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): September 10, 2019
ARMSTRONG FLOORING, INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-37589 | 47-4303305 | ||
(State or other jurisdiction of incorporation ) |
(Commission File No.) |
(IRS Employer Identification No.) |
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2500 Columbia Avenue P.O. Box 3025 Lancaster, Pennsylvania |
17603 | |||
(Address of principal executive offices) | (Zip code) |
Registrants telephone number, including area code: (717) 672-9611
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:
☐ |
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)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading
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Name of each
exchange
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Common Stock, $0.0001 par value | AFI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Appointment of New President and Chief Executive Officer and Director
(c) On September 10, 2019, Armstrong Flooring, Inc. (the Company) announced the appointment of Michel Vermette, age 52, to the position of President and Chief Executive Officer and as a director of the Company, effective as of September 11, 2019.
In connection with Mr. Vermettes appointment to the Board of Directors (the Board), the Board increased the size of the Board from seven (7) to eight (8) directors, effective September 11, 2019. Mr. Vermette has not been appointed to any standing committee of the Board. Mr. Vermette will not receive compensation for his services as a member of the Board.
Mr. Vermette has served as President of Residential Carpeting for Mohawk Industries, Inc. (an international designer, manufacturer, distributor and marketer of flooring in residential and commercial spaces) since February 2019 and, before such position, as President of Mohawk Group (a marketer and distributer under Mohawk Industries, Inc.s floor covering products line) since 2011. From 2004 to 2011, Mr. Vermette served in various positions of increasing responsibility at Mohawk Industries, Inc. including Corporate Controller, Chief Accounting Officer, Chief Financial Officer of Mohawk Flooring and Senior Vice President of International Sales and Business Development. Prior to joining Mohawk Industries, Inc., Mr. Vermette served in various capacities for Dal-Tile International Inc. (a manufacturer, distributor and marketer of ceramic tile), including Operations Controller and Divisions Controller from 1996 until the company was acquired by Mohawk Industries, Inc. in 2004. Mr. Vermette does not serve on the board of any other public companies.
Mr. Vermettes financial expertise and extensive knowledge of, and background in, the Companys industry and business are among the key characteristics that led to his appointment as President and Chief Executive Officer and as a director of the Company.
There are no other arrangements or understandings between Mr. Vermette and any other person pursuant to which Mr. Vermette was appointed as President and Chief Executive Officer and as a director of the Company, and there are no familial relationships between Mr. Vermette and any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer of the Company. Additionally, there have been no transactions involving the Company since the beginning of the Companys fiscal year in which Mr. Vermette, or his immediate family members, had or will have a direct or indirect material interest.
Entry into Employment Agreement in Connection with Appointment
In connection with Mr. Vermettes appointment as its President and Chief Executive Officer, the Company has entered into an employment agreement with Mr. Vermette (the Employment Agreement). The Employment Agreement has an initial term of three years commencing September 11, 2019 (the commencement date) and thereafter will automatically renew for successive one-year terms unless either he or the Company gives ninety days prior written notice of nonrenewal. Pursuant to the Employment Agreement, Mr. Vermette will be paid an annual base salary of $650,000 and, beginning in the Companys 2020 fiscal year, he will be eligible to earn a target annual cash bonus equal to 100% of his base salary and annual target long-term incentive awards equal to 200% of his base salary, generally consistent with the award issuances to other senior executives of the Company.
The Employment Agreement further provides that on the commencement date, the Company will grant Mr. Vermette (i) an initial grant of 143,062 shares of restricted common stock (replacing forfeited compensation from his prior employer), which will vest in equal annual installments on each of the five successive anniversaries of the grant date, subject to continued employment with the Company (the Initial Restricted Stock Award); (ii) an initial grant of 371,430 performance-based restricted stock units, which will be earned upon the Companys common stock achieving the per share price targets set forth in the award agreement at any time during the five-year period following the grant date, measured on each of the first five anniversaries of the grant date, subject to his continued employment through the applicable measurement date (the Initial PBRSU Award); and (iii) a cash sign-on bonus equal to $500,000 (which Mr. Vermette will be required to repay in the event his employment is terminated by the Company for cause or by him without good reason (as each term is defined in the Employment Agreement) prior to the first anniversary of Mr. Vermettes commencement date).
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In the event the Company terminates Mr. Vermettes employment without cause or Mr. Vermette terminates his employment for good reason during the term of the Employment Agreement, subject to his execution of a release of claims (a Qualifying Termination), Mr. Vermette will receive: (i) an amount equal to two times the sum of (x) his base salary plus (y) target annual bonus (which will be payable in lump sum within 60 days of Mr. Vermettes termination); (ii) if earned, an annual bonus for the year in which the termination of employment occurs based on actual performance for the year, prorated to reflect the portion of the year elapsed prior to his termination of employment (which will be payable at the time bonuses are paid to other senior executives of the Company); (iii) a lump sum payment equal to the cost for 18 months continuation of group health plan coverage as of the date of his termination of employment (which will be payable within 60 days of termination); and (iv) executive outplacement services for up to 24 months at a maximum cost of $30,000, and his equity-based awards will be treated as follows: (a) the Initial Restricted Stock Award will become vested, (b) the Initial PBRSU Award will remain eligible to vest based on actual performance, and (c) any other outstanding equity-based awards held by Mr. Vermette will be treated in accordance with the terms of the Companys 2016 Long Term Incentive Plan and the applicable award agreements thereunder. A nonrenewal of the term of the Employment Agreement by the Company will be treated as a termination by the Company without cause.
In the event that Mr. Vermette incurs a Qualifying Termination on, or during the 24-month period following, a change in control of the Company, Mr. Vermette will receive the severance pay and benefits listed above, except that (i) the severance amount will equal two and one-half times the sum of (x) his base salary plus (y) target annual bonus; (ii) Mr. Vermette will also receive coverage under the Companys post-retirement health and life insurance programs if he would have become eligible for such benefits within the 24-month period following termination; (iii) the Initial PBRSUs will vest (or forfeit) based on actual performance measured immediately prior to the change in control; and (iv) all other unvested equity awards held by Mr. Vermette will immediately vest, with any performance-based awards (excluding the Initial PBRSUs) deemed to have been earned at target.
The Employment Agreement also subjects Mr. Vermette to certain confidentiality and nondisparagement obligations and certain noncompetition and nonsolicitation restrictions for a period of 24 months post-employment.
The foregoing description of the Employment Agreement, the Initial Restricted Stock Award and Initial PBRSU Award, respectively, is a summary of certain terms only and is qualified in its entirety by the full text of the Employment Agreement filed as Exhibit 10.1 hereto, the form of time-based restricted stock award agreement filed as Exhibit 10.2 hereto, and the form of performance-based restricted stock unit award agreement filed as Exhibit 10.3 hereto, each of which is incorporated herein by reference.
Resignation of Interim President and Chief Executive Officer; Expiration of Role of Lead Independent Director
(b) On September 10, 2019, the Company also announced that Larry S. McWilliams, the Chair of the Board, resigned as the interim President and Chief Executive Officer, effective as of September 11, 2019. On May 2, 2019, Mr. McWilliams was appointed as President and Chief Executive Officer on an interim basis until such time as the Companys appointment of a new President and Chief Executive Officer becomes effective, and his resignation is not the result of any disagreement with the Company and is not related to the Companys operational performance or financial condition. Mr. McWilliams will continue to serve as the Chair of the Board.
Prior to his appointment as interim President and Chief Executive Officer, Mr. McWilliams was an independent director within the meaning of the New York Stock Exchange (the NYSE) listing standards. During Mr. McWilliamss service as interim President and Chief Executive Officer, he was not considered independent; however, in accordance with the NYSE listing standards and the Companys Corporate Governance Guidelines, the employment of a director on an interim basis as President and Chief Executive Officer of the Company shall not disqualify such director from being considered independent after ending that employment. As such, after his employment as the Companys interim President and Chief Executive Officer, Mr. McWilliams once again meets the standards for director independence set forth by the NYSE listing standards and the Companys Corporate Governance Guidelines.
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As previously disclosed, James C. Melville was appointed to the role of Lead Independent Director in connection with Mr. McWilliamss prior appointment to the role of interim President and Chief Executive Officer. The Companys Corporate Governance Guidelines provide that if the Chair of the Board is an independent director, then the duties of the Lead Independent Director shall be a part of the duties of the Chair of the Board. Accordingly, effective as of September 11, 2019 the role of Lead Independent Director will expire and Mr. Melville will relinquish his role as the Lead Independent Director of the Board. Mr. Melville will continue to serve as a member of the Board as the Chair of the Nominating and Governance Committee and as a member of both the Finance and Management Development and Compensation Committees of the Board.
Section 7 Regulation FD
Item 7.01 |
Regulation FD Disclosure |
On September 10, 2019, the Company issued a press release announcing the matters described above and is attached hereto as Exhibit 99.1.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1943, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 9.01 |
Financial Statements and Exhibits |
(d) Exhibits
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
ARMSTRONG FLOORING, INC. | ||
By: |
/s/ Christopher S. Parisi |
|
Christopher S. Parisi | ||
Senior Vice President, General Counsel & Secretary |
Date: September 10, 2019
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT (this Agreement) is hereby entered into as of the 30th day of August, 2019, by and between Armstrong Flooring, Inc. (the Company) and Michel S. Vermette, (the Executive) (hereinafter collectively referred to as the parties).
