Document:

Exhibit 10.4

Exhibit 10.4

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

THIS AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT (this “Pledge Agreement”), dated
as of November 23, 2010, is by and among ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvania
corporation (the “Pledgor”) and BANK OF AMERICA, N.A., as collateral agent (in such
capacity, the “Collateral Agent”) for the holders of the Secured Obligations referenced
below.

W I T N E S S E T H

WHEREAS, revolving credit and term loan facilities were established in favour of the Pledgor
pursuant to the terms of that certain credit agreement dated as of October 2, 2006 (as amended and
modified prior to the Closing Date, the “Existing Credit Agreement”) among the Pledgor,
certain of its Subsidiaries, as guarantors thereunder, the lenders party thereto and Bank of
America, N.A., as administrative agent for the lenders thereunder;

WHEREAS, in connection with the Existing Credit Agreement, the Pledgor entered into that
certain Pledge Agreement dated as of January 31, 2007 (the “Existing Pledge Agreement”);

WHEREAS, the Pledgor has requested certain modifications to the revolving credit and term loan
facilities under the Existing Credit Agreement;

WHEREAS, the Lenders have agreed to the requested modifications on the terms and conditions
provided in that certain Amended and Restated Credit Agreement, dated as of the date hereof (as
amended and modified, the “Credit Agreement”), among the Pledgor and Armstrong Wood
Products, Inc., a Delaware corporation (“Armstrong Wood Products”; together with the
Pledgor, the “Borrowers”), certain of their Subsidiaries, as guarantors thereunder, the
lenders party thereto and Bank of America, N.A., as administrative agent for the lenders
thereunder;

WHEREAS, this Pledge Agreement is required under the terms of the Credit Agreement, and is
given in amendment to, restatement of and substitution for the Existing Pledge Agreement provided
in connection with the Existing Credit Agreement;

NOW, THEREFORE, in consideration of these premises and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Definitions.

(a) Capitalized terms used and not otherwise defined herein shall have the meanings ascribed
to such terms in the definitions in Section 1.01 of the Credit Agreement provided however that for
the purposes hereof, any references to the “Uniform Commercial Code” or “UCC” in such definitions
shall and shall be deemed to mean “the UCC, the PPSA or the STA, as applicable”. In addition, the
following terms which are defined, as applicable, in (i) the UCC; (ii) the PPSA; or (iii) the STA
are used as defined therein: Accession, Financial Asset, Investment Property, Proceeds and
Security. For greater certainty, where any such term is defined in more than one of the UCC, PPSA
or STA (each, an “Applicable Statute”), its meaning for the purposes of any provision of
this Agreement where such term is used shall be the meaning ascribed to such term in the Applicable
Statute that applies to such provision.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

 

 

(b) As used herein, the following terms shall have the meanings set forth below:

“Borrowers” has the meaning provided in the recitals hereof.

“Collateral Agent” has the meaning provided in the introductory paragraph
hereof, together with its successors and assigns.

“Credit Agreement” has the meaning provided in the recitals hereof.

“Event of Default” has the meaning provided in Section 8 hereof.

“Existing Credit Agreement” has the meaning provided in the recitals hereof.

“Existing Pledge Agreement” has the meaning provided in the recitals hereof.

“Pledge Agreement” has the meaning provided in the introductory paragraph hereof, as
amended and modified.

“Pledged Collateral” has the meaning provided in Section 2 hereof.

“Pledged Shares” has the meaning provided in Section 2(a) hereof.

“Pledgor” has the meaning provided in the introductory paragraph hereof.

“PPSA” means the Personal Property Security Act as in force from time to
time in the relevant province or territory of Canada.

“Secured Obligations” means, without duplication, (a) all Obligations and
(b) all costs and expenses incurred in connection with enforcement and collection of
the Secured Obligations, including reasonable legal fees and expenses.

“STA” means the Securities Transfer Act as in force from time to time in the
relevant province or territory of Canada.

“UCC” means the Uniform Commercial Code as in effect in the state of New
York from time to time.

2. Pledge and Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time, acceleration, mandatory prepayment or
otherwise, of the Secured Obligations, the Pledgor hereby grants, pledges and assigns to the
Collateral Agent, for the benefit of the holders of the Secured Obligations, a continuing security
interest in any and all right, title and interest of the Pledgor in and to the following, whether
now owned or existing or owned, acquired, or arising hereafter (collectively, the “Pledged
Collateral”):

(a) Pledged Shares. Sixty-five percent (65%) (or, if less, the full amount
owned by the Pledgor) of the issued and outstanding Capital Stock owned by the Pledgor of
each Material First-Tier Foreign Subsidiary formed or existing under the laws of Canada, or
any province or territory thereof set forth on Schedule 2(a) attached hereto, in
each case together with the certificates (or other agreements or instruments), if any,
representing such Capital Stock, and all options and other rights, contractual or otherwise,
with respect thereto (collectively, together with the Capital Stock described in Section
2(b) and 2(c) below, the “Pledged Shares”), including the following:

(A) all shares, securities, membership interests or other equity interests
representing a dividend on any of the Pledged Shares, or representing a distribution
or return of capital upon or in respect of the Pledged Shares, or resulting from a
stock split, revision, reclassification or other exchange therefor, and any
subscriptions, warrants, rights or options issued to the holder of, or otherwise in
respect of, the Pledged Shares; and

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(B) without affecting the obligations of the Pledgor under any provision
prohibiting such action hereunder or under the Credit Agreement, in the event of any
consolidation or merger involving the issuer of any Pledged Shares and in which such
issuer is not the surviving entity, all Capital Stock of the successor entity formed
by or resulting from such consolidation or merger.

(b) Additional Shares. Sixty-five percent (65%) (or, if less, the full amount
owned by the Pledgor) of the issued and outstanding Capital Stock owned by the Pledgor of
any Person that hereafter becomes a Material First-Tier Foreign Subsidiary formed or
existing under the laws of Canada, or any province or territory thereof, including the
certificates (or other agreements or instruments) representing such Capital Stock.

(c) Proceeds. All Proceeds of any and all of the foregoing.

