’s employment for Good Reason or by
reason of death or Disability, or (iv) the termination by the Company of the Executive’s employment
for any reason.

5. Compensation Other Than Severance Payments.

5.1. Following a Change in Control and during the term of this Agreement, during any period
that the Executive fails to perform the Executive’s full-time duties with the Company as a result
of incapacity due to physical or mental illness, the Company shall pay the Executive’s full salary
to the Executive at the rate in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period, until the Executive’s
employment is terminated by the Company for Disability.

5.2. If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the term of this Agreement, the Company shall pay the Executive’s full salary to
the Executive through the Date of Termination at the rate in effect immediately prior to the Change
in Control or at the time the Notice of Termination is given, whichever is greater, together with
all compensation and benefits to which the Executive is entitled in respect of all periods
preceding the Date of Termination under the terms of the Company’s compensation and benefit plans,
programs or arrangements.

5.3. If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the term of this Agreement, the Company shall pay to the Executive the
Executive’s normal post-termination compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined under, and paid in accordance with,
the Company’s retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Change in Control or, if more favorable to the
Executive, as in effect immediately prior to the Date of Termination.

6. Severance Payments.

6.1. The Company shall pay the Executive the payments described in this Section 6.1 (the
“Severance Payments”) upon the termination of the Executive’s employment following a Change
in Control and during the term of this Agreement, in addition to any payment sand benefits to which
the Executive is entitled under Sections 5 and 8 hereof, unless such termination is (i) by the
Company for Cause, (ii) by reason of death or Disability, or (iii) by the Executive without Good
Reason. For purposes of this Agreement, the Executive’s employment shall be deemed to have been
terminated by the Company without Cause or by the Executive with Good Reason following a Change in
Control if (i) the Executive’s employment is terminated without Cause prior to a Change in Control
which actually occurs during the term of this Agreement and such termination was at the request or
direction of a Person who has entered into an agreement with the Company the consummation of which
would constitute a Change in Control, (ii) the Executive terminates his employment with Good Reason
prior to a Change in Control which actually occurs during the term of this Agreement and the
circumstance or event which constitutes Good Reason occurs at the request or direction of such
Person, (iii) the Executive’s employment is terminated without Cause prior to a Change in Control
and the Executive reasonably demonstrates that such termination is otherwise in connection with or
in anticipation of a Change in Control which actually occurs during the term of this Agreement, or
(iv) the Executive’s employment is terminated without Cause after a Potential Change in Control of
the type described in paragraphs (I) or (IV) of the definition of “Potential Change in Control.”

(A) In lieu of any further salary payments to the Executive for periods subsequent to
the Date of Termination and in lieu of any severance benefit otherwise payable to the
Executive, the Company shall pay to the Executive a lump sum severance payment, in cash,
equal to three (3) times the sum of (i) the higher of the Executive’s annual base salary in
effect immediately prior to the occurrence of the event or circumstance upon which the
Notice of

 

 

 

Termination is based or the Executive’s annual base salary in effect immediately
prior to the Change in Control (the “Change in Control Salary”), plus (ii) the higher of (x)
the highest annual bonus earned by the Executive pursuant to any annual bonus or incentive
plan maintained by the Company in respect of the three (3) years immediately preceding that
year in which the Date of Termination occurs or (y) the annual target bonus in respect of
the year in which the Change in Control occurs (the “Change in Control Bonus”).

(B) Notwithstanding any provision of any annual incentive plan to the contrary, the
Company shall pay to the Executive a lump sum amount, in cash, equal to a pro rata portion
to the Date of Termination of the value of the target incentive award under such plan for
the then uncompleted period under such plan, calculated by multiplying the Executive’s
target award by the fraction obtained by dividing the number of full months and any
fractional portion of a month during such performance award period through the Date of
Termination by the total number of months contained in such performance award period.