In consideration of the respective agreements of the parties contained herein, it is agreed as follows:
1. |
Term. The term of the Executives employment under this Agreement shall commence on the date that is mutually agreed by the parties, which date, once determined, shall be set forth in the signature page hereto (the Effective Date), and shall be no later than September 16, 2019, and, unless earlier terminated pursuant to Section 8 below, shall continue for a period ending on the date that is three years following the Effective Date; provided, however, that commencing on the third anniversary of the Effective Date and each anniversary thereafter, the term shall automatically be extended for one additional year unless either of the parties notifies the other in writing, no less than 90 days prior to the expiration of the then current term, that the notifying party is electing to terminate this Agreement at the expiration of the then current term (the actual period of the Executives employment with the Company, the Term). |
2. |
Employment. During the Term: |
(a) |
The Executive shall serve as Chief Executive Officer of the Company. In addition, as of the Effective Date, the Executive shall serve as member of the board of directors of the Company (the Board). For as long as the Executive is the Chief Executive Officer of the Company, the Company shall nominate the Executive for re-election to the Board. At the time of the Executives termination of employment with the Company for any reason, the Executive shall resign from the Board and the board of directors of any of the Companys affiliates and the Executive agrees to promptly execute any and all documents necessary to effectuate such resignation(s) at such time. The Executive shall not receive any compensation in addition to the compensation described herein for serving as a director of the Company or as a director or officer of any of the Companys affiliates. |
(b) |
The Executive shall report directly to the Board. The Executive shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar executive capacity. |
(c) |
The Executive shall devote his full working time and attention to the conduct of the business and affairs of the Company and its affiliates, and shall perform the Executives duties to the Company faithfully, competently, diligently and to the best of the Executives ability, and subject to, and in accordance with, all of the Companys policies, rules, ethical standards and regulations as are in effect from |
time to time. The Executive may (i) serve on corporate, civil, charitable or non-profit boards or committees, subject in all cases to the prior approval of the Board and other applicable written policies of the Company and its affiliates as in effect from time to time, and (ii) manage personal and family investments, participate in industry organizations and deliver lectures at educational institutions, in each case, so long as no such service or activity unreasonably interferes, individually or in the aggregate, with the performance of his responsibilities hereunder. |
(d) |
The Executives place of employment will be at the Companys World Headquarters in Lancaster, Pennsylvania. |
3. |
Base Salary. The Company agrees to pay or cause to be paid to the Executive during the Term a base salary at the rate of $650,000 per annum or such increased amount in accordance with this Section 3 (hereinafter referred to as the Base Salary). Such Base Salary shall be payable in accordance with the Companys customary practices applicable to its executives. Such Base Salary shall be reviewed at least annually by the Board or by the Management Development and Compensation Committee of the Board (the Committee), and may be increased, but not decreased, in the sole discretion of the Committee. |
4. |
Annual Incentive Plan Compensation. During the Term, beginning with the 2020 fiscal year, the Executive shall be eligible to earn a target annual cash bonus equal to 100% of the Base Salary (such target bonus, as may hereafter be increased, the Target Bonus) with the opportunity to receive a maximum annual cash bonus in accordance with the terms of the applicable annual cash bonus plan as in effect from time to time, subject to the achievement of performance targets set by the Committee in consultation with the Executive. Such annual cash bonus (Annual Incentive Compensation) shall be paid in no event later than the 15th day of the third month following the end of the taxable year in which the performance targets have been achieved. |
5. |
Sign-On Bonus. In connection with the entry into this Agreement, the Executive shall receive an inducement payment equal to $500,000 (the Sign-On Bonus), which shall be paid in cash within the first 10 days after the Effective Date, less such deductions or offsets required by applicable law or otherwise authorized by the Executive. The Sign-On Bonus is subject to repayment to the Company within thirty days after the Executives employment is terminated by the Company for Cause or by the Executive without Good Reason (in either case, the Repayment Deadline) in the amount of the full pre-tax amount of the Sign-On Bonus if such termination occurs on or before the first anniversary of the Effective Date. In the event the Executive does not repay the Company in full by the Repayment Deadline, if applicable, then the Company may, in its sole discretion, either (i) offset any other amounts payable to the Executive by the Company or any of its affiliates in satisfaction of the full Sign-On Bonus or (ii) cause the Executive to forfeit (or otherwise recoup) any equity interests that the Executive holds in respect of the Company or any of its affiliates in an amount equal to the full Sign-On Bonus, in each case subject to applicable law. |
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6. |
Long-Term Incentive Compensation. |
(a) |
Initial Long-Term Incentive Compensation. |
(i) |
On the Effective Date, the Executive will be granted 143,062 shares of restricted Company common stock, par value $0.01 per share (Company Stock) (the Initial Restricted Stock Award). The vesting restrictions on the Initial Restricted Stock Award shall lapse as to 20% of the shares of Company Stock on each of the first five anniversaries of the Effective Date, subject to continued service through each applicable vesting date, except as expressly provided herein, and the Initial Restricted Stock Award shall otherwise be evidenced by and subject to the terms and conditions set forth in the Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (the LTIP) and applicable award agreement, which shall be consistent with the terms and conditions set forth on this Section 6(a)(i) and Section 10 below. |
(ii) |
Also on the Effective Date, the Executive will be granted 371,430 performance-based restricted stock units (the Initial PBRSUs), which shall vest upon the Company stock achieving the per share price targets set forth below. Achievement will be measured on each of the first five anniversaries of the Effective Date (each, a Measurement Date) taking into account performance for any period between the Effective Date and the applicable Measurement Date. The earned PBRSUs shall vest on the Measurement Date first following the date on which the target is first achieved, provided that, except as expressly provided herein, the Executive is employed by the Company on such Measurement Date. The Company shall deliver unrestricted shares of Company stock as soon as practicable (but in any event within 45 days following) the date on which the earned PBRSUs vest. |
Percent PBRSUs Earned |
Average Closing Per Share Price Over
20 Consecutive Trading Days (Per Share Price) ($) |
|||
20% |
10.50 | |||
20% |
12.25 | |||
20% |
14.00 | |||
20% |
15.75 | |||
20% |
17.50 |
The Initial PBRSUs shall further be subject to the terms and conditions set forth in the LTIP and applicable award agreement, which shall be consistent with the terms and conditions set forth on this Section 6(a)(ii) and Section 10 below.
(b) |
During the Term, the Executive will be eligible to participate in the LTIP and any successor plan beginning with the Companys 2020 fiscal year. The Executives annual target long term incentive award under the LTIP will be equal to 200% of the Executives Base Salary. The terms of long-term incentive award issuances to the Executive under the LTIP after the Effective Date, except as expressly set forth herein, shall be consistent with and no less favorable than the award issuances to other senior executives of the Company generally, which shall be in the sole discretion of the Board. |
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7. |
Other Benefits. |
(a) |
Employee Benefits. During the Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company or its affiliates and made available to senior executives generally. No additional compensation provided under any of such plans shall be deemed to modify or otherwise affect the terms of this Agreement or any of the Executives entitlements hereunder. |
(b) |
Business Expenses. Upon submission of proper invoices in accordance with the Companys normal procedures, the Executive shall be entitled to receive reimbursement of all reasonable out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executives duties hereunder. Such reimbursement shall be made in no event later than the end of the calendar year following the calendar year in which the expenses were incurred. |
(c) |
Vacation and Sick Leave. The Executive shall be entitled, without loss of pay, to absent himself voluntarily from the performance of the Executives duties under this Agreement, pursuant to the following: |
(i) |
The Executive shall be entitled to annual vacation in accordance with the vacation policies of the Company as in effect from time to time, which shall in no event be less than four weeks per year; and |
(ii) |
The Executive shall be entitled to sick leave (without loss of pay) in accordance with the Companys policies as in effect from time to time. |
8. |
Termination. The Term and the Executives employment hereunder may be terminated under the circumstances set forth below; provided, however, that notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement unless the Executive would be considered to have incurred a separation from service from the Company within the meaning of Section 409A of the Code. |
(a) |
Disability. The Company may terminate the Executives employment, on written notice to the Executive upon the Executives Disability. For purposes of this Agreement, Disability shall mean such incapacity due to illness or other physical or mental disability of the Executive, resulting in the Executives inability to perform the essential functions of the Executives employment, with or without reasonable accommodation, for more than 180 calendar days in the aggregate during any 365-day period. |
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(b) |
Death. The Executives employment shall be terminated as of the date of the Executives death. |
(c) |
Cause. The Company may terminate the Executives employment for Cause, effective as of the date of the Notice of Termination (as defined in Section 9 below) and as evidenced by a resolution adopted by two-thirds of the independent members of the Board. Prior to a Change in Control, Cause shall mean any of the following conduct by the Executive: (a) conviction of a felony or a crime involving moral turpitude; (b) fraud, dishonesty, misrepresentation, theft or misappropriation of funds with respect to the Company; (c) violation of the Companys Code of Conduct or employment policies, including, but not limited to, its policy prohibiting harassment, as in effect from time to time; (d) breach of this agreement or any written noncompetition, confidentiality or nonsolicitation covenant of the Company; or (e) gross misconduct in the performance of the Executives duties with the Company. On or following a Change in Control, Cause shall mean (a) the deliberate and continued failure by the Executive to devote substantially all the Executives business time and best efforts to the performance of the Executives duties (other than any such failure resulting from the Executives incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive) after a demand for substantial performance is delivered to the Executive by the Board which demand specifically identifies the manner in which the Board believes the Executive has not substantially performed such duties; (b) the deliberate engaging by the Executive in gross misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) the Executives conviction of, or plea of guilty or nolo contendere to, a felony or any criminal charge involving moral turpitude. For the purposes of this Agreement, on and after a Change in Control, no act, or failure to act, on the part of the Executive shall be considered deliberate unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that such action or omission was in the best interests of the Company. |
(d) |
Without Cause. The Company may terminate the Executives employment without Cause. The Company shall deliver to the Executive a Notice of Termination (as defined in Section 9 below) not less than 30 days prior to the termination of the Executives employment without Cause and the Company shall have the option of terminating the Executives duties and responsibilities, and prohibiting the Executive from entering the Companys premises, prior to the expiration of such thirty-day notice period provided the Company pays Base Salary through the end of such notice period. |
(e) |
Good Reason. The Executive may terminate employment with the Company for Good Reason (as defined below) by delivering to the Company a Notice of Termination (as defined in Section 9 below) not less than 30 days prior to the termination of the Executives employment for Good Reason. The Company shall have the option of terminating the Executives duties and responsibilities, and prohibiting the Executive from entering the Companys premises, prior to the |
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expiration of such 30-day notice period. For purposes of this Agreement, Good Reason shall mean the occurrence of any of the following without the prior consent of the Executive: (i) a material diminution in the Executives authority, duties, or responsibilities or the assignment to the Executive of duties or responsibilities that are materially inconsistent with those in effect immediately prior to the event constituting Good Reason; including, without limitation, any alteration attributable to the Executive ceasing to be the chief executive officer of a public company reporting directly to the Board of Directors of such public company following the Change in Control; (ii) a reduction of ten percent (10%) or more by the Company in the Executives Base Salary except for across-the-board salary reductions similarly affecting all senior executive officers of the Company; (iii) the relocation of the Executives principal place of employment to a location more than fifty (50) miles from the Executives principal place of employment immediately prior to the date of termination or the Companys requiring the Executive to be based anywhere other than such principal place of employment (or permitted relocation thereof) except for required travel on the Companys business; or (iv) a material breach by the Company of its obligations under the agreement; provided, however, that the Executive has provided written notice (which shall set forth in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provisions of the agreement on which the Executive relies) to the Company of the existence of any condition described in any one of the subparagraphs (i), (ii), (iii) or (iv) within 30 days of the Executives knowledge of the initial existence of such condition, and the Company has not cured the condition within 30 days of the receipt of such notice. Any termination of employment by Executive for Good Reason pursuant to this section must occur no later than the date that is three months following the occurrence of the initial existence of the condition giving rise to the termination right. |
(f) |
Without Good Reason. The Executive may voluntarily terminate the Executives employment without Good Reason by delivering to the Company a Notice of Termination not less than 30 days prior to the termination of the Executives employment and the Company shall have the option of terminating the Executives duties and responsibilities, and prohibiting the Executive from entering the Companys premises, prior to the expiration of such 30-day notice period (or 90-day notice period in the case of the Executive providing notice of non-renewal pursuant to Section 1). |
9. |
Notice of Termination. For purposes of this Agreement, a Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon. |
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10. |
Compensation Upon Termination. Upon termination of the Executives employment during the Term, Executive shall be entitled to the following benefits: |
(a) |
Termination by the Company for Cause or by the Executive Without Good Reason. If the Executives employment is terminated by the Company for Cause or by Executive without Good Reason, the Company shall pay the Executive all amounts earned or accrued hereunder through the termination date, including: |
(i) |
any accrued and unpaid Base Salary, payable on the next payroll date; |
(ii) |
any Annual Incentive Compensation earned but unpaid in respect of any completed fiscal year preceding the termination date, payable at the time annual incentive compensation is paid to other senior executives of the Company; |
(iii) |
reimbursement for any and all monies advanced or expenses incurred in connection with the Executives employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company for the period ending on the termination date, which amount shall be reimbursed within 30 days of the Companys receipt of proper documentation from the Executive; |
(iv) |
any accrued and unpaid vacation pay, payable on the next payroll date; |
(v) |
any vested amount or benefit as provided under any benefit plan or program in accordance with the terms thereof; (the foregoing items in Sections 10(a)(i) through 10(a)(v) being collectively referred to as the Accrued Compensation); and |
(vi) |
any outstanding equity-based awards held by the Executive as of the date of termination shall be treated in accordance with the terms of the LTIP and applicable award agreements thereunder; provided, however, that (i) if the Executive has attained age 62 and completed 10 years of service with the Company (the Rule of 62 and 10) at the time that he terminates his employment without Good Reason, any performance-based awards then held by the Executive for at least 10 months following the date of grant of such award shall not be forfeited, but shall remain eligible to vest based on actual performance on the original vesting schedule, and (ii) if the Executive has attained age 55 and completed five years of service with the Company at the time that he terminates his employment without Good Reason, any time-based awards then held by the Executive for at least 10 months following the date of grant of such award shall vest with respect to a pro-rated portion of the award on the date of termination. The pro-rata portion shall be determined by multiplying the number of shares or units subject to the time-based award by a fraction, the numerator of which is the number of calendar months in the period starting with (x) the first calendar month following the month in which the date of grant occurs through (y) the calendar month in which the date of termination date occurs, with such final calendar month counting as a full month, and the denominator of which is the number of months in the vesting period applicable to the time-based award. |
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A notice of nonrenewal of the Term by the Executive pursuant to Section 1 of this Agreement shall be treated hereunder as a termination by the Executive without Good Reason effective at the end of the Term (subject to Section 8(f)).