Without limiting the generality of the foregoing, it is hereby specifically understood and
agreed that the Pledgor may from time to time hereafter deliver additional Capital Stock to the
Collateral Agent as collateral security for the Secured Obligations. Upon delivery to the
Collateral Agent, such additional Capital Stock shall be deemed to be part of the Pledged
Collateral of the Pledgor and shall be subject to the terms of this Pledge Agreement whether or not
Schedule 2(a) is amended to refer to such additional Capital Stock. Notwithstanding
anything to the contrary contained herein, the security interests granted under this Pledge
Agreement shall not extend to, and the “Pledged Collateral” shall not include, any Excluded
Property.

3. Security for Secured Obligations. The security interest created hereby in the
Pledged Collateral of the Pledgor constitutes continuing collateral security for all of the Secured
Obligations.

4. Delivery of the Pledged Collateral. The Pledgor hereby agrees that:

(a) To the extent that Pledged Collateral is certificated, the Pledgor shall (subject
to the provisions of Section 7.14 of the Credit Agreement) deliver to the Collateral Agent
(i) simultaneously with or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of the Pledgor and (ii) promptly upon the
receipt thereof by or on behalf of the Pledgor, all other certificates and instruments
constituting Pledged Collateral of the Pledgor. The Collateral Agent hereby acknowledges
that the certificate representing the Pledged Shares of the Pledgor as of the date hereof
was previously delivered to its counsel in connection with the Existing Pledge Agreement.
Prior to delivery to the Collateral Agent, all such certificates and instruments
constituting Pledged Collateral of the Pledgor shall be held in trust by the Pledgor for the
benefit of the Collateral Agent pursuant hereto. All such certificates shall be delivered
in suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, substantially in the form provided in
Exhibit 4(a) attached hereto.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(b) Additional Securities. If the Pledgor shall receive by virtue of its being
or having been the owner of any Pledged Collateral, any (i) certificate, including any
certificate
representing a dividend or distribution in connection with any increase or reduction of
capital, reclassification, merger, consolidation, sale of assets, combination of shares or
other equity interests, stock splits, spin-off or split-off, promissory notes or other
instruments; (ii) option or right, whether as an addition to, substitution for, or an
exchange for, any Pledged Collateral or otherwise; (iii) dividends payable in securities; or
(iv) distributions of securities in connection with a partial or total liquidation,
dissolution or reduction of capital, capital surplus or paid-in surplus, then the Pledgor
shall receive such certificate, instrument, option, right or distribution in trust for the
benefit of the Collateral Agent, shall segregate it from the Pledgor’s other property and
shall deliver it forthwith to the Collateral Agent in the exact form received together with
any necessary endorsement and/or appropriate stock power duly executed in blank,
substantially in the form provided in Exhibit 4(a), to be held by the Collateral
Agent as Pledged Collateral and as further collateral security for the Secured Obligations.

(c) Financing Statements. To the extent required by applicable law, the
Pledgor authorizes the Collateral Agent to file one or more financing statements disclosing
the Collateral Agent’s security interest in the Pledged Collateral. The Pledgor shall
execute and deliver to the Collateral Agent such other applicable financing statements,
other filings and other documents as may be reasonably requested by the Collateral Agent in
order to perfect and protect the security interest created hereby in the Pledged Collateral
of the Pledgor.

5. Representations and Warranties. The Pledgor hereby represents and warrants to the
Collateral Agent, for the benefit of the holders of the Secured Obligations, that so long as any of
the Secured Obligations remains outstanding and until all of the commitments relating thereto have
been terminated:

(a) Authorization of Pledged Shares. The Pledged Shares have been duly
authorized and validly issued, are fully paid and non-assessable and are not subject to the
pre-emptive rights of any Person.

(b) Title. The Pledgor has good and indefeasible title to the Pledged
Collateral of the Pledgor and is the legal and beneficial owner of such Pledged Collateral
free and clear of any Lien, other than Permitted Liens. With respect to the Pledged Shares
of the Pledgor, there exists no “adverse claim” within the meaning of (i) Section 8-102 of
the UCC or (ii) any corresponding provision of the PPSA.

(c) Exercising of Rights. The exercise by the Collateral Agent of its rights
and remedies hereunder will not violate any Law or governmental regulation or any material
contractual restriction binding on or affecting the Pledgor or any of its property.

(d) Pledgor’s Authority. No authorization, approval or action by, and no
notice or filing with, any Governmental Authority or the issuer of any Pledged Stock, its
directors or shareholders is required either (i) for the pledge made by the Pledgor or for
the granting of the security interest by the Pledgor pursuant to this Pledge Agreement
(except as have been already obtained) or (ii) for the exercise by the Collateral Agent or
the holders of the Secured Obligations of their rights and remedies hereunder (except as may
be required by Laws affecting the offering and sale of securities), except for such
authorization, approvals or actions as have already been obtained or performed and are in
full force and effect. Without limiting the generality of the foregoing, there are no
restrictions in any of the Organization Documents of the issuer of the Pledged Shares which
would limit or restrict the grant of security interest hereunder or the exercise of the
rights and remedies conferred hereby except such restrictions as have already been complied
with.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(e) Security Interest/Priority. This Pledge Agreement creates a valid security
interest in favour of the Collateral Agent for the benefit of the holders of the Secured
Obligations, in the Pledged Collateral. The taking of possession by the Collateral Agent or
its duly authorized agent of the certificates representing the Pledged Shares, or the
acknowledgement by such agent that it holds such certificates for the Agent, together with
duly executed instruments of transfer or assignment in blank, substantially in the form
provided in Schedule 4(a) attached hereto, and all other certificates and
instruments constituting Pledged Collateral, will perfect and establish the first priority
of the Collateral Agent’s security interest in the Pledged Shares, and such possession will
establish the first priority of such security interest in all other Pledged Collateral
represented by such Pledged Shares and instruments securing the Secured Obligations. Except
as set forth in this Section 5(e), no action is necessary at this time to perfect or
otherwise protect such security interest.

(f) Partnership and Membership Interests. As of the date hereof, none of the
Pledged Shares consist of partnership or limited liability company interests. Except as
previously disclosed to the Collateral Agent, none of the Pledged Shares consisting of
partnership or limited liability company interests (i) is dealt in or traded on a securities
exchange or in a securities market, (ii) by its terms expressly provides that it is a
security governed by Article 8 of the UCC or any corresponding provisions of the STA, (iii)
is an investment company security, (iv) is held in a securities account or (v) constitutes a
Security or a Financial Asset.

(g) No Other Interests. As of the Closing Date, pursuant to the terms of the
Credit Agreement, the Pledgor is not required to pledge any Capital Stock in any Subsidiary
other than as set forth on Schedule 2(a) attached hereto.

