Armstrong World Industries
Annual Report 2017

Plain-text annual report

ARMSTRONG WORLD INDUSTRIES INC FORM 10-K (Annual Report) Filed 02/26/18 for the Period Ending 12/31/17 Address Telephone CIK Symbol SIC Code 2500 COLUMBIA AVE LANCASTER, PA, 17603 7173970611 0000007431 AWI 3089 - Plastics Products, Not Elsewhere Classified Industry Construction Materials Sector Fiscal Year Basic Materials 12/31 http://www.edgar-online.com © Copyright 2018, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-K(Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 1-2116ARMSTRONG WORLD INDUSTRIES, INC.(Exact name of registrant as specified in its charter) Pennsylvania 23-0366390(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 2500 Columbia Avenue, Lancaster, Pennsylvania 17603(Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (717) 397-0611 Securities registered pursuant to Section 12(b) of the Act: Title of each classCommon Stock ($0.01 par value)Securities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required tosubmit and post such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, tothe best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):Large accelerated filer☒ Accelerated filer☐Non-accelerated filer☐ Smaller reporting company☐Emerging growth company☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒The aggregate market value of the Common Stock of Armstrong World Industries, Inc. held by non-affiliates based on the closing price ($46.00 per share) on the New YorkStock Exchange (trading symbol AWI) of June 30, 2017 was approximately $2.0 billion. As of February 21, 2018, the number of shares outstanding of the registrant's CommonStock was 53,105,216.Documents Incorporated by ReferenceCertain sections of Armstrong World Industries, Inc.’s definitive Proxy Statement for use in connection with its 2018 annual meeting of shareholders, to be filed no later thanApril 30, 2018 (120 days after the last day of our 2017 fiscal year), are incorporated by reference into Part III of this Form 10-K Report where indicated. TABLE OF CONTENTS PAGE Cautionary Note Regarding Forward-Looking Statements3 PART I Item 1.Business4Item 1A.Risk Factors8Item 1B.Unresolved Staff Comments14Item 2.Properties14Item 3.Legal Proceedings15Item 4.Mine Safety Disclosures15 PART II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities16Item 6.Selected Financial Data17Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations18Item 7A.Quantitative and Qualitative Disclosures about Market Risk32Item 8.Financial Statements and Supplementary Data34Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure87Item 9A.Controls and Procedures87Item 9B.Other Information87 PART III Item 10.Directors, Executive Officers and Corporate Governance88Item 11.Executive Compensation89Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters89Item 13.Certain Relationships and Related Transactions, and Director Independence89Item 14.Principal Accountant Fees and Services89 PART IV Item 15.Exhibits and Financial Statement Schedules90 Signatures96 2 When we refer to “AWI,” the “Company,” “we,” “our” and “us”, we are referring to Armstrong World Industries, Inc. and its subsidiaries.CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSCertain statements in this Annual Report on Form 10-K and the documents incorporated by reference may constitute forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. Those forward-looking statements are subject to various risks and uncertainties and include allstatements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, our expectations concerningour residential and commercial markets and their effect on our operating results; our expectations regarding the payment of dividends; and our ability to increaserevenues, earnings and EBITDA (as discussed below). Words such as “anticipate,” “expect,” “intend,” “plan,” “target,” “project,” “predict,” “believe,” “may,”“will,” “would,” “could,” “should,” “seek,” “estimate” and similar expressions are intended to identify such forward-looking statements. These statements arebased on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from thosedescribed in the forward-looking statements. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give noassurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or futureprospects or which could cause actual results to differ materially from our expectations include, but are not limited to: •economic conditions; •construction activity; •the announced sale of our Europe, Middle East and Africa (including Russia) (“EMEA”) and Pacific Rim businesses is subject to various risks anduncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time andexpense, which could disrupt or adversely affect our business; •competition; •key customers; •availability and costs of raw materials and energy; •Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc; •environmental matters; •covenants in our debt agreements; •our indebtedness; •our liquidity; •international operations; •strategic transactions; •negative tax consequences; •the tax consequences of the separation of our flooring business from our ceilings business; •defined benefit plan obligations; •cybersecurity breaches, claims and litigation; •labor; •intellectual property rights; •costs savings and productivity initiatives; and •other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and othercommunications, including those set forth under “Risk Factors” included elsewhere in this Annual Report on Form 10-K and in the documentsincorporated by reference.Such forward-looking statements speak only as of the date they are made. We expressly disclaim any obligation to release publicly any updates or revisions to anyforward-looking statements to reflect any change in our expectations with regard thereto or change in events, conditions or circumstances on which any statement isbased.3 PART IITEM 1.BUSINESSArmstrong World Industries, Inc. (“AWI” or the “Company”) is a Pennsylvania corporation incorporated in 1891. When we refer to “we,” “our” and “us” in thisreport, we are referring to AWI and its subsidiaries.We are a global leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions. We design,manufacture and sell ceiling systems (primarily mineral fiber, fiberglass wool and metal) throughout the Americas.On November 17, 2017, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Knauf International GmbH (“Knauf”), to sell certainsubsidiaries comprising our business in Europe, the Middle East and Africa (including Russia) (“EMEA”) and the Pacific Rim, including the correspondingbusinesses and operations conducted by Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc., in which AWI holds a50% interest. The consideration to be paid by Knauf in connection with the sale is $330.0 million in cash, inclusive of amounts due to WAVE, subject to certainadjustments as provided in the Purchase Agreement, including adjustments based on the economic impact of any required regulatory remedies and a workingcapital adjustment. The transaction, which is subject to regulatory approvals and other customary conditions, is currently anticipated to close in mid-2018. OurEMEA and Pacific Rim segment’s historical financial results have been reflected in AWI’s Consolidated Financial Statements as a discontinued operation for allperiods presented. On January 13, 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based in Newark, Ohio. Tectum is a manufacturer of acoustical ceiling, walland structural solutions for commercial building applications with two manufacturing facilities. Tectum’s operations from the date of acquisition, and its assetsand liabilities as of December 31, 2017, have been included as a component of our Architectural Specialties segment. On April 1, 2016, we completed our separation of Armstrong Flooring, Inc. (“AFI”). AFI’s historical financial results have been reflected in AWI’s ConsolidatedFinancial Statements as a discontinued operation for all periods presented. See Note 4 to the Consolidated Financial Statements for additional information related to our acquisition and discontinued operations.We are focused on driving sustainable shareholder value creation. Our strategic priority is to accelerate profitable sales and earnings growth. Our goal is to expandinto new markets and grow in existing markets in the Americas by selling a broader array of products and solutions into those markets. Reportable SegmentsEffective December 31, 2017 and in connection with the announced sale of our EMEA and Pacific Rim businesses, our historical EMEA and Pacific Rim segmentshave been excluded from our results of continuing operations. As a result, effective December 31, 2017 and for all periods presented, our operating segments areas follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate. See Note 3 to the Consolidated Financial Statements and Management’sDiscussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for additional financial information.MarketsWe are well positioned in the industry segments and markets in which we operate, often holding a leadership or significant market share position. The majormarkets in which we compete are:Commercial. Our revenue opportunities come from new construction as well as renovation of existing buildings. Renovation work is estimated to represent themajority of the commercial market opportunity. Most of our revenue comes from the following sectors of commercial building – office, education, transportation,healthcare and retail. We monitor U.S. construction starts and follow project activity. Our revenue from new construction can lag behind construction starts by asmuch as 18 to 24 months. We also monitor office vacancy rates, the Architecture Billings Index, state and local government spending, gross domestic product(“GDP”) and general employment levels, which can indicate movement in renovation and new construction opportunities. We believe that these statistics, takinginto account the time-lag effect, provide a reasonable indication of our future revenue opportunity from commercial renovation and newconstruction. Additionally, we believe that customer preferences for product type, style, color, availability, affordability and ease of installation also affect ourrevenue.4 In our Mineral Fiber segment, we estimate that a majority of our commercial market sales are used for renovation purposes by end-users of our products. The end-use of our products is based on management estimates as such information i s not easily determinable. Residential. We also sell mineral fiber products for use in single and multi-family housing. These products compete against mineral fiber and fiberglass productsfrom other manufacturers, as well as drywall. We compete directly with other domestic and international suppliers of these products. We estimate that existinghome renovation (also known as replacement / remodel) work represents the majority of the residential market opportunity. Key U.S. statistics that indicate marketopportunity include existing home sales (a key indicator for renovation opportunity), housing starts, housing completions, home prices, interest rates and consumerconfidence. Approximately 75% of our consolidated net sales are to distributors. Sales to large home centers account for slightly less than 10% of our consolidated sales. Ourremaining sales are to contractors and retailers. Geographic AreasSee Note 3 to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of thisForm 10-K for additional financial information by geographic areas.CustomersWe use our reputation, capabilities, service and brand recognition to develop long-standing relationships with our customers. We principally sell commercialproducts to building materials distributors, who re-sell our products to contractors, subcontractors’ alliances, large architect and design firms, and major facilityowners. We have important relationships with national home centers such as Lowe’s Companies, Inc. and The Home Depot, Inc., as well as wholesalers who re-sellour products to dealers who service builders, contractors and consumers.Net sales to three commercial distributors totaling $426.1 million, included within our Mineral Fiber and Architectural Specialties segments, individually exceeded10% of our consolidated net sales in 2017. Working CapitalWe produce goods for inventory and sell on credit to our customers. Generally, our distributors carry inventory as needed to meet local or rapid deliveryrequirements. We sell our products to select, pre-approved customers using customary trade terms that allow for payment in the future. These practices are typicalwithin the industry. CompetitionWe face strong competition in all of our businesses. Principal attributes of competition include product performance, product styling, service andprice. Competition comes from both domestic and international manufacturers. Additionally, some of our products compete with alternative products or finishingsolutions, namely, drywall and exposed structure (also known as open plenum). Excess industry capacity exists for certain products, which tends to increase pricecompetition. The following companies are our primary competitors:CertainTeed Corporation (a subsidiary of Saint-Gobain), Chicago Metallic Corporation (owned by ROCKWOOL International A/S), Georgia-Pacific Corporation,Rockfon A/S (owned by ROCKWOOL International A/S), USG Corporation, Ceilings Plus (owned by USG Corporation), Rulon International, and 9Wood.Raw MaterialsWe purchase raw materials from numerous suppliers worldwide in the ordinary course of business. The principal raw materials include: fiberglass, perlite, starch,waste paper, pigments and clays. We manufacture most of the production needs for mineral wool at one of our manufacturing facilities. Finally, we use aluminumand steel in the production of metal ceilings by us and by WAVE, our joint venture that manufactures ceiling grid.We also purchase significant amounts of packaging materials and consume substantial amounts of energy, such as electricity and natural gas and water.In general, adequate supplies of raw materials are available to all of our operations. However, availability can change for a number of reasons, includingenvironmental conditions, laws and regulations, shifts in demand by other industries competing for the same5 materials, transportation disruptions and/or business decisions made by, or events that affect, our suppliers. There is no ass urance that these raw materials willremain in adequate supply to us.Prices for certain high usage raw materials can fluctuate dramatically. Cost increases for these materials can have a significant adverse impact on ourmanufacturing costs. Given the competitiveness of our markets, we may not be able to recover the increased manufacturing costs through increasing selling pricesto our customers.Sourced ProductsSome of the products that we sell are sourced from third parties. Our primary sourced products include specialty ceiling products. We purchase some of oursourced products from suppliers that are located outside of the U.S., primarily from the Pacific Rim and Europe. Sales of sourced products representedapproximately 15% of our total consolidated revenue in 2017.In general, we believe we have adequate supplies of sourced products. However, we cannot guarantee that the supply will remain adequate.SeasonalityGenerally, our sales tend to be stronger in the second and third quarters of our fiscal year due to more favorable weather conditions, customer business cycles andthe timing of renovation and new construction. Patent and Intellectual Property RightsPatent protection is important to our business. Our competitive position has been enhanced by patents on products and processes developed or perfected withinAWI or obtained through acquisitions and licenses. In addition, we benefit from our trade secrets for certain products and processes.Patent protection extends for varying periods according to the date of patent filing or grant and the legal term of a patent in the various countries where patentprotection is obtained. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of itscoverage and the availability of legal remedies. Although we consider that, in the aggregate, our patents, licenses and trade secrets constitute a valuable asset ofmaterial importance to our business, we do not believe we are materially dependent upon any single patent or trade secret, or any group of related patents or tradesecrets.Certain of our trademarks, including without limitation, , Armstrong®, Calla®, Cirrus®, Cortega®, Dune™, Humiguard®, Infusions®, Lyra®,MetalWorks™, Optima®, Perla™, Soundscapes®, Sustain®, Tectum®, Total Acoustics®, Ultima®, and WoodWorks®, are important to our business because oftheir significant brand name recognition. Registrations are generally for fixed, but renewable, terms.In connection with the separation and distribution of AFI, we entered into several agreements with AFI that, together with a plan of division, provided for theseparation and allocation of assets between AWI and AFI. These agreements include a Trademark License Agreement and a Transition Trademark LicenseAgreement. Pursuant to the Trademark License Agreement, AWI provided AFI with a perpetual, royalty-free license to utilize the “Armstrong” trade name andlogo. Pursuant to the Transition Trademark License Agreement, AFI provided us with a five-year royalty-free license to utilize the “Inspiring Great Spaces”tagline, logo and related color scheme.Pursuant to our Purchase Agreement with Knauf related to the sale of our EMEA and Pacific Rim businesses and prior to the closing, AWI anticipates entering intoan agreement with Knauf relating to the use of certain intellectual property by Knauf after the closing, including the Armstrong trade name.We review the carrying value of trademarks annually for potential impairment. See the “Critical Accounting Estimates” section of Management’s Discussion andAnalysis of Financial Condition and Results of Operations in Item 7 of this Form 10-K for further information.EmployeesAs of December 31, 2017, we had approximately 3,900 full-time and part-time employees worldwide compared to approximately 3,700 as of December 31,2016. The increase in total worldwide employees as of December 31, 2017 in comparison to December 31, 2016 was primarily due to our addition of Tectumemployees, partially offset by a reduction of employees related to the closure of one6 of our plants in China. Excluding our EMEA and Pacific Rim businesses, we had approximately 2,200 employees as of December 31, 2017 compared toapproximately 2,000 as of December 31, 20 16. As of December 31, 2017, approximately 75% of our 1,100 production employees in the U.S. were represented by labor unions. Collective bargaining agreementscovering approximately 460 employees at two U.S. plants will expire during 2018. Outside the U.S., most of our production employees are covered by eitherindustry-sponsored and/or state-sponsored collective bargaining mechanisms. We believe that our relations with our employees are satisfactory.Research & DevelopmentResearch and development (“R&D”) activities are important and necessary in helping us improve our products’ competitiveness. Principal R&D functions includethe development and improvement of products and manufacturing processes. We incurred $17.4 million in 2017, $17.8 million in 2016 and $18.7 million in 2015of R&D expenses.Sustainability and Environmental MattersThe adoption of environmentally responsible building codes and standards such as the Leadership in Energy and Environmental Design (“LEED”) rating systemestablished by the U.S. Green Building Council, has the potential to increase demand for products, systems and services that contribute to building sustainablespaces. Many of our products meet the requirements for the award of LEED credits, and we are continuing to develop new products, systems and services toaddress market demand for products that enable construction of buildings that require fewer natural resources to build, operate and maintain. Our competitors alsohave developed and introduced to the market products with an increased focus on sustainability.We expect that there will be increased demand over time for products, systems and services that meet evolving regulatory and customer sustainability standards andpreferences and decreased demand for products that produce significant greenhouse gas emissions. We also believe that our ability to continue to provide theseproducts, systems and services to our customers will be necessary to maintain our competitive position in the marketplace. We are committed to complying withall environmental laws and regulations that are applicable to our operations.Legal and Regulatory ProceedingsRegulatory activities of particular importance to our operations include proceedings under the Comprehensive Environmental Response, Compensation andLiability Act (“CERCLA”), and state Superfund and similar type environmental laws governing existing or potential environmental contamination at severaldomestically owned, formerly owned and non-owned locations allegedly resulting from past industrial activity. In a few cases, we are one of several potentiallyresponsible parties and have agreed to jointly fund required investigation, while preserving our defenses to the liability. We may also have rights of contribution orreimbursement from other parties or coverage under applicable insurance policies. Most of our facilities are affected by various federal, state and local environmental requirements relating to the discharge of materials or the protection of theenvironment. We make expenditures necessary for compliance with applicable environmental requirements at each of our operating facilities. We have notexperienced a material adverse effect upon our capital expenditures or competitive position as a result of environmental control legislation and regulations.On September 8, 2017, Roxul USA, Inc. (d/b/a Rockfon) filed litigation against us in the United States District Court for the District of Delaware alleginganticompetitive conduct seeking remedial measures and unspecified damages. Roxul USA, Inc. is a significant ceilings systems competitor with globalheadquarters in Europe and expanding operations in the Americas. We believe the allegations are without merit and are vigorously defending the matter.We are involved in various other lawsuits, claims, investigations and other legal matters from time to time that arise in the ordinary course of business, includingmatters involving our products, intellectual property, relationships with suppliers, relationships with distributors, relationships with competitors, employees andother matters. From time to time, for example, we may be a party to various litigation matters that involve product liability, tort liability and other claims undervarious allegations, including illness due to exposure to certain chemicals used in the workplace; or medical conditions arising from exposure to product ingredientsor the presence of trace contaminants. Such allegations may involve multiple defendants and relate to legacy products that we and other defendants purportedlymanufactured or sold. We believe that any current claims are without merit and intend to defend them vigorously. For these matters, we also may have rights ofcontribution or reimbursement from other parties or coverage under applicable insurance policies. When applicable and appropriate, we will pursue coverage andrecoveries under those policies, but are unable to predict the outcome of those demands. While complete assurance cannot be given to the outcome of theseproceedings, we7 do not believe that any current claims, individually or in the aggregate, will have a material adverse effect on our financial condition, liquidity or results ofoperations.Liabilities of $13.5 million and $4.7 million as of December 31, 2017 and December 31, 2016, respectively, were recorded for environmental liabilities that weconsider probable and for which a reasonable estimate of the probable liability could be made. See Note 27 to the Consolidated Financial Statements and RiskFactors in Item 1A of this Form 10-K, for information regarding the possible effects that compliance with environmental laws and regulations may have on ourbusinesses and operating results.WebsiteWe maintain a website at http://www.armstrongceilings.com. Information contained on our website is not incorporated into this document. Annual reports onForm 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, all amendments to those reports and other information about us are available free ofcharge through this website as soon as reasonably practicable after the reports are electronically filed with the SEC. Reference in this Form 10-K to our websiteand the SEC’s website is an inactive text reference only. ITEM 1A.R ISK FACTORSUnstable market and economic conditions could have a material adverse impact on our financial condition, liquidity or results of operations.Our business is influenced by market and economic conditions, including inflation, deflation, interest rates, availability and cost of capital, consumer spendingrates, energy availability and the effects of governmental initiatives to manage economic conditions. Volatility in financial markets and the continued softness orfurther deterioration of national and global economic conditions could have a material adverse effect on our financial condition, liquidity or results of operations,including as follows: •the financial stability of our customers or suppliers may be compromised, which could result in additional bad debts for us or non-performance bysuppliers; •commercial and residential consumers of our products may postpone spending in response to tighter credit, negative financial news and/or stagnationor further declines in income or asset values, which could have a material adverse impact on the demand for our products; •the value of investments underlying our defined benefit pension plans may decline, which could result in negative plan investment performance andadditional charges which may involve significant cash contributions to such plans, to meet obligations or regulatory requirements; and •our asset impairment assessments and underlying valuation assumptions may change, which could result from changes to estimates of future salesand cash flows that may lead to substantial impairment charges.Continued or sustained deterioration of economic conditions would likely exacerbate and prolong these adverse effects.Our business is dependent on construction activity. Downturns in construction activity could adversely affect our financial condition, liquidity or results ofoperations.Our businesses have greater sales opportunities when construction activity is strong and, conversely, have fewer opportunities when such activity declines. Thecyclical nature of commercial and residential construction activity, including construction activity funded by the public sector, tends to be influenced by prevailingeconomic conditions, including the rate of growth in gross domestic product, prevailing interest rates, government spending patterns, business, investor andconsumer confidence and other factors beyond our control. Prolonged downturns in construction activity could have a material adverse effect on our financialcondition, liquidity or results of operations.Our business could be adversely impacted as a result of uncertainty related to the proposed disposition of our EMEA and Pacific Rim businesses.The proposed disposition of our EMEA and Pacific Rim businesses to Knauf could cause disruptions to our business or our business relationships, which couldhave an adverse impact on our results of operations. For example, our employees may experience uncertainty about their future roles with us, which may adverselyaffect our ability to hire and retain key personnel, and parties with which we have business relationships may experience uncertainty as to the future of suchrelationships and seek alternative relationships with third parties or seek to alter their present business relationships with us. In addition, our management team andother employees are devoting significant time and effort to activities related to the proposed disposition.8 We have incurred and will continue to incur significant costs, expenses and fees for professional services and other transaction costs in connection with theproposed disposition, and many of these fees and costs are payable regardless of whether or not the disposition is completed. In the event the disposition is notcompleted for any reason, or the timing of its consu mmation is delayed, our operating results may be adversely affected as a result of the incurring of thesesignificant additional expenses and the diversion of management’s attention.The proposed disposition of our EMEA and Pacific Rim businesses is subject to the receipt of consents and clearances from regulatory authorities that mayimpose conditions that could have an