(C) In addition to the retirement benefits to which the Executive is entitled under
each Pension Plan or any successor plan thereto, the Company shall pay the Executive a lump
sum amount, in cash, equal to the excess of (i) the actuarial equivalent of the aggregate
retirement pension (taking into account any early retirement subsidies associated therewith
and determined as a straight life annuity commencing at the date (but in no event earlier
than the third anniversary of the Date of Termination) as of which the actuarial equivalent
of such annuity is greatest) which the Executive would have accrued under the terms of all
Pension Plans (without regard to any amendment to any Pension Plan made subsequent to the
earlier of a Potential Change in Control or a Change in Control and on or prior to the Date
of Termination, which amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if the Executive were fully vested thereunder
and had accumulated (after the Date of Termination) thirty-six (36) additional months of
service credit thereunder and had been credited under each Pension Plan during such period
with compensation at the higher of (1) the Executive’s compensation (as defined in such
Pension Plan) during the twelve (12) months immediately preceding the Date of Termination or
(2) the Executive’s compensation (as defined in such Pension Plan) during the twelve (12)
months immediately preceding the Change in Control, over (ii) the actuarial equivalent of
the aggregate retirement pension (taking into account any early retirement subsidies
associated therewith and determined as a straight life annuity commencing at the date (but
in no event earlier than the Date of Termination) as of which the actuarial equivalent of
such annuity is greatest) which the Executive had accrued pursuant to the provisions of the
Pension Plans as of the Date of Termination. For purposes of this Section 6.1(C),
“actuarial equivalent” shall be determined using the same assumptions utilized under the
aggregate retirement pension (taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing at the date (but in no event
earlier than the Date of Termination) as of which the actuarial equivalent of such annuity
is greatest) which the Executive had accrued pursuant to the provisions of the Pension Plans
as of the Date of Termination. For purposes of this Section 6.1(C), “actuarial equivalent”
shall be determined using the same assumptions utilized under the Company’s Retirement
Income Plan immediately prior to the Change in Control, to determine lump sum present values
under Article VI, Section (3) of the Company’s Retirement Income Plan.

(D) For the thirty-six (36) month period immediately following the Date of Termination,
the Company shall arrange to provide the Executive (which includes the Executive’s eligible
dependents for purposes of this paragraph (D)) with life, disability, accident and health
insurance benefits substantially similar to those which the Executive was receiving
immediately prior to the Notice of Termination (without giving effect to any amendment to
such benefits made subsequent to the earlier of a Potential Change in Control or a Change in
Control which amendment adversely affects in any manner the Executive’s entitlement to or
the amount of such benefits); provided, however, that, unless the Executive
consents to a different method, such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Executive pursuant to this
Section 6.1(D) shall be reduced to the extent

 

 

 

comparable benefits are actually received by
or made available to the Executive by a subsequent
employer without cost during the thirty-six (36) month period following the Executive’s
termination of employment (and any such benefits actually received by or made available to
the Executive shall be reported to the Company by the Executive).

(E) If the Executive would have become entitled to benefits under the Company’s
post-retirement health care or life insurance plans (as in effect immediately prior to a
Potential Change in Control, the Change in Control or the Date of Termination, whichever is
most favorable to the Executive) had the Executive’s employment terminated at any time
during the period of thirty-six (36) months after the Date of Termination, the Company shall
provide such post-retirement health care or life insurance benefits to the Executive
(subject to any employee contributions required under the terms of such plans at the level
in effect immediately prior to the Change in Control or the Date of Termination, whichever
is more favorable to the Executive) commencing on the later of (i) the date that such
coverage would have first become available or (ii) the date that benefits described in
subsection (D) of this Section 6.1 terminate. From the end of the period described in the
preceding sentence until the Executive and his spouse (if any, as of the Change in Control)
become entitled to Medicare coverage, the Company will permit them to purchase, at COBRA
rates, any health care coverage that they were receiving on the date of the Change in
Control.

(F) The Company will pay the Executive, at a daily salary rate calculated from the
higher of the Executive’s annual base salary in effect immediately prior to the occurrence
of the event or circumstance upon which the Notice of Termination is based or the
Executive’s annual base salary in effect immediately prior to the Change in Control, an
amount equal to all unused vacation days which would have been earned had the Executive
continued employment through December 31 of the year in which the Date of Termination
occurs.

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

6.2. Excise Tax Gross-Up Payment.

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

(B) Subject to the provisions of Section 6.2(C), all determinations required to be made
under this Section 6.2, including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by a nationally recognized accounting firm
designated by the Company (the “Accounting Firm”) which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen (15) business
days after there has been a Payment, or such earlier time as requested by the Company. In
the event that the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the

 

 

 

Change in Control, the Company shall appoint another
nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 6, shall be paid by the Company to the Executive within five days of the receipt of
the Accounting Firm’s determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 6.2(C) and the Executive thereafter is required to mare a
payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.

