UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 25, 2010
ARMSTRONG WORLD INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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| Pennsylvania
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1-2116
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23-0366390 |
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(State or other jurisdiction
of incorporation)
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(Commission File Number)
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(IRS Employer Identification No.) |
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2500 Columbia Avenue, Lancaster, Pennsylvania
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17603 |
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(Zip Code) |
Registrant’s telephone number, including area code: (717) 397-0611
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers
(c)
Armstrong World Industries, Inc. (the “Company”) has announced the election of Matthew J. Espe to
the position of Chief Executive Officer and President of the Company. Mr. Espe will begin
employment effective on or about July 26, 2010, but in no event later than August 1, 2010. A press
release is attached hereto as Exhibit 99.1.
Employment Agreement
In connection with Mr. Espe joining the Company, the Company and Mr. Espe have entered into an
employment agreement dated as of June 24, 2010, which is attached hereto as Exhibit 10.1. The
employment agreement provides that Mr. Espe will be paid an annual base salary of $980,000. He is
also eligible to earn an annual target bonus of 100% of base salary with a maximum potential bonus
of 200% of his annual target bonus, based on the achievement of performance targets set by the
Management Development and Compensation Committee of the Board of Directors of the Company (the
“Compensation Committee). Mr. Espe’s 2010 bonus will be at least equal to the annual target bonus
on a prorated basis.
Mr. Espe will also be eligible to participate in the Company’s long-term incentive plan beginning
in 2011. Actual awards will be determined by the Compensation Committee based on Mr. Espe’s and
Company performance and other applicable factors. Mr. Espe will be eligible to participate in the
retirement and employee benefit plans that are generally available to the executives of the
Company. He will also be eligible for certain perquisites generally available to the executives of
the Company, a yearly physical paid by the Company and up to $4,500 as reimbursement for personal
financial planning and tax preparation services.
Mr. Espe will receive a one-time replacement grant in the gross amount of $4.552 million consisting
of a replacement cash bonus that vests on November 1, 2010 and a grant of replacement restricted
stock units with a grant date value of $1.1 million, vesting in three equal installments on the
first, second and third anniversary of the grant date. Mr. Espe will also receive a one-time
inducement grant consisting of stock options with a grant date value of $3.5 million, vesting in
three equal installments on the first, second and third anniversary of the grant date and
performance restricted stock units with a grant date value of $1.5 million, vesting 50% on December
31, 2012 and the remaining 50% on December 31, 2013, provided, that specified stock price targets
($55 per share on December 31, 2012 and $70 per share on December 31, 2013) are achieved.
In the event of Mr. Espe’s involuntary termination without cause or voluntary termination with
“good reason”, Mr. Espe will be entitled to the following severance pay and benefits, conditioned
on the execution of a release and his compliance with certain restrictive covenants: (1) payment of
200% of his base salary, (2) welfare benefit continuation for 24 months and (3) a pro rata bonus.
For purposes of Mr. Espe’s employment agreement, the term “good reason” generally means a material
and adverse change in duties, titles or positions, a 10% or more reduction in salary and the
Company’s material breach of any other obligation under the employment agreement that is not
corrected within 30 days. Mr. Espe will be subject to a two-year non-compete and non-solicit
following his termination of employment.
The Company will reimburse Mr. Espe’s legal expenses up to $25,000 in connection with the
negotiation of the employment agreement.
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Change in Control Agreement
The Company and Mr. Espe have also entered into a change in control agreement dated as of June 24,
2010, which is attached hereto as Exhibit 10.2. Upon a “qualifying termination”
Mr. Espe will be entitled to (1) a severance payment equal to 2.5 times the sum of Mr. Espe’s base
salary and annual target bonus, (2) welfare benefit continuation for a period of 30 months, (2) a
pro rata bonus and (4) outplacement fees not to exceed $30,000. In addition, any amounts paid
under the change in control agreement will be reduced to the maximum amount that can be paid
without being subject to the excise tax imposed under Internal Revenue Code Section 280G, but only
if the after-tax benefit of the reduced amount is higher than the after-tax benefit of the
unreduced amount. For purposes of Mr. Espe’s change in control agreement, a “qualifying
termination” means an involuntary termination without cause and voluntary termination with “good
reason”, each within 24 months following a change in control, or an involuntary termination without
cause within 6 months prior to a change in control if termination is related to the change in
control. “Good reason” generally means the assignment of duties or responsibilities that are
materially inconsistent with duties or responsibilities of the CEO position, a material diminution
in authority, duties or responsibilities, a 10% or more reduction in salary, the Company’s material
breach of any obligation under the change in control agreement, the failure to continue the
executive’s participation in any material compensation plan on a basis not materially less
favorable to the executive and the failure to continue to provide the executive with benefits
substantially similar in the aggregate to those the executive enjoyed prior to a change in control.
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