adverse effect on us or Knauf or, if not obtained, could prevent the completion of the proposed disposition.Before the proposed disposition of our EMEA and Pacific Rim businesses to Knauf may be completed, applicable waiting periods must expire or terminate underantitrust and competition laws and clearances or approvals must be obtained from various regulatory entities. In deciding whether to grant antitrust or regulatoryclearances, the relevant governmental entities will consider the effect of the disposition on competition within their relevant jurisdiction.There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions to the consummation of the disposition and that suchconditions, terms, obligations or restrictions will not have the effect of delaying the completion of the disposition, or resulting in additional material costs to us. Inaddition, we cannot provide assurance that any such conditions, terms, obligations or restrictions will not result in the delay or abandonment of the disposition.Additionally, the completion of the disposition is conditioned on the absence of certain restraining orders or injunctions by judgment, court order or law that wouldprohibit the completion of the disposition.Our markets are highly competitive. Competition can reduce demand for our products or cause us to lower prices. Failure to compete effectively by meetingconsumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distribution relationships, growing marketshare, and expanding our solutions capabilities and reach could adversely affect our results.Our markets are highly competitive. Competition can reduce demand for our products, negatively affect our product sales mix or cause us to lower prices. Failureto compete effectively by meeting consumer preferences, developing and marketing innovative solutions, maintaining strong customer service and distributionrelationships, growing market share and expanding our solutions capabilities and reach could have a material adverse effect on our financial condition, liquidity orresults of operations. Our customers consider our products’ performance, product styling, customer service and price when deciding whether to purchase ourproducts. Shifting consumer preference in our highly competitive markets, from acoustical solutions to other ceiling and wall products, for example, whether forperformance or styling preferences or our inability to develop and offer new competitive performance features could have an adverse effect on our sales. Similarly,our ability to identify, protect and market new and innovative solutions is critical to our long-term growth strategy, namely to sell into more spaces and sell moresolutions in every space. In addition, excess industry capacity for certain products in several geographic markets could lead to industry consolidation and/orincreased price competition. In certain local markets, we are also subject to potential increased price competition from foreign competitors, which may have lowercost structures.Sales fluctuations to and changes in our relationships with key customers could have a material adverse effect on our financial condition, liquidity or results ofoperations.Some of our markets are dependent on certain key customers, including independent distributors. The loss, reduction, or fluctuation of sales to key customers, orany adverse change in our business relationship with them, whether as a result of competition, industry consolidation or otherwise, could have a material adverseeffect on our financial condition, liquidity or results of operations.Customer consolidation, and competitive, economic and other pressures facing our customers, may put pressure on our operating margins and profitability.A number of our customers, including distributors and contractors, have consolidated in recent years and consolidation could continue. Such consolidation couldimpact margin growth and profitability as larger customers may realize benefits of scale with increased buying power and reduced inventories. The economic andcompetitive landscape for our customers is constantly changing, and our customers' responses to those changes could impact our business. These factors and otherscould have an adverse impact on our business, financial condition or results of operations.9 If the availability of raw materials or energy decreases, or the costs increase, and we are unable to pass along increased costs, our financial condition, liquidityor results of operations could be adversely affected.The availability and cost of raw materials, packaging materials, energy and sourced products are critical to our operations. For example, we use substantialquantities of natural gas and petroleum-based raw materials in our manufacturing operations. The cost of some of these items has been volatile in recent years andavailability has been limited at times. We source some materials from a limited number of suppliers, which, among other things, increases the risk ofunavailability. Limited availability could cause us to reformulate products or limit our production. Decreased access to raw materials and energy or significantincreased cost to purchase these items and any corresponding inability to pass along such costs through price increases could have a material adverse effect on ourfinancial condition, liquidity or results of operations.The performance of our WAVE joint venture is important to our financial results. Changes in the demand for, or quality of, WAVE products, or in theoperational or financial performance of the WAVE joint venture, could have a material adverse effect on our financial condition, liquidity or results ofoperations. Similarly, if there is a change with respect to our joint venture partner that adversely impacts its relationship with us, WAVE’s performance couldbe adversely impacted.Our equity investment in our WAVE joint venture remains important to our financial results. We believe an important element in the success of this joint ventureis the relationship with our partner, Worthington Industries, Inc. If there is a change in ownership, a change of control, a change in management or managementphilosophy, a change in business strategy or another event with respect to our partner that adversely impacts our relationship, WAVE’s performance could beadversely impacted. In addition, our partner may have economic or business interests or goals that are different from or inconsistent with our interests or goals,which may impact our ability to influence or align WAVE’s strategy and operations.We may be subject to liability under, and may make substantial future expenditures to comply with, environmental laws and regulations, which couldmaterially adversely affect our financial condition, liquidity or results of operations.We are actively involved in environmental investigation and remediation activities relating to several domestically owned, formerly owned and non-ownedlocations allegedly resulting from past industrial activity, for which our ultimate liability may exceed the currently estimated and accrued amounts. See Note 27 tothe Consolidated Financial Statements for further information related to our current environmental matters and the potential liabilities associated therewith. It isalso possible that we could become subject to additional environmental matters and corresponding liabilities in the future.The building materials industry has been subject to claims relating to raw materials such as silicates, polychlorinated biphenyl (“PCB”), PVC, formaldehyde, fire-retardants and claims relating to other issues such as mold and toxic fumes, as well as claims for incidents of catastrophic loss, such as building fires. We have notreceived any significant claims involving our raw materials or our product performance; however, product liability insurance coverage may not be available oradequate in all circumstances to cover claims that may arise in the future.In addition, our operations are subject to various environmental, health, and safety laws and regulations. These laws and regulations not only govern our currentoperations and products, but also impose potential liability on us for our past operations. Our costs to comply with these laws and regulations may increase as theserequirements become more stringent in the future, and these increased costs may materially adversely affect our financial condition, liquidity or results ofoperations.The agreements that govern our indebtedness contain a number of covenants that impose significant operating and financial restrictions, including restrictionson our ability to engage in activities that may be in our best long-term interests.The agreements that govern our indebtedness include covenants that, among other things, may impose significant operating and financial restrictions, includingrestrictions on our ability to engage in activities that may be in our best long-term interests. These covenants may restrict our ability to: •incur additional debt; •pay dividends on or make other distributions in respect of our capital stock or redeem, repurchase or retire our capital stock or subordinated debt ormake certain other restricted payments; •make certain acquisitions; •sell certain assets; •consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and •create liens on certain assets to secure debt.10 Under the terms of our senior secured credit facility, we are required to maintain specified leverage and interest coverage ratios. Our ability to meet these ratioscould be affected by events beyond our control, and we cannot assure that we will meet them. A breach of any of the restrictive covenants or ratios would result ina default under the senior secured credit facility. If any such default occurs, the lenders under the senior secured credit facility may b e able to elect to declare alloutstanding borrowings under our facilities, together with accrued interest and other fees, to be immediately due and payable, or enforce their security interest. Thelenders may also have the right in these circumstances to terminate commitments to provide further borrowings.Our indebtedness may adversely affect our cash flow and our ability to operate our business, make payments on our indebtedness and declare dividends on ourcapital stock.Our level of indebtedness and degree of leverage could: •make it more difficult for us to satisfy our obligations with respect to our indebtedness; •make us more vulnerable to adverse changes in general economic, industry and competitive conditions and adverse changes in governmentregulation; •limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; •place us at a competitive disadvantage compared to our competitors that are less leveraged and, therefore, more able to take advantage ofopportunities that our leverage prevents us from exploiting; •limit our ability to refinance existing indebtedness or borrow additional amounts for working capital, capital expenditures, acquisitions, debt servicerequirements, execution of our business strategy or other purposes; •restrict our ability to pay dividends on our capital stock; and •adversely affect our credit ratings.We may also incur additional indebtedness, which could exacerbate the risks described above. In addition, to the extent that our indebtedness bears interest atfloating rates, our sensitivity to interest rate fluctuations will increase.Any of the above listed factors could materially adversely affect our financial condition, liquidity or results of operations.We require a significant amount of liquidity to fund our operations, and borrowing has increased our vulnerability to negative unforeseen events.Our liquidity needs vary throughout the year. If our business experiences materially negative unforeseen events, we may be unable to generate sufficient cash flowfrom operations to fund our needs or maintain sufficient liquidity to operate and remain in compliance with our debt covenants, which could result in reduced ordelayed planned capital expenditures and other investments and adversely affect our financial condition or results of operations.We are subject to risks associated with our international operations in both established and emerging markets. Legislative, political, regulatory and economicvolatility, as well as vulnerability to infrastructure and labor disruptions, could have an adverse effect on our financial condition, liquidity or results ofoperations.On November 20, 2017, we announced that we had entered into a definitive agreement with Knauf to sell our EMEA and Pacific Rim businesses. This transaction,which is subject to regulatory approvals and other customary conditions, is currently anticipated to close in mid-2018.A significant portion of our products move in international trade. See Notes 3 and 4 to the Consolidated Financial Statements for further information. Ourinternational trade is subject to currency exchange fluctuations, trade regulations, import duties, logistics costs, delays and other related risks. Our internationaloperations are also subject to various tax rates, credit risks in emerging markets, political risks, uncertain legal systems, high costs in repatriating profits to theUnited States from some countries, and loss of sales to local competitors following currency devaluations in countries where we import products for sale. Inaddition, our international growth strategy depends, in part, on our ability to expand our operations in certain emerging markets. However, some emerging marketshave greater political and economic volatility and greater vulnerability to infrastructure and labor disruptions than established markets. Similarly, our efforts toenhance the profitability or accelerate the growth of our operations in certain markets depends largely on the economic and geopolitical conditions in those local orregional markets.In addition, in many countries outside of the United States, particularly in those with developing economies, it may be common for others to engage in businesspractices prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act or11 similar local anti-corruption or anti-bribery laws. These laws generally prohibit companies and their employees, contractors or agents from making improperpayments to government officials for the purpose of obtaining or retaining business. Failure to comply wit h these laws, as well as U.S. and foreign export andtrading laws, could subject us to civil and criminal penalties. As we continue to expand our business, we may have difficulty anticipating and effectively managingthese and other risks that our operati ons may face, which may adversely affect our business outside the United States and our financial condition, liquidity orresults of operations.We may pursue strategic transactions that could create risks and present unforeseen integration obstacles or costs, any of which could materially adverselyaffect our financial condition, liquidity or results of operations.We have evaluated, and expect to continue to evaluate, potential strategic transactions as opportunities arise. We routinely engage in discussions with third partiesregarding potential transactions, including joint ventures, which could be significant. Any such strategic transaction involves a number of risks, including potentialdisruption of our ongoing business and distraction of management, difficulty with integrating or separating personnel and business operations and infrastructure,and increasing or decreasing the scope, geographic diversity and complexity of our operations. Strategic transactions could involve payment by us of a substantialamount of cash, assumption of liabilities and indemnification obligations, regulatory requirements, incurrence of a substantial amount of debt or issuance of asubstantial amount of equity. Certain strategic opportunities may not result in the consummation of a transaction or may fail to realize the intended benefits andsynergies. If we fail to consummate and integrate our strategic transactions in a timely and cost-effective manner, our financial condition, liquidity or results ofoperation could be materially and adversely affected.Negative tax consequences can have an unanticipated effect on our financial results.We are subject to the tax laws of the many jurisdictions in which we operate. The tax laws are complex, and the manner in which they apply to our operations andresults is sometimes open to interpretation. Because our income tax expense for any period depends heavily on the mix of income derived from the various taxingjurisdictions, our income tax expense and reported net income may fluctuate significantly, and may be materially different than forecasted or experienced in thepast. Our financial condition, liquidity, results of operations or tax liability could be adversely affected by changes in the effective tax rate as a result of a change inthe mix of earnings in countries with differing statutory tax rates, changes in our overall profitability, changes in tax legislation and rates, changes in the amount ofearnings permanently reinvested offshore, the results of examinations of previously filed tax returns, and ongoing assessments of our tax exposures.Our financial condition, liquidity, results of operations or tax liability could also be adversely affected by changes in the valuation of deferred tax assets andliabilities. We have substantial deferred tax assets related to U.S. domestic foreign tax credits, or FTCs, and state net operating losses, or NOLs, which are availableto reduce our U.S. income tax liability and to offset future state taxable income. However, our ability to utilize the current carrying value of these deferred taxassets may be impacted as a result of certain future events, such as changes in tax legislation and insufficient future taxable income prior to expiration of the FTCsand NOLs.If the separation and distribution of Armstrong Flooring, Inc. (“AFI”) fails to qualify as a tax-free transaction for U.S. federal income tax purposes, then AFI,AWI and AWI’s shareholders could be subject to significant tax liability or tax indemnity obligations.On April 1, 2016, we completed our previously announced separation of AFI by allocating the assets and liabilities related primarily to the Resilient Flooring andWood Flooring segments to AFI and then distributing the common stock of AFI to our shareholders at a ratio of one share of AFI common stock for every twoshares of AWI common stock. In connection with the distribution, we received an opinion from our special tax counsel, on the basis of certain facts,representations, covenants and assumptions set forth in such opinion, substantially to the effect that, for U.S. federal income tax purposes, the separation anddistribution should qualify as a transaction that generally is tax-free to us and our shareholders under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code.Notwithstanding the tax opinion, the Internal Revenue Service (“IRS”) could determine on audit that the distribution should be treated as a taxable transaction if itdetermines that any of the facts, assumptions, representations or covenants set forth in the tax opinion is not correct or has been violated, or that the distributionshould be taxable for other reasons, including as a result of a significant change in stock or asset ownership after the distribution, or if the IRS were to disagree withthe conclusions of the tax opinion. If the distribution is ultimately determined to be taxable, the distribution could be treated as a taxable dividend to each U.S.holder of our common shares who receives shares of AFI in connection with the spinoff for U.S. federal income tax purposes, and such shareholders could incursignificant U.S. federal income tax liabilities. In addition, we and/or AFI could incur significant U.S. federal income tax liabilities or tax indemnificationobligations, whether under applicable law or the Tax Matters Agreement that we entered into with AFI, if it is ultimately determined that certain relatedtransactions undertaken in anticipation of the distribution are taxable.12 Significant changes in factors and assumptions used to measure our defined benefit plan obligations, actual investment returns on pension assets and otherfactors could negatively impact our operating results and cash flows.We maintain pension and postretirement plans throughout the world, with the most significant plans located in the U.S. The recognition of costs and liabilitiesassociated with these plans for financial reporting purposes is affected by assumptions made by management and used by actuaries engaged by us to calculate thebenefit obligations and the expenses recognized for these plans.The inputs used in developing the required estimates are calculated using a number of assumptions, which represent management’s best estimate of the future. Theassumptions that have the most significant impact on reported results are the discount rate, the estimated long-term return on plan assets for the funded plans,retirement rates, and mortality rates and, for postretirement plans, the estimated inflation in health care costs. These assumptions are generally updated annually.Our U.S. pension plans were overfunded by $29.6 million as of December 31, 2017. Our unfunded U.S. postretirement plan liabilities were $86.6 million as ofDecember 31, 2017. If our cash flows and capital resources are insufficient to fund our pension and postretirement plans obligations, we could be forced to reduceor delay investments and capital expenditures, seek additional capital, or restructure or refinance our indebtedness.A disruption in our information technology systems due to a catastrophic event or security breach could interrupt or damage our operations.In the conduct of our business, we collect, use, transmit and store data on information systems, which are vulnerable to an increasing threat of continually evolvingcyber security risks. Any security breach or compromise of our information systems could significantly damage our reputation, cause the disclosure of confidentialcustomer, employee, supplier or company information, including our intellectual property, and result in significant losses, litigation, fines and costs. The securitymeasures we have implemented to protect against unauthorized access to our information systems and data may not be sufficient to prevent breaches. Theregulatory environment related to information security, data collection and privacy is evolving, with new and constantly changing requirements applicable to ourbusiness, and compliance with those requirements could result in additional costs.We also compete through our use and improvement of information technology. In order to remain competitive, we need to provide customers with timely, accurate,easy-to-access information about product availability, orders and delivery status using state-of-the-art systems. While we have processes for short-term failures anddisaster recovery capability, a prolonged disruption of systems or other failure to meet customers’ expectations regarding the capabilities and reliability of oursystems may materially and adversely affect our operating results.Adverse judgments in regulatory actions, product claims, environmental claims and other litigation could be costly. Insurance coverage may not be availableor adequate in all circumstances.In the ordinary course of business, we are subject to various claims and litigation. Any such claims, whether with or without merit, could be time consuming andexpensive to defend and could divert management’s attention and resources. While we strive to ensure that our products comply with applicable governmentregulatory standards and internal requirements, and that our products perform effectively and safely, customers from time to time could claim that our products donot meet warranty or contractual requirements, and users could claim to be harmed by use or misuse of our products. These claims could give rise to breach ofcontract, warranty or recall claims, or claims for negligence, product liability, strict liability, personal injury or property damage. They could also result in negativepublicity.In addition, claims and investigations may arise related to patent infringement, distributor relationships, commercial contracts, antitrust or competition lawrequirements, employment matters, employee benefits issues, and other compliance and regulatory matters, including anti-corruption and anti-briberymatters. While we have processes and policies designed to mitigate these risks and to investigate and address such claims as they arise, we cannot predict or, insome cases, control the costs to defend or resolve such claims.We currently maintain insurance against some, but not all, of these potential claims. In the future, we may not be able to maintain insurance at commerciallyacceptable premium levels. In addition, the levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. If any significantjudgment or claim is not fully insured or indemnified against, it could have a material adverse impact. We cannot assure that the outcome of all current or futurelitigation will not have a material adverse effect on our financial condition, liquidity or results of operations.13 Increased costs of labor, labor disputes, work stoppages or union organizing activity could delay or impede production and coul d have a material adverse effecton our financial condition, liquidity or results of operations.Increased costs of labor, including the costs of employee benefits plans, labor disputes, work stoppages or union organizing activity could delay or impedeproduction and have a material adverse effect on our financial condition, liquidity or results of operations. As the majority of our manufacturing employees arerepresented by unions and covered by collective bargaining or similar agreements, we often incur costs attributable to periodic renegotiation of those agreements,which may be difficult to project. We are also subject to the risk that strikes or other conflicts with organized personnel may arise or that we may become thesubject of union organizing activity at our facilities that do not currently have union representation. Prolonged negotiations, conflicts or related activities could alsolead to costly work stoppages and loss of productivity.Our intellectual property rights may not provide meaningful commercial protection for our products or brands, which could adversely impact our financialcondition, liquidity or results of operations.We rely on our proprietary intellectual property, including numerous patents and registered trademarks, as well as our licensed intellectual property to market,promote and sell our products. We monitor and protect against activities that might infringe, dilute, or otherwise harm our patents, trademarks and otherintellectual property and rely on the patent, trademark and other laws of the U.S. and other countries. However, we may be unable to prevent third parties fromusing our intellectual property without our authorization. In addition, the laws of some non-U.S. jurisdictions, particularly those of certain emerging markets,provide less protection for our proprietary rights than the laws of the U.S. and present greater risks of counterfeiting and other infringement. To the extent wecannot protect our intellectual property, unauthorized use and misuse of our intellectual property could harm our competitive position and have a material adverseeffect on our financial condition, liquidity or results of operations.Our cost-saving and productivity initiatives may not achieve expected savings in our operating costs or improved operating results.We aggressively look for ways to make our operations more efficient and effective. We reduce, move, modify and expand our plants and operations, as well as oursourcing and supply chain arrangements, as needed, to control costs and improve productivity. Such actions involve substantial planning, often require capitalinvestments and may result in charges for fixed asset impairments or obsolescence and substantial severance costs. Our ability to achieve cost savings and otherbenefits within expected time frames is subject to many estimates and assumptions. These estimates and assumptions are subject to significant economic,competitive and other uncertainties, some of which are beyond our control. If these estimates and assumptions are incorrect, if we experience delays, or if otherunforeseen events occur, our financial condition, liquidity or results of operations could be materially and adversely affected.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESWe own a 100-acre, multi-building campus in Lancaster, Pennsylvania comprising the site of our corporate headquarters and most of our non-manufacturingoperations.As of December 31, 2017, we had 16 manufacturing plants in eight countries. Three of our plants are leased and the remaining 13 are owned. We operate eightplants located throughout the United States. In addition, our WAVE joint venture operates nine additional plants in five countries.Upon closure of the sale of our EMEA and Pacific Rim businesses, we will have ten plants, including eight plants in the U.S. One of our plants will be leased andthe remaining nine will be owned. 