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

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

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

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

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

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

 

 

 

to such advance; and further provided that any
extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

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

6.3. Payment of Severance Payments.

(A) Each payment provided for in Section 6.1 hereof is intended to constitute a
separate payment within the meaning of Section 409A of the Code. The payments provided for
in subsections (A), (B), (C) and (F) of Section 6.1 hereof shall be made not later than the
thirtieth (30th) day following the Date of Termination subject to Section 6.3(B) below;
provided, however, that (i) if the amounts of such payments cannot be
finally determined on or before such day, the Company shall pay to the Executive on such day
an estimate, as determined in good faith by the Executive of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest at 120% of the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined and (ii) in the event the
Executive becomes entitled to Severance Payments pursuant to the second sentence of Section
6.1 (except for a termination occurring with respect to clause (iv) of such sentence, which
shall be paid as set forth above), such payments shall be due and payable on the date of the
actual Change in Control that triggered the Severance Payments or as soon as practicable
thereafter but in no event later than 30 days following the Change in Control. In the event
that the amount of the estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with interest at 120% of
the rate provided in Section 1274(b)(2)(B) of the Code). In the event the Company should
fail to pay when due the amounts described in subsections (A), (B), (C) and (F) of Section
6.1 hereof; the Executive shall also be entitled to receive from the Company an amount
representing interest on any unpaid or untimely paid amounts from the due date, as
determined under this Section 6.3 (without regard to any extension of the Date of
Termination pursuant to Section 7.3 hereof), to the date of payment at a rate equal to 120%
of the rate provided in Section 1274(b)(2)(B) of the Code.

(B) If any cash payment amounts payable to the Executive under this Agreement could
reasonably be expected to result in additional tax pursuant to Section 409A of the Code to
the Executive on account of being a ‘specified employee,’ as such term is defined under
Section 409A of the Code, such cash payment amounts shall be suspended during the six-month
period following the Executive’s date of termination. The Company is entitled to determine
whether any cash payment amounts under this Agreement are to be suspended, and the Company
shall have no liability to the Executive for any such determination or any errors made by
the Company in identifying the Executive as a specified employee. If any cash payment
amounts are suspended pursuant to the foregoing, such amounts shall be made on the earlier
of

 

 

 

(i) the first business day following the expiration of the six-month period referred to
in the first sentence of this subsection or (ii) the date of the Executive’s death. Any
amounts so suspended shall earn interest thereon, if applicable, calculated based upon the then prevailing monthly
short-term applicable federal rate. If the continuation of benefits to the Executive under
this Agreement could reasonably be expected to result in additional tax pursuant to Section
409A of the Code, the Company may elect to suspend continuation of benefits unless the
Executive elects to continue benefits coverage that otherwise would be suspended under this
subsection and to pay the cost of such coverage at the rate generally charged by the Company
(which, in the case of group medical coverage shall be the applicable COBRA cost), and the
Executive shall be reimbursed such cost (reduced by the amount of the Executive’s required
premium contributions) on the first business day of the month following the expiration of
the six-month period referred to above.

6.4. The Company also shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the termination of the
Executive’s employment, in seeking in good faith to obtain or enforce any benefit or right provided
by this Agreement or in connection with any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the Executive’s written
requests for payment accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.

7. Termination Procedures and Compensation During Dispute.

7.1. Notice of Termination. After a Potential Change in Control or, if there is no
Potential Change in Control, after a Change in Control and during the term of this Agreement, any
purported termination of the Executive’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of
Termination” shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include a copy of a
resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive’s counsel, to be heard before the Board) finding that, in
the good-faith opinion of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof in detail.

7.2. Date of Termination. “Date of Termination,” with respect to any
purported termination of the Executive’s employment after a Change in Control and during the term
of this Agreement, shall mean (i) if the Executive’s employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive’s duties during such thirty (30) day
period), and (ii) if the Executive’s employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case
of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty
(60) days, respectively, from the date such Notice of Termination is given).

7.3. Dispute Concerning Termination. If within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination shall be extended until the
date on which the dispute is finally resolved, either by mutual written agreement of the parties or
by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such

 

 

 

notice is given in good faith
and the Executive pursues the resolution of such dispute with reasonable diligence.

7.4. Compensation During Dispute. If a purported termination occurs following a
Change in Control and during the term of this Agreement and the Date of Termination is extended in
accordance with Section 7.3 hereof the Company shall continue to pay the Executive the full
compensation in effect when the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving rise to the dispute
was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this Agreement.

8. Acceleration of Certain Stock-Based Benefits.

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

(B) Upon the occurrence of a Change in Control, all unearned performance restricted
 shares held by the Executive under the Company’s Stock Plan at the time of such Change in
Control shall be deemed to have been earned to the maximum extent permitted under the Stock
Plan for any performance period not then completed and all earned but unvested performance
restricted shares, including those deemed to be earned pursuant to this sentence, and all
unvested restricted stock awards shall immediately vest and the restrictions on all shares
subject to restriction shall lapse.