(b) |
Termination by the Company for Disability. If the Executives employment is terminated by the Company for Disability, the Company shall pay the Executive: |
(i) |
the Accrued Compensation; |
(ii) |
an amount equal to the Annual Incentive Compensation that the Executive would have been entitled to receive in respect of the fiscal year in which the Executives termination date occurs, had the Executive continued in employment until the end of such fiscal year, which amount, determined based on actual performance for such year relative to the applicable performance goals shall be multiplied by a fraction (A) the numerator of which is the number of days in such fiscal year through the termination date and (B) the denominator of which is 365 (the Pro-Rata Bonus) and shall be payable in a lump sum at the time annual incentive compensation is paid to other senior executives of the Company; and |
(iii) |
Any unvested portion of the Initial Restricted Stock Award that is outstanding as of the date of termination shall immediately vest and all restrictions thereon shall lapse, and the Initial PBRSUs shall not be forfeited on the termination date and shall instead vest if the applicable Per Share Price is achieved during the five-year performance period in accordance with Section 6(a)(ii) (disregarding any requirement for continued employment through the vesting date). Any other outstanding equity-based awards (other than the Initial Restricted Stock LTI Award and the Initial PBRSUs) held by the Executive as of the date of termination shall be treated in accordance with the terms of the LTIP and applicable award agreements thereunder; provided, however, that if the Executive has met the Rule of 62 and 10 as of the date of termination, any performance-based awards shall be provided with the treatment described in Section 10(a)(vi), if more favorable to the Executive. |
(c) |
Termination By Reason of Death. If the Executives employment is terminated by reason of the Executives death, the Company shall pay the Executives beneficiaries: |
(i) |
the Accrued Compensation; |
(ii) |
the Pro-Rata Bonus payable in a lump sum at the time annual incentive compensation is paid to other senior executives of the Company; and |
(iii) |
Any unvested portion of the Initial Restricted Stock Award that is outstanding as of the date of termination shall immediately vest and all restrictions thereon shall lapse, and the Initial PBRSUs shall not be forfeited on the termination date and shall instead vest if the applicable Per |
8
Share Price is achieved during the five-year performance period in accordance with Section 6(a)(ii) (disregarding any requirement for continued employment through the vesting date). Any other outstanding equity-based awards (other than the Initial Restricted Stock LTI Award and the Initial PBRSUs) held by the Executive as of the date of termination shall be treated in accordance with the terms of the LTIP and applicable award agreements thereunder; provided, however, that if the Executive has met the Rule of 62 and 10 as of the date of termination, any performance-based awards shall be provided with the treatment described in Section 10(a)(vi), if more favorable to the Executive. |
(d) |
Termination by the Company Without Cause or by the Executive for Good Reason Other Than in Connection with a Change in Control. If the Executives employment by the Company shall be terminated by the Company without Cause (other than on account of the Executives Disability or death) or by the Executive for Good Reason, in either case other than where such termination would entitle the Executive to the benefits provided in Section 10(e) of this Agreement, then, the Executive shall be entitled to the benefits provided in this Section 10(d): |
(i) |
the Accrued Compensation; |
(ii) |
in lieu of any further Base Salary or other compensation and benefits for periods subsequent to the termination date, an amount in cash, which amount shall be payable in a lump sum payment within 60 days following such termination (subject to Section 10(c)), equal to two times the sum of (A) Executives Base Salary and (B) the Target Bonus for the year of termination; |
(iii) |
the Pro-Rata Bonus, payable in a lump sum at the time annual incentive compensation is paid to other senior executives of the Company; |
(iv) |
Any unvested portion of the Initial Restricted Stock Award that is outstanding as of the date of termination shall immediately vest and all restrictions thereon shall lapse, and the Initial PBRSUs shall not be forfeited on the termination date and shall instead vest if the applicable Per Share Price is achieved during the five-year performance period in accordance with Section 6(a)(ii) (disregarding any requirement for continued employment through the vesting date). Any other outstanding equity-based awards (other than the Initial Restricted Stock LTI Award and the Initial PBRSUs) held by the Executive as of the date of termination shall be treated in accordance with the terms of the LTIP and applicable award agreements thereunder; provided, however, that if the Executive has met the Rule of 62 and 10 as of the date of termination, any performance-based awards shall be provided with the treatment described in Section 10(a)(vi), if more favorable to the Executive; |
9
(v) |
An additional cash amount equal to 18 times the monthly COBRA premium in effect under the Companys health, dental and vision plans applicable to the Executive and his dependents, less the monthly premium cost for active employees, to be paid in lump sum within 60 days of termination. The Executive shall be solely responsible for any taxes imposed on the Executive arising from the Companys payment of COBRA amounts hereunder; and |
(vi) |
Executive outplacement services, for up to 24 months after the termination date, not to exceed a maximum of $30,000 in cost. The Company will pay the cost of these services directly to the outplacement provider. |
A notice of nonrenewal of the Term by the Company pursuant to Section 1 of this Agreement shall be treated hereunder as a termination by the Company without Cause effective at the end of the Term.
(e) |
Termination by the Company Without Cause or by the Executive for Good Reason Following a Change in Control. If the Executives employment by the Company shall be terminated by the Company without Cause (other than on account of the Executives Disability or death) or by the Executive for Good Reason on, or within 24 months following, the date of a Change in Control, then, in lieu of the amounts due under Section 10(d) above of this Agreement, the Executive shall be entitled to the benefits provided in this Section 10(e): |
(i) |
the Accrued Compensation; |
(ii) |
in lieu of any further Base Salary or other compensation and benefits for periods subsequent to the termination date, an amount in cash, which amount shall be payable in a lump sum payment within 60 days following such termination (subject to Section 10(c)), equal to two and one-half times the sum of (A) the Executives Base Salary and (B) the Target Bonus for the year of termination; |
(iii) |
the Pro-Rata Bonus, payable in a lump sum at the time annual incentive compensation is paid to other senior executives of the Company; |
(iv) |
All unvested equity awards held by the Executive on the date of termination shall immediately vest, all restrictions thereon shall lapse, and any performance-based awards (other than the Initial PBRSUs, which shall be treated in accordance with the terms of the award agreement) shall be deemed to have been earned at the target level set forth in the applicable award agreement for any performance period not then completed. All such vested equity awards shall be settled and paid to the Executive within five days following the Executives date of termination; |
10
(v) |
An additional cash amount equal to 18 times the monthly COBRA premium in effect under the Companys health, dental and vision plans applicable to the Executive and his dependents, less the monthly premium cost for active employees, to be paid in lump sum within 60 days of termination. The Executive shall be solely responsible for any taxes imposed on the Executive arising from the Companys payment of COBRA amounts hereunder; |
(vi) |
If the Executive would have become entitled to benefits under the Companys post-retirement health care or life insurance plans (as in effect immediately prior to the date of termination) had the Executives employment terminated at any time during the period of 24 months after the date of termination, the Company shall provide such post-retirement health care or life insurance benefits to the Executive (subject to any employee contributions required under the terms of such plans in the same amounts as active employees of the Company) commencing on the later of (i) the date that such coverage would have first become available or (ii) the date that benefits described in subsection (v) of this 10(e) terminate; and |
(vii) |
Executive outplacement services, for up to 24 months after the termination date, not to exceed a maximum of $30,000 in cost. The Company will pay the cost of these services directly to the outplacement provider. |
For purposes of this Agreement, Change in Control shall have the meaning set forth in the LTIP.
(f) |
No Mitigation. The Company agrees that the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 10 hereof. Further, except as specifically provided in Section 5 or Section 11(a) hereof, no payment or benefit provided for in this Agreement shall be offset against any amount claimed to be owed by the Executive to the Company. |
11. |
Certain Tax Treatment. |
(a) |
Golden Parachute Tax. In the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a Change in Control or the termination of the Executives employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, being hereinafter referred to as the Total Payments) would be subject (in whole or part), to the Excise Tax, then the Total Payments shall be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). |
11
(b) |
For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a payment within the meaning of section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of tax counsel (Tax Counsel) reasonably acceptable to the Executive and selected by the accounting firm (the Auditor) which was, immediately prior to the Change in Control, the Companys independent auditor, does not constitute a parachute payment within the meaning of section 280G(b)(2) of the Code (including by reason of section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in excess of the Base Amount (within the meaning set forth in section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. Any such reduction as may apply under Section 11(a) shall be applied in the following order: (i) payments that are payable in cash the full amount of which are treated as parachute payments under Treasury Regulation Section 1.280G-1, Q&A 24(a) shall be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and benefits due in respect of any equity the full amount of which are treated as parachute payments under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24), shall next be reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced first, shall next be reduced; (iv) payments and benefits due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24), shall next be reduced; and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) shall be next reduced pro-rata. |
(c) |
At the time that payments are made under this Agreement, the Company shall provide the Executive with a written statement setting forth the manner in which such payments were calculated and the basis for such calculations including, without limitation, any opinions or other advice the Company has received from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice which are in writing shall be attached to the statement). If the Executive objects to the Companys calculations, the Company shall pay to the Executive such portion of the payments provided pursuant to Section 10(e) (up to 100% thereof) as the Executive determines is necessary to result in the proper application of subsection (a) of this Section 11. |
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(d) |
Section 409A. The intent of the parties is that payments and benefits under this Agreement comply with section 409A of the Code to the extent subject thereto or be exempt therefrom, and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Notwithstanding anything contained herein to the contrary, to the extent required to avoid the application of an accelerated or additional tax under section 409A of the Code, the Executive shall not be considered to have terminated employment with the Company for purposes of this Agreement until such time as the Executive is considered to have incurred a separation from service from the Company within the meaning of section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separately identified payment for purposes of section 409A of the Code, and any payments that are due within the short term deferral period as defined in section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. To the extent required to avoid the application of an accelerated or additional tax under section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement during the six-month period immediately following the Executives termination of employment shall instead be paid on the first business day after the date that is six months following the Executives termination of employment (or upon the Executives death, if earlier). The Company is entitled to determine whether any amounts under this Agreement are to be suspended or delayed pursuant to the foregoing sentence. Any amounts so suspended shall earn interest thereon, if applicable, calculated based upon the then prevailing monthly short-term applicable federal rate. Notwithstanding the foregoing, to the extent that the foregoing applies to the provision of any ongoing welfare benefits to the Executive that would not be required to be delayed if the premiums therefor were paid by the Executive, the Executive shall pay the full cost of premiums for such welfare benefits during the six-month period and the Company shall pay the Executive an amount equal to the amount of such premiums paid by the Executive during such six-month period on the first business day of the month following the expiration of the six-month period referred to above. To the extent required to avoid an accelerated or additional tax under section 409A of the Code, amounts reimbursable to Executive under this Agreement shall be paid to Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in-kind benefits provided to Executive) during any one year may not effect amounts reimbursable or provided in any subsequent year. |
13
12. |
Restrictive Covenants. |
(a) |
During the Executives employment with the Company and for a period of twenty-four (24) months thereafter: |
(i) |