14 Operating Segment Number ofPlants Location of Principal Facilities Mineral Fiber 6 U.S. (Florida, Georgia, Ohio, Oregon, Pennsylvania and West Virginia)Architectural Specialties 3 U.S. (Ohio), CanadaUnallocated Corporate 1 ChinaDuring the fourth quarter of 2016, we idled one of our plants in China, which is reported as a component of our Unallocated Corporate segment as it will beretained by AWI after the sale of our Pacific Rim business. During the fourth quarter of 2017, we announced the closing of our St. Helens, Oregon mineral fibermanufacturing facility, expected to occur in the first half of 2018. Sales and administrative offices are leased and/or owned worldwide, and leased facilities are utilized to supplement our owned warehousing facilities.Production capacity and the extent of utilization of our facilities are difficult to quantify with certainty. In any one facility, utilization of our capacity variesperiodically depending upon demand for the product that is being manufactured. We believe our facilities are adequate and suitable to support thebusiness. Additional incremental investments in plant facilities are made as appropriate to balance capacity with anticipated demand, improve quality and service,and reduce costs.ITEM 3.LEGAL PROCEEDINGSSee the “Specific Material Events” section of the “Environmental Matters” section of Note 27 to the Consolidated Financial Statements, which is incorporatedherein by reference, for a description of our significant legal proceedings.ITEM 4.MINE SAFETY DISCLOSURESNot applicable. 15 PART IIITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESAWI’s common shares trade on the New York Stock Exchange under the ticker symbol “AWI.” As of February 21, 2018, there were approximately 270 holders ofrecord of AWI’s common stock. First Second Third Fourth Total Year 2017 Price range of common stock - high $48.00 $47.95 $51.98 $61.50 $61.50 Price range of common stock - low $38.45 $41.20 $43.77 $49.25 $38.45 2016 Price range of common stock - high $48.66 $48.39 $45.75 $45.00 $48.66 Price range of common stock - low $35.92 $36.33 $37.49 $36.38 $35.92 The above figures represent the high and low intra-day sale prices for our common stock as reported by the New York Stock Exchange. Historical prices have notbeen restated as a result of our separation of AFI on April 1, 2016.There were no cash dividends declared during 2017 or 2016.Dividends are paid when declared by our Board of Directors and in accordance with restrictions set forth in our debt agreements. In general, our debt agreementsallow us to make “restricted payments,” which include dividends and stock repurchases, subject to certain limitations and other restrictions and provided that weare in compliance with the financial and other covenants of our debt agreements and meet certain liquidity requirements after giving effect to the restrictedpayment. For further discussion of the debt agreements, see the Financial Condition and Liquidity section of Management’s Discussion and Analysis of FinancialCondition and Results of Operations in Item 7 and Risk Factors in Item 1A in this Form 10-K.Issuer Purchases of Equity Securities Period Total Number ofSharesPurchased 1  Average PricePaid per Share  Total Number ofSharesPurchased asPart of PubliclyAnnounced Plansor Programs  MaximumApproximate ValueofShares that mayyet be Purchasedunder the Plansor Programs October 1 – 31, 2017 - $- - $280,864,974 November 1 – 30, 2017 509 $51.50 - 280,864,974 December 1 – 31, 2017 84,865 $59.56 83,943 275,865,282 Total 85,374 83,943 1Includes shares reacquired through the withholding of shares to pay employee tax obligations upon the exercise of options or vesting of restricted sharespreviously granted under long-term incentive plans. For more information regarding securities authorized for issuance under our equity compensationplans, see Note 21 to the Consolidated Financial Statements included in this Form 10-K.On July 29, 2016, the Company announced that its Board of Directors had approved a share repurchase program pursuant to which the Company is authorized torepurchase up to $150.0 million of its outstanding shares of common stock through July 31, 2018 (the “Program”). On October 31, 2017, we announced that ourBoard of Directors had approved an additional $250.0 million authorization to repurchase shares of our outstanding common stock under the Program. TheProgram was also extended to October 31, 2020. Repurchases under the Program may be made through open market, block and privately-negotiated transactions,including Rule 10b5-1 plans, at times and in such amounts as management deems appropriate, subject to market and business conditions, regulatory requirementsand other factors. The Program does not obligate the Company to repurchase any particular amount of common stock and may be suspended or discontinued at anytime without notice. During 2017, 1.8 million shares were repurchased under the Program for a total cost of $80.4 million, or an average price of $43.58 pershare. Since inception of the Program, we have repurchased 2.95 million shares under the Program for a total cost of $124.2 million, or an average price of $42.03per share. 16 ITEM 6.SELECTE D FINANCIAL DATAThe following selected historical consolidated financial data should be read in conjunction with our audited consolidated financial statements, the accompanyingnotes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Form 10-K. The selected historicalconsolidated financial data for the periods presented have been derived from our audited consolidated financial statements. 2017 2016 2015 2014 2013 (amounts in millions, except for per-share data) Income statement data Net sales $893.6 $837.3 $805.1 $798.3 $780.8 Operating income 255.1 188.9 157.0 203.1 186.3 Earnings from continuing operations 220.6 99.3 57.9 104.6 91.3 Per common share - basic (a) $4.12 $1.79 $1.04 $1.89 $1.57 Per common share - diluted (a) $4.08 $1.78 $1.03 $1.88 $1.55 Dividends declared per share of common stock  -   -   -   -   -  Balance sheet data (end of period) Total assets $1,873.5 $1,758.0 $2,687.2 $2,599.6 $2,907.7 Long-term debt 817.7 848.6 936.1 986.3 1,023.7 Total shareholders' equity 419.3 266.4 768.8 649.1 673.2 Notes:(a)See definition of basic and diluted earnings per share in Note 2 to the Consolidated Financial Statements. 17ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSArmstrong World Industries, Inc. (“AWI”) is a Pennsylvania corporation incorporated in 1891.This discussion should be read in conjunction with the financial statements, the accompanying notes, the cautionary note regarding forward-looking statements andrisk factors included in this Form 10-K.OverviewWe are a global leader in the design, innovation and manufacture of commercial and residential ceiling, wall and suspension system solutions. We design,manufacture and sell ceiling systems (primarily mineral fiber, fiberglass wool and metal) throughout the Americas.On November 17, 2017, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Knauf International GmbH (“Knauf”), to sell certainsubsidiaries comprising our business in Europe, the Middle East and Africa (including Russia) (“EMEA”) and the Pacific Rim, including the correspondingbusinesses and operations conducted by Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc., in which AWI holds a50% interest. The total consideration to be paid by Knauf in connection with the sale is $330 million in cash, inclusive of amounts due to WAVE, subject to certainadjustments as provided in the Purchase Agreement, including adjustments based on the economic impact of any required regulatory remedies and a workingcapital adjustment. The transaction, which is subject to regulatory approvals and other customary conditions, is currently anticipated to close in mid-2018. EMEAand Pacific Rim segment historical financial results have been reflected in AWI’s Consolidated Financial Statements as discontinued operations for all periodspresented. In January 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based in Newark, Ohio. Tectum is a manufacturer of acoustical ceiling, wall andstructural solutions for commercial building applications with two manufacturing facilities. Tectum’s operations from the date of acquisition, and its assets andliabilities as of December 31, 2017, have been included as a component of our Architectural Specialties segment. On April 1, 2016, we completed our separation of Armstrong Flooring, Inc. (“AFI”). AFI’s historical financial results have been reflected in AWI’s ConsolidatedFinancial Statements as a discontinued operation for all periods presented. See Note 4 to the Consolidated Financial Statements for additional information related to our acquisitions and discontinued operations.As of December 31, 2017, we had 16 manufacturing plants in eight countries, including eight plants located throughout the U.S. During the fourth quarter of 2016we idled one of our mineral fiber plants in China, reported as a component of our Unallocated Corporate segment as it will be retained by AWI after the sale of thePacific Rim business. Upon closure of the sale of our EMEA and Pacific Rim businesses, we will have ten plants, including eight plants in the U.S.During the fourth quarter of 2017, we announced the closing of our St. Helens, Oregon mineral fiber manufacturing facility, expected to occur in the first half of2018. WAVE operates 9 additional plants in five countries to produce suspension system (grid) products, which we use and sell in our ceiling systems. Upon closure ofthe sale of its corresponding EMEA and Pacific Rim businesses, WAVE will operate five plants in the U.S.Reportable Segments Effective December 31, 2017 and in connection with the anticipated sale of our EMEA and Pacific Rim businesses, our EMEA and Pacific Rim segments havebeen excluded from our results of continuing operations. As a result, effective December 31, 2017 and for all periods presented, our operating segments are asfollows: Mineral Fiber, Architectural Specialties and Unallocated Corporate. Mineral Fiber – produces suspended mineral fiber and soft fiber ceiling systems for use in commercial and residential settings. Products offer various performanceattributes such as acoustical control, rated fire protection and aesthetic appeal. Commercial ceiling products are sold to resale distributors and to ceiling systemscontractors. Residential ceiling products are sold primarily to wholesalers and retailers (including large home centers). The Mineral Fiber segment also includesthe results of WAVE, which manufactures suspension system (grid) products and ceiling component products that are invoiced by both us and WAVE. Segmentresults relating to WAVE consist primarily of equity earnings and reflect our 50% equity interest in the joint venture. Ceiling component products consist ofceiling perimeters and trim, in addition to grid products that support drywall ceiling systems. To a18Management’s Discussion and Analysis of Financial Condition and Results of Operations lesser extent, however, in some markets, WAVE sells its suspension systems products to us for resale to customers. Mineral Fiber segment results reflect thosesales transactions. Architectural Specialties – produces and sources ceilings and walls for use in commercial settings. Products are available in numerous materials, such as metal andwood, in addition to various colors, shapes and designs. Products offer various performance attributes such as acoustical control, rated fire protection and aestheticappeal. We produce standard and customized products, with the majority of Architectural Specialties revenues derived from sourced products. ArchitecturalSpecialties products are sold to resale distributors and ceiling systems contractors. The majority of revenues are project driven, which can lead to more volatilesales patterns due to project scheduling. Unallocated Corporate – includes assets, liabilities, income and expenses that have not been allocated to our other business segments and consist of: cash and cashequivalents, the net funded status of our U.S. Retirement Income Plan (“RIP”), the estimated fair value of interest rate swap contracts, outstanding borrowingsunder our senior credit facilities and income tax balances. Effective December 31, 2017 and for all periods presented, our Unallocated Corporate segment alsoincludes all assets, liabilities, income and expenses formerly reported in our EMEA and Pacific Rim segments that are not included in the pending sale to Knauf. Factors Affecting RevenuesFor information on our segments’ 2017 net sales by geography, see Note 3 to the Consolidated Financial Statements included in this Form 10-K.Markets. We compete in building material markets in the Americas. We closely monitor publicly available macroeconomic trends that provide insight intocommercial and residential market activity, including GDP, office vacancy rates, the Architecture Billings Index, new commercial construction starts, state andlocal government spending, corporate profits and retail sales. In addition, we noted several factors and trends within our markets that directly affected our business performance during 2017, including: Mineral FiberWe experienced lower renovation activity, partially offset by growth from new construction, leading to a slight overall decline in volume. Architectural SpecialtiesWe experienced strong growth due to new commercial construction activity and increased market penetration, partially driven by the acquisition of Tectum. Average Unit Value . We periodically modify sales prices of our products due to changes in costs for raw materials and energy, market conditions and thecompetitive environment. In certain cases, realized price increases are less than the announced price increases because of project pricing, competitive reactions andchanging market conditions. Additionally, we offer a wide assortment of products that are differentiated by style, design and performance attributes. Pricing andmargins for products within the assortment vary. In addition, changes in the relative quantity of products purchased at different price points can impact year-to-year comparisons of net sales and operating income. We focus on improving sales dollars per unit sold, or average unit value (“AUV”), as a measure that accountsfor the varying assortment of products and geographic mix impacting our revenues. We estimate that favorable AUV increased our Mineral Fiber and totalconsolidated net sales for 2017 by approximately $29 million compared to 2016. Architectural Specialties revenues are generally earned based on individualcontracts that include a mix of products, manufactured by us and sourced, that vary by project. As such, we do not track AUV performance for this segment, butrather attribute all changes in net sales to volume. In the first and fourth quarters of 2017, we implemented ceiling tile pricing increases. We also implemented a pricing increase on grid products in the third quarterof 2017. Finally, in the fourth quarter of 2017 we also announced price increases on certain architectural specialties products, ceiling tile and grid productseffective in the first quarter of 2018. We may implement additional pricing actions based on numerous factors, most notably upon future movements in rawmaterial prices.19Management’s Discussion and Analysis of Financial Condition and Results of Operations Factors Affecting Operating CostsOperating Expenses. Our operating expenses are comprised of direct production costs (principally raw materials, labor and energy), manufacturing overheadcosts, freight, costs to purchase sourced products and selling, general, and administrative (“SG&A”) expenses. Our largest individual raw material expenditures are for fiberglass, perlite, starch, waste paper, pigments and clays. We manufacture most of the production needsfor mineral wool at one of our manufacturing facilities. Natural gas and packaging materials are also significant input costs. Fluctuations in the prices of theseinputs are generally beyond our control and have a direct impact on our financial results. In 2017, the costs for raw materials, sourced products and energynegatively impacted operating income by approximately $3 million, compared to 2016.During the fourth quarter of 2017, we announced the closing of our St. Helens, Oregon mineral fiber manufacturing facility, expected to occur in the first half of2018. Production activity will move to existing facilities in the U.S. We will continue to evaluate the efficiency of our manufacturing footprint and may takeadditional actions in support of our cost and standardization initiatives. The charges associated with any additional cost reduction initiatives could includeseverance and related termination benefits, fixed asset write-downs, asset impairments and accelerated depreciation and may be material to our financial statements.See also “Results of Operations” for further discussion of other significant items affecting operating costs.EmployeesAs of December 31, 2017, we had approximately 3,900 full-time and part-time employees worldwide compared to approximately 3,700 as of December 31,2016. Excluding our EMEA and Pacific Rim businesses, we had approximately 2,200 employees as of December 31, 2017 compared to approximately 2,000 as ofDecember 31, 2016.    The increase in total worldwide employees as of December 31, 2017 in comparison to December 31, 2016 was primarily due to our additionof Tectum employees, partially offset by a reduction of employees related to the closure of one of our plants in China. Collective bargaining agreements covering approximately 460 employees at two U.S. plants will expire during 2018. We believe that our relations with ouremployees are satisfactory.CRITICAL ACCOUNTING ESTIMATESIn preparing our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), we are required to make certainestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements, and the reported amounts of revenues and expenses during the reporting period. We evaluate our estimates and assumptions on an on-going basis,using relevant internal and external information. We believe that our estimates and assumptions are reasonable. However, actual results may differ from what wasestimated and could have a significant impact on the financial statements.We have identified the following as our critical accounting estimates. We have discussed these critical accounting estimates with our Audit Committee.U.S. Pension Credit and Postretirement Benefit Costs – We maintain pension and postretirement plans throughout the world, with the most significant plans locatedin the U.S. Our defined benefit pension and postretirement benefit costs are developed from actuarial valuations. These valuations are calculated using a numberof assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on reported results are thediscount rate, the estimated long-term return on plan assets and the estimated inflation in health care costs. These assumptions are generally updated annually.Management utilizes the Aon Hewitt AA only above median yield curve, which is a hypothetical AA yield curve comprised of a series of annualized individualdiscount rates, as the primary basis for determining discount rates. As of December 31, 2017 and 2016, we assumed discount rates of 3.63% and 4.12%,respectively, for the U.S. defined benefit pension plans. As of December 31, 2017 and 2016, we assumed a discount rates of 3.60% and 4.10%, respectively, forthe U.S. postretirement plan. The effects of the change in discount rate will be amortized into earnings as described below. Absent any other changes, a one-quarter percentage point increase or decrease in the discount rates for the U.S. pension and postretirement plans would not have a material impact on 2018operating income.20Management’s Discussion and Analysis of Financial Condition and Results of Operations We manage two U.S. defined benefit pension plans, our RIP, which is a qualified funded plan, and a nonqualified unfunded plan. For the RIP, the expected long-term return on plan assets represents a long-term view of the future estimated investment return on plan assets. This estimate is d etermined based on the targetallocation of plan assets among asset classes and input from investment professionals on the expected performance of the asset classes over 10 to 30years. Historical asset returns are monitored and considered when we develop our expected long-term return on plan assets. An incremental component is addedfor the expected return from active management based on historical information obtained from the plan’s investment consultants. These forecasted gross returnsare reduced by estimated management fees and expenses. Over the 10 year period ended December 31, 2017, the historical annualized return was approximately5.5% compared to an average expected return of 7.1%. The actual gain on plan assets achieved for 2017 was 12.4%. The difference between the actual andexpected rate of return on plan assets will be amortized into earnings as described below.The expected long-term return on plan assets used in determining our 2017 U.S. pension cost was 6.50%. We have assumed a return on plan assets for 2018 of6.50%. The 2018 expected return on assets was calculated in a manner consistent with 2017. A one-quarter percentage point increase or decrease in thisassumption would increase or decrease 2018 operating income by approximately $3.7 million.Contributions to the unfunded plan were $3.9 million in 2017 and were made on a monthly basis to fund benefit payments. We estimate the 2018 contributions willbe approximately $4.0 million. See Note 16 to the Consolidated Financial Statements for more information.The estimated inflation in health care costs represents a 5-10 year view of the expected inflation in our postretirement health care costs. We separately estimateexpected health care cost increases for pre-65 retirees and post-65 retirees due to the influence of Medicare coverage at age 65, as illustrated below: Assumptions Actual Post 65 Pre 65 Post 65 Pre 65 2016 9.0 % 7.5 % 8.6 % 3.3 %2017 8.5 % 7.3 % 6.8 % 11.3 %2018 9.2 % 8.0 % The difference between the actual and expected health care costs is amortized into earnings as described below. As of December 31, 2017, health care costincreases are estimated to decrease ratably until 2026, after which they are estimated to be constant at 4.5%. A one percentage point increase or decrease in theassumed health care cost trend rate would not have a material impact on 2018 operating income. See Note 16 to the Consolidated Financial Statements for moreinformation.Actual results that differ from our various pension and postretirement plan estimates are captured as actuarial gains/losses. When certain thresholds are met, thegains and losses are amortized into future earnings over the remaining life expectancy of participants. Changes in assumptions could have significant effects onearnings in future years.We recognized a decrease in net actuarial losses related to our U.S. pension benefit plans of $34.8 million in 2017 primarily due to a better than expected return onassets and a partial settlement of the RIP in 2017, partially offset by changes in actuarial assumptions (most significantly a 49 basis point decrease in the discountrate). The $34.8 million actuarial gain impacting our U.S. pension plans is reflected as a component of other comprehensive income in our Consolidated Statementof Earnings and Comprehensive Income along with actuarial gains and losses from our foreign pension plan and our U.S. postretirement benefit plan.Income Taxes – Our effective tax rate is primarily determined based on our pre-tax income and the statutory income tax rates in the jurisdictions in which weoperate. The effective tax rate also reflects the tax impacts of items treated differently for tax purposes than for financial reporting purposes. Some of thesedifferences are permanent, such as expenses that are not deductible in our tax returns, and some differences are temporary, reversing over time, such as depreciationexpense. These temporary differences create deferred income tax assets and liabilities. Deferred income tax assets are also recorded for net operating loss(“NOL”) and foreign tax credit (“FTC”) carryforwards.Deferred income tax assets and liabilities are recognized by applying enacted tax rates to temporary differences that exist as of the balance sheet date. We reducethe carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets will not berealized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, a valuationallowance in accordance with the more likely than not standard, we give appropriate consideration to all positive and negative evidence related to the realization ofthe deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts21Management’s Discussion and Analysis of Financial Condition and Results of Operations of future profitability and foreign source income (“FSI”), the duration of statutory carryforward periods, and our experience with operating loss and tax creditcarryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses isincurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in the assessment.As of December 31, 2017, we have recorded valuation allowances totaling $47.4 million for various federal, state, and foreign deferred tax assets. While we haveconsidered future taxable income in assessing the need for the valuation allowances based on our best available projections, if these estimates and assumptionschange in the future or if actual results differ from our projections, we may be required to adjust our valuation allowances accordingly. Such adjustments could bematerial to our Consolidated Financial Statements.As further described in Note 14 to the Consolidated Financial Statements, our Consolidated Balance Sheet as of December 31, 2017 includes net deferred incometax assets of $96.8 million. Included in this amount are deferred federal income tax assets for FTC carryforwards of $15.7 million, and state NOL deferred incometax assets of $35.6 million. We have established valuation allowances in the amount of $47.4 million consisting of $10.3 million for federal deferred tax assetsrelated to FTC carryovers, $17.7 million for d ifferences between book and tax basis of undistributed foreign earnings , and $19.4 million for state deferred taxassets, primarily operating loss carryovers.Inherent in determining our effective tax rate are judgments regarding business plans and expectations about future operations. These judgments include theamount and geographic mix of future taxable income, the amount of FSI, limitations on usage of NOL carryforwards, the impact of ongoing or potential tax audits,and other future tax consequences.We estimate we will need to generate future U.S. taxable income of approximately $506.8 million for state income tax purposes during the respective realizationperiods (ranging from 2018 to 2036) in order to fully realize the net deferred income tax assets.As previously disclosed in prior SEC filings, our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislationand insufficient future taxable income prior to expiration of certain deferred tax assets.We recognize the tax benefits of an uncertain tax position if those benefits are more likely than not to be sustained based on existing tax law. Additionally, weestablish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained uponexamination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold ismet, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired,whichever is earlier.Impairments of Long-Lived Tangible and Intangible Assets – Our indefinite-lived intangibles are primarily trademarks and brand names, which are integral to ourcorporate identity and expected to contribute indefinitely to our corporate cash flows. Accordingly, they have been assigned an indefinite life. We conduct ourannual impairment test for non-amortizable intangible assets during the fourth quarter, although we conduct interim impairment tests if events or circumstancesindicate the asset might be impaired. We conduct impairment tests for tangible assets and amortizable intangible assets when indicators of impairment exist, suchas operating losses and/or negative cash flows. If an indication of impairment exists, we compare the carrying amount of the asset group to the estimatedundiscounted future cash flows expected to be generated by the assets. If the undiscounted cash flows of an impaired asset are less than the carrying value, anestimate of an asset group’s fair value is based on discounted future cash flows expected to be generated by the asset group, or based on management’s estimatedexit price assuming the assets could be sold in an orderly transaction between market participants or estimated salvage value