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

(D) The Company will hold the Executive harmless against any and all losses that he may
directly or indirectly incur as a result of (i) any third party claims brought against the
Executive (other than by any taxing authority) with respect to the Company’s performance of
or (ii) the Company’s failure to perform any commitment made to the Executive in, this
Section 8.

9. No Mitigation. The Company agrees that, if the Executive’s employment with the
Company terminates during the term of this Agreement, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the Executive by the Company
pursuant to Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(D) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to the Company, or
otherwise.

 

 

 

10. Successors; Binding Agreement.

10.1. In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Company to
expressly assume and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken place. Failure of
the Company to obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.

10.2. This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.

11. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address shown for the Executive in the personnel records of
the Company and, if to the Company, to the address set forth below, or to such other address as
either party may have furnished to the other in writing in accordance herewith, except that notice
of change of address shall be effective only upon actual receipt:

To the Company:

Armstrong World Industries, Inc.

P.O. Box 3001

Lancaster, Pennsylvania 17604

Attention: General Counsel

12. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or of any lack of compliance
with, any condition or provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes the Original Agreement in its entirety and all
amendments, modifications and clarifications thereto, and the Original Agreement is hereby
cancelled and terminated without further force or effect. This Agreement also supersedes
any other agreements or representations, oral or otherwise, express or implied, with respect to
the subject matter hereof which have been made by any party. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania. All references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for hereunder shall be
paid net of any applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The obligations of the Company and the
Executive under Sections 6 and 7 hereof shall survive the expiration of the term of this Agreement.
The Executive agrees that to the extent the Executive is entitled to severance benefits under this
Agreement, the Executive shall be deemed to waive any rights to any benefits under the Company’s
Severance Pay Plan for Salaried Employees or any other severance benefits plan or arrangement of
the Company. This

 

 

 

Agreement is not intended by the parties hereto to constitute an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as amended.

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

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

15. Settlement of Disputes; Arbitration. All claims by the Executive for benefits
under this Agreement shall be directed in writing to and determined by the Committee, which shall
give full consideration to the evidentiary standards set forth in this Agreement. Any denial by
the Committee of a claim for benefits under this Agreement shall be delivered to the Executive in
writing and shall set forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to the Executive for a
review of the decision denying a claim and shall further allow the Executive to appeal to the
Committee a decision of the Committee within sixty (60) days after notification by the Committee
that the Executive’s claim has been denied. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in Allegheny County,
Pennsylvania in accordance with the rules for the resolution of employment law disputes of the
American Arbitration Association then in effect; provided, however, that the
evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific performance of the
Executive’s right to be paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The Company shall reimburse the
Executive for all costs and expenses relating to litigation arising hereunder, including reasonable
attorney’s fees and expenses, promptly upon receipt of a written demand therefor and regardless of
whether such litigation results in any settlement or judgment or order in favor of any party.

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

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

(B) “AHI” shall mean Armstrong Holding, Inc.

(C) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the
Exchange Act.

(D) “Board” shall mean the Board of Directors of the Company.

(E) “Cause” for termination by the Company of the Executive’s employment shall
mean (i) conviction of the Executive for (or a plea of nolo contendre by the Executive with
respect to) a felony or of a misdemeanor involving moral turpitude; or (ii) the deliberate
engaging by the Executive in gross misconduct which is demonstrably and materially injurious
to the Company, monetarily or otherwise, including but not limited to fraud or embezzlement
by the Executive; or (iii) the deliberate and continued failure to substantially perform the
duties and responsibilities of such Executive’s office. For the purposes of this Agreement,
no act, or failure to act, on the part of the Executive shall be considered “deliberate”
unless done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that such action or omission was in the best interests of the Company. In
the event of a dispute concerning the application of this provision, no claim by the Company
that Cause exists shall be given effect

 

 

 

unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.

