Armstrong Ties Directors to Interests of Sharehold

Lancaster, PA, October 31, 2006--Armstrong World Industries wants its new directors and new shareholders to have the same aspirations, according to the Lancaster New Era. The newspaper reported that as a result, the company s giving each of its outside directors $319,000 worth of the new Armstrong stock — sort of. Armstrong gave all seven of its outside directors 8,183 units of “phantom” stock, which carries the value of the stock but isn’t the actual stock. The idea, Armstrong said Thursday, is “to promote the growth and profitability” of the firm “by increasing the mutuality of interests between directors and shareholders of the corporation.” Armstrong made the two-part payments Monday, when the stock closed at $38.95 a share. The first portion, of 2,183 phantom shares, vests in a year. The second portion, of 6,000 phantom shares, vests in thirds after one, two and three years. The outside directors will get more phantom shares in October 2007; the quantity will be determined at that time. Of course, the ultimate value of the phantom shares remains to be seen. They become payable in cash six months after a director leaves Armstrong, at the market price of Armstrong stock on that day. The phantom shares represent only a portion of the outside directors’ pay. The remainder of their pay was not immediately available. An Armstrong spokeswoman could not be reached by press time. When Armstrong emerged from bankruptcy Oct. 2 as a new corporation with a new stock, its outside directors became Judith Haberkorn, John Roberts, James Gaffney, Robert Garland, Russell Peppet, Arthur Pergament and Alexander Sanders Jr. An eighth outside director, Scott Miller, resigned Monday. Armstrong chairman and CEO Michael Lockhart also is a director; he’s excluded from the phantom-stock plan. However, considerable amounts of the new stock were earmarked for him and other members of Armstrong’s top management under a long-term incentive plan, as the New Era previously reported. Lockhart received 225,000 stock options and 75,000 restricted shares. Both kinds vest in thirds in two, three and four years. The long-term plan covers 72 Armstrong officers and managers.