if no sale is assumed. If the fair valueis less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair value and carrying value of the assetgroup.The principal assumption utilized in our impairment tests for definite-lived intangible assets is operating profit adjusted for depreciation and amortization. Theprincipal assumptions utilized in our impairment tests for indefinite-lived intangible assets include revenue growth rate, discount rate and royalty rate. Revenuegrowth rate and operating profit assumptions are primarily derived from those utilized in our operating plan and strategic planning processes. The discount rateassumption is calculated based upon an estimated weighted average cost of equity which reflects the overall level of inherent risk and the rate of return a marketparticipant would expect to achieve. The royalty rate assumption represents the estimated contribution of the intangible assets to the overall profits of the reportingunit.In 2017, indefinite-lived intangibles were tested for impairment based on our existing reporting units, which changed as a result of the announced future sale of ourEMEA and Pacific Rim segments. No other methodologies used for valuing our intangible assets changed from prior periods.22Management’s Discussion and Analysis of Financial Condition and Results of Operations The cash flow estimates used in applyin g our impairment tests are based on management’s analysis of information available at the time of the impairmenttest. Actual cash flows lower than the estimate could lead to significant future impairments. If subsequent testing indicates that fair value s have declined, thecarrying values would be reduced and our future statements of income would be affected.There were no material impairment charges recorded in 2017, 2016 or 2015 related to intangible assets.We did not test tangible assets within our continuing operations for impairment in 2017, 2016 or 2015 as no indicators of impairment existed.We cannot predict the occurrence of certain events that might lead to material impairment charges in the future. Such events may include, but are not limited to,the impact of economic environments, particularly related to the commercial and residential construction industries, material adverse changes in relationships withsignificant customers, or strategic decisions made in response to economic and competitive conditions.See Notes 3 and 10 to the Consolidated Financial Statements for further information.Environmental Liabilities – We are actively involved in the investigation, closure and/or remediation of existing or potential environmental contamination underthe Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), and state Superfund and similar type environmental laws at severaldomestically owned, formerly owned and non-owned locations allegedly resulting from past industrial activity. In a few cases, we are one of several potentiallyresponsible parties and have agreed to jointly fund the required investigation, while preserving our defenses to the liability. We may also have rights ofcontribution or reimbursement from other parties or coverage under applicable insurance policies. We provide for environmental remediation costs and penalties when the responsibility to remediate is probable and the amount of associated costs is reasonablydeterminable. Accruals are estimates based on the judgment of management related to ongoing proceedings. Estimates of our future liability at the environmentalsites are based on evaluations of currently available facts regarding each individual site. In determining the probability of contribution, we consider the solvency ofother parties, the site activities of other parties, whether liability is being disputed, the terms of any existing agreements and experience with similar matters, andthe effect of our October 2006 Chapter 11 reorganization upon the validity of the claim. We evaluate the measurement of recorded liabilities each reporting period based on current facts and circumstances specific to each matter. The ultimate lossesincurred upon final resolution may materially differ from the estimated liability recorded. Changes in estimates are recorded in earnings in the period in whichsuch changes occur.We are unable to predict the extent to which any recoveries from other parties or coverage under insurance policies might cover our final share of costs for thesesites. Our final share of investigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries may be material.ACCOUNTING PRONOUNCEMENTS EFFECTIVE IN FUTURE PERIODSSee Note 2 to the Consolidated Financial Statements for further information.RESULTS OF OPERATIONSUnless otherwise indicated, net sales in these results of operations are reported based upon the AWI location where the sale was made. Please refer to Notes 3 and4 to the Consolidated Financial Statements for a reconciliation of segment operating income to consolidated earnings from continuing operations before incometaxes and additional financial information related to discontinued operations.2017 COMPARED TO 2016CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS(dollar amounts in millions)   2017 2016 Favorable Total consolidated net sales $893.6 $837.3 6.7 %Operating income $255.1 $188.9 35.0 %23Management’s Discussion and Analysis of Financial Condition and Results of Operations Consolidated net sales increased due to favorable AUV of $29 million and higher volumes of $27 million.Cost of goods sold was 63.8% of net sales in 2017, compared to 63.5% in 2016 due to higher manufacturing and input costs. The increase in cost of goods sold as apercentage of sales in comparison to 2016 was impacted by $10 million of accelerated depreciation charges due to management’s decision to permanently close aplant in China that will be retained by AWI after the sale of our Pacific Rim business and management’s decision to close our St. Helens, Oregon plant. Cost ofgoods sold for 2017 were also impacted by an increase in manufacturing and input costs and $3 million of severance and other charges associated with theannounced closure of our St. Helens, Oregon plant. Partially offsetting these increases was a $10 million reduction in RIP expense and a $10 million reduction ofcost of goods sold related to environmental insurance settlements recorded in 2017.SG&A expenses in 2017 were $135.7 million, or 15.2% of net sales, compared to $155.5 million, or 18.6% of net sales, in 2016. The decrease in SG&A expenseswas impacted by a $7 million decrease in the RIP expense, a $6 million reduction in expenses resulting from an increase in certain selling, promotional andadministrative processing service reimbursements from WAVE and a $5 million reduction related to environmental insurance settlements, net of charges. Thesedecreases in SG&A expenses were partially offset by higher SG&A expenses as a result of the Tectum acquisition and $2 million of severance related to costcontrol measures in the U.S. Separation costs of $34.5 million in 2016 were primarily related to outside professional services and employee retention and severance accruals incurred inconjunction with our initiative to separate our flooring business from our ceilings business.Equity earnings from our WAVE joint venture were $67.0 million in 2017, compared to $73.1 million in 2016. The decrease in WAVE earnings was primarilydriven by an increase in selling and administrative processing charges from AWI and Worthington Industries, Inc. WAVE earnings were also negatively impactedby higher input costs, particularly steel. See Note 9 to the Consolidated Financial Statements for further information. Interest expense was $35.4 million in 2017, compared to $49.5 million in 2016. Interest expense in 2016 included higher debt financing costs as a result of therefinancing of our credit facilities in April 2016 and $8.3 million of net losses that were reclassified from accumulated other comprehensive income as a result ofthe settlement of interest rate swaps which occurred in April 2016 and in connection with our entering into $450.0 million of notional amount of basis rate swapsduring the fourth quarter of 2016. Also contributing to the decrease in interest expense was a reduction in total debt outstanding and a lower interest rate spread incomparison to 2016.Other non-operating income was $2.4 million in 2017 and $11.2 million in 2016. The changes in other non-operating income were primarily due to foreignexchange rate gains on the translation of unhedged cross-currency intercompany loans in 2016. Income tax expense was $1.5 million and $51.3 million in 2017 and 2016, respectively. The effective tax rate for 2017 was 0.7% as compared to a rate of 34.1%for 2016. On December 22, 2017, the U.S. federal government enacted the Tax Cut and Jobs Act of 2017 (the “2017 Tax Act”), resulting in significant changesfrom previous tax law. Effective January 1, 2018, the 2017 Tax Act reduces the federal corporate income tax rate from 35% to 21%. As a result, we recorded a net$82.5 million income tax benefit in the fourth quarter of 2017. Excluding the impact of the 2017 Tax Act, income tax expense for 2017 increased in comparison to2016 due to an increase in pre-tax income, a decrease in reversals of reserves for uncertain tax positions from the expiration of the federal statute of limitations andan increase to the valuation allowance on foreign tax credits due to the anticipated sale of our EMEA and Pacific Rim businesses.Total other comprehensive income (“OCI”) was $57.9 million for 2017 compared to $23.6 million for 2016. Foreign currency translation adjustments represent thechange in the U.S. dollar value of assets and liabilities denominated in foreign currencies. Foreign currency translation adjustments in 2017 were driven primarilyby changes in the exchange rates of the British pound, the Chinese renminbi, the Russian ruble and the Canadian dollar. Derivative gain/loss represents the mark tomarket value adjustments of our derivative assets and liabilities and the recognition of gains and losses previously deferred in OCI. Derivative gains in 2016 wereimpacted by $8.3 million of net losses related to settlements of interest rates swaps. Pension and postretirement adjustments represent actuarial gains and lossesrelated to our defined benefit pension and postretirement plans and amortization of net losses on the U.S. pension plans. Increases in OCI in 2017 primarily relatedto our U.S. pension plans.24Management’s Discussion and Analysis of Financial Condition and Results of Operations REPORTABLE SEGMENT RESULTSMineral Fiber(dollar amounts in millions) Change is 2017 2016 Favorable Total segment net sales $756.4 $736.6 2.7 %Operating income $231.9 $223.9 3.6 % Net sales increased due to favorable AUV of $29 million, partially offset by lower volumes of $10 million. The favorable AUV was primarily due to improved mixfrom the sale of higher end ceiling tile products, while the decrease in volumes was primarily in lower end ceiling tile products. Operating income increased due to lower SG&A expenses of $20 million and the favorable margin impact of higher AUV of $12 million, partially offset by highermanufacturing and input costs of $13 million, lower earnings from WAVE of $6 million and the negative impact of lower volumes of $2 million. The reduction inSG&A expenses was impacted by $6 million of additional expense reimbursements from WAVE and $5 million of environmental insurance settlements, net ofcharges, both recorded in 2017. The increase in manufacturing costs was impacted by higher costs associated with planned enhancements to our manufacturingfootprint to produce high end products and $7 million of severance and accelerated depreciation charges, primarily associated with the announced closure of our St.Helens manufacturing plant, partially offset by a $10 million reduction in costs related to environmental insurance settlements, net of charges, in 2017. Architectural Specialties(dollar amounts in millions) Change is 2017 2016 Favorable Total segment net sales $137.2 $100.7 36.2 %Operating income $27.7 $19.2 44.3 % Net sales increased due to higher volumes, partially as a result of our acquisition of Tectum and increased new construction activity.Operating income increased due to the positive impact of higher volumes, partially offset by an increase in SG&A expenses due primarily to the acquisition ofTectum and investments in selling and design capabilities.Unallocated CorporateUnallocated Corporate expense of $5 million decreased from $54 million in the prior year, due to $35 million of charges incurred in connection with our separationof AFI in 2016 and a $17 million decrease in RIP expense. FINANCIAL CONDITION AND LIQUIDITYCash FlowThe discussion that follows includes cash flows related to discontinued operations.Operating activities for 2017 provided $170.4 million of cash, compared to $49.3 million of cash provided in 2016. The increase was primarily due to changes inworking capital, most notably a decrease accounts payable and accrued expenses related to the separation of AFI. Net cash used for investing activities was $54.2 million in 2017, compared to $17.0 million in 2016. The change in investing activities cash flows was primarilydue to the acquisition of Tectum and lower dividends from our WAVE joint venture, partially offset by decreased purchases of property, plant and equipment.Net cash used by financing activities was $102.7 million in 2017, compared to $128.9 million in 2016. The favorable change in use of cash was primarily the resultof lower payments of debt, partially offset by higher repurchases of outstanding common stock.25Management’s Discussion and Analysis of Financial Condition and Results of Operations LiquidityOur liquidity needs for operations vary throughout the year. We retain lines of credit to facilitate our seasonal cash flow needs, since cash flow is generally lowerduring the first and fourth quarters of our fiscal year. We have a $1,050.0 million senior credit facility which is comprised of a $200.0 million revolving credit facility (with a $150.0 million sublimit for letters ofcredit), a $600.0 million Term Loan A and a $250.0 million Term Loan B. The revolving credit facility and Term Loan A are currently priced at 2.00% overLIBOR and the Term Loan B portion is priced at 2.75% over LIBOR with a 0.75% floor. The senior credit facility also has a $25.0 million letter of credit facility,also known as our bi-lateral facility. The revolving credit facility and Term Loan A mature in March 2021 and Term Loan B matures in November 2023. This$1,050.0 million senior credit facility is secured by U.S. personal property, the capital stock of material U.S. subsidiaries and a pledge of 65% of the stock of ourmaterial first tier foreign subsidiaries. As of December 31, 2017, total borrowings outstanding under our senior credit facility were $577.5 million under Term Loan A and $245.6 million under TermLoan B. There were no borrowings outstanding under the revolving credit facility. In February 2017, we repriced the interest rate of our Term Loan B borrowing, resulting in a lower LIBOR spread (2.75% vs. 3.25%). The maturity date remainedunchanged along with all other terms and conditions. In connection with the repricing we paid $0.6 million of bank, legal and other fees, the majority of whichwere capitalized. Under our senior credit facility we are subject to year-end leverage tests that may trigger mandatory prepayments. If our ratio of consolidated funded indebtednessminus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100 million to consolidated earnings before interest, taxes, depreciation andamortization (“EBITDA”) (“Consolidated Net Leverage Ratio”) is greater than 3.5 to 1.0, the prepayment amount would be based on a computation of 50% ofConsolidated Excess Cash Flow, as defined by the credit agreement. These annual payments would be made in the first quarter of the following year. No paymentwas made in 2017 or will be required in 2018.The senior credit facility includes two financial covenants that require the ratio of consolidated EBITDA to consolidated cash interest expense minus cashconsolidated interest income to be greater than or equal to 3.0 to 1.0 and requires the Consolidated Net Leverage Ratio to be less than or equal to 3.75 to 1.0. As ofDecember 31, 2017, we were in compliance with all covenants of the senior credit facility.The Term Loan A and Term Loan B were both fully drawn and are currently priced on a variable interest rate basis. The following table summarizes our interestrate swaps (dollar amounts in millions): Trade Date NotionalAmount Coverage Period Risk CoverageNovember 13, 2016 $250.0 November 2016 to March 2018 Term Loan ANovember 13, 2016 $200.0 November 2016 to March 2021 Term Loan AApril 1, 2016 $100.0 April 2016 to March 2023 Term Loan B These swaps are designated as cash flow hedges against changes in LIBOR for a portion of our variable rate debt. The unpaid balances of Term Loan A, theRevolving Credit Facility and Term Loan B may be prepaid without penalty at the maturity of their respective interest reset periods. Any amounts prepaid on theTerm Loan A or Term Loan B may not be re-borrowed. In connection with the refinancing of our credit facilities in April 2016, $450.0 million of notional amount Term Loan B swaps with a trade date of March 27, 2012were settled and $10.7 million of losses previously recorded as a component of accumulated other comprehensive income were reclassified to interest expense in2016. As of December 31, 2017, we had $450.0 million notional Term A swaps (the “Term Loan A Swaps”), in which we received 1-month LIBOR and paid a fixed rateover the hedged period. During the fourth quarter of 2016, we elected to change the basis for interest payments due under our Term Loan A Swaps from 3-month LIBOR to 1-monthLIBOR. In connection with the change in our underlying interest payments, in November 2016 we entered into $450.0 million forward-starting notional amountbasis rate swaps to convert the floating rate risk under our Term Loan A Swaps from 3-month LIBOR to 1-month LIBOR and jointly designated the basis swapswith our Term Loan A Swaps in cash flow hedging relationships. As a result of this transaction, $2.4 million of gains previously recorded as a component ofaccumulated other comprehensive income were reclassified as a reduction to interest expense during the fourth quarter of 2016. Since the basis rate26Management’s Discussion and Analysis of Financial Condition and Results of Operations swaps had a non-zero fair value upon designation as cash flow hedges, mark-to-market gains or losses on ineffective portions of these hedges are reco rded as acomponent of interest expense. As of December 31, 2017, we had a $100.0 million notional Term Loan B swap in which we receive the greater of 3-month LIBOR or a 0.75% LIBOR Floor andpay a fixed rate over the hedged period. As of December 31, 2017 our outstanding long-term debt included a $35.0 million variable rate, tax-exempt industrial development bond that financed theconstruction of a plant in prior years. This bond has a scheduled final maturity of 2041 and is remarketed by an agent on a regular basis at a market-clearing interestrate. Any portion of the bond that is not successfully remarketed by the agent is required to be repurchased. This bond is backed by letters of credit which will bedrawn if a portion of the bond is not successfully remarketed. We have not had to repurchase the bond.As of December 31, 2017, we had $159.6 million of cash and cash equivalents, $81.0 million in the U.S and $78.6 million in various foreign jurisdictions. Uponcompletion of the sale of our EMEA and Pacific Rim businesses, it is our intention to repatriate a significant majority of the $78.6 million of cash held in variousforeign jurisdictions; however our Purchase Agreement with Knauf allows AWI to transfer any cash balances held in our EMEA and Pacific Rim businesses toKnauf up to $10.0 million. See Note 4 to the Consolidated Financial Statements for additional information.We have a $40.0 million Accounts Receivable Securitization Facility (the “funding entity”) that matures in March 2019. Under our Accounts ReceivableSecuritization Facility we sell accounts receivables to Armstrong Receivables Company, LLC (“ARC”), a Delaware entity that is consolidated in these financialstatements. ARC is a 100% wholly owned single member LLC special purpose entity created specifically for this transaction; therefore, any receivables sold toARC are not available to the general creditors of AWI. ARC then sells an undivided interest in the purchased accounts receivables to the funding entity. Thisundivided interest acts as collateral for drawings on the facility. Any borrowings under this facility are obligations of ARC and not AWI. ARC contracts with andpays a servicing fee to AWI to manage, collect and service the purchased accounts receivables. All new receivables under the program are continuously purchasedby ARC with the proceeds from collections of receivables previously purchased. As of December 31, 2017 we had no borrowings under this facility.We utilize lines of credit and other commercial commitments in order to ensure that adequate funds are available to meet operating requirements. Letters of creditare currently arranged through our revolving credit facility, our bi-lateral facility and our securitization facility. Letters of credit may be issued to third partysuppliers, insurance and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to the beneficiary. Thefollowing table presents details related to our letters of credit (dollar amounts in millions): As of December 31, 2017 Financing Arrangement Limit Used Available Revolving credit facility $150.0 $- $150.0 Bi-lateral facility 25.0 17.1 7.9 Accounts receivable securitization facility 29.6 36.2 (6.6)Total $204.6 $53.3 $151.3 As of December 31, 2017 and 2016, $6.6 million and $4.0 million, respectively, of letters of credit issued under our accounts receivable securitization facility inexcess of our maximum limit were classified as restricted cash and reported as a component of Cash and cash equivalents on our Consolidated BalanceSheets. This restriction will lapse upon replacement of collateral with accounts receivables and/or upon a change in the letter of credit limit as a result of highersecuritized accounts receivable balances. We believe that cash on hand and cash generated from operations, together with lines of credit, availability under our revolving credit facility, will be adequate toaddress our foreseeable liquidity needs based on current expectations of our business operations, capital expenditures and scheduled payments of debt obligations.27Management’s Discussion and Analysis of Financial Condition and Results of Operations 2016 COMPARED TO 2015CONSOLIDATED RESULTS FROM CONTINUING OPERATIONS(dollar amounts in millions)   Change is 2016 2015 Favorable Total consolidated net sales $837.3 $805.1 4.0 %Operating income $188.9 $157.0 20.3 % Consolidated net sales for 2016 increased due to higher volumes of $20 million and favorable AUV of $15 million. Cost of goods sold was 63.5% of net sales in 2016, compared to 62.0% in 2015. Compared to the prior year, the increase was due to higher manufacturing andinput costs. SG&A expenses in 2016 were $155.5 million, or 18.6% of net sales, compared to $180.8 million, or 22.5% of net sales in 2015. The decrease was the result of theAFI separation and a decrease in RIP expense. Separation costs of $34.5 million in 2016 and $34.3 million in 2015 were primarily related to outside professional services and employee retention and severanceaccruals incurred in conjunction with our initiative to separate our flooring business from our ceilings business.Equity earnings from our WAVE joint venture were $73.1 million in 2016, compared to $66.1 million in 2015. The increase was due to higher sales volumes,favorable AUV and lower manufacturing input costs, partially offset by higher SG&A expenses for go-to-market investments. Interest expense was $49.5 million in 2016, compared to $44.6 million in 2015. The increase in interest expense was due to $10.7 million of losses that werereclassified from accumulated other comprehensive income to interest expense during 2016 as a result of the settlement of $450.0 million of notional amountinterest rate swaps which occurred in connection with the refinancing of our credit facilities, partially offset by lower costs due to a reduction in total debtoutstanding and a lower interest rate spread and $2.4 million of gains that were reclassified from accumulated other comprehensive income to interest expenseduring 2016 in connection with our entering into $450.0 million of notional amount of basis rate swaps. Other non-operating income was $11.2 million in 2016, compared to other non-operating expense of $17.8 million in 2015. The changes in other non-operatingincome were primarily due to foreign exchange rate gains on the translation of unhedged cross-currency intercompany loans. Expenses in 2015 were primarily dueto foreign exchange rate losses on the translation of unhedged cross-currency intercompany loans denominated in Russian rubles, related to the construction of ourRussian mineral fiber ceiling plant that was completed in the first quarter of 2015. During the fourth quarter of 2016, all Russian ruble denominated intercompanyloans were settled with intercompany capital contributions. Income tax expense was $51.3 million and $36.7 million in 2016 and 2015, respectively. The effective tax rate for 2016 was 34.1% as compared to a rate of 38.8%for 2015. The effective tax rate for 2016 was lower than 2015 primarily due to income tax benefits recorded during the second half of 2016 resulting from thereversal of reserves for uncertain tax positions as a result of an expiration of the federal statute of limitations to review previously filed income tax returns.REPORTABLE SEGMENT RESULTSMineral Fiber(dollar amounts in millions) Change is Favorable/ 2016 2015 (Unfavorable) Total segment net sales $736.6 $723.7 1.8 %Operating income $223.9 $270.3 (17.2)% Net sales increased due to favorable AUV of $15 million, while volume was flat.Operating income decreased due to higher SG&A expenses of $50 million, the margin impact of lower volumes of $5 million and an increase manufacturing andinput costs of $4 million, partially offset by the margin impact of favorable AUV of $8 million and higher28Management’s Discussion and Analysis of Financial Condition and Results of Operations earnings from WAVE of $7 million. The increase in SG&A expenses in 2016 was primarily a result of the inclusion of costs formally assigned to our UnallocatedCorporate se gment prior to the separation of AFI, partially offset by a reduction in costs primarily due to the separation of AFI.Architectural Specialties(dollar amounts in millions) Change is 2016 2015 Favorable Total segment net sales $100.7 $81.4 23.7 %Operating income $19.2 $16.5 16.4 % Net sales and operating income both increased due to higher volumes. The increase in operating income was partially offset by a $4 million increase in SG&Aexpenses, due to investments in selling and design capabilities. Unallocated CorporateUnallocated Corporate expense of $54.2 million decreased from $129.8 million in the prior year. The decrease was due to the inclusion of most of the Corporatefunctions within the Mineral Fiber and Architectural Specialties segments starting in 2016 as a result of the AFI separation.Cash FlowThe discussion that follows includes cash flows related to discontinued operations.Operating activities for 2016 provided $49.3 million of cash, compared to $203.7 million of cash provided in 2015. The decrease was primarily due to change inworking capital, most notably a decrease in accounts payable and accrued expenses related to the separation of AFI. The decrease due to the change in workingcapital was partially offset by higher cash earnings partially offset by a reduction in depreciation and amortization.Net cash used for investing activities was $17.0 million in 2016, compared to $101.5 million in 2015. The change in investing activities cash flows was primarilydue to decreased purchases of property, plant and equipment, partially offset by higher dividends from our WAVE joint venture.Net cash used by financing activities was $128.9 million in 2016, compared to $32.3 million in 2015. The unfavorable use of cash was primarily the result ofhigher payments of debt and repurchase of outstanding common stock.OFF-BALANCE SHEET ARRANGEMENTSNo disclosures are required pursuant to Item 303(a)(4) of Regulation S-K.29Management’s Discussion and Analysis of Financial Condition and Results of Operations CONTRACTUAL OBLIGATIONSAs part of our normal operations, we enter into numerous contractual obligations that require specific payments during the term of the various agreements. Thefollowing table includes amounts ongoing under contractual obligations existing as of December 31, 2017. Only known payments that are dependent solely on thepassage of time are included. Obligations under contracts that contain minimum payment amounts are shown at the minimum payment amount. Contracts thatcontain variable payment structures without minimum payments are excluded. Purchase orders that are entered into in the normal course of business are alsoexcluded because they are generally cancelable and not legally binding. Amounts are presented below based upon the currently scheduled payment terms. Actualfuture payments may differ from the amounts presented below due to changes in payment terms or events affecting the payments. (dollar amounts in millions) 2018 2019 2020 2021 2022 Thereafter Total Long-term debt (1) $32.5 $55.0 $62.5 $437.5 $2.5 $268.1 $858.1 Scheduled interest payments (2) 33.1 34.7 32.2 21.8 12.9 19.6 154.3 Operating lease obligations, net of sublease income (3) 2.4 2.2 1.8 1.5 1.1 4.3 13.3 Unconditional purchase obligations (4) 49.8 5.7 1.6 1.4 1.2 1.7 61.4 Pension contributions (5) 4.0  -   -   -   -   -  4.0 Other obligations (6), (7) 4.7 -  -   -   -   -  4.7 Total contractual obligations $126.5 $97.6 $98.1 $462.2 $17.7 $293.7 $1,095.8 (1)Excludes $7.9 million of unamortized debt financing costs as of December 31, 2017. (2)For debt with variable interest rates and interest rate swaps, we projected future interest payments based on market-based interest rate swap curves.