The Executive shall not, for the Executive or any third party, except on behalf of the Company or its affiliates, with or without compensation, become engaged by or provide services or advice to, any business that is manufacturing, or preparing to manufacture, or providing, or preparing to provide: (i) flooring products, (ii) products used to prepare floors for flooring products, (iii) products used to maintain floors or flooring products, or (iv) any other products or services provided by the Company in the then-immediately preceding twenty-four (24) month period up to and including the date of the termination of the Executives employment with the Company for any reason; provided, however, that this provision shall not restrict the Executive from owning or investing in publicly traded securities, so long as the Executives aggregate holdings in such company do not exceed 2% of the outstanding equity of such company and such investment is passive; |
(ii) |
The Executive shall not, for the Executive or any third party, except on behalf of the Company or its affiliates, (i) (A) solicit business from any person who was a customer of the Company or any of its affiliates during the period of the Executives employment hereunder or who was a customer within the six-month period prior to such solicitation, or (B) solicit potential customers who are or were identified through leads developed during the course of the Executives employment with the Company, in each case, with whom the Executive was involved as part of the Executives job responsibilities during the Executives employment with the Company, or regarding whom the Executive learned confidential information during the Executives employment with the Company, or (ii) otherwise divert or attempt to divert any existing business of the Company or any of its affiliates; and |
(iii) |
The Executive shall not, for the Executive or any third party, except on behalf of the Company or its affiliates, (i) solicit, induce, recruit or cause another person in the employment of the Company or any of its affiliates to terminate the employment of, or (ii) hire or retain, in each case, any person who is, or within the six-month period prior to such hiring or retention was, an employee of the Company or any of its affiliates. |
(b) |
The Executive agrees that he shall not, while employed with the Company or at any time thereafter for any reason, in any fashion, form or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Company, including, without limiting the generality of the foregoing, any customer lists or other customer identifying information, the techniques, methods or systems of the Companys operation or management, any information regarding its financial matters, or any other material information concerning the business of the Company, its manner of operation, its plans or other material data. The provisions of this Section 12(b) shall not apply to (i) information that is public knowledge other than as a result of |
14
disclosure by the Executive in breach of this Section 12(b); (ii) information disseminated by the Company to third parties in the ordinary course of business; (iii) information lawfully received by the Executive from a third party who, based upon inquiry by the Executive, is not bound by a confidential relationship to the Company, or (iv) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over the Executive. |
(c) |
The Executive agrees that he will not, while employed with the Company or at any time thereafter for any reason, in any fashion, form or manner, either directly or indirectly, disparage or criticize the Company, or otherwise speak of the Company, in any negative or unflattering way to anyone with regard to any matters relating to the Executives employment by the Company or the business or employment practices of the Company. The Company agrees that it will direct the executive officers of the Company at the time of the Executives termination of employment with the Company to not, in any fashion, form or manner, either directly or indirectly, disparage or criticize the Executive or otherwise speak of the Executive in any negative or unflattering way to anyone with regard to any matters relating to the Executives employment with the Company. |
(d) |
On the Executives last day of employment with the Company, the Executive will return all Company property, including, without limitation, all documents (regardless of form) which contain confidential information or trade secrets of the Company, and the Executive shall not retain any copies thereof. Executive shall deliver to the Company a document certifying his compliance with this Section 12(d). |
(e) |
Pursuant to 18 U.S.C. § 1833(b), the Executive will not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret of the Company that (i) is made (A) in confidence to a Federal, State, or local government official, either directly or indirectly, or to the Executives attorney and (B) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the trade secret to the Executives attorney and use the trade secret information in the court proceeding if the Executive (x) files any document containing the trade secret under seal, and (y) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement, or any other agreement that the Executive has with the Company, is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section. Further, nothing in this Agreement or any other agreement that the Executive has with the Company prohibits (1) internal communications between and among the employees of the Company with a job-related need to know about matters related to the administration of this Agreement, (2) voluntary communications by employees or former employees with the Securities and Exchange Commission or other authorities regarding possible violations of law or from recovering a Commission whistleblower award |
15
as provided under Section 21F of the Securities Exchange Act of 1934, or (3) the Executive responding to a valid subpoena, court order or similar legal process; provided, however, that prior to making any such disclosure pursuant to this Section 12(e)(3), the Executive shall provide the Company with written notice of the subpoena, court order or similar legal process sufficiently in advance of such disclosure to afford the Company a reasonable opportunity to challenge the subpoena, court order or similar legal process. |
(f) |
The Executive understands that in the event of a violation of any provision of this Section 12, the Company shall have the right to (i) seek injunctive relief, in addition to any other existing rights provided in this Agreement or by operation of law, without the requirement of posting bond and (ii) stop making any future payments or providing benefits under this Agreement. The remedies provided in this Section 12(f) shall be in addition to any legal or equitable remedies existing at law or provided for in any other agreement between the Executive and the Company or any of its affiliates, and shall not be construed as a limitation upon, or as an alternative or in lieu of, any such remedies. If any provision of this Section 12 is held to be excessively broad as to duration, activity or subject, it is the desire of the Company and the Executive that such provisions be construed by limiting and reducing them so as to be enforceable to the maximum extent allowed by applicable law and then fully enforced as so modified. In the event that one or more of the provisions shall be held to be invalid, illegal or unenforceable, it is the desire of the Company and the Executive that the validity, legality and unenforceability of the remaining provisions shall not in any way be affected or impaired thereby. |
(g) |
The Executive acknowledges that the provisions of Section 12 shall extend to any business that becomes an affiliate of or successor to the Company or any of its affiliates on account of a Change in Control or otherwise. |
(h) |
The provisions of this Section 12 shall survive any termination of the Term. |
13. |
Requirement of Release. |
(a) |
Notwithstanding anything in this Agreement to the contrary, except as prohibited by law, the Executives entitlement to any payments or compensation payable under Section 10 of this Agreement shall be contingent upon the Executive having executed a release substantially in the form attached as Exhibit A hereto and such release becoming effective within 60 days after the date of termination of the Executives employment with the Company. Provided that the Company has provided the release to the Executive within three business days of his last day of employment, if such release does not become effective within the time period prescribed above, the Companys obligations under Section 10 shall cease immediately. |
16
14. |
Settlement of Disputes; Arbitration. |
(a) |
All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within 60 days after notification by the Board that the Executives claim has been denied. Notwithstanding the above, in the event of any dispute, any decision by the Board hereunder shall be subject to a de novo review by the arbitrator. |
(b) |
Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Lancaster County, Pennsylvania in accordance with the rules of the American Arbitration Association then in effect. |
15. Representations and Warranties.
(a) |
The Company represents and warrants that (i) it is fully authorized by action of the Board (and of any other person or body whose action is required) to enter into this Agreement and to perform its obligations under it, (ii) the execution, delivery and performance of this Agreement by it does not violate any applicable law, regulation, order, judgment or decree or any agreement, arrangement, plan or corporate governance document (x) to which it is a party or (y) by which it is bound, and (iii) upon the execution and delivery of this Agreement by the parties, this Agreement shall be its valid and binding obligation, enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting the enforcement of creditors rights generally. |
(b) |
The Executive represents and warrants to the Company that the execution and delivery by the Executive of this Agreement do not, and the performance by the Executive of the Executives obligations hereunder will not, with or without the giving of notice or the passage of time, or both: (a) violate any judgment, writ, injunction, or order of any court, arbitrator, or governmental agency applicable to the Executive; or (b) conflict with, result in the breach of any provisions of or the termination of, or constitute a default under, any agreement to which the Executive is a party or by which the Executive is or may be bound. |
16. |
Miscellaneous. |
(a) |
Successors and Assigns. |
(i) |
In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. |
17
(ii) |
This Agreement shall inure to the benefit of and be enforceable by the Executives personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executives estate. |
(b) |
Fees and Expenses. |
(i) |
The Company shall pay reasonable and documented legal fees and related expenses, up to a maximum amount of $40,000 in the aggregate, incurred by the Executive in connection with the negotiation of this Agreement and related employment arrangements. Such reimbursement shall be made as soon as practicable, but in no event later than the end of the calendar year following the calendar year in which the expenses were incurred. The Executive is responsible for any taxes that may be due based upon the value of the fees and expenses reimbursed by the Company. The Executive acknowledges that the Executive has had the opportunity to consult with legal counsel of the Executives choice in connection with the drafting, negotiation and execution of this Agreement and related employment arrangements. |
(ii) |
The Company also shall pay to the Executive all reasonable and documented legal fees and related expenses incurred by the Executive in disputing in good faith any issue hereunder relating to any tax audit or tax proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder. Such payments shall be made within five business days after delivery of the Executives written requests for payment accompanied with such evidence of fees and expenses incurred as the Company reasonably may require; provided that in no event will payment be made for requests that are submitted later than December 15th of the year following the year in which the expense is incurred. |
18
(c) |
Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when mailed by United States registered mail, return receipt requested, postage prepaid, or delivered personally, by electronic mail or by courier service, addressed, if to the Executive, to the most recent address shown in the personnel records of the Company and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt: |
To the Company: |
Armstrong Flooring, Inc. |
2500 Columbia Avenue |
Lancaster, Pennsylvania 17603 |
Attention: General Counsel |
Email: CSParisi@armstrongflooring.com |
(d) |
Indemnification. The Executive shall be indemnified by the Company to the maximum extent permitted by applicable law as provided in the By-Laws of the Company. In addition, the Company agrees to continue and maintain, at the Companys sole expense, a directors and officers liability insurance policy covering the Executive both during and after the Term and while the potential liability exists (but in no event longer than six years, if such limitation applies to all other individuals covered by such policy) after the Term, that is no less favorable than the policy covering Board members and other executive officers of the Company from time to time. The obligations under this Section 16(d) shall survive any termination of the Term. |
(e) |
Withholding. The Company shall be entitled to withhold the amount, if any, of all taxes of any applicable jurisdiction required to be withheld by an employer with respect to any amount paid to the Executive hereunder. The Company, in its sole and absolute discretion, shall make all determinations as to whether it is obligated to withhold any taxes hereunder and the amount thereof. |
(f) |
Modification; Entire Agreement. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 10 hereof) shall survive such expiration. |
(g) |
Effect of Other Law. Anything herein to the contrary notwithstanding, the terms of this Agreement shall be modified to the extent required to meet the provisions of the Sarbanes-Oxley Act of 2002, Section 409A of the Code, or other federal law applicable to the employment arrangements between the Executive and the Company. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required under the preceding sentence shall not in and of itself constitute a breach of this Agreement. |
19
(h) |
Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Pennsylvania applicable to contracts executed in and to be performed entirely within such Commonwealth, without giving effect to the conflict of law principles thereof. |
(i) |
Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. |
(j) |
Counterparts; Electronic Signature. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. Each party agrees that electronic signatures, whether digital or encrypted, of either party to this Agreement, are intended to authenticate this writing and to have the same force and effect as manual signatures. |
20
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.
ARMSTRONG FLOORING, INC. | ||
By: |
/s/ Larry S. McWilliams |
|
Larry S. McWilliams | ||
Chairman of the Board of Directors | ||
EXECUTIVE | ||
By: |
/s/ Michel S. Vermette |
|
Michel S. Vermette |
Effective Date: September 11, 2019
Executives Initials: ____
For the Company: ____
SIGNATURE PAGE
EXHIBIT A
FORM OF RELEASE AGREEMENT
THIS RELEASE AGREEMENT (the Release) is made as of this day of , 20__, by and between (Executive) and Armstrong Flooring, Inc. (the Company).