(h) None of the issuers of the Pledged Shares are unlimited liability companies and
neither the Collateral Agent nor any other person shall be liable for the obligations of any
issuer of the Pledged Shares as a result of the grant of security interest hereunder or the
exercise of the rights and remedies conferred hereby.

6. Covenants. The Pledgor hereby covenants, that so long as any of the Secured
Obligations remains outstanding and until all of the commitments relating thereto have been
terminated, the Pledgor shall:

(a) Books and Records. Upon the reasonable request of the Collateral Agent,
mark its books and records (and shall cause the issuer of the Pledged Shares of the Pledgor
to mark its books and records) to reflect the security interest granted to the Collateral
Agent, for the benefit of the holders of the Secured Obligations, pursuant to this Pledge
Agreement.

(b) Defense of Title. Warrant and defend title to and ownership of the Pledged
Collateral of the Pledgor at its own expense against the claims and demands of all other
parties claiming an interest therein, keep the Pledged Collateral free from all Liens,
except for Permitted Liens, and not sell, exchange, transfer, assign, lease or otherwise
dispose of Pledged Collateral of the Pledgor or any interest therein, except as permitted
under the Credit Agreement and the other Loan Documents.

(c) Further Assurances. Promptly execute and deliver at its expense all
further instruments and documents and take all further action that may be necessary and
desirable or that the Collateral Agent may reasonably request in order to (i) perfect and
protect the security interest created hereby in the Pledged Collateral of the Pledgor
(including any and all action necessary to satisfy the Collateral Agent that the Collateral
Agent has obtained a first priority perfected security interest in all Pledged Collateral);
(ii) enable the Collateral Agent to exercise and enforce
its rights and remedies hereunder in respect of the Pledged Collateral of the Pledgor; and
(iii) otherwise effect the purposes of this Pledge Agreement.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(d) Amendments. Not make or consent to any amendment or other modification or
waiver with respect to any of the Pledged Collateral of the Pledgor or enter into any
agreement or allow to exist any restriction with respect to any of the Pledged Collateral of
the Pledgor other than pursuant hereto or as may be permitted under the Credit Agreement.

(e) Compliance with Securities Laws. File all reports and other information
now or hereafter required to be filed by the Pledgor with the United States Securities and
Exchange Commission, the Ontario Securities Commission, and any other state, provincial,
territorial, federal or foreign agency in connection with the ownership of the Pledged
Collateral of the Pledgor.

(f) Issuance or Acquisition of Capital Stock Consisting of an Interest in a
Partnership or a Limited Liability Company. Not, without executing and delivering, or
causing to be executed and delivered, to the Collateral Agent such agreements, documents and
instruments as the Collateral Agent may require, issue or acquire any Capital Stock of a
Subsidiary consisting of an interest in a partnership or a limited liability company that
(i) is dealt in or traded on a securities exchange or in a securities market, (ii) by its
terms expressly provides that it is a security governed by Article 8 of the UCC or the STA,
(iii) is an investment company security, (iv) is held in a securities account or (v)
constitutes a Security or a Financial Asset.

7. Advances by Holders of the Secured Obligations. On failure of the Pledgor to
perform any of the covenants and agreements contained herein and upon prior written notice to the
Pledgor, the Collateral Agent may, at its sole option and in its sole discretion, perform the same
and in so doing may expend such sums as the Collateral Agent may reasonably deem advisable in the
performance thereof, including the payment of any insurance premiums, the payment of any taxes, a
payment to obtain a release of a Lien or potential Lien, expenditures made in defending against any
adverse claim and all other expenditures that the Collateral Agent may make for the protection of
the security hereof or may be compelled to make by operation of Law. All such sums and amounts so
expended shall be repayable by the Pledgor promptly upon timely notice thereof and demand therefor,
shall constitute additional Secured Obligations and shall, subjection to Section 2.08 of the Credit
Agreement, bear interest from the date said amounts are expended at the rate then applicable to
Revolving Loans that are Base Rate Loans. No such performance of any covenant or agreement by the
Collateral Agent on behalf of the Pledgor, and no such advance or expenditure therefor, shall
relieve the Pledgor of any default under the terms of this Pledge Agreement, the other Loan
Documents or any other documents relating to the Secured Obligations. The Collateral Agent may
make any payment hereby authorized in accordance with any bill, statement or estimate procured from
the appropriate public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being contested in good
faith by the Pledgor in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.

8. Events of Default. The occurrence of an event that would constitute an Event of
Default under the Credit Agreement shall be an Event of Default hereunder (an “Event of
Default”).

9. Remedies.

(a) General Remedies. Upon the occurrence of an Event of Default and during
the continuation thereof, the Collateral Agent and the holders of the Secured Obligations
shall have, in addition to the rights and remedies provided herein, in the Loan Documents,
in any other
documents relating to the Secured Obligations, or by Law (including levy of attachment and
garnishment), the rights and remedies of a secured party under the UCC or the PPSA, as the
case may be, of the jurisdiction applicable to the enforcement of security interests in the
affected Pledged Collateral.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(b) Sale of Pledged Collateral. Upon the occurrence of an Event of Default and
during the continuation thereof, without limiting the generality of this Section 9
and without notice, the Collateral Agent may, in its sole discretion, sell or otherwise
dispose of or realize upon the Pledged Collateral, or any part thereof, in one or more
parcels, at public or private sale, at any exchange or broker’s board or elsewhere, at such
price or prices and on such other terms as the Collateral Agent may deem commercially
reasonable, for cash, credit or for future delivery or otherwise in accordance with
applicable Law. To the extent permitted by Law, any holder of the Secured Obligations may
in such event, bid for the purchase of such securities. The Pledgor agrees that, to the
extent notice of sale shall be required by Law and has not been waived by the Pledgor, any
requirement of reasonable notice shall be met if notice, specifying the place of any public
sale or the time after which any private sale is to be made, is personally served on or
mailed, postage prepaid, to the Pledgor, in accordance with the notice provisions of Section
11.02 of the Credit Agreement at least ten (10) days before the time of such sale or such
other notice as may be required by applicable Law. The Collateral Agent shall not be
obligated to make any sale of Pledged Collateral of the Pledgor regardless of notice of sale
having been given. The Collateral Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.