(3)Lease obligations include the minimum payments due under existing agreements with non-cancelable lease terms in excess of one year.(4)Unconditional purchase obligations include (a) purchase contracts whereby we must make guaranteed minimum payments of a specified amount regardlessof how little material is actually purchased (“take or pay” contracts) and (b) service agreements. Unconditional purchase obligations exclude contractsentered into during the normal course of business that are non-cancelable and have fixed per unit fees, but where the monthly commitment varies basedupon usage. Cellular phone contracts are an example.(5)Pension contributions include estimated contributions for our defined benefit pension plans. We are not presenting estimated payments in the table abovebeyond 2018 as funding can vary significantly from year to year based upon changes in the fair value of plan assets, funding regulations and actuarialassumptions.(6)Other obligations include payments under severance agreements.(7)Other obligations excludes $53.4 million of unrecognized tax benefit liabilities under ASC 740 “Income Taxes.” Due to the uncertainty relating to thesepositions, we are unable to reasonably estimate the ultimate amount or timing of the settlement of these issues. Other obligations also excludes $10.3million of one-time deemed repatriation tax liabilities on undistributed foreign earnings and profits, gross of foreign tax credit utilization, as a result of theenactment of the 2017 Tax Act as such amounts were recorded on a provisional basis and estimated based on information available as of December 31,2017. See Note 14 to the Consolidated Financial Statements for more information.This table excludes obligations related to postretirement benefits (retiree health care and life insurance) since we voluntarily provide these benefits. The amount ofbenefit payments we made in 2017 was $10.3 million. See Note 16 to the Consolidated Financial Statements for additional information regarding future expectedcash payments for postretirement benefits.We are party to supply agreements, some of which require the purchase of inventory remaining at the supplier upon termination of the agreement. Had theseagreements terminated at December 31, 2017, we would have been obligated to purchase approximately $0.6 million of inventory. Historically, due to productionplanning, we have not had to purchase material amounts of product at the end of similar contracts. Accordingly, no liability has been recorded for these guarantees.30Management’s Discussion and Analysis of Financial Condition and Results of Operations Letters of credit are currently arranged through our revolving credit facility, our bi-lateral facility and our securitization facility. Letters of credit may be issued tothird party suppliers, insurance and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to thebeneficiary. The following table summarizes the commitments we have available for use as of December 31, 2017. Other Commercial Commitments(dollar amounts in millions) Total AmountsCommitted LessThan 1Year 1 – 3Years 4 – 5Years Over 5Years Letters of credit $53.3 $53.3 $- $- $- In connection with our disposition of certain assets through a variety of unrelated transactions, we have entered into contracts that included various indemnityprovisions, some of which are customary for such transactions, while others hold the acquirer of the assets harmless with respect to liabilities relating to suchmatters as taxes, environmental and other litigation. Some of these provisions include exposure limits, but many do not. Due to the nature of the indemnities, it isnot possible to estimate the potential maximum exposure under these contractual provisions. As of December 31, 2017, we had no liabilities recorded for which anindemnity claim had been received. 31 ITEM 7A.QUANTITATIVE AND QUALITA TIVE DISCLOSURES ABOUT MARKET RISKMarket RiskWe are exposed to market risk from changes in foreign currency exchange rates, interest rates and commodity prices that could impact our results of operations,cash flows and financial condition. We use forward swaps and option contracts to hedge these exposures, which are entered into for periods consistent withunderlying exposure and do not constitute positions independent of those exposures. We use derivative financial instruments as risk management tools and not forspeculative trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order tomanage our exposure to potential nonperformance on such instruments. We regularly monitor developments in the capital markets.Counterparty RiskWe only enter into derivative transactions with established counterparties having an investment grade or better. We monitor counterparty credit default swap levelsand credit ratings on a regular basis. All of our derivative transactions with counterparties are governed by master International Swap and Derivatives Associationagreements (“ISDAs”) with netting arrangements. These agreements can limit our exposure in situations where we have gain and loss positions outstanding with asingle counterparty. We do not post nor receive cash collateral with any counterparty for our derivative transactions. These ISDAs do not contain any creditcontingent features other than those contained in our bank credit facility. Exposure to individual counterparties is controlled, and thus we consider the risk ofcounterparty default to be negligible.Interest Rate SensitivityWe are subject to interest rate variability on our Term Loan A, Term Loan B, revolving credit facility and other borrowings. A hypothetical increase of one-quarterpercentage point in LIBOR interest rates from December 31, 2017 levels would increase 2018 interest expense by approximately $1.4 million. As of December 31,2017, $245.6 million of our debt has a 0.75% LIBOR floor, which would not be affected by a one-quarter percentage point move in LIBOR given the currentinterest rate environment. We also have $550.0 million of interest rate swaps outstanding, which fix the interest rates for a portion of our debt. The current portionof the interest rate swaps is included in this calculation. As of December 31, 2017, we had interest rate swaps outstanding on Term Loan A and on Term Loan B, with notional amounts of $450.0 million and $100.0million, respectively. We utilize interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. Under the terms of the Term Loan Aswaps we receive 1-month LIBOR and pay a fixed rate over the hedged period. Under the terms of our Term Loan B, we receive the greater of 3-month LIBOR ora 0.75% LIBOR Floor and pay a fixed rate over the hedged period. The following table summarizes our interest rate swaps as of December 31, 2017 (dollaramounts in millions): Trade Date NotionalAmount Coverage Period Risk CoverageNovember 13, 2016 $250.0 November 2016 to March 2018 Term Loan ANovember 13, 2016 $200.0 November 2016 to March 2021 Term Loan AApril 1, 2016 $100.0 April 2016 to March 2023 Term Loan B These swaps are designated as cash flow hedges against changes in LIBOR for a portion of our variable rate debt. The net asset measured at fair value was $8.9million at December 31, 2017.The table below provides information about our long-term debt obligations as of December 31, 2017, including payment requirements and related weighted-average interest rates by scheduled maturity dates. Weighted average variable rates are based on implied forward rates in the yield curve and are exclusive of ourinterest rate swaps. Scheduled maturity date(dollar amounts in millions) 2018 2019 2020 2021 2022 After2022 Total Variable rate principal payments $32.5 $55.0 $62.5 $437.5 $2.5 $268.1 $858.1 Average interest rate 3.90% 4.30% 4.37% 4.41% 5.26% 4.91% 4.54% Variable rate principle payments reflected in the preceding table exclude $7.9 million of unamortized debt financing costs as of December 31, 2017. 32 Exchange Rate SensitivityWe manufacture and sell our products in a number of countries throughout the world and, as a result, are exposed to movements in foreign currency exchangerates. To a large extent, our global manufacturing and sales provide a natural hedge of foreign currency exchange rate movement. Upon completion of the sale ofour EMEA and Pacific Rim businesses, and on a continuing operations basis as of December 31, 2017, our only major foreign currency exposure is to the Canadiandollar. A 10% strengthening of the Canadian dollar against the U.S. dollar compared to December 31, 2017 levels would increase our 2018 earnings before incometaxes by approximately $0.5 million, including the impact of current foreign currency forward exchange contracts.The table below details our outstanding currency instruments as of December 31, 2017. On balance sheet foreign exchange related derivatives(dollar amounts in millions) Maturing in 2018 Maturing in 2019 Total Notional amounts $15.7 $3.2 $18.9 Assets at fair value (0.7) (0.1) (0.8) Natural Gas Price SensitivityWe purchase natural gas for use in the manufacturing process and to heat many of our facilities. As a result, we are exposed to fluctuations in the price of naturalgas. We have a policy of reducing North American natural gas volatility through derivative instruments, including forward contracts and swaps, purchased calloptions, and zero-cost collars up to 24 months forward. As of December 31, 2017, we had contracts to hedge approximately $9.2 million (notional amounts) ofnatural gas. All of these contracts mature by November 2019. A 10% increase in North American natural gas prices compared to December 31, 2017 prices wouldincrease our 2018 expenses by approximately $0.5 million including the impact of current hedging contracts. As of December 31, 2017 we had recorded netliabilities of $0.6 million related to these contracts. 33 ITEM 8.FINANCIAL STATEMEN TS AND SUPPLEMENTARY DATASUPPLEMENTARY DATAQuarterly Financial Information for the Years Ended December 31, 2017 and 2016 (Unaudited)The following consolidated financial statements are filed as part of this Annual Report on Form 10-K:Reports of Independent Registered Public Accounting Firm.Consolidated Statements of Earnings and Comprehensive Income for the Years Ended December 31, 2017, 2016 and 2015.Consolidated Balance Sheets as of December 31, 2017 and 2016.Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016 and 2015.Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015.Notes to Consolidated Financial Statements.Schedule II for the Years Ended December 31, 2017, 2016 and 2015. 34 Armstrong World Industries, Inc., and Subsi diariesQuarterly Financial Information (unaudited)(dollar amounts in millions, except for per share data) First Second Third Fourth 2017 Net sales $219.8 $225.6 $233.9 $214.3 Gross profit 83.4 90.3 83.6 66.5 Earnings from continuing operations 35.5 43.7 37.3 104.1 Per share of common stock: Basic $0.65 $0.82 $0.70 $1.96 Diluted $0.65 $0.81 $0.70 $1.92 Price range of common stock - high $48.00 $47.95 $51.98 $61.50 Price range of common stock - low $38.45 $41.20 $43.77 $49.25 2016 Net sales $200.1 $214.8 $226.0 $196.4 Gross profit 70.7 79.5 87.3 68.3 (Loss) earnings from continuing operations (0.2) 26.8 54.5 18.2 Per share of common stock: Basic $- $0.48 $0.97 $0.33 Diluted $- $0.48 $0.97 $0.33 Price range of common stock - high $48.66 $48.39 $45.75 $45.00 Price range of common stock - low $35.92 $36.33 $37.49 $36.38 Note: The net sales and gross profit amounts above are reported on a continuing operations basis. The sum of the quarterly earnings per share data may not equalthe total year amounts due to changes in the average shares outstanding and, for diluted data, the exclusion of the anti-dilutive effect in certain quarters. Historicalstock prices above have not been restated as a result of the separation of AFI. 35 Armstrong World Industries, Inc., and SubsidiariesQuarterly Financial Information (unaudited)(dollar amounts in millions, except for per share data)Fourth Quarter 2017 Compared With Fourth Quarter 2016 – Continuing OperationsConsolidated net sales of $214.3 million in the fourth quarter of 2017 increased 9.1% due to higher volumes of $14 million and favorable AUV of $4 million.Mineral Fiber net sales increased 3.4% due to favorable AUV of $4 million and higher volumes of $1 million. Architectural Specialties net sales increased 49.0%due to higher volumes due to the acquisition of Tectum and increased new construction activity.For the fourth quarter of 2017, cost of goods sold was 69.0% of net sales, compared to 65.2% in 2016. The increase in cost of goods sold as a percentage of saleswas impacted by $6 million of accelerated depreciation charges primarily due to management’s decision to permanently close a plant in China that will be retainedby AWI after the sale of our Pacific Rim business and management’s decision to close our St. Helens, Oregon plant. Cost of goods sold for 2017 was also impactedby an increase in manufacturing and input costs and $3 million of severance and other charges associated with the announced closure of our St. Helens, Oregonplant. Partially offsetting these increases was a $6 million reduction in RIP expense and a $2 million reduction of cost of goods sold related to environmentalinsurance settlements, net of charges, recorded in 2017.SG&A expenses for the fourth quarter of 2017 were $29.9 million, or 14.0% of net sales compared to $42.6 million, or 21.7% of net sales, for the fourth quarter of2015. The decrease in SG&A expenses was primarily due to a reduction of $6 million related to environmental insurance settlements, net of charges, a $4 milliondecrease in the RIP expense and a $2 million reduction in expenses resulting from an increase in certain selling, promotional and administrative processing servicereimbursements from WAVE. These decreases in SG&A expenses were partially offset by $2 million of severance related to cost control measures in the U.S. as aresult of the announced future sale of our EMEA and Pacific Rim businesses. Equity earnings in the fourth quarters of 2017 and 2016 were $15.1 million and $16.1 million, respectively. The decrease in WAVE earnings was primarily drivenby higher input costs, particularly steel, and an increase in selling and administrative processing charges from AWI and Worthington Industries, Inc. Operating income was $51.7 million in the fourth quarter of 2017 compared to $40.3 million in the fourth quarter of 2016, with the increase due primarily to adecrease in SG&A expenses as described above.Interest expense in the fourth quarter of 2017 decreased to $8.8 million compared to $11.2 million in the fourth quarter of 2016 primarily due to a reduction in totaldebt outstanding and a lower interest rate spread, partially offset by $2.4 million of gains on interest rate swaps recorded as a reduction to interest expense in thefourth quarter of 2016.Fourth quarter income tax benefit was $60.7 million on pre-tax earnings from continuing operations of $43.4 million in 2017 compared to income tax expense of$12.7 million on a pre-tax earnings from continuing operations of $30.9 million in 2016. The effective tax rate for 2017 was lower than 2016 primarily due to theincome tax benefits of the 2017 Tax Act. Effective January 1, 2018, the 2017 Tax Act reduces the federal corporate income tax rate from 35% to 21%. As a result,we recorded a net $82.5 million income tax benefit in the fourth quarter of 2017. Excluding the impact of the 2017 Tax Act, income tax expense for the fourthquarter of 2017 increased in comparison to 2016 due to an increase in pre-tax income and an increase to the valuation allowance on foreign tax credits in 2017 dueto the anticipated sale of our EMEA and Pacific Rim businesses.36 Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting was designed to provide reasonable assuranceregarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally acceptedaccounting principles.Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate.Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internalcontrol over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations ofthe Treadway Commission (COSO). Based on this evaluation and the criteria in the COSO framework, our management concluded that our internal control overfinancial reporting was effective as of December 31, 2017.KPMG LLP, an independent registered public accounting firm, audited our internal control over financial reporting as of December 31, 2017, as stated in theirreport included herein. /s/ Victor D. Grizzle Victor D. GrizzleDirector, President and Chief Executive Officer /s/ Brian L. MacNeal Brian L. MacNealSenior Vice President and Chief Financial Officer /s/ Stephen F. McNamara Stephen F. McNamaraVice President and Corporate ControllerFebruary 26, 201837 Report of Independent Regist ered Public Accounting Firm To the Shareholders and Board of Directors Armstrong World Industries, Inc.:Opinion on Internal Control Over Financial ReportingWe have audited Armstrong World Industries, Inc. and subsidiaries (the “Company”) internal control over financial reporting as of December 31, 2017, based oncriteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In ouropinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria establishedin Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balancesheets of the Company as of December 31, 2017 and 2016, the related consolidated statements of earnings and comprehensive income, equity, and cash flows foreach of the years in the three-year period ended December 31, 2017, and the related notes and financial statement schedule of valuation and qualifying reserves(collectively, the “consolidated financial statements”), and our report dated February 26, 2018 expressed an unqualified opinion on those consolidated financialstatements.Basis for OpinionThe Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting . Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB andare required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reportingincluded obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating thedesign and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considerednecessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.Definition and Limitations of Internal Control Over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactionsand dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance withauthorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ KPMG LLP Philadelphia, Pennsylvania February 26, 201838 Report of Independent Registered Public Accounting FirmTo the Shareholders and Board of Directors Armstrong World Industries, Inc.: Opinion on the Consolidated Financial StatementsWe have audited the accompanying consolidated balance sheets of Armstrong World Industries, Inc. and subsidiaries (the “Company”) as of December 31, 2017and 2016, the related consolidated statements of earnings and comprehensive income, equity, and cash flows for each of the years in the three‑year period endedDecember 31, 2017, and the related notes and financial statement schedule of valuation and qualifying reserves (collectively, the “consolidated financialstatements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,2017 and 2016, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2017, in conformity withU.S. generally accepted accounting principles.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internalcontrol over financial reporting as of December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committeeof Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2018 expressed an unqualified opinion on the effectiveness of theCompany’s internal control over financial reporting. Basis for OpinionThese consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidatedfinancial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to theCompany in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performingprocedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures thatrespond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overallpresentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion./s/ KPMG LLPWe have served as the Company’s auditor since 1929.Philadelphia, PennsylvaniaFebruary 26, 201839 Armstrong World Industries, Inc., and SubsidiariesConsolidated Statements of Earnings and Comprehensive Income(amounts in millions, except per share data) Years Ended December 31, 2017 2016 2015 Net sales $893.6 $837.3 $805.1 Cost of goods sold 569.8 531.5 499.1 Gross profit 323.8 305.8 306.0 Selling, general and administrative expenses 135.7 155.5 180.8 Separation costs - 34.5 34.3 Equity earnings from joint venture (67.0) (73.1) (66.1)Operating income 255.1 188.9 157.0 Interest expense 35.4 49.5 44.6 Other non-operating (income) expense, net (2.4) (11.2) 17.8 Earnings from continuing operations before income taxes 222.1 150.6 94.6 Income tax expense 1.5 51.3 36.7 Earnings from continuing operations 220.6 99.3 57.9 Net gain (loss) from discontinued operations, net of tax expense (benefit) of $3.6, ($0.8) and $34.6 4.2 (9.9) (5.3)(Loss) gain on disposal of discontinued business, net of tax (benefit) of ($4.1), ($15.2) and ($41.8) (70.0) 15.3 41.6 Net (loss) gain from discontinued operations (65.8) 5.4 36.3 Net earnings $154.8 $104.7 $94.2 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments 24.5 (33.2) (25.5)Derivative (loss) gain (0.3) 7.5 0.7 Pension and postretirement adjustments 33.7 49.3 32.9 Total other comprehensive income 57.9 23.6 8.1 Total comprehensive income $212.7 $128.3 $102.3 Earnings per share of common stock, continuing operations: Basic $4.12 $1.79 $1.04 Diluted $4.08 $1.78 $1.03 (Loss) earnings per share of common stock, discontinued operations: Basic $(1.23) $0.09 $0.65 Diluted $(1.22) $0.09 $0.65 Net earnings per share of common stock: Basic $2.89 $1.88 $1.69 Diluted $2.86 $1.87 $1.68 Average number of common shares outstanding: Basic 53.3 55.4 55.5 Diluted 53.9 55.7 55.9 See accompanying notes to consolidated financial statements beginning on page 44. 40 Armstrong World Industries, Inc., and SubsidiariesConsolidated Balance Sheets(amounts in millions, except share data) December 31, 2017 December 31, 2016 Assets Current assets: Cash and cash equivalents $159.6 $141.9 Accounts and notes receivable, net 90.8 58.8 Inventories, net 53.8 46.9 Current assets of discontinued operations 306.1 125.2 Income tax receivable 30.7 22.2 Other current assets 7.9 11.2 Total current assets 648.9 406.2 Property, plant, and equipment, less accumulated depreciation and amortization of $361.4 and $323.8, respectively 499.9 465.2 Prepaid pension costs 88.3 48.7 Investment in joint venture 107.3 106.2 Goodwill and intangible assets, net 441.1 427.7 Noncurrent assets of discontinued operations  -  221.1 Deferred income taxes 19.6 14.4 Income tax receivable 4.1 5.7 Other noncurrent assets 64.3 62.8 Total assets $1,873.5 $1,758.0 Liabilities and Shareholders' Equity Current liabilities: Current installments of long-term debt $32.5 $25.0 Accounts payable and accrued expenses 108.4 117.0 Liabilities of discontinued operations 128.5 80.8 Income tax payable 0.5 1.3 Deferred income taxes  -   - Total current liabilities 269.9 224.1 Long-term debt, less current installments 817.7 848.6 Postretirement benefit liabilities 79.2 84.8 Pension benefit liabilities 57.2 56.8 Other long-term liabilities 35.5 27.0 Noncurrent liabilities of discontinued operations  -  34.0 Income tax payable 53.0 62.2 Deferred income taxes 141.7 154.1 Total noncurrent liabilities 1,184.3 1,267.5 Shareholders' equity: Common stock, $0.01 par value per share, authorized 200 million shares; issued 60,782,736 shares, outstanding 52,772,139 shares in 2017 and 60,597,140 shares issued, 54,428,233 outstanding shares in 2016 0.6 0.6 Capital in excess of par value 516.8 504.9 Retained earnings 633.4 469.9 Treasury stock, at cost, 8,010,597 shares as of December 31, 2017 and 6,168,907 shares as of December 31, 2016 (385.6) (305.2)Accumulated other comprehensive (loss) (345.9) (403.8)Total shareholders' equity 419.3 266.4 Total liabilities and shareholders' equity $1,873.5 $1,758.0 See accompanying notes to consolidated financial statements beginning on page 44. 41 Armstrong World Industries, Inc., and SubsidiariesConsolidated Statements of Equity(amounts in millions, except share data) Accumulated Additional Other Common Stock Paid-In Retained Treasury Stock Comprehensive Shares Amount Capital Earnings Shares Amount Income (Loss) Total December 31, 2014 55,126,153 $0.6 $1,134.4 $271.0 5,057,382 $(261.4) $(495.5) $649.1 Stock issuance, net 232,911 Share-based employee compensation 17.4 17.4 Net earnings 94.2 94.2 Other comprehensive income 8.1 8.1 December 31, 2015 55,359,064 $0.6 $1,151.8 $365.2 5,057,382 $(261.4) $(487.4) $768.8 Stock issuance, net 180,694 Share-based employee compensation 9.2 9.2 Net earnings 104.7 104.7 Other comprehensive income 23.6 23.6 Separation of Armstrong Flooring, Inc. (656.1) 60.0 (596.1)Acquisition of treasury stock (1,111,525) 1,111,525 (43.8) (43.8)December 31, 2016 54,428,233 $0.6 $504.9 $469.9 6,168,907 $(305.2) $(403.8) $266.4 Cumulative effect impact of ASU 2016-09 adoption 8.7 8.7 Stock issuance, net 185,596 Share-based employee compensation 11.4 11.4 Net earnings 154.8 154.8 Other comprehensive income 57.9 57.9 Separation of Armstrong Flooring, Inc. 0.5 0.5 Acquisition of treasury stock (1,841,690) 1,841,690 (80.4) (80.4)December 31, 2017 52,772,139 $0.6 $516.8 $633.4 8,010,597 $(385.6) $(345.9) $419.3 See accompanying notes to consolidated financial statements beginning on page 44. 42 Armstrong World Industries, Inc., and SubsidiariesConsolidated Statements of Cash Flows(amounts in millions) Years Ended December 31, 2017 2016 2015 Cash flows from operating activities: Net earnings $154.8 $104.7 $94.2 Adjustments to reconcile earnings to net cash provided by operating activities: Depreciation and amortization 89.2 89.2 118.3 Write off of debt financing costs  -  1.1  - Loss (gain) on disposal of discontinued operations 74.1 (0.1) 0.2 Deferred income taxes (12.3) 51.0 (48.5)Share-based compensation 10.2 12.4 13.4 Equity earnings from joint venture (67.0) (73.1) (66.1)Separation costs - 34.5 34.3 Loss on interest rate swap - 10.7  - U.S. pension (credit) expense (4.5) 15.0 25.2 Non-cash foreign currency translation on intercompany loans (2.6) (3.6) 19.8 Other, non-cash adjustments, net 2.2 (0.3) 0.3 Changes in operating assets and liabilities: Receivables (37.1) (23.9) 2.7 Inventories 3.6 (7.0) (15.7)Other current assets 2.2 7.1 (7.3)Other noncurrent assets (1.6) (9.9) 7.9 Accounts payable and accrued expenses (20.0) (82.1) 15.0 Income taxes payable (18.8) (49.3) 33.6 Other long-term liabilities (1.2) (22.0) (22.2)Other, net (0.8) (5.1) (1.4)Net cash provided by operating activities 170.4 49.3 203.7 Cash flows from investing activities: Purchases of property, plant and equipment (89.7) (104.2) (170.7)Return of investment from joint venture 69.1 86.9 64.2 Cash paid for acquisition (31.2) - - Payment of company-owned life insurance, net (2.4)  -  2.2 Other investing activities - 0.3 2.8 Net cash (used for) investing activities (54.2) (17.0) (101.5)Cash flows from financing activities: Proceeds from revolving credit facility and other short-term debt 103.0 90.0  - Payments of revolving credit facility and other short-term debt (103.0) (90.0)  - Proceeds from long-term debt  -  363.5  - Payments of long-term debt (25.0) (434.1) (39.5)Financing costs (0.6) (8.1)  - Special dividends paid  -   -  (1.2)Proceeds from exercised stock options 3.3 0.7 6.4 Cash transferred to Armstrong Flooring, Inc. - (9.1)  - Proceeds from company-owned life insurance loans, net - 2.0 2.0 Payment for treasury stock acquired (80.4) (43.8)  - Net cash (used for) financing activities (102.7) (128.9) (32.3)Effect of exchange rate changes on cash and cash equivalents 4.2 (6.3) (10.4)Net increase (decrease) in cash and cash equivalents 17.7 (102.9) 59.5 Cash and cash equivalents at beginning of year 141.9 244.8 185.3 Cash and cash equivalents at end of year 159.6 141.9 244.8 Cash and cash equivalents at end of year of discontinued operations  -   -  35.5 Cash and cash equivalents at end of year of continuing operations $159.6 $141.9 $209.3 Supplemental Cash Flow Disclosures: Interest paid $30.7 $33.4 $39.4 Income taxes paid, net $32.1 $33.7 $44.4 Amounts in accounts payable for capital expenditures $2.6 $4.4 $14.3 See accompanying notes to consolidated financial statements beginning on page 44. 43Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 1. BUSINESSArmstrong World Industries, Inc. (“AWI”) is a Pennsylvania corporation incorporated in 1891. When we refer to “AWI,” the “Company,” “we,” “our” and “us” inthese notes, we are referring to AWI and its subsidiaries. On November 17, 2017, we entered into a Share Purchase Agreement (the “Purchase Agreement”) with Knauf International GmbH (“Knauf”), to sell certainsubsidiaries comprising our business in Europe, the Middle East and Africa (including Russia) (“EMEA”) and the Pacific Rim, including the correspondingbusinesses and operations conducted by Worthington Armstrong Venture (“WAVE”), our joint venture with Worthington Industries, Inc., in which AWI holds a50% interest. The total consideration to be paid by Knauf in connection with the sale is $330.0 million in cash, inclusive of amounts due to WAVE, subject tocertain adjustments as provided in the Purchase Agreement, including adjustments based on the economic impact of any required regulatory remedies and aworking capital adjustment. The transaction, which is subject to regulatory approvals and other customary conditions, is currently anticipated to close in mid-2018. EMEA and Pacific Rim’s historical financial results have been reflected in AWI’s Consolidated Financial Statements as discontinued operations for allperiods presented. See Note 4 for additional information.In January 2017, we acquired the business and assets of Tectum, Inc. (“Tectum”), based in Newark, Ohio. Tectum is a manufacturer of acoustical ceiling, wall andstructural solutions for commercial building applications with two manufacturing facilities. Tectum’s operations and its assets and liabilities have been included asa component of our Architectural Specialties segment. See Note 4 for additional information. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESConsolidation Policy . The consolidated financial statements and accompanying data in this report include the accounts of AWI and its majority-ownedsubsidiaries. All significant intercompany transactions have been eliminated from the consolidated financial statements.Use of Estimates . We prepare our financial statements in conformity with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which requiresmanagement to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Whenpreparing an estimate, management determines the amount based upon the consideration of relevant internal and external information. Actual results may differfrom these estimates.Reclassifications . Certain amounts in the prior year’s Consolidated Financial Statements and related notes and schedule thereto have been recast to conform to the2017 presentation.Revenue Recognition . We recognize revenue from the sale of products when persuasive evidence of an arrangement exists, title and risk of loss transfers to thecustomers, prices are fixed and determinable, and it is reasonably assured the related accounts receivable is collectible. Our standard sales terms are Free On Board(“FOB”) shipping point. We have some sales terms that are FOB destination. Our products are sold with normal and customary return provisions. Sales discountsare deducted immediately from the sales invoice. Provisions, which are recorded as a reduction of revenue, are made for the estimated cost of rebates, promotionalprograms and warranties. Sales Incentives . Sales incentives are reflected as a reduction of net sales.Shipping and Handling Costs . Shipping and handling costs are reflected in cost of goods sold.Advertising Costs . We recognize advertising expenses as they are incurred. Research and Development Costs . We expense research and development costs as they are incurred.Pension and Postretirement Benefits . We have benefit plans that provide for pension, medical and life insurance benefits to certain eligible employees when theyretire from active service. See Note 16 to the Consolidated Financial Statements for disclosures on pension and postretirement benefits.Taxes . The provision for income taxes has been determined using the asset and liability approach of accounting for income taxes to reflect the expected future taxconsequences of events recognized in the financial statements. Deferred income tax assets and44Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) liabilities a re recognized by applying enacted tax rates to temporary differences that exist as of the balance sheet date, which result from differences in the timingof reported taxable income between tax and financial reporting.We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets willnot be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, avaluation allowance in accordance with the more likely than not standard, we give appropriate consideration to all positive and negative evidence related to therealization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses,forecasts of future profitability and foreign source income, the duration of statutory carryforward periods, and our experience with operating loss and tax creditcarryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative losses isincurred for a tax jurisdiction, forecasts of future profitability are generally not used as positive evidence related to the realization of the deferred tax assets in theassessment.We recognize the tax benefits of an uncertain tax position if those benefits are more likely than not to be sustained based on existing tax law. Additionally, weestablish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained uponexamination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold ismet, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired,whichever is earlier.Taxes collected from customers and remitted to governmental authorities are reported on a net basis.Earnings per Share . Basic earnings per share is computed by dividing the earnings attributable to common shares by the weighted average number of shares ofcommon stock outstanding during the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings.Cash and Cash Equivalents . Cash and cash equivalents include cash on hand, short-term investments that have maturities of three months or less when purchasedand restricted cash. Concentration of Credit . We principally sell products to customers in building products industries in various geographic regions. Revenues from three commercialdistributors, included within our Mineral Fiber and Architectural Specialties segments, individually exceeded 10% of our revenues in 2017. Net sales in 2017 tothese three customers totaled $426.1 million. Net sales of $372.9 million and $305.6 million to these three customers also exceeded 10% of our revenues in 2016and 2015, respectively. We monitor the creditworthiness of our customers and generally do not require collateral.Receivables . We sell our products to select, pre-approved customers using customary trade terms that allow for payment in the future. Customer trade receivables,customer notes receivable and miscellaneous receivables (which include supply related rebates and other), net of allowances for doubtful accounts, customer creditsand warranties are reported in accounts and notes receivable, net. Cash flows from the collection of receivables are classified as operating cash flows on theconsolidated statements of cash flows.We establish credit-worthiness prior to extending credit. We estimate the recoverability of receivables each period. This estimate is based upon new informationin the period, which can include the review of any available financial statements and forecasts, as well as discussions with legal counsel and the management of thedebtor company. As events occur, which impact the collectability of the receivable, all or a portion of the receivable is reserved. Account balances are charged offagainst the allowance when the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to our customers.Inventories . Inventories are valued at the lower of cost and net realizable value. See Note 6 to the Consolidated Financial Statements for further information onour accounting for inventories.Property Plant and Equipment . Property plant and equipment is recorded at cost reduced by accumulated depreciation. Depreciation expense is recognized on astraight-line basis over the assets’ estimated useful lives. Machinery and equipment includes manufacturing equipment (depreciated over 3 to 15 years), computerequipment (depreciated over 3 to 5 years) and office furniture and equipment (depreciated over 5 to 7 years). Within manufacturing equipment, assets that aresubject to accelerated obsolescence or wear out quickly, such as dryer components, are depreciated over shorter periods (3 to 7 years). Heavy productionequipment, such as conveyors and production presses, are depreciated over longer periods (10 to 15 years). Buildings are depreciated over 15 to 30 years,depending on factors such as type of construction and use. Computer software is depreciated over 3 to 7 years.45Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Property, plant and equipment is tested for impairment by asset group when indicators of impairment are present, such a s operating losses and/or negative cashflows. If an indication of impairment exists, we compare the carrying amount of the asset group to the estimated undiscounted future cash flows expected to begenerated by the asset group. The estimate of an asset group’s fair value is based on discounted future cash flows expected to be generated by the asset group, orbased on management’s estimated exit price assuming the assets could be sold in an orderly transaction between market participants, or estimated sal vage value ifno sale is assumed. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between the fair valueand carrying value of the asset group. Impairments of assets related to our manufacturing operations are recorded in cost of goods sold.When assets are disposed of or retired, their costs and related depreciation are removed from the financial statements, and any resulting gains or losses normally arereflected in cost of goods sold or selling, general and administrative (“SG&A”) expenses depending on the nature of the asset.Asset Retirement Obligations . We recognize the fair value of obligations associated with the retirement of tangible long-lived assets in the period in which they areincurred. Upon initial recognition of a liability, the discounted cost is capitalized as part of the related long-lived asset and depreciated over the correspondingasset’s useful life. Over time, accretion of the liability is recognized as an operating expense to reflect the change in the liability’s present value.Intangible Assets . Our definite-lived intangible assets are primarily customer relationships (amortized over 20 years) and developed technology (amortized over 15years). We review significant definite-lived intangible assets for impairment when indicators of impairment exist. We review our businesses for indicators ofimpairment such as operating losses and/or negative cash flows. If an indication of impairment exists, we compare the carrying amount of the asset group to theestimated undiscounted future cash flows expected to be generated by the asset group. The estimate of an asset group’s fair value is based on discounted futurecash flows expected to be generated by the asset group, or based on management’s estimated exit price assuming the assets could be sold in an orderly transactionbetween market participants. If the fair value is less than the carrying value of the asset group, we record an impairment charge equal to the difference between thefair value and carrying value of the asset group.Our indefinite-lived intangibles are primarily goodwill, trademarks and brand names, with Armstrong representing our primary trademark, which are integral to ourcorporate identity and expected to contribute indefinitely to our cash flows. Accordingly, they have been assigned an indefinite life. We perform annualimpairment tests during the fourth quarter on these indefinite-lived intangibles. These assets undergo more frequent tests if an indication of possible impairmentexists.The principal assumption used in our impairment tests for definite-lived intangible assets is future operating profit adjusted for depreciation and amortization. Theprincipal assumptions used in our impairment tests for indefinite-lived intangible assets include revenue growth rate, discount rate and royalty rate. Revenuegrowth rate and future operating profit assumptions are derived from those utilized in our operating plan and strategic planning processes. The discount rateassumption is calculated based upon an estimated weighted average cost of equity which reflects the overall level of inherent risk and the rate of return a marketparticipant would expect to achieve. The royalty rate assumption represents the estimated contribution of the intangible asset to the overall profits of the reportingunit. Methodologies used for valuing our intangible assets did not change from prior periods.See Note 10 to the Consolidated Financial Statements for disclosure on intangible assets.Foreign Currency Transactions . Assets and liabilities of our subsidiaries operating outside the United States which account in a functional currency other thanU.S. dollars are translated using the period end exchange rate. Revenues and expenses are translated at exchange rates effective during each month. Foreigncurrency translation gains or losses are included as a component of accumulated other comprehensive income (loss) within shareholders' equity. Gains or losses onforeign currency transactions are recognized through earnings.Financial Instruments and Derivatives . From time to time, we use derivatives and other financial instruments to offset the effect of currency, interest rate andcommodity price variability. See Notes 17 and 18 to the Consolidated Financial Statements for further discussion.Share-based Employee Compensation . We recognize share-based compensation expense on a straight-line basis over the vesting period for the entireaward. Compensation expense for performance based awards with non-market based conditions are also recognized over the vesting period for the entire award,however, compensation expense may vary based on the expectations for actual46Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) performance relative to defined performa nce measures. See Note 21 to the Consolidated Financial Statements for additional information on share-based employeecompensation.Subsequent Events . We have evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements includedin the Annual Report on Form 10-K were issued.Recently Adopted Accounting StandardsIn July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11, “ Simplifying the Measurement ofInventory ,” which requires inventory that is measured on a first-in, first-out or average cost basis to be measured at lower of cost and net realizable value, asopposed to the lower of cost or market. For inventory that is measured under the last-in, first-out (“LIFO”) basis or the retail recovery method, there is no changeto current measurement requirements. The adoption of this standard on January 1, 2017 did not have an impact on our financial condition, results of operations orcash flows.In March 2016, the FASB issued ASU 2016-09, “ Improvements to Employee Share-Based Payment Accounting .” This new guidance simplifies accounting forshare-based payments, most notably by requiring all excess tax benefits and tax deficiencies to be recorded as income tax benefits or expense in the incomestatement and by allowing entities to recognize forfeitures of awards when they occur. Effective January 1, 2017, we adopted the provisions of ASU 2016-09 andelected to continue to estimate the impact of forfeitures when determining share-based compensation cost. We prospectively adopted the provisions of this newguidance related to the recognition of excess tax benefits and deficiencies through income tax expense, the presentation of excess tax benefits from share-basedcompensation as operating cash outflows, and changes to diluted earnings per share computations, the impact of which were not material to our ConsolidatedStatements of Earnings and Comprehensive Income or Consolidated Statements of Cash Flows. Finally, as required by ASU 2016-09, effective January 1, 2017,we recorded an $8.7 million cumulative-effect increase to Retained earnings and Deferred income taxes (assets), representing prior years’ tax benefits that were notpreviously recognized because the related tax deductions had not reduced income taxes payable. Recently Issued Accounting StandardsIn May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The guidance requires an entity to recognize the amount of revenue towhich it expects to be entitled for the transfer of promised goods or services to a customer. The ASU will replace most existing revenue recognition guidance inU.S. GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, “Principal versus Agent Considerations (Reporting Gross versus Net),”which clarifies the implementation guidance relating to principle versus agent considerations. In April 2016, the FASB issued ASU 2016-10, “IdentifyingPerformance Obligations and Licensing,” which clarifies the implementation guidance relating to the identification of performance obligations in a contract,including how entities should account for shipping and handling services provided after control of goods transfers to a customer. In May 2016, the FASB issuedASU 2016-12, “Narrow-Scope Improvements and Practical Expedients,” which clarifies the guidance related to the presentation of sales taxes, noncashconsideration, and completed contracts and contract modifications. In December 2016, the FASB issued ASU 2016-20, “Technical Corrections and Improvementsto Topic 606, Revenue from Contracts with Customers,” which clarifies the scope and application of the adoption of the new revenue recognition standard.Collectively, the revenue recognition updates are effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted. Wehave adopted these standards effective January 1, 2018 using the modified retrospective transition method and have applied all practical expedients related tocompleted contracts upon adoption. Substantially all of our revenues from contracts with customers are recognized from the sale of products with standardshipping terms, sales discounts and warranties. Based on our evaluation, adoption will not have a material impact to our financial condition, results of operations orcash flows as the amount and timing of substantially all of our revenues will continue to be recognized at a point in time. We will be impacted by the expandeddisclosure requirements of the revenue recognition updates, most notably the disclosure of revenues from contracts with customers into disaggregated categories. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which addresses certain aspects ofrecognition, measurement, presentation, and disclosure of financial instruments. Most notably, this new guidance requires equity investments (except thoseaccounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair valuerecognized in net income. This new guidance is effective for annual reporting periods beginning after December 15, 2017. We do not believe the adoption of thisstandard will have a material impact on our financial condition, results of operations and cash flows.47Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) In February 2016, the FASB issued ASU 2016-02, “Leases,” which amends accounting for leases, most notably by requiring a lessee to recognize the ass ets andliabilities that arise from a lease agreement. Specifically, this new guidance will require lessees to recognize a liability to make lease payments and a right-of-useasset representing its right to use the underlying asset for the lease term, wit h limited exceptions. The accounting applied by a lessor is largely unchanged fromthat applied under existing U.S. GAAP. This new guidance is effective for annual reporting periods beginning after December 15, 2018 and must be adopted undera modified r etrospective basis. We are currently evaluating the impact the adoption of this standard will have on our financial condition, results of operations andcash flows.In August 2016, the FASB issued ASU 2016-15 , “Classification of Certain Cash Receipts and Cash Payments.” This guidance clarifies how entities shouldclassify certain cash receipts and cash payments on the statement of cash flows. This new guidance is effective for annual reporting periods beginning afterDecember 15, 2017. We do not believe the impact the adoption of this standard will have a material impact on our cash flows.In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,” whichrequires companies to report the service cost component of net benefit cost in the same line item or items as other compensation costs arising from servicesrendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separatelyfrom the service cost component and outside a subtotal of income from operations, if one is presented. This new guidance is effective for annual periods beginningafter December 15, 2017 and will have an impact on the classification of net benefit costs, which are currently included as a component of Costs of goods sold andSelling, general and administrative (“SG&A”) expenses, on our Consolidated Statements of Earnings and Comprehensive Income. See Note 16 for details relatedto our components of net benefit costs.In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” whichamends the financial reporting of hedging relationships in order to better portray the economic results of an entity’s risk management activities in its financialstatements. In addition, this new guidance simplifies the application of current hedge accounting guidance. This new guidance is effective for annual periodsbeginning after December 15, 2018. We are currently evaluating the impact the adoption of this standard will have on our financial condition, results of operationsand cash flows.In February 2018, the FASB issued ASU 2018-02, “ Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income .” On December 22,2017, the U.S. federal government enacted the Tax Cuts and Jobs Act of 2017 (the “Tax Act of 2017”), which, in addition to numerous other provisions, loweredthe Corporate statutory tax rate from 35% to 21%. Under U.S. GAAP, all deferred tax assets and liabilities are required to be adjusted for the effect of a change intax laws or rates, with the effect included in income from continuing operations in the reporting period that includes the enactment date. As a result of thisguidance, the tax effects of items recorded within Accumulated Other Comprehensive Income (“AOCI”) do not reflect the appropriate tax rate. This standardwould require entities to record a reclassification from AOCI to retained earnings for the purpose of appropriately including the tax effect of items within AOCI atthe newly enacted 21% U.S. federal tax rate. This new guidance is effective for annual periods beginning after December 15, 2018. Upon adoption, we will recordan approximately $54 million reduction to AOCI with a corresponding increase to retained earnings. NOTE 3. NATURE OF OPERATIONSEffective December 31, 2017 and in connection with the announced sale of our EMEA and Pacific Rim businesses, our former EMEA and Pacific Rim segmentshave been excluded from our results of continuing operations. As a result, effective December 31, 2017 and for all periods presented, our operating segments areas follows: Mineral Fiber, Architectural Specialties and Unallocated Corporate. Mineral Fiber – produces suspended mineral fiber and soft fiber ceiling systems for use in commercial and residential settings. Products offer various performanceattributes such as acoustical control, rated fire protection and aesthetic appeal. Commercial ceiling products are sold to resale distributors and to ceiling systemscontractors. Residential ceiling products are sold primarily to wholesalers and retailers (including large home centers). The Mineral Fiber segment also includesthe results of our Worthington Armstrong Venture (“WAVE”) joint venture with Worthington Industries, Inc., which manufactures suspension system (grid)products and ceiling component products that are invoiced by both us and WAVE. Segment results relating to WAVE consist primarily of equity earnings andreflect our 50% equity interest in the joint venture. Ceiling component products consist of ceiling perimeters and trim, in addition to grid products that supportdrywall ceiling systems. To a lesser extent, however, in some markets, WAVE sells its suspension systems products to us for resale to customers. Our segmentresults reflect those sales transactions. The Mineral Fiber segment also includes all assets and liabilities not specifically allocated to our Architectural Specialties orUnallocated48Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Corporate segment, including all property and related depre ciation associated with our Lancaster, PA headquarters. Operating results for the Mineral Fibersegment include a significant majority of allocated Corporate administrative expenses that represent a reasonable allocation of general services to support itsoperations. Architectural Specialties – produces and sources ceilings and walls for use in commercial settings. Products are available in numerous materials, such as metal andwood, in addition to various colors, shapes and designs. Products offer various performance attributes such as acoustical control, rated fire protection and aestheticappeal. We produce standard and customized products, with the majority of Architectural Specialties revenues derived from sourced products. ArchitecturalSpecialties products are sold to resale distributors and ceiling systems contractors. The majority of revenues are project driven, which can lead to more volatilesales patterns due to project scheduling. Operating results for the Architectural Specialties segment include a minor portion of allocated Corporate administrativeexpenses that represent a reasonable allocation of general services to support its operations. Unallocated Corporate – includes assets, liabilities, income and expenses that have not been allocated to our other business segments and consist of: cash and cashequivalents, the net funded status of our U.S. Retirement Income Plan (“RIP”), the estimated fair value of interest rate swap contracts, outstanding borrowingsunder our senior credit facilities and income tax balances. Effective December 31, 2017 and for all periods presented, our Unallocated Corporate segment alsoincludes all assets, liabilities, income and expenses formerly reported in our EMEA and Pacific Rim segments that are not included in the pending sale to Knauf. Segment results below have been restated for all periods presented as a result of the disaggregation of our former Americas segment and the reclassification ofUnallocated Corporate assets. Mineral Fiber ArchitecturalSpecialties UnallocatedCorporate Total For the year ended 2017 Net sales to external customers $756.4 $137.2 $- $893.6 Equity (earnings) from joint venture (67.0) - - (67.0)Segment operating income (loss) 231.9 27.7 (4.5) 255.1 Segment assets 1,193.5 53.2 320.7 1,567.4 Depreciation and amortization (1) 59.2 1.8 6.0 67.0 Investment in joint venture 107.3 - - 107.3 Purchases of property, plant and equipment (1) 76.1 1.6 - 77.7 Mineral Fiber ArchitecturalSpecialties UnallocatedCorporate Total For the year ended 2016 Net sales to external customers $736.6 $100.7 $- $837.3 Equity (earnings) from joint venture (73.1) - - (73.1)Segment operating income (loss) 223.9 19.2 (54.2) 188.9 Segment assets 1,145.1 17.3 249.3 1,411.7 Depreciation and amortization (1) 53.6 0.8 0.4 54.8 Investment in joint venture 106.2 - - 106.2 Purchases of property, plant and equipment (1) 66.1 0.2 - 66.3 49Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Mineral Fiber ArchitecturalSpecialties UnallocatedCorporate Total For the year ended 2015 Net sales to external customers $723.7 $81.4 $- $805.1 Equity (earnings) from joint venture (66.1) - - (66.1)Segment operating income (loss) 270.3 16.5 (129.8) 157.0 Segment assets 1,132.8 17.2 271.0 1,421.0 Depreciation and amortization (1) 43.9 0.8 11.9 56.6 Investment in joint venture 130.8 - - 130.8 Purchases of property, plant and equipment (1) 51.5 0.6 22.4 74.5 (1)Totals will differ from the totals on our Consolidated Statement of Cash Flows by the amounts that have been classified as discontinued operations. SeeNote 4 for additional details.Segment operating income (loss) is the measure of segment profit or loss reviewed by the chief operating decision maker. The sum of the segments’ operatingincome (loss) equals the total consolidated operating income as reported on our Consolidated Statements of Earnings and Comprehensive Income. The followingreconciles our total consolidated operating income to earnings from continuing operations before income taxes. These items are only measured and managed on aconsolidated basis: 2017 2016 2015 Segment operating income $255.1 $188.9 $157.0 Interest expense 35.4 49.5 44.6 Other non-operating (income)/expense, net (2.4) (11.2) 17.8 Earnings from continuing operations before income taxes $222.1 $150.6 $94.6 Accounting policies of the segments are the same as those described in the summary of significant accounting policies.The sales in the table below are allocated to geographic areas based on the location of our selling entities. 