(F) A “Change in Control” shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred after the Effective Date:

(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates) representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the Company’s then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction described
in clause (i) of paragraph (III) below; or

(II) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors on the date
hereof or whose appointment, election or nomination for election was
previously so approved; or

(III) there is consummated a merger or consolidation of the Company
(including a triangular merger to which the Company is a party) with any
other corporation other than (i) a merger or consolidation which would
result in holders of voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to hold
securities representing (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent
thereof) at least 66 2/3% of the combined voting power of the voting
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired
directly from the Company or its subsidiaries) representing 20% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company’s then outstanding securities other
than a Person who was such a Beneficial Owner prior to such
recapitalization; or

(IV) the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or substantially
all of the Company’s assets, other than a sale or disposition by the Company
of all or substantially all of the Company’s assets to an entity, at least
75% of the combined voting power of the voting securities of which are owned
by shareholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no “Change in Control” shall be deemed to
have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of
the common stock of the Company immediately prior to such transaction or
series of transactions continue to have

 

 

 

substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of
the Company immediately following such transaction or series of
transactions.

The parties acknowledge and agree that for purposes of this Agreement a “Change in Control”
occurred on October 2, 2006, as a result of the Plan of Reorganization of the Company that
was confirmed by the U.S. Bankruptcy Court for the District of Delaware, on October 2, 2006.
Moreover, for the avoidance of doubt, the parties acknowledge and agree that a “Change in
Control” did not occur when, as contemplated by the Plan of Reorganization, the shareholders
of AHI approved the liquidation of AHI on or about July 18, 2007, or AHI was liquidated and
dissolved on December 14, 2007, following the cancellation of all of the shares of the
Company owned by AHI and issuance of new shares of common stock of the Company to the
Asbestos Personal Injury Trust.

(G) “Change in Control Salary” shall have the meaning stated in Section 6.1
hereof.

(H) “Change in Control Bonus” shall have the meaning stated in Section 6.1
hereof.

(I) “Code” shall mean the Internal Revenue Code of 1986, as amended from time
to time.

(J) “Committee” shall mean (i) the individuals (not fewer than three in number)
who, on the date six (6) months before a Change in Control, constitute the Management
Development and Compensation Committee of the Board, plus (ii) in the event that fewer than
three individuals are available from the group specified in clause (i) above for any reason,
such individuals as may be appointed by the individual or individuals so available
(including for this purpose any individual or individuals previously so appointed under this
clause (ii)).

(K) “Company” shall mean Armstrong World Industries, Inc. and, except in
determining under Section 16(F) hereof whether or not any Change in Control of the Company
has occurred, shall include any subsidiary or any successor to its business and/or assets,
which in either case assumes and agrees to perform this Agreement by operation of law or
otherwise.

(L) “Date of Termination” shall have the meaning stated in Section 7.2 hereof.

(M) “Disability” shall be deemed the reason for the termination by the Company
of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical
or mental illness, the Executive shall have been absent from the full-time performance of
the Executive’s duties with the Company for a period of six (6) consecutive months, the
Company shall have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall not have
returned to the full-time performance of the Executive’s duties.

(N) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended
from time to time.

(O) “Excise Tax” shall have the meaning stated in Section 6.2(A) hereof.

(P) “Executive” shall mean the individual named in the first paragraph of this
Agreement.

 

 

 

(Q) “Good Reason” for termination by the Executive of the Executive’s
employment shall mean the occurrence (without the Executive’s express written consent)
during the term of this Agreement and after any Change in Control, or prior to a Change in
Control under the circumstances described in clause (ii) of the second sentence of Section
6.1 hereof (treating all references in paragraphs (I) through (VIII) below to a “Change in
Control” as references to a “Potential Change in Control”), of any one of the following acts
by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph
(I), (V) , (VI) or (VII) below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect thereof:

(I) the assignment to the Executive of any duties inconsistent with the
Executive’s status as an executive officer of the Company or a substantial
adverse alteration in the nature or, status of the Executive’s
responsibilities, which in the Executive’s reasonable judgment, represents a
substantial reduction of the status, title, position or responsibilities
from those in effect immediately prior to the Change in Control;

(II) a reduction by the Company in the Executive’s annual base salary
as in effect on the date hereof as the same may be increased from time to
time;

(III) the relocation of the Executive’s principal place of employment
to a location more than 30 miles from the Executive’s principal place of
employment immediately prior to the Change in Control (unless such
relocation is closer to the Executive’s principal residence) or the
Company’s requiring the Executive to be based anywhere other than such
principal place of employment (or permitted relocation thereof) except for
required travel on the Company’s business to an extent substantially
consistent with the Executive’s present business travel obligations;

(IV) the failure by the Company to pay to the Executive any portion of
the Executive’s current compensation or to pay to the Executive any portion
of an installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation
is due;