(c) Private Sale. Upon the occurrence of an Event of Default and during the
continuation thereof, the Pledgor recognizes that the Collateral Agent may deem it
impracticable to effect a public sale of all or any part of the Pledged Shares or any of the
securities constituting Pledged Collateral and that the Collateral Agent may, therefore,
determine to make one or more private sales of any such Pledged Collateral to a restricted
group of purchasers who will be obligated to agree, among other things, to acquire such
Pledged Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor hereby waives any claims against the Collateral
Agent arising by reason that any such private sale shall not have been made in a
commercially reasonable manner and agrees that the Collateral Agent shall have no obligation
to delay sale of any such Pledged Collateral for the period of time necessary to permit the
issuer of such Pledged Collateral to register such Pledged Collateral for public sale under
the Securities Act or qualify such Pledged Collateral for sale under the applicable Law as
in force from time to time in the relevant province or territory of Canada. The Pledgor
further acknowledges and agrees that any offer to sell such Pledged Collateral that has been
(i) publicly advertised on a bona fide basis in a newspaper or other publication of general
circulation in the financial community of New York, New York (to the extent that such offer
may be advertised without prior registration under the Securities Act or the applicable Law
as in force from time to time in the relevant province or territory of Canada), or (ii) made
privately in the manner described above shall be deemed to involve a “public sale” under the
UCC and the PPSA, as applicable, notwithstanding that such sale may not constitute a “public
offering” under the Securities Act or the applicable Law as in force from time to time in
the relevant province or territory of Canada, and the Collateral Agent may, in such event,
bid for the purchase of such Pledged Collateral.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(d) Retention of Pledged Collateral. To the extent permitted under applicable
Law, in addition to the rights and remedies hereunder, upon the occurrence and continuance
of an Event of Default, the Collateral Agent may, after providing the notices required by
Sections 9-620 and 9-621 of the UCC or Section 65 of the PPSA (Ontario) as applicable, or otherwise
complying with the requirements of applicable Law of the relevant jurisdiction, accept or
retain all or any portion of the Pledged Collateral in satisfaction of the Secured
Obligations. Unless and until the Collateral Agent shall have provided such notices,
however, the Collateral Agent shall not be deemed to have accepted or retained any Pledged
Collateral in satisfaction of any Secured Obligations for any reason.

(e) Deficiency. In the event that the proceeds of any sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent or the holders
of the Secured Obligations are legally entitled, the Pledgor shall be liable for the
deficiency, together with interest thereon at the Default Rate, together with the costs of
collection and reasonable legal fees and expenses. Any surplus remaining after the full
payment and satisfaction of the Secured Obligations shall be returned to the Pledgor or to
whomsoever a court of competent jurisdiction shall determine to be entitled thereto.

10. Rights of the Collateral Agent.

(a) Power of Attorney. In addition to other powers of attorney contained
herein, the Pledgor hereby designates and appoints the Collateral Agent, on behalf of the
holders of the Secured Obligations, and each of its designees or agents, as attorney-in-fact
of the Pledgor, irrevocably and with power of substitution, with authority to take any or
all of the following actions upon the occurrence and during the continuation of an Event of
Default:

(i) to demand, collect, settle, compromise and adjust, and give discharges and
releases concerning the Pledged Collateral, all as the Collateral Agent may
reasonably deem appropriate;

(ii) to commence and prosecute any actions at any court for the purposes of
collecting any of the Pledged Collateral and enforcing any other right in respect
thereof;

(iii) to defend, settle or compromise any action brought and, in connection
therewith, give such discharge or release as the Collateral Agent may reasonably
deem appropriate;

(iv) to pay or discharge taxes, liens, security interests or other encumbrances
levied or placed on or threatened against the Pledged Collateral;

(v) to direct any parties liable for any payment in connection with any of the
Pledged Collateral to make payment of any and all monies due and to become due
thereunder directly to the Collateral Agent or as the Collateral Agent shall direct;

(vi) to receive payment of and receipt for any and all monies, claims, and
other amounts due and to become due at any time in respect of or arising out of any
Pledged Collateral;

(vii) to sign and endorse any drafts, assignments, proxies, stock powers,
verifications, notices and other documents relating to the Pledged Collateral;

(viii) to execute and deliver all assignments, conveyances, statements,
financing statements, renewal financing statements, security and pledge agreements,
affidavits, notices and other agreements, instruments and documents that the
Collateral
Agent may reasonably deem appropriate in order to perfect and maintain the security
interests and liens granted in this Pledge Agreement and in order to fully
consummate all of the transactions contemplated therein;

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

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(ix) to exchange any of the Pledged Collateral or other property upon any
merger, consolidation, reorganization, recapitalization or other readjustment of the
issuer thereof and, in connection therewith, deposit any of the Pledged Collateral
with any committee, depository, transfer agent, registrar or other designated agency
upon such terms as the Collateral Agent may reasonably deem appropriate;

(x) to vote for a shareholder resolution, or to sign an instrument in writing,
sanctioning the transfer of any or all of the Pledged Collateral into the name of
the Collateral Agent or one or more of the holders of the Secured Obligations or
into the name of any transferee to whom the Pledged Collateral or any part thereof
may be sold pursuant to Section 9 hereof; and

(xi) to do and perform all such other acts and things as the Collateral Agent
may reasonably deem appropriate or convenient in connection with the Pledged
Collateral.

This power of attorney is a power coupled with an interest and shall be irrevocable for
so long as any of the Secured Obligations shall remain outstanding and until all of the
commitments relating thereto shall have been terminated. The Collateral Agent shall be
under no duty to exercise or withhold the exercise of any of the rights, powers, privileges
and options expressly or implicitly granted to the Collateral Agent in this Pledge
Agreement, and shall not be liable for any failure to do so or any delay in doing so. The
Collateral Agent shall not be liable for any act or omission or for any error of judgment or
any mistake of fact or Law in its individual capacity or its capacity as attorney-in-fact
except acts or omissions resulting from its gross negligence or wilful misconduct. This
power of attorney is conferred on the Collateral Agent solely to protect, preserve and
realize upon its security interest in the Pledged Collateral.

(b) Assignment by the Collateral Agent. The Collateral Agent may assign the
Secured Obligations and any portion thereof and/or the Pledged Collateral and any portion
thereof to a successor collateral agent appointed pursuant to Section 10.09 of the Credit
Agreement, and the assignee shall be entitled to all of the rights and remedies of the
Collateral Agent under this Pledge Agreement in relation thereto.