2017 2016 2015 Geographic Areas Net trade sales Mineral Fiber: United States $699.8 $680.8 $670.8 Canada 56.6 55.8 52.9 Total Mineral Fiber 756.4 736.6 723.7 Architectural Specialties: United States 129.5 95.1 75.1 Canada 7.7 5.6 6.3 Total Architectural Specialties 137.2 100.7 81.4 Total net trade sales $893.6 $837.3 $805.1 50Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) 2017 2016 Property, plant and equipment, net at December 31, Mineral Fiber: United States $488.7 $457.3 Total Mineral Fiber 488.7 457.3 Architectural Specialties: Canada $4.5 $4.0 United States 3.0 0.3 Total Architectural Specialties 7.5 4.3 Unallocated Corporate (1) 3.7 3.6 Total property, plant and equipment, net $499.9 $465.2 (1)Includes property, plant and equipment located in China that were formerly reported in our Pacific Rim segment and will not be included in the sale toKnauf. Impairment testing of our tangible assets occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not berecoverable. In September 2017, we made the decision to permanently close a previously idled plant in China, which is reported as a component of Unallocated Corporate as ofDecember 31, 2017. As a result, during 2017 we recorded $5.6 million in costs of goods sold for accelerated depreciation of machinery and equipment based onmanagement estimates. During the fourth quarter of 2017, we announced the closing of our St. Helens, Oregon mineral fiber manufacturing facility, expected tooccur in the first half of 2018. During the fourth quarter of 2017, we recorded $4.0 million in costs of goods sold primarily related to accelerated depreciation ofmachinery and equipment within our Mineral Fiber segment based on management estimates. NOTE 4. ACQUISITIONS AND DISCONTINUED OPERATIONSACQUISITION OF TECTUMOn January 13, 2017, in connection with the acquisition of Tectum, the $31.2 million purchase price was allocated to the tangible and intangible assets acquiredand the liabilities assumed based on their estimated fair values, with the remaining unallocated amount recorded as goodwill. The total fair value of tangible assetsacquired, less liabilities assumed, in connection with the Tectum acquisition was $4.4 million. The total fair value of intangible assets acquired, comprised ofamortizable customer relationships and non-amortizing brand names, was $16.0 million, resulting in $10.8 million of goodwill. All of the acquired goodwill isdeductible for tax purposes.EMEA AND PACIFIC RIM BUSINESSESOn November 17, 2017, in connection with the Purchase Agreement we entered into with Knauf, we agreed to sell certain subsidiaries comprising our businesses inEMEA and the Pacific Rim. Pursuant to the Purchase Agreement, prior to the closing, we and Knauf will enter into (i) an agreement relating to the mutual supplyof certain products after the closing, (ii) an agreement relating to the use of certain intellectual property by Knauf after the closing, including the Armstrong tradename and (iii) an agreement relating to certain transition services to be provided by AWI to Knauf after closing for a period of one year. WAVE and Knauf willalso enter into similar agreements for such purposes.As of December 31, 2017, based on anticipated net sales proceeds to be received from Knauf, the fair value of EMEA and Pacific Rim net assets are less than theircarrying value. As a result, we recorded an impairment charge of $74.0 million during the fourth quarter of 2017, which included $51.4 million of accumulatedother comprehensive income adjustments, primarily accumulated foreign currency translation amounts, that will be subsequently reclassified to earnings fromdiscontinued operations upon sale of our EMEA and Pacific Rim businesses. 51Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) FLOORING BUSINESSESSeparation and Distribution of AFIOn April 1, 2016, we completed our separation of Armstrong Flooring, Inc. (“AFI”) by allocating the assets and liabilities related primarily to our Resilient andWood Flooring segments to AFI and then distributing the common stock of AFI to our shareholders at a ratio of one share of AFI common stock for every twoshares of AWI common stock. Separation costs for 2016 and 2015 were $34.5 million and $34.3 million, respectively. Separation costs for all periods primarilyrelated to outside professional services and employee compensation and retention and severance accruals which were recorded within the Unallocated Corporatesegment in conjunction with this initiative. On April 1, 2016, in connection with the separation and distribution of AFI, we entered into several agreements with AFI that, together with a plan of division,provided for the separation and allocation between AWI and AFI of the flooring assets, employees, liabilities and obligations of AWI and its subsidiariesattributable to periods prior to, at and after AFI’s separation from AWI, and govern the relationship between AWI and AFI subsequent to the completion of theseparation and distribution. These agreements include a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, a TrademarkLicense Agreement, a Transition Trademark License Agreement and a Campus Lease Agreement. AWI and AFI provided various services to each other during atransition period that expired on December 31, 2017.The Tax Matters Agreement generally governs AWI’s and AFI’s respective rights, responsibilities and obligations after the separation and distribution with respectto tax matters. Upon distribution, AWI received an opinion from its tax counsel that the separation and distribution qualified as a tax-free transaction for AWI andits shareholders.The Employee Matters Agreement governed certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of AWI and AFI. Pursuant to this agreement and in connection with the distribution, AWI transferred assets and liabilities from the AWIdefined benefit pension and postretirement plans to AFI that relate to active AFI employees and certain former AFI employees to mirror plans established by AFI.See Note 16 for additional details. Pursuant to the Trademark License Agreement, AWI provided AFI with a perpetual, royalty-free license to utilize the “Armstrong” trade name and logo. Pursuantto the Transition Trademark License Agreement, AFI provided us with a five-year royalty-free license to utilize the “Inspiring Great Spaces” tagline, logo andrelated color scheme.Under the Campus Lease Agreement, certain portions of the AWI headquarters are being leased to AFI to use as its corporate headquarters for an initial term offive years, subject to certain renewal rights. European Resilient FlooringOn December 4, 2014, our Board of Directors approved the cessation of funding to our former DLW subsidiary, which was our former European flooringbusiness. As a result, DLW management filed for insolvency in Germany on December 11, 2014. The German insolvency court subsequently appointed anadministrator (the “Administrator”) to oversee DLW operations. As of December 4, 2014, DLW had a net liability of $12.9 million, representing assets of $151.9 million and liabilities of $164.8 million, which were removedfrom our balance sheet. This net liability was recognized as a contingent liability on our consolidated balance sheet pending the closure and results of theinsolvency proceeding. The amount of the net liability, included within Accounts payable and accrued expenses on our Consolidated Balance Sheets, was $11.9million as of December 31, 2016. In April 2017, we entered into a settlement agreement and mutual release with the Administrator on behalf of the DLW estate tosettle all claims of the Administrator related to the insolvency for a cash payment of $11.8 million. DLW was previously shown within our Resilient Flooringreporting segment.CABINETSIn September 2012, we entered into a definitive agreement to sell our cabinets business to American Industrial Partners. The sale was completed in October2012. Net loss on disposal of discontinued operations in 2015 related to the settlement of a multi-employer pension plan.52Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Summarized Financial Information of Discontinued OperationsThe following tables detail the businesses and line items that comprise income from discontinued operations on the Consolidated Statements of Earnings andComprehensive Income. EMEA and PacificRim Businesses FlooringBusinesses Total 2017: Net sales $436.2 $- $436.2 Cost of goods sold 350.8 - 350.8 Gross profit 85.4 - 85.4 Selling, general and administrative expenses 78.3 - 78.3 Operating income 7.1 - 7.1 Interest expense 1.2 - 1.2 Other non-operating (income), net (1.9) - (1.9)Earnings from discontinued operations before income tax 7.8 - 7.8 Income tax expense 3.6 - 3.6 Gain from discontinued operations $4.2 $- $4.2 (Loss) on expected disposal of discontinued businesses before income tax (1) $(74.0) $(0.1) $(74.1)Income tax (benefit) - (4.1) (4.1)Net (loss) gain on disposal of discontinued businesses $(74.0) $4.0 $(70.0) Net (loss) gain from discontinued operations $(69.8) $4.0 $(65.8) (1)Loss on disposal of EMEA and Pacific Rim businesses for the year ended December 31, 2017 represents the estimated write-down of EMEA and PacificRim assets based on our expected sales proceeds to be received upon closure of the transaction. EMEA and PacificRim Businesses FlooringBusinesses Total 2016: Net sales $397.2 $284.4 $681.6 Cost of goods sold 331.8 237.2 569.0 Gross profit 65.4 47.2 112.6 Selling, general and administrative expenses 69.7 50.5 120.2 Operating (loss) (4.3) (3.3) (7.6)Interest expense 0.3 - 0.3 Other non-operating expense, net 1.7 1.1 2.8 (Loss) from discontinued operations before income tax (6.3) (4.4) (10.7)Income tax (benefit) expense (0.9) 0.1 (0.8)(Loss) from discontinued operations $(5.4) $(4.5) $(9.9) Gain on disposal of discontinued businesses before income tax $- $0.1 $0.1 Income tax (benefit) - (15.2) (15.2)Net gain on disposal of discontinued businesses $- $15.3 $15.3 Net (loss) gain from discontinued operations $(5.4) $10.8 $5.4 53Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) EMEA and PacificRim Businesses FlooringBusinesses Cabinets Total 2015: Net sales $426.2 $1,188.7 $- $1,614.9 Cost of goods sold 355.8 962.3 - 1,318.1 Gross profit 70.4 226.4 - 296.8 Selling, general and administrative expenses 86.9 179.5 - 266.4 Operating (loss) income (16.5) 46.9 - 30.4 Interest expense 0.7 - - 0.7 Other non-operating (income) expense, net (2.7) 3.1 - 0.4 (Loss) earnings from discontinued operations before income tax (14.5) 43.8 - 29.3 Income tax expense 16.8 17.8 - 34.6 (Loss) earnings from discontinued operations $(31.3) $26.0 $- $(5.3) (Loss) gain on disposal of discontinued businesses before income tax $- $(0.8) $0.6 $(0.2)Income tax (benefit) expense - (42.0) 0.2 (41.8)Net gain on disposal of discontinued businesses $- $41.2 $0.4 $41.6 Net (loss) gain from discontinued operations $(31.3) $67.2 $0.4 $36.3 54Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The following is a summary of the carrying amount of the major classes of assets and liabilities classified as assets and liabilities of discontinued operations as ofDecember 31, 2017 and 2016 related to our EMEA and Pacific Rim businesses. December 31, 2017 December 31, 2016 Assets Current assets: Accounts and notes receivable, net $61.4 $49.5 Inventories, net 59.2 62.1 Income tax receivable 3.1 4.0 Other current assets 12.9 9.6 Total current assets discontinued operations 136.6 125.2 Property, plant, and equipment, less accumulated depreciation and amortization (1) (2) 131.3 204.4 Prepaid pension costs (1) 26.1 7.9 Goodwill and intangible assets, net (1) 7.2 6.8 Deferred income taxes (1) 4.0 1.0 Other non-current assets (1) 0.9 1.0 Total non-current assets of discontinued operations (1) 169.5 221.1 Total assets of discontinued operations (1) $306.1 $346.3 Liabilities Current liabilities: Accounts payable and accrued expenses $78.6 $80.1 Income tax payable 1.3 0.7 Total current liabilities 79.9 80.8 Pension benefit liabilities (3) 34.7 29.5 Other long-term liabilities (3) 1.8 2.1 Deferred income taxes (3) 12.1 2.4 Total non-current liabilities of discontinued operations (3) 48.6 34.0 Total liabilities of discontinued operations (3) $128.5 $114.8 (1)Presented as Current assets of discontinued operations on the Consolidated Balance Sheets as of December 31, 2017. (2)Includes a pre-tax impairment charge of $74.0 million recorded during the fourth quarter of 2017.(3) Presented as Current liabilities of discontinued operations on the Consolidated Balance Sheets as of December 31, 2017. The following is a summary of total depreciation and amortization and capital expenditures presented as discontinued operations and included as components ofoperating and investing cash flows on our consolidated statements of cash flows: EMEA and PacificRim Businesses FlooringBusinesses Total 2017: Depreciation and amortization $22.2 $- $22.2 Fixed asset impairment (1) 74.0 - 74.0 Purchases of property, plant and equipment (12.0) - (12.0) 2016: Depreciation and amortization $23.0 $11.4 $34.4 Purchases of property, plant and equipment (25.8) (12.1) (37.9) 2015: Depreciation and amortization $22.6 $39.1 $61.7 Purchases of property, plant and equipment (34.6) (61.6) (96.2) (1)Loss on disposal of EMEA and Pacific Rim businesses for the year ended December 31, 2017 represents the estimated write-down of EMEA and PacificRim assets based on our expected sales proceeds to be received upon closure of the transaction. 55Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 5. ACCOUNTS AND NOTES RECEIVABLE December 31, 2017 December 31, 2016 Customer receivables $62.8 $56.9 Miscellaneous receivables 29.9 3.8 Less allowance for warranties, discounts, and losses (1.9) (1.9)Accounts and notes receivable, net $90.8 $58.8 We sell our products to select, pre-approved customers whose businesses are affected by changes in economic and market conditions. We consider these factorsand the financial condition of each customer when establishing our allowance for losses from doubtful accounts. Miscellaneous receivables as of December 31, 2017 include insurance recoveries related to environmental matters. See Note 27 for more information. NOTE 6. INVENTORIES December 31, 2017 December 31, 2016 Finished goods $33.2 $30.1 Goods in process 2.7 2.6 Raw materials and supplies 26.1 21.4 Less LIFO reserves (8.2) (7.2)Total inventories, net $53.8 $46.9 Approximately 84% and 87% of our total inventory in 2017 and 2016, respectively, were valued on a LIFO (last-in, first-out) basis.The distinction between the use of different methods of inventory valuation is primarily based on geographical locations and/or legal entities. The following tablesummarizes the amount of inventory that is not accounted for under the LIFO method. December 31, 2017 December 31, 2016 U.S. locations $6.5 $4.2 Canada locations 2.2 1.9 Total $8.7 $6.1 Our Canadian locations use the FIFO method of inventory valuation (or other methods which closely approximate the FIFO method) primarily because the LIFOmethod is not permitted for local tax and/or statutory reporting purposes. In these situations, a conversion to LIFO would be highly complex and involve excessivecost and effort to achieve under local tax and/or statutory reporting requirements. U.S. locations that use the FIFO method of inventory valuation primarilyrepresent certain finished goods sourced from third party suppliers. NOTE 7. OTHER CURRENT ASSETS December 31, 2017 December 31, 2016 Prepaid expenses $7.1 $6.4 Fair value of derivative assets 0.2 2.2 Other 0.6 2.6 Total other current assets $7.9 $11.2 56Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 8. PROPERTY, PLANT AND EQUIPMENT December 31, 2017 December 31, 2016 Land $32.5 $32.2 Buildings 224.6 202.8 Machinery and equipment 537.1 471.2 Computer software 20.9 15.2 Construction in progress 46.2 67.6 Less accumulated depreciation and amortization (361.4) (323.8)Net property, plant and equipment $499.9 $465.2 See Note 2 to the Consolidated Financial Statements for discussion of policies related to property and depreciation and asset retirement obligations. NOTE 9. EQUITY INVESTMENTSInvestment in joint venture as of December 31, 2017 reflected the equity interest in our 50% investment in our WAVE joint venture. The WAVE joint venture isreflected within the Mineral Fiber segment in our consolidated financial statements using the equity method of accounting.We use the equity in earnings method to determine the appropriate classification of distributions from WAVE within our cash flow statement. During 2017, 2016and 2015, WAVE distributed amounts in excess of our capital contributions and proportionate share of retained earnings. Accordingly, the distributions in theseyears were reflected as a return of investment in cash flows from investing activity in our Consolidated Statement of Cash Flows. Distributions from WAVE in2017, 2016 and 2015 were $69.1 million, $86.9 million, and $64.2 million, respectively.In certain markets, we sell WAVE products directly to customers pursuant to specific terms of sale. In those circumstances, we record the sales and associatedcosts within our consolidated financial statements. The total sales associated with these transactions were $31.2 million, $29.8 million and $29.9 million for theyears ended 2017, 2016 and 2015, respectively.Our recorded investment in WAVE was higher than our 50% share of the carrying values reported in WAVE’s consolidated financial statements by $161.0 millionas of December 31, 2017 and $166.6 million as of December 31, 2016. These differences are due to our adoption of fresh-start reporting upon emergence fromChapter 11 in October 2006, while WAVE’s consolidated financial statements do not reflect fresh-start reporting. The differences are composed of the followingfair value adjustments to assets: December 31, 2017 December 31, 2016 Property, plant and equipment $0.4 $0.4 Other intangibles 130.2 135.8 Goodwill 30.4 30.4 Total $161.0 $166.6 Other intangibles include customer relationships, trademarks and developed technology. Customer relationships are amortized over 20 years and developedtechnology is amortized over 15 years. Trademarks have an indefinite life. See Exhibit 99.1 for WAVE’s consolidated financial statements. On November 17, 2017, in connection with the Purchase Agreement we entered into with Knauf,the corresponding European and Pacific Rim businesses of WAVE will also be sold. Accordingly, WAVE’s European and Pacific Rim historical financialstatement results have been reflected in WAVE’s consolidated financial statements as a discontinued operation for all periods presented. Our equity earnings injoint venture reflected as a component of earnings from continuing operations included $1.7 million, $2.8 million and $2.6 million of equity earnings fromWAVE’s European and Pacific Rim businesses in 2017, 2016 and 2015, respectively. Condensed financial data for WAVE is summarized below.57Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) December 31, 2017 December 31, 2016 Current assets $96.8 $96.3 Current assets of discontinued operations 36.4 16.8 Noncurrent assets 32.6 32.9 Noncurrent assets of discontinued operations - 17.4 Current liabilities 18.1 33.1 Current liabilities of discontinued operations 8.1 8.2 Other noncurrent liabilities 246.6 244.0 2017 2016 2015 Net sales $344.5 $330.7 $309.7 Gross profit 192.7 192.4 172.1 Net earnings 144.3 151.9 136.5 Management evaluated its investment in WAVE for impairment as a result of WAVE’s anticipated sale of its European and Pacific Rim businesses. Based on thatevaluation, management concluded that as of December 31, 2017, its investment in WAVE was not impaired. See discussion in Note 26 to the Consolidated Financial Statements for additional information on this related party. NOTE 10. GOODWILL AND INTANGIBLE ASSETSWe conduct our annual impairment testing of non-amortizing intangible assets during the fourth quarter. The 2017, 2016 and 2015 reviews concluded that noimpairment charges were necessary. See Note 2 to the Consolidated Financial Statements for a discussion of our accounting policy for intangible assets.The following table details amounts related to our intangible assets as of December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Estimated UsefulLife Gross CarryingAmount AccumulatedAmortization Gross CarryingAmount AccumulatedAmortization Amortizing intangible assets Customer relationships20 years $176.3 $93.9 $165.3 $84.9 Developed technology15 years 83.7 60.9 82.8 55.4 OtherVarious 5.9 1.1 6.3 1.3 Total $265.9 $155.9 $254.4 $141.6 Non-amortizing intangible assets Trademarks and brand namesIndefinite 319.8 314.4 Goodwill 11.3 0.5 Total goodwill and intangible assets $597.0 $569.3 2017 2016 2015 Amortization expense$14.6 $13.9 $14.0 The expected annual amortization expense for the years 2018 through 2022 are as follows: 2018$14.7 201914.7 202014.7 202113.3 20229.3 58Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 11. OTHER NON-CURRENT ASSETS December 31, 2017 December 31, 2016 Cash surrender value of company-owned life insurance policies $53.9 $52.7 Fair value of derivative assets 8.7 7.5 Other 1.7 2.6 Total other non-current assets $64.3 $62.8 NOTE 12. ACCOUNTS PAYABLE AND ACCRUED EXPENSES December 31, 2017 December 31, 2016 Payables, trade and other $67.6 $68.7 Employment costs 18.0 16.3 Current portion of pension and postretirement benefit liabilities 11.6 12.2 Contingent liability related to discontinued operations - 11.9 Other 11.2 7.9 Total accounts payable and accrued expenses $108.4 $117.0 NOTE 13. SEVERANCE AND RELATED COSTSIn an effort to optimize our organizational and manufacturing cost structures, during the fourth quarter of 2017, we recorded $3.3 million in costs of goods sold inour Mineral Fiber segment for severance and related costs to reflect approximately 126 position eliminations in connection with the planned closure of our St.Helens, Oregon mineral fiber manufacturing facility, expected to occur in the first half of 2018. In addition, during the fourth quarter of 2017, we recorded $1.3million in SG&A expenses in our Mineral Fiber and Architectural Specialties segments for severance and related costs to reflect 18 position eliminations at ourLancaster, PA headquarters.In 2016 and 2015, we recorded $2.4 million and $5.3 million, respectively, in Unallocated Corporate for severance and related costs to reflect approximately 30position eliminations (including our former Chief Executive Officer) as a result of our initiative to separate our flooring business from our ceiling business. Thesecosts are reflected within Separation costs on the Consolidated Statements of Earnings and Comprehensive Income (Loss). NOTE 14. INCOME TAXESOn December 22, 2017, the U.S. federal government enacted the 2017 Tax Act, resulting in significant changes from existing U.S. tax laws that impact us,including, but not limited to, reducing the U.S. federal corporate income tax rate from 35% to 21%, allowing immediate 100% deduction for the cost of qualifiedproperty, eliminating the domestic production activities deduction, and imposing a one-time transition tax on the cumulative earnings and profits of certain foreignsubsidiaries that were previously not repatriated and therefore not taxed for U.S. income tax purposes. Our federal income tax expense for periods beginning in2018 will be based on the new rate.In December 2017, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 118 (“SAB 118”), which addresses situations wherethe accounting is incomplete for the income tax effects of the 2017 Tax Act. SAB 118 directs registrants to consider the impact of the Act as “provisional” whenthey do not have the necessary information available, prepared or analyzed (including computations) to finalize the accounting for the change in taxlaw. Registrants are provided a measurement period of up to one year to obtain, prepare, and analyze information necessary to finalize the accounting forprovisional amounts or amounts that cannot be estimated as of December 31, 2017. As a result of the reduction of the corporate income tax rate to 21%, we were required to re-measure our deferred tax assets and liabilities as of the date ofenactment based on the rates at which they are expected to be utilized in the future. The rate change resulted in an $87.2 million reduction of our net deferred taxliabilities and a corresponding deferred income tax benefit in the fourth quarter of 2017.59Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The 2017 Tax Act also changes the taxation of foreign earnings . Generally, corporations are no longer subject to U.S. federal income tax upon the receipt ofdividends from foreign subsidiaries and are not permitted foreign tax credits (“FTCs”) related to such dividends. Accordingly, we recorded an additional valuati onallowance on $9.5 million of FTCs as of December 31, 2017. This increase in our valuation allowance was due to these 2017 Tax Act provisions and as a result ofthe anticipated sale of our EMEA and Pacific Rim businesses. As we continue to analyze the 2017 Tax Act and refine our calculations, it could give rise toadditional changes in our valuation allowance and the realizability of foreign tax credits.The one-time transition tax is based on the total post-1986 earnings and profits of our foreign subsidiaries. Substantially all of our earnings and profits werepermanently reinvested outside the U.S prior to the 2017 Tax Act. We recorded provisional U.S. amounts for the one-time transition tax liabilities, resulting in anincrease in income tax expense of $10.3 million. We have not yet completed our calculation of the total post-1986 earnings and profits for our foreign subsidiariesor the tax pools of our foreign subsidiaries. Further, the one-time transition tax is based in part on the amount of those earnings held in cash and other specifiedassets. This amount may change when we finalize the calculation of tax pools, finalize the calculation of post-1986 foreign earnings and profits previously deferredfrom U.S. federal taxation and finalize the amounts held in cash or other specified assets. Taxes due on the one-time transition tax are payable as of December 31,2017 and may be elected to be paid over a period of eight years. We intend on making this election. The 2017 Tax Act also provides for immediate 100% deduction of the costs of qualified property placed in service from September 27, 2017 to December 31,2022. This provision will begin to phase down by 20% per year beginning January 1, 2023 and will be completely phased out as of January 1, 2027. As ofDecember 31, 2017, we have not completed our analysis of qualifying expenditures for purposes of determining the expenditures that qualify for the immediate100% deduction under the 2017 Tax Act.The adjustments to deferred tax assets and liabilities, the liability related to the one-time transition tax, changes in our valuation allowance, the realizability offoreign tax credits and the immediate deduction of 100% of the costs of qualifying property are provisional amounts estimated based on information available as ofDecember 31, 2017. These amounts are subject to change as we obtain information necessary to complete the calculations. Additional information that may affectour provisional amounts would include further clarification and guidance on how the Internal Revenue Service will implement tax reform, including guidance withrespect to the one-time transition tax, further clarification and guidance on the impact of the 2017 Act from state taxing authorities and completion of our 2017 taxreturn filings. We will recognize any