1. |
FOR AND IN CONSIDERATION of the payments and benefits provided in the Employment Agreement dated as of [ ], (the Employment Agreement), Executive, for himself or herself, his or her successors and assigns, executors and administrators, now and forever hereby releases and discharges the Company, together with all of its past and present parents, subsidiaries, and affiliates, together with each of their officers, directors, stockholders, partners, employees, agents, representatives and attorneys, and each of their subsidiaries, affiliates, estates, predecessors, successors, and assigns (hereinafter collectively referred to as the Releasees) from any and all rights, claims, charges, actions, causes of action, complaints, sums of money, suits, debts, covenants, contracts, agreements, promises, obligations, damages, demands or liabilities of every kind whatsoever, in law or in equity, whether known or unknown, suspected or unsuspected (collectively, Claims), which Executive or Executives executors, administrators, successors or assigns ever had, now has or may hereafter claim to have by reason of any matter, cause or thing whatsoever: (i) arising from the beginning of time up to the date upon which Executive signs this Release including, but not limited to (A) any such Claims relating in any way to Executives employment relationship with the Company or any of the Releasees, or the termination of Executives employment relationship with the Company or any of the Releasees, and (B) any such Claims arising under any federal, local or state statute or regulation, including, without limitation, the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, the Pennsylvania Equal Pay Law and/or the applicable state law against discrimination, each as amended; (ii) relating to wrongful employment termination; or (iii) arising under or relating to any policy, agreement, understanding or promise, written or oral, formal or informal, between the Company and any of the Releasees and Executive, including, without limitation, the Employment Agreement; provided, however, that notwithstanding the foregoing, nothing contained in the Release shall in any way diminish or impair: (I) the Executives indemnification rights, (II) [any claims for accrued and vested benefits under any of the Companys employee retirement and welfare benefit plans];1 or (III) any rights or claims Executive may have that cannot be waived under applicable law; (collectively, the Excluded Claims). Executive further acknowledges and agrees that, except with respect to the Excluded Claims, the Company and the Releasees have fully satisfied any and all obligations whatsoever owed to Executive arising out of Executives employment with the Company or any of the Releasees, and that no further payments or benefits are owed to Executive by the Company or any of the Releasees. |
1 |
The actual Release will include a specific list of vested benefits under employee benefit plans which are not waived and are to be excluded from the Release requirement. |
A-1
2. |
Executive acknowledges and agrees that Executive has been advised to consult with an attorney of Executives choosing prior to signing the Release. Executive understands and agrees that Executive has the right and has been given the opportunity to review the Release with an attorney of Executives choosing should Executive so desire. Executive also agrees that Executive has entered into the Release freely, knowingly and voluntarily. Executive further acknowledges and agrees that Executive has had at least forty-five (45) calendar days to consider the Release, although Executive may sign it sooner if Executive wishes; provided, however, that Executive may not sign this Release prior to the last day of Executives employment with the Company. Executive agrees that changes to this Release, whether material or immaterial, shall not restart the running of the forty-five (45) calendar day period. In addition, once Executive has signed the Release, Executive shall have seven (7) additional calendar days from the date of execution to revoke Executives consent and may do so only by writing to: Armstrong Flooring, Inc., 2500 Columbia Avenue, Lancaster, Pennsylvania 17604, Attention: General Counsel. The Release shall not be effective until the eighth (8th) day after Executive shall have executed the Release and returned it to the Company, assuming that Executive had not revoked Executives consent to the Release prior to such date. Executive understands that, aside from the Accrued Compensation, no payments shall be due under Section 10 of the Employment Agreement unless this Release has become effective, and no such amounts shall be paid until the times set forth therein. |
3. |
It is understood and agreed by Executive that the payment made to Executive is not to be construed as an admission of any liability whatsoever on the part of the Company or any of the other Releasees, by whom liability is expressly denied. |
4. |
The Release is executed by Executive voluntarily and is not based upon any representations or statements of any kind made by the Company or any of the other Releasees as to the merits, legal liabilities or value of Executives claims. Executive further acknowledges that Executive has had a full and reasonable opportunity to consider the Release and that Executive has not been pressured or in any way coerced into executing the Release. |
5. |
Any dispute or controversy arising under or in connection with this Release shall be settled exclusively by arbitration in Lancaster County, Pennsylvania in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in Section 14 of the Employment Agreement shall apply, as applicable. Judgment may be entered on the arbitrators award in any court having jurisdiction. |
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6. |
The Release and the rights and obligations of the parties hereto shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania If any provision hereof is unenforceable or is held to be unenforceable, such provision shall be fully severable, and this document and its terms shall be construed and enforced as if such unenforceable provision had never comprised a part hereof, the remaining provisions hereof shall remain in full force and effect, and the court construing the provisions shall add as a part hereof a provision as similar in terms and effect to such unenforceable provision as may be enforceable, in lieu of the unenforceable provision. |
7. |
The Release shall inure to the benefit of and be binding upon the Company and its successors and assigns. |
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IN WITNESS WHEREOF, Executive and the Company have executed the Release as of the date and year first written above.
ARMSTRONG FLOORING, INC. | ||
By: |
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Name: | ||
Title: | ||
EXECUTIVE | ||
By: |
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Name: |
A-4
Exhibit 10.2
ARMSTRONG FLOORING, INC.
2500 Columbia Ave., P.O. Box 3025
Lancaster, PA 17604
2019 Long-Term Time-Based Restricted Stock Grant
Michel S. Vermette
I am pleased to inform you that the Companys Management Development and Compensation Committee granted you the following:
Date of Grant: | September [], 2019 | |
Time-Based Restricted Stock: | 143,062 |
This grant is subject to the terms of the 2016 Long-Term Incentive Plan and the award agreement. The award agreement consists of this grant letter and the Terms and Conditions attached as Exhibit A.
Vesting - The shares of Restricted Stock will vest and all restrictions thereon will lapse in accordance with the following schedule, if you remain employed by the Employer through the applicable vesting date, except as described below.
Vesting Date |
Restricted Stock Vesting | |||
One year from Date of Grant |
20 | % | ||
Two years from Date of Grant |
20 | % | ||
Three years from Date of Grant |
20 | % | ||
Four years from Date of Grant |
20 | % | ||
Five years from Date of Grant |
20 | % |
Taxes - The Company will use share tax withholding to satisfy the minimum tax withholding obligations, unless prohibited by country law or you provide a payment to cover the taxes.
Employment Events
The following chart is a summary of the provisions which apply to this award in connection with your termination of employment. The following is only a summary, and in the event of termination of employment, the award will be governed by the Terms and Conditions.
Event |
Provisions |
|
Voluntary Resignation |
Forfeit all unvested shares of Restricted Stock and accrued dividends | |
Termination for Cause |
Forfeit all unvested shares of Restricted Stock and accrued dividends | |
Involuntary Termination |
Shares of Restricted Stock and accrued dividends vest and restrictions thereon lapse | |
Death Termination due to Disability |
Shares of Restricted Stock and accrued dividends vest and restrictions thereon lapse |
If the Company makes cash dividend payments before the shares of Restricted Stock are vested, the value of the dividends will accrue in a non-interest bearing bookkeeping account. You will receive a cash payment for the accrued dividends based on vesting and the lapse of restrictions on the shares of Restricted Stock.
In the event of any inconsistency between the foregoing summary and the Employment Agreement between you and the Company, the Terms and Conditions or the 2016 Long-Term Incentive Plan, the Employment Agreement shall govern, or if not applicable, the Terms and Conditions or the 2016 Long-Term Incentive Plan, as applicable, will govern. Capitalized terms used but not defined in this grant letter will have the meanings set forth in the 2016 Long-Term Incentive Plan or the Terms and Conditions, as applicable.
Please note that the Terms and Conditions contain restrictive covenant language pertaining to confidentiality, non-competition and non-solicitation, as set forth in the Employment Agreement between you and the Company. You should read these sections carefully before deciding whether to accept the shares of Restricted Stock. If you decide not to accept the Restricted Stock, you will not be subject to the restrictive covenants set forth in the Terms and Conditions, but you will forfeit the Restricted Stock. There will be no other consequences as a result of your decision not to accept the Restricted Stock.
Please contact John Bassett (717-673-7315) if you have questions.
Sincerely,
Larry S. McWilliams
Chairman of the Armstrong Flooring Board of Directors
2
EXHIBIT A
ARMSTRONG FLOORING, INC.
2016 LONG-TERM INCENTIVE PLAN
TIME-BASED RESTRICTED STOCK GRANT
TERMS AND CONDITIONS
1. Grant.
(a) Subject to the terms set forth below, Armstrong Flooring, Inc. (the Company) has granted to the designated employee (the Grantee) an award of time-based restricted stock (the Restricted Stock) as specified in the 2019 Long-Term Time-Based Restricted Stock Grant Letter to which these Grant Conditions relate (the Grant Letter). The Date of Grant is September [], 2019.
(b) The shares of Restricted Stock shall be vested and the restrictions thereon shall lapse in accordance with the schedule set forth below, if and to the extent the terms of the Grant Letter and these Grant Conditions are met.
(c) These Terms and Conditions (the Grant Conditions) are part of the Grant Letter. This grant is made under the Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (the Plan). Any terms not defined herein shall have the meanings set forth in the Plan.
2. Vesting.
(a) Except as provided in Sections 3 and 4 below, the shares of Restricted Stock shall vest and the restrictions thereon shall lapse on the following dates, if the Grantee continues to be employed by the Company or its subsidiaries or affiliates (collectively, the Employer) on the applicable dates below (each individually, a Vesting Date):
Vesting Date |
Time-Based Shares Vesting | |||
One year from Date of Grant |
20 | % | ||
Two years from Date of Grant |
20 | % | ||
Three years from Date of Grant |
20 | % | ||
Four years from Date of Grant |
20 | % | ||
Five years from Date of Grant (the Fifth Vesting Date) |
20 | % |
(b) The vesting of the Restricted Stock is cumulative, but shall not exceed 100% of the shares of Restricted Stock. If the foregoing schedule or the provisions of Section 3 would produce fractional shares, the number of shares of Restricted Stock vesting shall be rounded up to the nearest whole share, but not in excess of 100% of the number of shares of Restricted Stock granted.
3. Termination of Employment.
(a) Except as described below, if the Grantee ceases to be employed by the Employer for any reason prior to the Fifth Vesting Date, the unvested shares of Restricted Stock shall be forfeited as of the termination date and shall cease to be outstanding.
(b) Subject to Section 4 below, if, prior to the Fifth Vesting Date, the Grantee ceases to be employed by the Employer on account of death or Long-Term Disability (as defined below), or Involuntary Termination (as defined below) (each, a Qualifying Termination), the Grantee shall vest in 100% of the shares of Restricted Stock and the restrictions thereon shall lapse in full.
(c) If the Grantees employment with the Employer is terminated by the Employer for Cause (as defined below), or by the Grantee without Good Reason (as defined below), any unvested shares of Restricted Stock shall be forfeited as of the termination date and shall cease to be outstanding.
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4. Definitions. For purposes of these Grant Conditions and the Grant Letter:
(a) Cause shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(b) Company Trade Secrets shall have the meaning ascribed to the term on Attachment 1, the terms of which are incorporated herein.
(c) Confidential Information shall have the meaning ascribed to the term on Attachment 1, the terms of which are incorporated herein.
(d) Disability shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(e) Good Reason shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(f) Injurious Conduct shall mean the activities described in Sections 12(a), (b) and (c) of the Employment Agreement between you and the Company and if, during the Grantees employment or service with the Employer or thereafter, the Grantee breaches any other written confidentiality, non-solicitation or non-competition covenant with the Employer. For purposes of the Restricted Stock, this definition of Injurious Conduct shall replace the definition of Injurious Conduct set forth in Section 13 of the Plan.
(g) Involuntary Termination shall mean the Employers termination of the Grantees employment other than for Cause or by the Grantee with Good Reason (as such terms are defined in the Grantees Employment Agreement with the Company).
5. Restrictive Covenants; Forfeiture.
(a) The Committee may determine that the Restricted Stock shall be forfeited if the Grantee engages in Injurious Conduct.
(b) If the Company Stock held upon the lapse of restrictions on the Restricted Stock has been disposed of by the Grantee, then the Company may require the Grantee to pay to the Company the economic value of the Company Stock as of the date of disposition.
(c) The Committee shall exercise the right of forfeiture and recoupment provided to the Company in this Section 5 within 180 days after the Companys discovery of the Injurious Conduct activities giving rise to the Companys right of forfeiture or recoupment.
(d) The Grantee may make a request to the Committee in writing for a determination regarding whether any proposed business or activity would constitute Injurious Conduct. Such request shall fully describe the proposed business or activity. The Committee shall respond to the Grantee in writing and the Committees determination shall be limited to the specific business or activity so described.
(e) By accepting the Restricted Stock, the Grantee acknowledges and agrees that all Company trade secrets and confidential information developed, created or maintained by the Grantee, alone or with others, during the Grantees employment or service with the Employer, shall remain at all times the sole property of the Company and its subsidiaries and affiliates, and further acknowledges and agrees that he is bound by the provisions of Section 12(b) of the Grantees Employment Agreement with the Company.
(f) This Agreement consists of a series of separate restrictive covenants, all of which shall survive and be enforceable in law and/or equity after the Grantees termination or cessation of the Grantees employment or service with the Employer. The Grantee understands that in the event of a violation of any provision of this Section 5, the Company shall have the right to seek injunctive relief, in addition to any other existing rights provided in this Agreement or by operation of law, without the requirement of posting bond. The remedies provided in this Section 5 shall be in addition to any legal or equitable remedies existing at law or provided for in any other agreement between the Grantee and the Company or any of its subsidiaries or affiliates, and shall not be construed as a limitation upon, or as an alternative or in lieu of, any such remedies. If any provisions of this Section 5 and Attachment 1 shall be determined by a court of competent jurisdiction to be unenforceable in part by reason of it being too great a period of time or covering too great a geographical area, it shall be in full force and effect as to that period of time or geographical area determined to be reasonable by the court.
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(g) By accepting the Restricted Stock, the Grantee acknowledges that the Grantee has carefully read and considered the provisions of this Section 5 and Sections 12(a), (b) and (c) of the Employment Agreement between the Grantee and the Company incorporated herein and agrees that the restrictions set forth herein are fair and reasonable, are supported by valid consideration, and are reasonably required to protect the legitimate business interests of the Company and its subsidiaries and affiliates.