(c) The Collateral Agent’s Duty of Care. Other than the exercise of reasonable
care to assure the safe custody and preservation of the Pledged Collateral while being held
by the Collateral Agent hereunder, the Collateral Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that the Pledgor shall be
responsible for preservation of all rights in the Pledged Collateral, and the Collateral
Agent shall be relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering the surrender of it to the Pledgor. The Collateral Agent shall be deemed to
have exercised reasonable care in the custody and preservation of the Pledged Collateral in
its possession if such Pledged Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property, which shall be no less than the
treatment employed by a reasonable and prudent agent in the industry, it being understood
that the Collateral Agent shall not have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or other matters
relating to any Pledged Collateral, whether or not the Collateral Agent has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve
rights against any parties with respect to any of the Pledged Collateral.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

9

 

(d) Voting Rights in Respect of the Pledged Collateral.

(i) So long as no Event of Default shall have occurred and be continuing, to
the extent permitted by Law, the Pledgor may exercise any and all voting and other
consensual rights pertaining to the Pledged Collateral of the Pledgor or any part
thereof for any purpose not inconsistent with the terms of this Pledge Agreement or
the Credit Agreement; and

(ii) Upon the occurrence and during the continuance of an Event of Default and
notice from the Collateral Agent to the Pledgor that the Collateral Agent intends to
exercise its rights pursuant to this paragraph (ii), all rights of the
Pledgor to exercise the voting and other consensual rights that it would otherwise
be entitled to exercise pursuant to paragraph (i) of this subsection shall
cease and all such rights shall thereupon become vested in the Collateral Agent,
which shall then have the sole right to exercise such voting and other consensual
rights.

(e) Dividend Rights in Respect of the Pledged Collateral.

(i) So long as no Event of Default shall have occurred and be continuing and
subject to Section 4(b) hereof, the Pledgor may receive and retain any and
all dividends (other than stock dividends and other dividends constituting Pledged
Collateral addressed hereinabove) or interest paid in respect of the Pledged
Collateral to the extent they are allowed under the Credit Agreement.

(ii) Upon the occurrence and during the continuance of an Event of Default and
notice from the Collateral Agent to the Pledgor that the Collateral Agent intends to
exercise its rights pursuant to this paragraph (e):

(A) all rights of the Pledgor to receive the dividends and interest
payments that it would otherwise be authorized to receive and retain
pursuant to paragraph (i) of this subsection shall cease and all
such rights shall thereupon be vested in the Collateral Agent, which shall
then have the sole right to receive and hold as Pledged Collateral such
dividends and interest payments; and

(B) all dividends and interest payments that are received by the
Pledgor contrary to the provisions of paragraph (A) of this
subsection shall be received in trust for the benefit of the Collateral
Agent, shall be segregated from other property or funds of the Pledgor, and
shall be forthwith paid over to the Collateral Agent as Pledged Collateral
in the exact form received, to be held by the Collateral Agent as Pledged
Collateral and as further collateral security for the Secured Obligations.

(f) Release of Pledged Collateral. The Collateral Agent may release any of the
Pledged Collateral from this Pledge Agreement or may substitute any of the Pledged
Collateral for other Pledged Collateral without altering, varying or diminishing in any way
the force, effect, lien, pledge or security interest of this Pledge Agreement as to any
Pledged Collateral not expressly released or substituted, and this Pledge Agreement shall
continue as a first priority lien on all Pledged Collateral not expressly released or
substituted.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

10

 

11. Rights of Required Lenders. All rights of the Collateral Agent hereunder, if not
exercised by the Collateral Agent, may be exercised by the Required Lenders.

12. Application of Proceeds. Upon the occurrence and during the continuation of an
Event of Default, any payments in respect of the Secured Obligations and any proceeds of the
Pledged Collateral, when received by the Collateral Agent or any of the holders of the Secured
Obligations in cash or its equivalent, will be applied in reduction of the Secured Obligations in
the order set forth in the Credit Agreement or other document relating to the Secured Obligations,
and the Pledgor irrevocably waives the right to direct the application of such payments and
proceeds and acknowledges and agrees that the Collateral Agent shall have the continuing and
exclusive right to apply and reapply any and all such payments and proceeds in the Collateral
Agent’s sole discretion, notwithstanding any entry to the contrary upon any of its books and
records.

13. Costs of Counsel. At all times hereafter, whether or not upon the occurrence of
an Event of Default, the Pledgor agree to promptly pay upon demand any and all reasonable costs and
expenses (including reasonable legal fees and expenses) of the Collateral Agent and the holders of
the Secured Obligations (a) as required under Section 11.04 of the Credit Agreement and (b) as
necessary to protect the Pledged Collateral or to exercise any rights or remedies under this Pledge
Agreement or with respect to any of the Pledged Collateral. All of the foregoing costs and
expenses shall constitute Secured Obligations hereunder.

14. Continuing Agreement.

(a) This Pledge Agreement shall be a continuing agreement in every respect and shall
remain in full force and effect so long as any of the Secured Obligations remains
outstanding (other than contingent indemnity obligations not yet due and payable) and until
all of the commitments relating thereto have been terminated. Upon such payment and
termination, this Pledge Agreement shall be automatically terminated and the Collateral
Agent shall, upon the request and at the expense of the Pledgor, forthwith release and
discharge all of its liens and security interests hereunder and shall execute and deliver
all UCC termination statements, PPSA discharges and/or other documents reasonably requested
by the Pledgor evidencing such termination, release and discharge and shall re-deliver the
certificates evidencing the Pledged Shares to the Pledgor or to such other Person as the
Pledgor shall direct. Notwithstanding the foregoing, all indemnities provided hereunder
shall survive termination of this Pledge Agreement.

(b) This Pledge Agreement shall continue to be effective or be automatically
reinstated, as the case may be, if at any time payment, in whole or in part, of any of the
Secured Obligations is rescinded or must otherwise be restored or returned by the Collateral
Agent or any holder of the Secured Obligations as a preference, fraudulent conveyance or
otherwise under any bankruptcy, insolvency or similar Law, all as though such payment had
not been made; provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable costs and expenses
(including reasonable legal fees and expenses) incurred by the Collateral Agent or any
holder of the Secured Obligations in defending and enforcing such reinstatement shall be
deemed to be included as a part of the Secured Obligations.