(V) the failure by the Company to continue in effect any compensation
plan in which the Executive participates immediately prior to the Change in
Control which is material to the Executive’s total compensation, including
but not limited to the Company’s Base Salary Plan, Management Achievement
Plan, 2006 Long-Term Incentive Plan, Armstrong Deferred Compensation Plan,
Retirement Income Plan and Retirement Benefit Equity Plan, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the Company
to continue the Executive’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the amount or timing of payment of benefits provided and the level of the
Executive’s participation relative to other participants, as existed
immediately prior to the Change in Control;

(VI) any material breach of any provision of this Agreement or any
employment that the Executive may have with the Company;

(VII) the failure by the Company to continue to provide the Executive
with benefits substantially similar to those enjoyed by the Executive under
any of the Company’s pension, savings, life insurance, medical, health and
accident, or

 

 

 

disability plans in which the Executive was participating
immediately prior to the Change in Control, the taking of any action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by
the Executive at the time of the Change in Control, or the failure by the
Company to provide the Executive with the number of paid vacation days to
which the Executive is entitled on the basis of years of service with the Company in accordance with the Company’s normal
vacation policy in effect at the time of the Change in Control; or

(VIII) any purported termination of the Executive’s employment which is
not effected pursuant to a Notice of Termination satisfying the requirements
of Section 7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.

Notwithstanding anything herein to the contrary, termination of employment by the Executive
for any reason during the 30-day period commencing on the one (1) year anniversary of a
Change in Control shall constitute Good Reason; provided however, that solely for purposes
of this paragraph, the term Change in Control must include both (i) a merger described by
Section 16(F)(III) in which the Company is the surviving corporation or parent corporation
and the holders of the voting securities of the Company outstanding immediately prior to
such merger represent less than 66 2/3% of the combined voting power of the securities of
the Company outstanding immediately after such merger, and (ii) an event described in
Section 16(F)(II) also occurs. Solely for the provision of this paragraph, a Change in
Control shall not occur by reason of the consummation of any transaction to sell or
otherwise dispose of voting securities of the reorganized entity occurring after the
effective date of a plan of reorganization in the Company’s Chapter 11 case which is
effected by a trust established under Section 524(g) of the U.S. Bankruptcy Code.

The Executive’s right to terminate the Executive’s employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or mental illness. The Executive’s
continued employment shall not constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason hereunder. For purposes of any
determination regarding the existence of Good Reason, any claim by the Executive that Good
Reason exists shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that Good Reason does not exist.

The Executive’s right to terminate employment for Good Reason shall be subject to the
following conditions: (i) any amounts payable upon a Good Reason termination shall be paid
only if the Executive actually terminates employment within two (2) years following the
initial existence of the Good Reason condition and (ii) the amount, time and form of payment
upon a termination of employment for Good Reason shall be the same as the amount, time and
form of payment payable upon an involuntary termination without Cause. The Executive must
also provide notice to the Company of the Good Reason condition within ninety (90) days of
the initial existence of the condition and the Company must be given at least thirty (30)
days to remedy such situation.

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

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

(T) “Original Agreement” shall have the meaning stated in the Recitals hereof.

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

 

 

 

(V) “Pension Plan” shall mean any tax-qualified, supplemental or excess benefit
pension plan maintained by the Company and any other agreement entered into between the
Executive and the Company which is designed to provide the Executive with supplemental
retirement benefits.

(W) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall
not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its subsidiaries,
(iii) an underwriter temporarily holding securities pursuant to an offering of such
securities, (iv) a corporation owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of stock of the Company, or
(v) an entity or entities which are eligible to file and have filed a Schedule 13G under
Rule 13d-1-(b) of the Exchange Act, which Schedule indicates beneficial ownership of 15% or
more of the outstanding shares of common stock of the Company or the combined voting power
of the Company’s then outstanding securities.

(X) “Potential Change in Control” shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:

(I) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;

(II) the Company or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute a
Change in Control;

(III) any Person becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 15% or more of either the then
outstanding shares of common stock of the Company or the combined voting
power of the Company’s then outstanding securities (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates); or

(IV) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Potential Change in Control has occurred.

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

(Z) “Stock Plan” shall mean the Company’s 2006 Long-Term Stock Incentive Plan
and the Company’s Stock Award Plan, as the same may be amended from time to time, and any
successor plan or plans to such plans.

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

 

 

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date
first above written.

	 	 	 	 	 
	 	ARMSTRONG WORLD INDUSTRIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	Donald A. McCunniff 	 
	 	 	Title:  	Senior Vice President, Human Resources 	 
	 
	 	EXECUTIVE 	 
	 	 	 
	 	Michael D. Lockhart

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