(h) In the event of a breach by the Grantee of any restrictive covenant contained in Sections 12(a), (b) and (c) of the Employment Agreement, the running of the period of restriction shall automatically be tolled and suspended for the amount of time the breach continues, and shall automatically commence when the breach is remedied so that the Company and its subsidiaries and affiliates shall receive the benefit of the Grantees compliance with the terms and conditions of this Section 5.
6. Certificates. The Restricted Stock may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Grantee, then the Company may retain physical possession of the certificates until the restrictions thereon have lapsed.
7. Dividends. Dividends shall accrue with respect to the Restricted Stock and shall be payable subject to the same vesting terms and other conditions as the Restricted Stock to which they relate. Dividends shall be credited on the Restricted Stock when dividends are paid on shares of Company Stock from the Date of Grant until the vesting date for the Restricted Stock. The Company will keep records of dividends in a non-interest bearing bookkeeping account for the Grantee. No interest will be credited to any such account. Vested dividends shall be paid in cash at the same time and subject to the same terms as the underlying vested Restricted Stock. If and to the extent that the Restricted Stock is forfeited, all related dividends shall also be forfeited.
8. Delivery of Shares. The Companys obligation to deliver shares in connection with the grant of Restricted Stock shall be subject to applicable laws, rules and regulations and also to such approvals by governmental agencies as may be deemed appropriate to comply with relevant securities laws and regulations.
9. Stockholder Rights. Except as provided in Sections 7 and 8 above, the Grantee will have all voting, dividend, liquidation and other rights with respect to the Restricted Stock upon the Grantee becoming the holder of record of such shares as if the Participant were a holder of record of shares of unrestricted Company Stock. The Grantee hereby consents and agrees to electronic delivery of any Plan documents, proxy materials, annual reports, and other related documents. If the Company establishes procedures for an electronic signature system for delivery and acceptance of Plan documents (including documents relating to any programs adopted under the Plan), the Grantee hereby consents to such procedures and agrees that his electronic signature is the same as, and shall have the same force and effect as, his manual signature.
10. No Right to Continued Employment. The grant of Restricted Stock shall not confer upon the Grantee any right to continued employment with the Employer or interfere with the right of the Employer to terminate the Grantees employment at any time.
11. Incorporation of Plan by Reference. The Grant Letter and these Grant Conditions are made pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Management Development and Compensation Committee (the Committee) shall be conclusive upon any question arising hereunder. The Grantees receipt of the Restricted Stock constitutes the Grantees acknowledgment that all decisions and determinations of the Committee with respect to the Plan, the Grant Letter, these Grant Conditions, and the Restricted Stock shall be final and binding on the Grantee and any other person claiming an interest in the Restricted Stock.
12. Withholding Taxes.
(a) The Employer shall have the right, and the Grantee hereby authorizes the Employer, to deduct from all payments made hereunder and from other compensation an amount equal to the federal (including FICA), state, local and foreign taxes, social insurance, payroll tax, contributions, payment on account obligations or other amounts required by law to be collected, withheld or accounted for with respect to the Restricted Stock (the Taxes). The Employer will withhold shares of Company Stock payable hereunder to satisfy the withholding obligation for Taxes on amounts payable in shares, unless the Grantee provides a payment to the Employer to cover such Taxes, in accordance with procedures established by the Committee. Unless the Committee determines otherwise, the share withholding amount shall not exceed the Grantees minimum applicable withholding amount for Taxes.
(b) Regardless of any action the Employer takes with respect to any such Taxes, the Grantee acknowledges that the ultimate liability for all such Taxes legally due by the Grantee is and remains the Grantees responsibility and may exceed the amount actually withheld by the Employer. The Grantee further acknowledges that the Employer (i) makes no representations or undertakings regarding the treatment of any Taxes in connection with any aspect of the Restricted Stock, including the grant, vesting or settlement of the Restricted Stocks and the subsequent sale of any shares of unrestricted Company Stock; and (ii) does
5
not commit to structure the terms of the grant or any aspect of the Restricted Stock to reduce or eliminate the Grantees liability for Taxes. Further, if the Grantee has become subject to tax in more than one jurisdiction between the Date of Grant and the date of any relevant taxable event, the Grantee acknowledges that the Employer may be required to collect, withhold or account for Taxes in more than one jurisdiction.
(c) If the Grantee makes an election under Section 83(b) of the Code, or any successor section thereto, to be taxed with respect to the Restricted Stock as of the Date of Grant of the Restricted Stock rather than as of the date or dates upon which the Grantee would otherwise be taxable under Section 83(a) of the Code, the Grantee shall deliver a copy of such election to the Company immediately after filing such election with the Internal Revenue Service, together with any tax withholding required by the Committee.
13. Company Policies. All amounts payable under the Grant Letter and these Grant Conditions shall be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Companys Board of Directors from time to time.
14. Assignment. The Grant Letter and these Grant Conditions shall bind and inure to the benefit of the successors and assignees of the Company. The Grantee may not sell, assign, transfer, pledge or otherwise dispose of the Restricted Stock prior to vesting, except to a successor grantee in the event of the Grantees death.
15. Section 409A. The Grant Letter and these Grant Conditions are intended to comply with section 409A of the Code or an exemption, consistent with Section 20(h) of the Plan, including the six-month delay for specified employees in accordance with the requirements of section 409A of the Code, if applicable.
16. Successors. The provisions of the Grant Letter and these Grant Conditions shall extend to any business that becomes a successor to the Company or its subsidiaries or affiliates on account of a merger, consolidation, sale of assets, spinoff or similar transaction with respect to any business of the Company or its subsidiaries or affiliates with which the Grantee is employed, and if this grant continues in effect after such corporate event, references to the Company or its subsidiaries or affiliates or the Employer in the Grant Letter and these Grant Conditions shall include the successor business and its affiliates, as appropriate. In that event, the Company may make such modifications to the Grant Letter and these Grant Conditions as it deems appropriate to reflect the corporate event.
17. Governing Law. The validity, construction, interpretation and effect of the Grant Letter and these Grant Conditions shall be governed by, and determined in accordance with, the applicable laws of the State of Delaware, excluding any conflicts or choice of law rule or principle.
18. No Entitlement or Claims for Compensation. In connection with the acceptance of the grant of the Restricted Stock under the Grant Letter and these Grant Conditions, the Grantee acknowledges the following:
(a) the Plan is established voluntarily by the Company, the grant of the Restricted Stock under the Plan is made at the discretion of the Committee and the Plan may be modified, amended, suspended or terminated by the Company at any time;
(b) the grant of the Restricted Stock under the Plan is voluntary and occasional and does not create any contractual or other right to receive future grants of any equity-based awards, or benefits in lieu of them, even if equity-based awards have been granted repeatedly in the past;
(c) all decisions with respect to future grants of Restricted Stock, if any, will be at the sole discretion of the Committee;
(d) the Grantee is voluntarily participating in the Plan;
(e) the Restricted Stock and shares of Company Stock acquired under the Plan are not to be considered part of the Grantees normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, payment in lieu of notice, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
(f) the Restricted Stock and the shares of Company Stock subject to the award are not intended to replace any pension rights or compensation;
(g) the grant of Restricted Stock and the Grantees participation in the Plan will not be interpreted to form an employment contract or relationship with the Employer;
6
(h) the future value of the shares of Company Stock is unknown and cannot be predicted with certainty. If the Grantee vests in the Restricted Stock, the value of the shares of Company Stock may increase or decrease; and
(i) the Grantee shall have no rights, claim or entitlement to compensation or damages as a result of the Grantees cessation of employment (for any reason whatsoever, whether or not in breach of contract or local labor law or the terms of the Grantees employment agreement, if any), insofar as these rights, claim or entitlement arise or may arise from the Grantees ceasing to have rights under or be entitled to receive shares of Company Stock under or ceasing to have the opportunity to participate in the Plan as a result of such cessation or loss or diminution in value of the Restricted Stock or any of the shares of Company Stock acquired thereunder as a result of such cessation, and the Grantee irrevocably releases the Employer from any such rights, entitlement or claim that may arise. If, notwithstanding the foregoing, any such right or claim is found by a court of competent jurisdiction to have arisen, then the Grantee shall be deemed to have irrevocably waived the Grantees entitlement to pursue such rights or claim.
19. Data Privacy.
(a) The Grantee hereby explicitly, willingly and unambiguously consents to the collection, systematization, accumulation, storage, blocking, destruction, use, disclosure and transfer, in electronic or other form, of the Grantees personal data as described in these Grant Conditions by and among, as applicable, the Grantees employer, the Company or its subsidiaries or affiliates for the exclusive purpose of implementing, administering and managing the Grantees participation in the Plan.
(b) The Grantee understands that the Grantees employer, the Company or its subsidiaries or affiliates, as applicable, hold certain personal information and sensitive personal information about the Grantee regarding the Grantees employment, the nature and amount of the Grantees compensation and the fact and conditions of the Grantees participation in the Plan, including, but not limited to, the Grantees name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or its subsidiaries or affiliates, details of all options, awards or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantees favor, for the purpose of implementing, administering and managing the Plan (the Data).
(c) The Grantee understands that the Data may be transferred, including any cross-border, transfer to the Company, its subsidiaries and affiliates and, to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantees country, or elsewhere, and that the recipients country may have different data privacy laws and protections than the Grantees country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantees local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantees participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party. The Grantee understands that the Data will be held only as long as is necessary to implement, administer and manage the Grantees participation in the Plan. The Grantee understands that the Grantee may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantees local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantees consent may affect the Grantees ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantees local human resources representative.
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Exhibit 10.3
ARMSTRONG FLOORING, INC.
2500 Columbia Ave., P.O. Box 3025
Lancaster, PA 17604
2019 Long-Term Performance-Based Restricted Stock Unit Grant
Company Confidential
Michel S. Vermette
Date of Grant: | September [], 2019 | |
Number of Performance Units: | 371,430 | |
Performance Period (Performance Period): |
Date of Grant through the fifth anniversary of the Date of Grant |
This award recognizes the importance of your role in achieving the Companys long-term strategy and is subject to the terms of the 2016 Long-Term Incentive Plan and the award agreement. The award agreement consists of this grant letter with the Price Targets (defined below) attached as Exhibit A and incorporated herein and the Terms and Conditions attached as Exhibit B.
The Performance Units will be earned upon the Company stock achieving the per share price targets set forth in Exhibit A (Price Targets), subject to your continued employment, as described in the Terms and Conditions.
Achievement of the Price Targets set forth on Exhibit A will be measured on each of the first five anniversaries of the Date of Grant (each, a Measurement Date) taking into account performance for any period between the Date of Grant and the applicable Measurement Date. To the extent a Price Target is achieved and you satisfy the employment requirements, the earned Performance Units will vest on the first Measurement Date following the date on which the Price Target is first achieved. The earned and vested Performance Units will be distributed to you as unrestricted shares of Common Stock as soon as practicable (but in any event within 45 days following) the date on which the earned Performance Units vest. The Company will withhold shares to satisfy your tax obligations unless prohibited by country law or unless you provide a payment to cover the tax withholding obligation. You have no ownership or voting rights relative to the Performance Units.
If the Company makes cash dividend payments during the Performance Period, the value of the dividends on shares attributable to the Performance Units will accrue as dividend equivalents in a non-interest bearing bookkeeping account. You will receive a cash payment equal to the accrued dividend equivalents at the end of the Performance Period, adjusted for the number of Performance Units that become earned and vested.
Employment Events
The following chart is a summary of the provisions which apply to this award in connection with your termination of employment. The following is only a summary, and in the event of termination of employment, the award will be governed by the Terms and Conditions and the Employment Agreement between you and the Company.