15. Amendments and Waivers. This Pledge Agreement and the provisions hereof may not
be amended, waived, modified, changed, discharged or terminated except as set forth in Section
11.01 of the Credit Agreement.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

11

 

16. Successors in Interest. This Pledge Agreement shall create a continuing security
interest in the Collateral and shall be binding upon the Pledgor, its successors and assigns, and
shall inure, together with the rights and remedies of the Collateral Agent and the holders of the
Secured Obligations hereunder, to the benefit of the Collateral Agent and the holders of the
Secured Obligations and their successors and permitted assigns; provided, however, that
none of the Pledgor may assign its rights or delegate its duties hereunder without the prior
written consent of the requisite Lenders under the Credit Agreement.

17. Notices. All notices required or permitted to be given under this Pledge
Agreement shall be given as provided in Section 11.02 of the Credit Agreement.

18. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in making proof of this
Pledge Agreement to produce or account for more than one such counterpart.

19. Headings. The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of any provision of
this Pledge Agreement.

20. Governing Law; Submission to Jurisdiction; Venue.

(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE PROVINCE OF ONTARIO AND THE FEDERAL LAWS OF CANADA APPLICABLE THEREIN.

(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT MAY BE BROUGHT IN THE
COURTS OF THE PROVINCE OF ONTARIO AND ALL COURTS COMPETENT TO HEAR APPEALS THEREFROM, OR, IF THE
COLLATERAL AGENT SO ELECTS, THE STATE OF NEW YORK SITTING IN NEW YORK, NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS PLEDGE
AGREEMENT, EACH PARTY HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH PARTY HERETO IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS PLEDGE AGREEMENT OR OTHER DOCUMENT RELATED HERETO. EACH PARTY HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS
PERMITTED BY THE LAW OF SUCH PROVINCE OR STATE, AS APPLICABLE.

(c) EACH PARTY TO THIS PLEDGE AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS PLEDGE AGREEMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO THIS PLEDGE AGREEMENT, OR THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY
TO THIS PLEDGE AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

12

 

21. Severability. If any provision of this Pledge Agreement or any related document
is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of
the remaining provisions of this Pledge Agreement and any other related document shall not be
affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to
replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect
of which comes as close as possible to that of the illegal, invalid or unenforceable provisions.
The invalidity of a provision in a particular jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

22. Entirety. This Pledge Agreement, the other Loan Documents and the other documents
relating to the Secured Obligations comprise the complete and integrated agreement of the parties
on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on
such subject matter. This Pledge Agreement was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor in favour of any party, but
rather in accordance with the fair meaning thereof.

23. Survival. All representations and warranties made hereunder or other document
delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof. Such representations and warranties have been or will
be relied upon by the Administrative Agent, the Collateral Agent and each Lender, regardless of any
investigation made by the Administrative Agent, the Collateral Agent or any Lender or on their
behalf and notwithstanding that the Administrative Agent, the Collateral Agent or any Lender may
have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue
in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid
or unsatisfied or any Letter of Credit shall remain outstanding.

24. Other Security. To the extent that any of the Secured Obligations are now or
hereafter secured by property other than the Pledged Collateral (including real and other personal
property owned by the Pledgor), or by a guarantee, endorsement or property of any other Person,
then the Collateral Agent shall have the right to proceed against such other property, guarantee or
endorsement upon the occurrence of any Event of Default, and the Collateral Agent shall have the
right, in its sole discretion, to determine which rights, security, liens, security interests or
remedies the Collateral Agent shall at any time pursue, relinquish, subordinate, modify or take
with respect thereto, without in any way modifying or affecting any of them or the Secured
Obligations or any of the rights of the Collateral Agent or the holders of the Secured Obligations
under this Pledge Agreement, under any of the other Loan Documents or under any other document
relating to the Secured Obligations.

25. Limitation on Guarantor Obligations. Notwithstanding any provision to the
contrary contained herein, in any other of the Loan Documents or in any other documents relating to
the Secured Obligations, the obligations of each Guarantor under the Credit Agreement and the other
Loan Documents shall be limited to an aggregate amount equal to the largest amount that would not
render such obligations subject to avoidance under Section 548 of the Bankruptcy Code of the United
States or any other applicable Debtor Relief Law (including any comparable provisions of any
applicable state, or Canadian provincial, territorial or federal law).

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

13

 

26. Replacement of Existing Pledge Agreement. As of the date hereof, the Existing
Pledge Agreement shall be amended, restated and superseded and replaced in its entirety by this
Pledge Agreement.

[Signatures on Following Page]

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

14

 

Each of the parties hereto has caused a counterpart of this Pledge Agreement to be duly
executed and delivered as of the date first above written.

	 	 	 	 	 
	PLEDGOR: 	 ARMSTRONG WORLD INDUSTRIES, INC.,

a Pennsylvania corporation

 	 
	 	By:  	/s/  Thomas J. Waters
 	 
	 	 	Name:  	Thomas J. Waters 	 
	 	 	Title:  	Vice President and Treasurer 	 

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

 

 

Accepted and agreed to as of the date first above written.

BANK OF AMERICA, N.A.,

as Collateral Agent

	 	 	 	 	 	 	 
	By:	 	/s/ Kimberly D. Williams	 	 
	 	 	 	 	 
	 

	 	Name:
	 	Kimberly D. Williams	 	 
	 

	 	Title:
	 	Vice President	 	 

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

 

 

SCHEDULES

	 	 	 
	Schedule 2(a)

	 	Pledged Stock

EXHIBITS

	 	 	 
	Exhibit 4(a)

	 	Form of Stock Power

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

 

 

Schedule 2(a)

to

Amended and Restated Pledge Agreement

dated as of November 23, 2010

in favour of Bank of America, N.A.,

as Collateral Agent

PLEDGED STOCK

	 	 	 	 	 	 	 
	Subsidiary	 	Class of Shares	 	Number held by Pledgor	 
	 
	 	 	 	 	 	 
	Armstrong World Industries Canada Ltd.
	 	Common	 	 	500	 

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENT

 

 

 

Exhibit 4(a)

to

Amended and Restated Pledge Agreement

dated as of November 23, 2010

in favour of Bank of America, N.A.,

as Collateral Agent

Form of Irrevocable Stock Power

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
_______________________ the following shares of capital stock of
 _____ 

[ISSUER], a
 _____ 

corporation:

	 	 	 
	No. of Shares
	 	Certificate No.

and irrevocably appoints
 _____ 

its agent and attorney-in-fact to
transfer all or any part of such capital stock and to take all necessary and appropriate action to
effect any such transfer. The agent and attorney-in-fact may substitute and appoint one or more
persons to act for him. The effectiveness of a transfer pursuant to this stock power shall be
subject to any and all transfer restrictions referenced on the face of the certificates evidencing
such interest or in the certificate of incorporation or bylaws of the subject corporation, to the
extent they may from time to time exist.

	 	 	 	 	 
	 	ARMSTRONG WORLD INDUSTRIES, INC.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

ARMSTRONG WORLD INDUSTRIES, INC.

AMENDED AND RESTATED CANADIAN PLEDGE AGREEMENTExhibit 10.5

Exhibit 10.5

MALLESONS STEPHEN JAQUES

Equitable Mortgage of Shares

Dated: 2/12/07

Armstrong World Industries, Inc. (“Mortgagor”)

Bank of America, N.A. (“Mortgagee”)

Mallesons Stephen Jaques

Level 50

Bourke Place

600 Bourke Street

Melbourne Vic 3000

Australia

T +61 3 9643 4000

F +61 3 9643 5999

DX 101 Melbourne

www.mallesons.com

KCS:AJH

 

 

 

Equitable Mortgage of Shares

Contents

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

 

i

 

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

 

ii

 

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

 

iii

 

Equitable Mortgage of Shares

Details

	 	 	 	 	 
	Parties	 	Mortgagor and Mortgagee
	Mortgagor

	 	Name
	 	Armstrong World Industries, Inc.
	 
	 	 	 	 
	 

	 	Address
	 	2500 Columbia Avenue

Lancaster, Pennsylvania 17603

Attn: Barry Sullivan and Teresa Redcay
	 
	 	 	 	 
	Mortgagee

	 	Name
	 	Bank of America, N.A. as

Administrative Agent and Collateral

Agent for the Lenders under the

Credit Agreement
	 
	 	 	 	 
	 

	 	Address
	 	One Independence Center

101 North Tryon St, 15th Floor

Charlotte, NC 28255-0001

Mail Code: NC1-001-15-14

Attn: Anne Brooke Lazorik
	 
	 	 
	Date of mortgage

	 	See Signing page	 	 

 

1

 

Equitable Mortgage of Shares

General terms

	1.	 	INTERPRETATION
	 
	1.1	 	Terms defined in the Credit Agreement

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

	1.2	 	Definitions

These meanings apply unless the contrary intention appears:

Attorney means each attorney appointed by the Mortgagor under clause 19 (“Power of
attorney”).

Authorised Officer means:

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

Beneficiary means:

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

A reference to the Beneficiary means each of them individually and every two or more of
them jointly.

Certificate means the certificate which evidences title to a Share.

Certificated Share means a Share forming part of the Secured Property, title to which is
evidenced by a Certificate.

Controller has the meaning it has in the Corporations Act.

 

2

 

Credit Agreement means the credit agreement dated 2 October 2006 between, among others, the
Mortgagor as borrower and the Mortgagee as Administrative Agent and Collateral Agent.

Details means the section of this mortgage headed “Details”.

Encumbrance means any:

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

or any agreement to create any of them or allow them to exist.

Event of Default means an event so described in clause 15.1 (“Events of Default”).

Future Security means sixty five percent of the Mortgagor’s interest in the Shares issued
by Armstrong World Industries (Australia) Pty Ltd. which, after the date of this mortgage,
become owned beneficially by the Mortgagor or by anyone (including a trustee, nominee,
broker or agent) for the Mortgagor.

A person is Insolvent if:

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

 

3

 

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

and any reference to Insolvency shall be construed accordingly.

Issuer means a corporation which has issued Shares included in the Secured Property.

Mortgagee means the person so described in the Details.

Mortgagor means the person so described in the Details.

New Rights means:

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

in connection with the Present Security or the Future Security.

Potential Event of Default means an event which, with the giving of notice, lapse of time
or fulfilment of any condition, would be likely to become an Event of Default.

Present Security means the Mortgagor’s interest in the following Shares, reflecting sixty
five percent of the issued Shares held by the Mortgagor in the Issuer:

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

Receiver includes a receiver or receiver and manager.

Related Entity has the meaning it has in the Corporations Act.

Secured Money means all Obligations and all costs and expenses incurred in connection with
enforcement and collection of the Secured Money, including Attorney Costs,

 

4

 

This definition applies:

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

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

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

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

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

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

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

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

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

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

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

Secured Property means the Present Security, the Future Security and the New Rights.

Security Notice means a notice in the form of schedule 1.

Share means shares, stock units or units in the capital of a corporation.

Taxes means taxes, levies, imposts, charges and duties imposed by any authority (including
stamp and transaction duties) together with any related interest, penalties, fines and
expenses in connection with them, except if imposed on, or calculated having regard to, the
overall net income of the Mortgagee.

Transfer means a transfer of the Secured Property executed by the Mortgagor as transferor.

Uncertificated Share means a Share forming part of the Secured Property, title to which is
not evidenced by a Certificate.

	1.3	 	References to certain general terms

Unless the contrary intention appears, in this mortgage:

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

 

5

 

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

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

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

 

6

 

	1.6	 	Designation

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

	2.	 	MORTGAGOR MUST PAY THE SECURED MONEY

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

	3.	 	MORTGAGE
	 
	3.1	 	Mortgage

The Mortgagor:

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

The Mortgagor does this as beneficial owner.