Event |
Provisions |
|
Voluntary Termination Termination for Cause |
All Performance Units are forfeited. | |
Involuntary Termination |
The Performance Units will not be forfeited, and shall instead vest to the extent that a Price Target or Price Targets are achieved during the Performance Period (disregarding any requirement for continued employment through the relevant Measurement Date). | |
Death Termination due to Disability |
The Performance Units will not be forfeited, and, shall instead vest to the extent that a Price Target or Price Targets are achieved during the Performance Period (disregarding any requirement for continued employment through the relevant Measurement Date). | |
Change in Control |
Vesting of Performance Units shall be as described on Exhibit A |
Capitalized terms used but not defined in this grant letter will have the meanings set forth in the 2016 Long-Term Incentive Plan, the Employment Agreement between you and the Company, or the Terms and Conditions, as applicable. As described in the Terms and Conditions, if and to the extent that the terms of this Grant Letter conflict with the terms of the Employment Agreement between you and the Company, the terms of the Employment Agreement shall govern.
Please note that the Terms and Conditions contain restrictive covenant language pertaining to confidentiality, non-competition and non-solicitation, as set forth in the Employment Agreement between you and the Company. You should read these sections carefully before deciding whether to accept the Performance Units. If you decide not to accept the Performance Units, you will not be subject to the restrictive covenants set forth in the Terms and Conditions, but you will forfeit the Performance Units. You will continue to be subject to any restrictive covenants set forth in any other agreements between you and the Company. There will be no other consequences as a result of your decision not to accept the Performance Units.
Please contact John Bassett (717-673-7315) if you have questions.
Sincerely,
Larry S. McWilliams
Chairman of the Armstrong Flooring Board of Directors
2
Exhibit A
Performance Goal
The Performance Units will be earned by achieving the per share Price Targets, as calculated and set forth below:
Percent Performance Units Earned |
Average Closing Per Share Price Over
20 Consecutive Trading Days ($) |
|||
20% |
10.50 | |||
20% |
12.25 | |||
20% |
14.00 | |||
20% |
15.75 | |||
20% |
17.50 |
Achievement of the Price Targets will be measured on each of the first five anniversaries of the Date of Grant (each, a Measurement Date) taking into account performance for any period between the Date of Grant and the applicable Measurement Date. To the extent a Price Target or Price Targets are achieved and you satisfy the employment requirements, the earned Performance Units will vest on the first Measurement Date following the date on which the Price Target is first achieved.
Change in Control
If a Change in Control occurs prior to the end of the Performance Period, the Performance Units shall be earned based on actual performance through the date of the Change in Control, with the closing price of the Common Stock immediately prior to the date of the Change in Control treated as the Per Share Price.
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Exhibit B
ARMSTRONG FLOORING, INC.
2016 LONG-TERM INCENTIVE PLAN
PERFORMANCE-BASED RESTRICTED STOCK UNIT GRANT
TERMS AND CONDITIONS
1. Grant.
(a) Subject to the terms set forth below, Armstrong Flooring, Inc. (the Company) has granted to the designated employee (the Grantee) an award of performance-based restricted stock units (the Performance Units), as specified in the 2019 Long-Term Performance-Based Restricted Stock Unit Grant Letter (including Exhibit A attached hereto) to which the Grant Conditions (as defined below) relate (the Grant Letter). The Date of Grant is September [], 2019. The Performance Units are Stock Units with respect to common stock of the Company (Company Stock).
(b) The Performance Units shall be earned, vested and payable if and to the extent that the per share price targets set forth in Exhibit A (the Price Targets), employment conditions and other terms of these Grant Conditions are met. The Performance Period for which the attainment of the Price Targets will be measured is the Date of Grant through the fifth anniversary of the Date of Grant. Achievement of the Price Targets will be measured on each of the first five anniversaries of the Date of Grant (each, a Measurement Date) taking into account performance for any period between the Date of Grant and the applicable Measurement Date.
(c) These Terms and Conditions (the Grant Conditions) are part of the Grant Letter. This grant is made under the Armstrong Flooring, Inc. 2016 Long-Term Incentive Plan (the Plan). Any terms not defined herein shall have the meanings set forth in the Plan or in the Employment Agreement between you and the Company.
2. Price Targets; Vesting.
(a) The Grantee shall earn and vest in a number of Performance Units based on the attainment of the Price Targets as determined on each Measurement Date , provided that the Grantee continues to be employed by the Company or its subsidiaries or affiliates (collectively the Employer) through the applicable Measurement Date (the Vesting Date). The Performance Units shall be earned based on attainment of the Price Targets and shall vest based on the Grantees continued employment through the Vesting Date, or as otherwise provided below.
(b) On each Measurement Date the Management Development and Compensation Committee (the Committee) or its designee will determine whether and to what extent the Price Targets have been met and the number of Performance Units earned. Earned and vested Performance Units shall be payable as described in Section 6.
(c) If a Change in Control occurs prior to the end of the Performance Period, the number of Performance Units earned shall be determined as of the date of the Change in Control as described in the Grant Letter. Earned and vested Performance Units shall be paid as of the date of the Change in Control if the Change in Control is a 409A CIC (as defined below) and if permitted by the plan termination provisions of the regulations under section 409A of the Code. If payment at the date of the Change in Control is not permitted under section 409A, the earned and vested Performance Units shall be payable as described in Section 6.
(d) Except as described below, no Performance Units shall be earned prior to the Committees determination of achievement of the Price Targets in accordance with Exhibit A, and to the extent that the Price Targets are not attained during the Performance Period, the Performance Units shall be immediately forfeited and shall cease to be outstanding as of the date of the Committees determination on the fifth Measurement Date.
3. Termination of Employment.
(a) General Rule. Except as described below, if the Grantee ceases to be employed by the Employer for any reason prior to a Vesting Date, the Performance Units shall be forfeited as of the termination date and shall cease to be outstanding.
(b) Involuntary Termination before a Change in Control. If, before a Change in Control and after the Date of Grant but prior to the end of the Performance Period, the Grantee ceases to be employed by the Employer on account of Involuntary Termination (as defined below), the Performance Units will not be forfeited, and will instead vest if and to the extent that the Price Targets are achieved during the Performance Period (disregarding any requirement for continued employment through each Vesting Date).
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(c) Death or Termination due to Disability. If the Grantee ceases to be employed by the Employer prior to the end of the Performance Period on account of death or Disability (as defined below), the Performance Units will not be forfeited, and, shall instead vest if and to the extent that the Price Targets are achieved during the Performance Period (disregarding any requirement for continued employment through each Vesting Date).
4. Definitions. For purposes of these Grant Conditions and the Grant Letters:
(a) Cause shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(b) Company Trade Secrets shall have the meaning ascribed to the term on Attachment 1, the terms of which are incorporated herein.
(c) Confidential Information shall have the meaning ascribed to the term on Attachment 1, the terms of which are incorporated herein.
(d) Disability shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(e) Good Reason shall have the meaning ascribed to the term in the Grantees Employment Agreement with the Company.
(f) Injurious Conduct shall mean the activities described in Sections 12(a), (b) and (c) of the Employment Agreement between you and the Company and if, during the Grantees employment or service with the Employer or thereafter, the Grantee breaches any other written confidentiality, non-solicitation or non-competition covenant with the Employer. For purposes of the Performance Units, this definition of Injurious Conduct shall replace the definition of Injurious Conduct set forth in Section 13 of the Plan.
(g) Involuntary Termination shall mean the termination of the Grantees employment (i) by the Employer other than for Cause or (ii) by the Grantee with Good Reason.
5. Restrictive Covenants; Forfeiture.
(a) The Committee may determine that the Performance Units shall be forfeited if the Grantee engages in Injurious Conduct.
(b) If the Committee determines that the Grantee has engaged in Injurious Conduct, the Committee may in its discretion require the Grantee to return to the Company any Company Stock or cash received in settlement of Performance Units. If the Company Stock acquired in settlement of the Performance Units has been disposed of by the Grantee, then the Company may require the Grantee to pay to the Company the economic value of the Company Stock as of the date of disposition.
(c) The Committee shall exercise the right of forfeiture and recoupment provided to the Company in this Section 5 within 180 days after the Companys discovery of the Injurious Conduct activities giving rise to the Companys right of forfeiture or recoupment.
(d) The Grantee may make a request to the Committee in writing for a determination regarding whether any proposed business or activity would constitute Injurious Conduct. Such request shall fully describe the proposed business or activity. The Committee shall respond to the Grantee in writing and the Committees determination shall be limited to the specific business or activity so described.
(e) By accepting the Performance Units, the Grantee acknowledges and agrees that all Company trade secrets and confidential information developed, created or maintained by the Grantee, alone or with others, during the Grantees employment or service with the Employer, shall remain at all times the sole property of the Company and its subsidiaries and affiliates, and further acknowledges and agrees that he is bound by the provisions of Section 12(b) of the Grantees Employment Agreement with the Company.
(f) This Agreement consists of a series of separate restrictive covenants, all of which shall survive and be enforceable in law and/or equity after the Grantees termination or cessation of the Grantees employment or service with the Employer. The Grantee understands that in the event of a violation of any provision of this Section 5, the Company shall have the right to seek injunctive relief, in addition to any other existing rights provided in this Agreement or by operation of law, without the requirement of posting bond. The remedies provided in this Section 5 shall be in addition to any legal or equitable remedies
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existing at law or provided for in any other agreement between the Grantee and the Company or any of its subsidiaries or affiliates, and shall not be construed as a limitation upon, or as an alternative or in lieu of, any such remedies. If any provisions of this Section 5 and Attachment 1 shall be determined by a court of competent jurisdiction to be unenforceable in part by reason of it being too great a period of time or covering too great a geographical area, it shall be in full force and effect as to that period of time or geographical area determined to be reasonable by the court.
(g) By accepting the Performance Units, the Grantee acknowledges that the Grantee has carefully read and considered the provisions of this Section 5 and Sections 12(a), (b) and (c) of the Employment Agreement between you and the Company incorporated herein and agrees that the restrictions set forth herein are fair and reasonable, are supported by valid consideration, and are reasonably required to protect the legitimate business interests of the Company and its subsidiaries and affiliates.
(h) In the event of a breach by the Grantee of any restrictive covenant contained in Sections 12(a), (b) and (c) of the Employment Agreement between you and the Company, the running of the period of restriction shall automatically be tolled and suspended for the amount of time the breach continues, and shall automatically commence when the breach is remedied so that the Company and its subsidiaries and affiliates shall receive the benefit of the Grantees compliance with the terms and conditions of this Section 5.
6. Payment.
(a) If as of a Measurement Date the Committee or its designee certifies that the Price Target(s) and other conditions to payment of the Performance Units have been met, the Company shall issue shares of Company Stock to the Grantee equal to the number of earned and vested Performance Units as soon as practicable (but in any event within 45 days following) the date on which the Performance Units vest, subject to applicable withholding for Taxes (as defined below) and subject to compliance with section 409A of the Code and as described in Section 20(h) of the Plan.
(b) Any fractional shares will be rounded up to the nearest whole share, but not exceeding the total number of Performance Units.
7. Dividend Equivalents. Dividend Equivalents shall accrue with respect to Performance Units and shall be payable subject to the same Price Targets, vesting terms and other conditions as the Performance Units to which they relate. Dividend Equivalents shall be credited on the Performance Units when dividends are declared on shares of Company Stock from the Date of Grant until the payment date for the vested Performance Units. The Company will keep records of Dividend Equivalents in a non-interest bearing bookkeeping account for the Grantee. No interest will be credited to any such account. Vested Dividend Equivalents shall be paid in cash at the same time and subject to the same terms as the underlying vested Performance Units. If and to the extent that the underlying Performance Units are forfeited, all related Dividend Equivalents shall also be forfeited.
8. Delivery of Shares. The Companys obligation to deliver shares upon the vesting of the Performance Units shall be subject to applicable laws, rules and regulations and also to such approvals by governmental agencies as may be deemed appropriate to comply with relevant securities laws and regulations.
9. No Stockholder Rights. No shares of Company Stock shall be issued to the Grantee on the Date of Grant, and the Grantee shall not be, nor have any of the rights or privileges of, a stockholder of the Company with respect to any Performance Units.
10. No Right to Continued Employment. The grant of Performance Units shall not confer upon the Grantee any right to continued employment with the Employer or interfere with the right of the Employer to terminate the Grantees employment at any time.
11. Incorporation of Plan by Reference. The Grant Letters and these Grant Conditions are made pursuant to the terms of the Plan, the terms of which are incorporated herein by reference, and shall in all respects be interpreted in accordance therewith. The decisions of the Committee shall be conclusive upon any question arising hereunder. The Grantees receipt of the Performance Units constitutes the Grantees acknowledgment that all decisions and determinations of the Committee with respect to the Plan, the Grant Letters, these Grant Conditions, and the Performance Units shall be final and binding on the Grantee and any other person claiming an interest in the Performance Units.
12. Withholding Taxes.
(a) The Employer shall have the right, and the Grantee hereby authorizes the Employer, to deduct from all payments made hereunder and from other compensation an amount equal to the federal (including FICA), state, local and foreign taxes, social insurance, payroll tax, contributions, payment on account obligations or other amounts required by law to be collected, withheld or accounted for with respect to the Performance Units (the Taxes). The Employer will withhold shares of Company
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Stock payable hereunder to satisfy the withholding obligation for Taxes on amounts payable in shares, unless the Grantee provides a payment to the Employer to cover such Taxes, in accordance with procedures established by the Committee. Unless the Committee determines otherwise, the share withholding amount shall not exceed the Grantees minimum applicable withholding amount for Taxes.
(b) Regardless of any action the Employer takes with respect to any such Taxes, the Grantee acknowledges that the ultimate liability for all such Taxes legally due by the Grantee is and remains the Grantees responsibility and may exceed the amount actually withheld by the Employer. The Grantee further acknowledges that the Employer (i) makes no representations or undertakings regarding the treatment of any Taxes in connection with any aspect of the Performance Units, including the grant, vesting or settlement of the Performance Units and the subsequent sale of any shares of Company Stock acquired at settlement and the receipt of any Dividend Equivalents; and (ii) does not commit to structure the terms of the grant or any aspect of the Performance Units to reduce or eliminate the Grantees liability for Taxes. Further, if the Grantee has become subject to tax in more than one jurisdiction between the Date of Grant and the date of any relevant taxable event, the Grantee acknowledges that the Employer (or the Grantees former employer, as applicable) may be required to collect, withhold or account for Taxes in more than one jurisdiction.
13. Company Policies. All amounts payable under the Grant Letter and these Grant Conditions shall be subject to any applicable clawback or recoupment policies, share trading policies and other policies that may be implemented by the Companys Board of Directors from time to time.
14. Assignment. The Grant Letter and these Grant Conditions shall bind and inure to the benefit of the successors and assignees of the Company. The Grantee may not sell, assign, transfer, pledge or otherwise dispose of the Performance Units, except to a successor grantee in the event of the Grantees death.
15. Section 409A. The Grant Letter and these Grant Conditions are intended to comply with section 409A of the Code or an exemption, consistent with Section 20(h) of the Plan, including the six-month delay for specified employees in accordance with the requirements of section 409A of the Code, if applicable. In furtherance of the foregoing, if the Performance Units or related Dividend Equivalents constitute nonqualified deferred compensation within the meaning of section 409A of the Code, vested Performance Units and related Dividend Equivalents shall be settled on the earliest date that would be permitted under section 409A of the Code without incurring penalty or accelerated taxes thereunder.
16. Successors. The provisions of the Grant Letter and these Grant Conditions shall extend to any business that becomes a successor to the Company or its subsidiaries or affiliates on account of a merger, consolidation, sale of assets, spinoff or similar transaction with respect to any business of the Company or its subsidiaries or affiliates with which the Grantee is employed, and if this grant continues in effect after such corporate event, references to the Company or its subsidiaries or affiliates or the Employer in the Grant Letters and these Grant Conditions shall include the successor business and its affiliates, as appropriate. In that event, the Company may make such modifications to the Grant Letters and these Grant Conditions as it deems appropriate to reflect the corporate event.
17. Governing Law. The validity, construction, interpretation and effect of the Grant Letter and these Grant Conditions shall be governed by, and determined in accordance with, the applicable laws of the State of Delaware, excluding any conflicts or choice of law rule or principle.
18. No Entitlement or Claims for Compensation. In connection with the acceptance of the grant of the Performance Units under the Grant Letters and these Grant Conditions, the Grantee acknowledges the following:
(a) the Plan is established voluntarily by the Company, the grant of the Performance Units under the Plan is made at the discretion of the Committee and the Plan may be modified, amended, suspended or terminated by the Company at any time;
(b) the grant of the Performance Units under the Plan is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Units, or benefits in lieu of them, even if Performance Units have been granted repeatedly in the past;
(c) all decisions with respect to future grants of Performance Units, if any, will be at the sole discretion of the Committee;
(d) the Grantee is voluntarily participating in the Plan;
(e) the Performance Units and any shares of Company Stock acquired under the Plan are not to be considered part of the Grantees normal or expected compensation or salary for any purpose, including, but not limited to, calculating any severance, resignation, termination, payment in lieu of notice, redundancy, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;
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(f) the Performance Units and the shares of Company Stock subject to the award are not intended to replace any pension rights or compensation;
(g) the grant of Performance Units and the Grantees participation in the Plan will not be interpreted to form an employment contract or relationship with the Employer;
(h) the future value of the underlying shares of Company Stock is unknown and cannot be predicted with certainty. If the Grantee vests in the Performance Units and receives shares of Company Stock, the value of the acquired shares may increase or decrease. The Grantee understands that the Company is not responsible for any foreign exchange fluctuation between the United States Dollar and the Grantees local currency that may affect the value of the Performance Units or the shares of Company Stock; and
(i) the Grantee shall have no rights, claim or entitlement to compensation or damages as a result of the Grantees cessation of employment (for any reason whatsoever, whether or not in breach of contract or local labor law or the terms of the Grantees employment agreement, if any), insofar as these rights, claim or entitlement arise or may arise from the Grantees ceasing to have rights under or be entitled to receive shares of Company Stock under or ceasing to have the opportunity to participate in the Plan as a result of such cessation or loss or diminution in value of the Performance Units or any of the shares of Company Stock acquired thereunder as a result of such cessation, and the Grantee irrevocably releases the Employer from any such rights, entitlement or claim that may arise. If, notwithstanding the foregoing, any such right or claim is found by a court of competent jurisdiction to have arisen, then the Grantee shall be deemed to have irrevocably waived the Grantees entitlement to pursue such rights or claim.
19. Data Privacy.
(a) The Grantee hereby explicitly, willingly and unambiguously consents to the collection, systematization, accumulation, storage, blocking, destruction, use, disclosure and transfer, in electronic or other form, of the Grantees personal data as described in these Grant Conditions by and among, as applicable, the Grantees employer, the Company or its subsidiaries or affiliates for the exclusive purpose of implementing, administering and managing the Grantees participation in the Plan.
(b) The Grantee understands that the Grantees employer, the Company or its subsidiaries or affiliates, as applicable, hold certain personal information and sensitive personal information about the Grantee regarding the Grantees employment, the nature and amount of the Grantees compensation and the fact and conditions of the Grantees participation in the Plan, including, but not limited to, the Grantees name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or its subsidiaries or affiliates, details of all options, awards or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in the Grantees favor, for the purpose of implementing, administering and managing the Plan (the Data).
(c) The Grantee understands that the Data may be transferred, including any cross-border, transfer to the Company, its subsidiaries and affiliates and, to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantees country, or elsewhere, and that the recipients country may have different data privacy laws and protections than the Grantees country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting the Grantees local human resources representative. The Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Grantees participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party. The Grantee understands that the Data will be held only as long as is necessary to implement, administer and manage the Grantees participation in the Plan. The Grantee understands that the Grantee may, at any time, view the Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing the Grantees local human resources representative. The Grantee understands, however, that refusing or withdrawing the Grantees consent may affect the Grantees ability to participate in the Plan. For more information on the consequences of refusal to consent or withdrawal of consent, the Grantee understands that the Grantee may contact the Grantees local human resources representative.
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Exhibit 99.1
Armstrong Flooring Appoints Michel Vermette as President and CEO
LANCASTER, Pa. Sept. 10, 2019 Armstrong Flooring, Inc. (NYSE: AFI) (Armstrong Flooring), North Americas largest producer of resilient flooring products, announced today that its Board of Directors (the Board) has appointed Michel Vermette, President, Residential Carpet at Mohawk Industries, as President and Chief Executive Officer and a member of the Board, effective Sept. 11, 2019. Armstrong Flooring Chairman Larry S. McWilliams, who has served as interim President and CEO since May 3, 2019, will remain Chairman of the Board.
The appointment of Michel as President and CEO of Armstrong Flooring is the result of an extensive evaluation and search process participated in by the entire Board, and we are delighted that Michel has agreed to join the company, said Jim Melville, Chair of the Nominating and Governance Committee of the Armstrong Flooring Board. Michel brings both tremendous domestic and international industry experience and strong business, operational, financial and strategic expertise to AFI. He is also a proven leader who has modelled superb business and leadership principles throughout his career while establishing a track record of improving business performance by implementing product development, manufacturing and operational excellence. We know that he is exactly the right person to lead Armstrong Flooring, and we look forward to working with him.
Mr. Melville added, We also thank Larry for his service as interim Chief Executive Officer during the CEO search period and for his continued dedication and leadership as Chair of AFI.
Mr. Vermette, age 52, will join the company after a successful career spanning more than two decades at Mohawk Industries, where he served in multifaceted positions across the companys finance, investor relations, sales and marketing and business development operations. During his tenure, he helped transform the flooring business into an innovative and leading flooring manufacturer, redesigned the customer experience process, and led large-scale acquisitions and successful integrations.
Mr. Vermette was named President, Residential Carpet at Mohawk Industries, in February 2019, where he was responsible for the market strategy, product development, manufacturing and innovation of the residential carpet business in North America. In this role, Mr. Vermette set the groups product and manufacturing direction, improving the companys service and overall customer satisfaction.
He previously served as President of Mohawk Group, driving the companys commercial and international flooring operations and leading the customer experience team. During his tenure, Mohawk Group launched the first Certified Living Product in flooring, and the organization was recognized regularly for top product awards. Mr. Vermette also served as Chief Financial Officer for Mohawks North American Flooring Business Unit.
I am excited to join Armstrong Flooring and its talented team, where we will continue to execute on the companys foundation of innovation, design and product excellence, said Mr. Vermette. I look forward to working with the team to capitalize on the strong brand and to build a pipeline of innovative and differentiated products to drive growth and improve profitability while delivering value for our customers and shareholders.
Michel is an industry veteran with a passion for people and a strong business and financial background, and his experience is what we need to lead the company into the future, said Mr. McWilliams. During a time of intense shifts in the market, we are confident in Michels ability to lead a winning team that will focus on driving growth and improving performance while increasing value for shareholders and customers. I and the entire board are confident that with his deep industry understanding and commitment to excellence, Michel is the right person to move Armstrong Flooring into its next phase of success.
With the appointment of Mr. Vermette, the Board will consist of eight directors.
About Armstrong Flooring
Armstrong Flooring, Inc. (NYSE: AFI) is a global leader in the design and manufacture of innovative flooring solutions. Headquartered in Lancaster, Pennsylvania, Armstrong Flooring is North Americas largest producer of resilient flooring products. The company safely and responsibly operates 8 manufacturing facilities globally, working to provide the highest levels of service, quality and innovation to ensure it remains as strong and vital as its 150-year heritage. Learn more at www.armstrongflooring.com.
Forward-Looking Statements
Disclosures in this release, including without limitation, those relating to the companys management transition and in our other public documents and comments contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements provide our future expectations or forecasts and can be identified by our use of words such as anticipate, estimate, expect, project, intend, plan, believe, outlook, target, predict, may, will, would, could, should, seek, and other words or phrases of similar meaning in connection with any discussion of future operating or financial performance. Forward-looking statements, by their nature, address matters that are uncertain and involve risks because they relate to events and depend on circumstances that may or may not occur in the future. As a result, our actual results may differ materially from our expected results and from those expressed in our forward-looking statements. A more detailed discussion of the risks and uncertainties that could cause our actual results to differ materially from those projected, anticipated or implied is included in our reports filed with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update any forward-looking statements beyond what is required under applicable securities law.
Contact Information
Investors:
Doug Bingham
SVP, Chief Financial Officer
717-672-9300
IR@armstrongflooring.com
Media:
Steve Trapnell
Communications Manager
717-672-7218
media@armstrongflooring.com