	3.2	 	Mandatory action

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

	3.3	 	Consideration

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

 

7

 

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

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

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

	4.2	 	Deposit of Future Security documents

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

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

	4.3	 	Certificated Shares

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

	4.4	 	Conversion of Uncertificated Shares to Certificated Shares

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

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

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

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

 

8

 

	5.2	 	Where the law allows for creation of Encumbrance without consent

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

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

	6.	 	OTHER ENCUMBRANCES
	 
	6.1	 	Priority agreement

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

	6.2	 	Amount secured by other Encumbrance

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

	6.3	 	Obligations under other Encumbrance

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

	6.4	 	Mortgagee may rely on third party certificates

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

	6.5	 	Prospective liability

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

 

9

 

	7.	 	DIVIDENDS AND VOTES
	 
	7.1	 	Before an Event of Default

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

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

	7.2	 	After an Event of Default

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

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

	7.3	 	No obligation on Mortgagee

The Mortgagee need not:

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

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

 

10

 

	8.	 	MAINTAINING THE SECURED PROPERTY

The Mortgagor agrees to:

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

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

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

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

	9.	 	REPRESENTATIONS AND WARRANTIES

	9.1	 	Representations and warranties

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

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

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

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

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

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

 

11

 

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

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

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

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

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

	9.2	 	Reliance

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

	10.	 	PAYMENTS

	10.1	 	Manner of payment

The Mortgagor agrees to make payments under this mortgage:

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

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

	10.2	 	Currency of payment

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

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

 

12

 

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

	11.	 	COSTS AND INDEMNITIES

	11.1	 	Currency conversion on Judgment debt

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

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

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

	12.	 	APPLICATION OF PAYMENTS

	12.1	 	Application of money

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

	12.2	 	Order of payment

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

	12.3	 	Suspense account

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

 

13

 

	12.4	 	Remaining money

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

	12.5	 	Credit from date of receipt

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

	13.	 	ADMINISTRATIVE MATTERS

	13.1	 	Deposit of documents

In addition to the Mortgagor’s obligations under clause 4 (“Obligations to deposit
documents and give notices”) the Mortgagor agrees to deposit with the Mortgagee all other
documents the Mortgagee reasonably requests relating to the Secured Property.

However, the Mortgagor need not deposit them if another person is holding them under a
Permitted Lien which has priority over this mortgage.

	13.2	 	Registration of mortgage

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

	13.3	 	Further steps

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

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

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

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

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

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

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

 

14

 

	13.4	 	Authority to fill in blanks

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

	13.5	 	Supply of information

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

	 	(a)	 	the Secured Property; or

	 	(b)	 	this mortgage.

	14.	 	RIGHTS THE MORTGAGEE MAY EXERCISE AT ANY TIME

	14.1	 	Authority to deal

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

	14.2	 	Right to rectify

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

	15.	 	DEFAULT

	15.1	 	Events of Default

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

	15.2	 	Ensure no default

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

	15.3	 	Investigation of default

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

 

15

 

	15.4	 	Mortgagee’s powers on default

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

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

	 	(b)	 	appoint one or more Receivers; or

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

	15.5	 	Order of enforcement

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

	 	(a)	 	against any other person; or

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

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

	16.	 	EXCLUSION OF TIME PERIODS

	16.1	 	No notice required unless mandatory

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

	16.2	 	Mandatory notice period

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

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

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

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

 

16

 

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

	17.	 	RECEIVERS

	17.1	 	Terms of appointment of Receiver

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

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

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

	17.2	 	More than one Receiver

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

	17.3	 	Receiver is Mortgagor’s agent

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

	17.4	 	Receiver’s powers

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

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

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

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

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

	18.	 	DISPOSAL OF THE SECURED PROPERTY IS FINAL

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

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

 

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

	19.	 	POWER OF ATTORNEY

	19.1	 	Appointment

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

	19.2	 	Powers

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

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

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

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

	20.	 	REINSTATEMENT OF RIGHTS

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

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

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

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

 

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	21.	 	NOTICES

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

	22.	 	GENERAL

	22.1	 	Prompt performance

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

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

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

	22.2	 	Consents

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

	22.3	 	Certificates

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

	22.4	 	Set-off

The Mortgagee may set off any amount owing by the Mortgagee to the Mortgagor (whether or
not due for payment) against any amount due for payment by the Mortgagor to the Mortgagee
under this mortgage.

The Mortgagee may do anything necessary to effect any set-off under this clause (including
varying the date for payment of any amount owing by the Mortgagee to the Mortgagor and
making currency exchanges). This clause applies despite any other agreement between the
Mortgagor and the Mortgagee.

	22.5	 	Discretion in exercising rights

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

	22.6	 	Partial exercising of rights

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

 

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	22.7	 	No liability for loss

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

	22.8	 	Conflict of interest

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

	22.9	 	Remedies cumulative

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

	22.10	 	Other Encumbrances or judgments

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

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

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

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

	22.11	 	Continuing security

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

	22.12	 	Indemnities

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

	22.13	 	Rights and obligations are unaffected

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

	22.14	 	Inconsistent law

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

 

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	22.15	 	Superannuation legislation

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

	22.16	 	Supervening legislation

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

	22.17	 	Time of the essence

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

	22.18	 	Variation and waiver

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

	22.19	 	Receipts

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

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

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

	22.20	 	Each signatory bound

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

	22.21	 	Counterparts

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

	22.22	 	Governing law

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

 

21

 

	22.23	 	Serving documents

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

EXECUTED as a deed

 

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Equitable Mortgage of Shares

Schedule 1 — Form of Security Notice (clause 4.2(a) (“Future Security”) and definition of “Security
Notice”)

[Date]

	 	 	 
	To:

	 	Bank of America, N.A. (“Mortgagee”)
	Address:

	 	One Independence Center

101 North Tryon St, 15th Floor

Charlotte, NC 28255-0001

Mail Code: NC1-001-15-14

Attn: Anne Brooke Lazorik

SECURITY NOTICE

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

	1.	 	The following Shares constitute Future Security.

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

	2.	 	All the Shares are fully paid up.

We enclose:

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

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

If any of the above are not enclosed we undertake to forward them to you.

A term which has a defined meaning in the Mortgage has the same meaning as in the Mortgage when
used in this Security Notice.

	 	 	 
	 
	 	**** 
	 

for Armstrong World Industries, Inc,

	 	 

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

 

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Signing page

DATED: February 12, 2007

Each of the parties hereto has caused a counterpart of this mortgage to be duly executed and
delivered as of the date above

	 	 	 	 	 
	ARMSTRONG WORLD

INDUSTRIES, INC., a

Pennsylvania corporation	 	 
	 
	 	 	 	 
	By:

	 	/s/ Walter T. Gangl
 

Name: Walter T. Gangl
	 	 
	 

	 	Title:   Assistant Secretary	 	 
	 
	 	 	 	 
	BANK OF AMERICA, N.A., as

Administrative Agent and

Collateral Agent By:	 	 
	 
	 	 	 	 
	By:

	 	/s/ Anne B. Lazorik	 	 
	 

	 	 	 	 
	 

	 	Name: Anne B. Lazorik	 	 
	 

	 	Title:   Vice President	 	 

 

24

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