changes to the provisional amounts as we refine our estimates of cumulative temporary differences and our interpretations ofthe application of the 2017 Tax Act. We expect to complete our analysis of the provisional items by the second half of 2018.The tax effects of principal temporary differences between the carrying amounts of assets and liabilities and their tax basis are summarized below. Managementbelieves it is more likely than not that the results of future operations will generate sufficient taxable income in the appropriate jurisdiction and will generateforeign source income to realize deferred tax assets, net of valuation allowances. In arriving at this conclusion, we considered the profit before tax generated forthe years 2015 through 2017, as well as future reversals of existing taxable temporary differences and projections of future profit before tax and foreign sourceincome.We reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the available evidence, it is more likely than not that such assets willnot be realized. The need to establish valuation allowances for deferred tax assets is assessed quarterly. In assessing the requirement for, and amount of, avaluation allowance in accordance with the more likely than not standard for all periods, we give appropriate consideration to all positive and negative evidencerelated to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulativelosses, forecasts of future profitability and foreign source income, the duration of statutory carryforward periods, and our experience with operating loss and taxcredit carryforward expirations. A history of cumulative losses is a significant piece of negative evidence used in our assessment. If a history of cumulative lossesis incurred for a tax jurisdiction, forecasts of future profitability are not used as positive evidence related to the realization of the deferred tax assets in theassessment.As of December 31, 2017 and 2016, we had $664.6 million and $760.6 million, respectively, of gross state net operating loss (“NOL”) carryforwards expiringbetween 2018 and 2036. As of December 31, 2017, we also had FTC carryforwards of $15.7 million that expire between 2018 and 2022. U.S. FTC carryforwardsas of December 31, 2016 were $22.1 million on a gross basis, $19.3 million when netted with unrecognized tax benefits.As of December 31, 2017 and 2016, we had valuation allowances of $47.4 million and $17.3 million, respectively. As of December 31, 2017, our valuationallowance consisted of $10.3 million for federal deferred tax assets related to FTC carryforwards, $17.7 million for the outside basis difference between book andtax of our EMEA and Pacific Rim businesses and $19.4 million for state60Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) deferred tax assets, primarily operating loss carryforwards. Our valuation allowance increased in comparison to December 31, 2016 primarily as a result of the2017 Tax Act and the anticipated sale of our EMEA and Pacific Rim businesses.We estimate we will need to generate future federal taxable foreign source income of $74.8 million to fully realize FTC carryforwards before they expire in2022. We estimate we will need to generate future taxable income of approximately $506.8 million for state income tax purposes during the respective realizationperiods (ranging from 2018 to 2036) in order to fully realize the net deferred income tax assets discussed above.Our ability to utilize deferred tax assets may be impacted by certain future events, such as changes in tax legislation or insufficient future taxable income prior toexpiration of certain deferred tax assets. December 31, 2017 December 31, 2016 Deferred income tax assets (liabilities) Net operating losses $35.6 $32.0 Postretirement benefits 23.3 38.1 Pension benefit liabilities 16.7 42.4 Deferred compensation 12.1 17.8 Undistributed foreign earnings 17.7 - Foreign tax credit carryforwards 15.7 19.3 State tax credit carryforwards 10.5 9.1 Other 12.6 7.8 Total deferred income tax assets 144.2 166.5 Valuation allowances (47.4) (17.3)Net deferred income tax assets 96.8 149.2 Intangibles (136.3) (211.8)Accumulated depreciation (56.1) (49.2)Prepaid pension costs (20.4) (18.9)Inventories (4.4) (7.2)Other (1.7) (1.8)Total deferred income tax liabilities (218.9) (288.9)Net deferred income tax liabilities $(122.1) $(139.7)Deferred income taxes have been classified in the Consolidated Balance Sheet as: Deferred income tax assets - noncurrent $19.6 $14.4 Deferred income tax liabilities - noncurrent (141.7) (154.1)Net deferred income tax liabilities $(122.1) $(139.7)61Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) 2017 2016 2015 Details of taxes Earnings (loss) from continuing operations before income taxes: Domestic $224.1 $147.8 $92.7 Foreign (2.0) 2.8 1.9 Total $222.1 $150.6 $94.6 Income tax expense (benefit): Current: Federal $26.2 $15.1 $16.8 Foreign 1.4 5.0 2.8 State 4.7 (6.7) (4.8)Total current 32.3 13.4 14.8 Deferred: Federal (36.6) 22.6 12.7 Foreign (0.1) (1.1) (1.2)State 5.9 16.4 10.4 Total deferred (30.8) 37.9 21.9 Total income tax expense $1.5 $51.3 $36.7 We reviewed our position with regards to foreign unremitted earnings and determined that unremitted earnings will not be permanently reinvested as a result of theanticipated sale of our EMEA and Pacific Rim businesses. Accordingly, we have recorded foreign withholding taxes of $7.6 million, primarily within discontinuedoperations, on approximately $245.5 million of net undistributed earnings of foreign subsidiaries. 2017 2016 2015 Reconciliation to U.S. statutory tax rate Continuing operations tax at statutory rate $77.7 $52.7 $33.1 Increase in valuation allowances on deferred domestic income tax assets 9.1 0.8 4.1 State income tax expense, net of federal benefit 7.9 3.2 4.0 Separation costs - 15.1 - Domestic production activities (5.8) (1.9) (5.2)Federal statute closure (2.3) (15.2) - 2017 Tax Act (82.5) - - Other (2.6) (3.4) 0.7 Tax expense at effective rate $1.5 $51.3 $36.7 We recognize the tax benefits of an uncertain tax position only if those benefits are more likely than not to be sustained based on existing tax law. Additionally, weestablish a reserve for tax positions that are more likely than not to be sustained based on existing tax law, but uncertain in the ultimate benefit to be sustained uponexamination by the relevant taxing authorities. Unrecognized tax benefits are subsequently recognized at the time the more likely than not recognition threshold ismet, the tax matter is effectively settled or the statute of limitations for the relevant taxing authority to examine and challenge the tax position has expired,whichever is earlier.We have $53.4 million of Unrecognized Tax Benefits (“UTB”) as of December 31, 2017, $36.9 million ($35.2 million, net of federal benefit) of this amount, ifrecognized in future periods, would impact the reported effective tax rate.It is reasonably possible that certain UTB’s may increase or decrease within the next twelve months due to tax examination changes, settlement activities,expirations of statute of limitations, or the impact on recognition and measurement considerations related to the62Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) results of published tax cases or other similar activities. Ov er the next twelve months we estimate that UTB’s may decrease by $0.1 million related to state statutesexpiring and increase by $2.8 million due to uncertain tax positions expected to be taken on domestic tax returns.We account for all interest and penalties on uncertain income tax positions as income tax expense. We reported $3.5 million of interest and penalty exposure asnoncurrent income tax payable in the Consolidated Balance Sheet as of December 31, 2017.We had the following activity for UTB’s for the years ended December 31, 2017, 2016 and 2015: 2017 2016 2015 Unrecognized tax benefits balance at January 1, $86.9 $150.6 $142.6 Gross change for current year positions (2.2) 2.3 10.4 Increases for prior period positions 2.9 0.2 1.9 Decrease for prior period positions (0.1) (12.8) (4.1)Decrease due to settlements and payments - - - Decrease due to statute expirations (34.1) (53.4) (0.2)Unrecognized tax benefits balance at December 31, $53.4 $86.9 $150.6 We file income tax returns in the U.S., various states and international jurisdictions. In the normal course of business, we are subject to examination by taxingauthorities in Canada and the United States. Generally, we have open tax years subject to tax audit on average of between three years and six years. The statute oflimitations is no longer open for U.S. federal returns before 2014. With few exceptions, the statute of limitations is no longer open for state or non-U.S. income taxexaminations for the years before 2012. We have not significantly extended any open statutes of limitation for any major jurisdiction and have reviewed andaccrued for, where necessary, tax liabilities for open periods. 2017 2016 2015 Other taxes Payroll taxes $14.2 $13.9 $14.0 Property, franchise and capital stock taxes 4.0 4.0 4.0 NOTE 15. DEBT December 31, 2017 WeightedAverageInterest Ratefor 2017 December 31, 2016 WeightedAverageInterest Ratefor 2016 Term loan A due 2021 $577.5 3.24% $600.0 3.29%Term loan B due 2023 245.6 4.25% 248.1 4.58%Tax exempt bonds due 2041 35.0 0.79% 35.0 0.45%Principal debt outstanding 858.1 3.43% 883.1 3.54%Unamortized debt financing costs (7.9) (9.5) Long-term debt 850.2 3.43% 873.6 3.54%Less current portion and short-term debt 32.5 3.32% 25.0 3.42%Total long-term debt, less current portion $817.7 3.43% $848.6 3.54% The weighted average interest rates above are inclusive of our interest rate swaps. See Note 18 to the Consolidated Financial Statements for further information.We have a $1,050.0 million senior credit facility which is composed of a $200.0 million revolving credit facility (with a $150.0 million sublimit for letters ofcredit), a $600.0 million Term Loan A and a $250.0 million Term Loan B. The revolving credit facility and Term Loan A are currently priced at 2.00% overLIBOR and the Term Loan B portion is priced at 2.75% over LIBOR with a 0.75% floor. The senior credit facility also has a $25.0 million letter of credit facility,also known as our bi-lateral facility. The revolving credit facility and Term Loan A mature in March 2021 and Term Loan B matures in November 2023. 63Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) On April 1, 2016, we refinanced our senior credit facility. In connection with this refinancing, we paid $9.3 million of bank, legal and other fees, of which $8.1million were capitalized and recorded as a component of long-term debt and are being amortized into interest expense over the lives of the underlyingloans. Additionally, we wrote off $1.1 million of unamortized debt financing costs, included as a component of interest expense, in 2016 related to our previo uscredit facility. Finally, in connection with the refinancing, we executed new interest rate swaps. See Note 18 for additional details.In February 2017, we repriced the interest rate on our Term Loan B borrowing, resulting in a lower LIBOR spread (2.75% vs. 3.25%). The maturity date remainedunchanged along with all other terms and conditions. In connection with the repricing we paid $0.6 million of bank, legal and other fees, the majority of whichwere capitalized. Under our senior credit facility we are subject to year-end leverage tests that may trigger mandatory prepayments. If our ratio of consolidated funded indebtedness,minus AWI and domestic subsidiary unrestricted cash and cash equivalents up to $100.0 million, to consolidated earnings before interest, taxes, depreciation andamortization (“EBITDA”) (“Consolidated Net Leverage Ratio”) is greater than 3.5 to 1.0, the prepayment amount would be 50% of fiscal year Consolidated ExcessCash Flow. These annual payments would be made in the first quarter of the following year. No payment will be required in 2018 under the senior credit facility.As of December 31, 2017, we were in compliance with all covenants of the amended senior credit facility. Our debt agreements include other restrictions, includingrestrictions pertaining to the acquisition of additional debt, the redemption, repurchase or retirement of our capital stock, payment of dividends, and certainfinancial transactions as it relates to specified assets. We currently believe that default under these covenants is unlikely. Fully borrowing under our revolvingcredit facility would not violate these covenants. In anticipation of net sales proceeds to be received from Knauf in connection with the sale of our EMEA andPacific Rim businesses, we received a consent from Bank of America, N.A., the administrative agent and collateral agent of our amended senior credit facility, thatamong other conditions, waives any mandatory prepayment provisions under our credit facility related to this transaction. Our intention is to return a majority ofthe net proceeds from the sale of our EMEA and Pacific Rim businesses to our shareholders, in a manner and timing to be approved by our board of directors.As of December 31, 2017, our outstanding long-term debt included a $35.0 million variable rate, tax-exempt industrial development bond that financed theconstruction of a plant in prior years. This bond has a scheduled final maturity of 2041 and is remarketed by an agent on a regular basis at a market-clearing interestrate. Any portion of the bond that is not successfully remarketed by the agent is required to be repurchased by AWI. This bond is backed by letters of credit whichwill be drawn if a portion of the bond is not successfully remarketed. We have not had to repurchase the bond.We have a $40.0 million Accounts Receivable Securitization Facility (the “funding entity”) that matures in March 2019. Under our Accounts ReceivableSecuritization Facility we sell accounts receivables to Armstrong Receivables Company, LLC (“ARC”), a Delaware entity that is consolidated in these financialstatements. ARC is a 100% wholly owned single member LLC special purpose entity created specifically for this transaction; therefore, any receivables sold toARC are not available to the general creditors of AWI. ARC then sells an undivided interest in the purchased accounts receivables to the funding entity. Thisundivided interest acts as collateral for drawings on the facility. Any borrowings under this facility are obligations of ARC and not AWI. ARC contracts with andpays a servicing fee to AWI to manage, collect and service the purchased accounts receivables. All new receivables under the program generated by the originatorsare continuously purchased by ARC with the proceeds from collections of receivables previously purchased. As of December 31, 2017, we had no borrowingsunder this facility.None of our outstanding debt as of December 31, 2017 was secured with buildings and other assets. The credit lines under our revolving credit facility are subjectto immaterial annual commitment fees.Scheduled payments of long-term debt: 2018 $32.5 2019 55.0 2020 62.5 2021 437.5 2022 2.5 2023 and later 268.1 64Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) We utilize lines of credit and other commercial commitments in order to ensure that adequate funds are available to meet operating requirements. Letters of creditare currently arranged through our revolving credit facility, our bi-lateral facility and ou r securitization facility. Letters of credit may be issued to third partysuppliers, insurance and financial institutions and typically can only be drawn upon in the event of AWI’s failure to pay its obligations to the beneficiary. The following table presents details related to our letters of credit: As of December 31, 2017 Financing Arrangement Limit Used Available Revolving credit facility $150.0 $- $150.0 Bi-lateral facility 25.0 17.1 7.9 Accounts receivable securitization facility 29.6 36.2 (6.6)Total $204.6 $53.3 $151.3 The maximum limit for letters of credit availability under our accounts receivable securitization facility is subject to securitized accounts receivable balances andother collateral adjustments. As of December 31, 2017 and 2016, $6.6 million and $4.0 million of letters of credits issued under our accounts receivablesecuritization facility in excess of our maximum limit were classified as restricted cash and reported as a component of Cash and cash equivalents on ourConsolidated Balance Sheets. This restriction will lapse upon replacement of collateral with accounts receivables and/or upon a change in the letter of credit limitas a result of higher securitized accounts receivable balances. NOTE 16. PENSION AND OTHER BENEFIT PROGRAMSDEFINED CONTRIBUTION BENEFIT PLANSWe sponsor several defined contribution plans, which cover substantially all U.S. and non-U.S. employees. Eligible employees may defer a portion of their pre-taxcovered compensation on an annual basis. We match employee contributions up to pre-defined percentages. Employee contributions are 100% vested. Employercontributions are vested based on pre-defined requirements. Costs for worldwide defined contribution benefit plans were $6.2 million in 2017, $5.6 million in 2016and $5.7 million in 2015.DEFINED BENEFIT PENSION PLANSBenefits from defined benefit pension plans are based primarily on an employee's compensation and years of service. We fund our pension plans whenappropriate. Our U.S. defined benefit pension plans include both the qualified, funded RIP and the Retirement Benefit Equity Plan, which is a nonqualified, unfunded plandesigned to provide pension benefits in excess of the limits defined under Sections 415 and 401(a)(17) of the Internal Revenue Code.Our RIP was amended to freeze accruals for salaried non-production employees, effective December 31, 2017. The impact of this amendment resulted in areduction to our December 31, 2016 projected benefit obligation with a corresponding increase to unrecognized loss, resulting in no curtailment gain or loss. Theimpact of this amendment has been reflected in the net periodic pension credit for 2017.In 2017, certain RIP participants with deferred vested benefits were offered an opportunity to elect a lump sum distribution of the participant’s entire accruedbenefit. These distributions resulted in a partial plan settlement necessitating a plan remeasurement as of August 31, 2017. Settlement losses of $12.5 million and$8.3 million were recorded as components of cost of goods sold and SG&A expenses, respectively, during the third quarter of 2017. Effective December 31, 2017, AWI merged the Tectum, Inc. Pension Plan (the “Tectum Plan”) with and into the RIP. Tectum sponsored the Tectum Plan for thebenefit of its eligible employees, which are limited to certain union employees at Tectum’s Newark, Ohio plant.65Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Our non-U.S. defined benefit pension plan represents an unfunded plan in Germany not acquired by Knauf in connection with the announce d sale of our EMEAand Pacific Rim segments. This plan utilizes assumptions which are consistent with, but not identical to, those of the U.S. plans. The following tables summarize the balance sheet impact of our defined benefit pension plans, as well as the related benefit obligations, assets, funded status andrate assumptions. We use a December 31 measurement date for all our defined benefit pension plans. U.S. Pension Plans Non-U.S. Pension Plan 2017 2016 2017 2016 Change in benefit obligation: Benefit obligation as of beginning of period $1,522.4 $1,918.1 $2.5 $2.5 Service cost 8.6 10.1 - - Interest cost 48.1 69.8 - 0.1 Partial settlement (58.1) - - - Foreign currency translation adjustment - - 0.4 (0.2)Actuarial loss (gain) 77.2 0.6 (0.1) 0.2 Benefits paid (103.2) (111.0) (0.1) (0.1)Merger of Tectum Plan 5.1 - - - Separation of AFI - (365.2) - - Benefit obligation as of end of period $1,500.1 $1,522.4 $2.7 $2.5 U.S. Pension Plans Non-U.S. Pension Plan 2017 2016 2017 2016 Change in plan assets: Fair value of plan assets as of beginning of period $1,512.9 $1,837.2 $- $- Actual return on plan assets 170.8 144.7 - - Employer contribution 3.9 4.2 0.1 0.1 Partial settlement (58.1) - - - Benefits paid (103.2) (111.0) (0.1) (0.1)Merger of Tectum Plan 3.4 - - - Separation of AFI - (362.2) - - Fair value of plan assets as of end of period $1,529.7 $1,512.9 $- $- Funded status of the plans $29.6 $(9.5) $(2.7) $(2.5) U.S. Pension Plans Non-U.S. Pension Plan 2017 2016 2017 2016 Weighted-average assumptions used to determine benefit obligations at end of period: Discount rate 3.63% 4.12% 1.50% 1.40%Rate of compensation increase 3.05% 3.10%  -   - Weighted-average assumptions used to determine net periodic benefit cost for the period: Discount rate 4.12% 4.40% 1.40% 2.00%Expected return on plan assets 6.50% 6.75%  -   - Rate of compensation increase 3.10% 3.10%  -   - Basis of Rate-of-Return AssumptionLong-term asset class return assumptions for the RIP are determined based on input from investment professionals on the expected performance of the asset classesover 10 to 30 years. The forecasts were averaged to come up with consensus passive return forecasts for each asset class. Incremental components were added forthe expected return from active management and asset class rebalancing based on historical information obtained from investment consultants. These forecasted gross returns were reduced by estimated management fees and expenses, yielding a long-term return forecast of 6.50% and 6.75% for the yearsended December 31, 2017 and 2016, respectively.66Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The accumulated benefit obligation for the U.S. defined benefit pension plans was $1,496.4 million and $1,518.0 million as of December 31, 2017 and 2016,respectively. The accumulated benefit obligation for the non-U.S. defined benefit pension plan was $2.7 million and $2.5 million as of December 31, 2017 and2016, respectively. U.S. Pension Plans Non-U.S. Pension Plan 2017 2016 2017 2016 Pension plans with benefit obligations in excess of assets Projected benefit obligation, December 31 $58.5 $58.2 $2.7 $2.5 Accumulated benefit obligation, December 31 58.5 58.1 2.7 2.5 The components of the pension (credit) cost are as follows: U.S. Pension Plans Non-U.S. Pension Plan 2017 2016 2015 2017 2016 2015 Service cost of benefits earned during the period $8.6 $10.1 $16.3 $2.2 $2.2 $2.4 Interest cost on projected benefit obligation 48.1 69.8 80.9 5.4 6.9 8.3 Expected return on plan assets (98.7) (110.6) (140.3) (6.8) (7.8) (9.0)Amortization of prior service cost 1.5 1.6 1.9  -   -  - Recognized net actuarial loss 17.5 48.3 72.8 1.3 1.2 2.8 Partial settlement 20.8 - - - - - Net periodic pension (credit) cost $(2.2) $19.2 $31.6 $2.1 $2.5 $4.5 Less: Discontinued operations -   2.2   11.0   2.0   2.4   4.4 Net periodic pension (credit) cost, continuing operations $(2.2) $17.0 $20.6 $0.1 $0.1 $0.1 The change in amortization of net actuarial loss for the U.S. defined-benefit plans for 2017 in comparison to 2016 was due to a reduction in active plan participantsdue to the separation of AFI. During 2016, actuarial gains and losses were amortized into future earnings over the expected remaining service period of planparticipants, which was approximately 8 years for our U.S. defined-benefit pension plans. For 2017, actuarial gains and losses were amortized over the remaininglife expectancy of plan participants, which was approximately 19 years for our U.S. defined-benefit pension plans. Investment PoliciesU.S. Pension PlansThe RIP’s primary investment objective is to maintain the funded status of the plan such that the likelihood that we will be required to make significantcontributions to the plan is limited. This objective is expected to be achieved by (a) investing a substantial portion of the plan assets in high quality corporate bondswhose duration is at least equal to that of the plan’s liabilities, (b) investing in publicly traded equities in order to increase the ratio of plan assets to liabilities overtime, (c) limiting investment return volatility by diversifying among additional asset classes with differing expected rates of return and return correlations, and (d)using derivatives to either implement investment positions efficiently or to hedge risk but not to create investment leverage.67Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Each asset class utilized by the RIP has defined asset allocation targets and allowable ranges. The table below shows the asset allocation targets and the December31, 2017 and 2016 positions for each asset class: Target Weight at December 31,  Position at December 31, Asset Class 2017 2017 (1)  2016 Long duration bonds 59.0% 59.0% 55.0%Equities 30.0% 28.0% 26.0%High yield bonds and real assets 6.0% 3.0% 7.0%Real estate and private equity 4.0% 4.0% 5.0%Other 1.0% 6.0% 7.0% (1)Investments in collective trust funds as of December 31, 2017 have been categorized within the asset classes above based on the underlying investments inthose funds. Pension plan assets are required to be reported and disclosed at fair value. Fair value is defined as the exchange price that would be received for an asset or paid totransfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on themeasurement date. Three levels of inputs may be used to measure fair value:Level 1 - Quoted prices in active markets for identical assets or liabilities.Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quotedprices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observablemarket data.Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Thisincludes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair valuemeasurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.The following table sets forth by level within the fair value hierarchy a summary of the RIP plan assets measured at fair value on a recurring basis: Value at December 31, 2017 Description Level 1 Level 2 Level 3 Total Bonds $- $879.5 $- $879.5 Collective trust fund - 561.6 - 561.6 Other investments - - 2.7 2.7 Cash and other short-term investments 1.7 20.7 - 22.4 Net assets measured at fair value $1.7 $1,461.8 $2.7 $1,466.2 Investments measured at net asset value 63.5 Net assets $1,529.7 68Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Value at December 31, 2016 Description Level 1 Level 2 Level 3 Total Bonds $- $831.7 $- $831.7 Equities 329.0 60.1 - 389.1 High yield bonds - 67.6 - 67.6 Real assets - 32.5 - 32.5 Other investments - - 2.8 2.8 Cash and other short-term investments 34.2 78.2 - 112.4 Net assets measured at fair value $363.2 $1,070.1 $2.8 $1,436.1 Investments measured at net asset value 76.8 Net assets $1,512.9 RIP Level 3 assets remained relatively unchanged from December 31, 2016 to December 31, 2017, with the change in Level 3 assets during 2017 due primarily tounrealized gains and losses. The RIP has investments in alternative investment funds as of December 31, 2017 and December 31, 2016 which are reported at fair value. Certain investmentsthat are measured at fair value using the net asset value (“NAV”) per share (or its equivalent) practical expedient have not been categorized in the fair valuehierarchy. The fair value amounts presented in the tables above are intended to permit reconciliation of the fair value hierarchy to the total fair value of plan assets.We have concluded that the NAV reported by the underlying fund approximates the fair value of the investment. These investments are redeemable at NAV underagreements with the underlying funds. However, it is possible that these redemption rights may be restricted or eliminated by the funds in the future in accordancewith the underlying fund agreements. Due to the nature of the investments held by the funds, changes in market conditions and the economic environment maysignificantly impact the NAV of the funds and, consequently, the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. Furthermore,changes to the liquidity provisions of the funds may significantly impact the fair value of the U.S. defined benefit pension plan asset’s interest in the funds. As ofDecember 31, 2017, there were no restrictions on redemption of these investments. The following table sets forth a summary of the RIP’s investments measured at NAV: Value at December 31, 2017 Description Fair Value UnfundedCommitments RedemptionFrequency RedemptionNoticePeriodReal estate $59.9 $2.2 Quarterly 45-90 DaysOther investments 3.6 0.9 None NoneInvestments measured at net asset value $63.5 $3.1 Value at December 31, 2016 Description Fair Value UnfundedCommitments RedemptionFrequency RedemptionNoticePeriodReal estate $73.3 $2.2 Quarterly 45-90 DaysOther investments 3.5 0.9 None NoneInvestments measured at net asset value $76.8 $3.1 Following is a description of the valuation methodologies used for assets measured at fair value and at NAV. Bonds: Consists of registered investment funds and common and collective trust funds investing in fixed income securities tailored to institutionalinvestors. There are no readily available market quotations for registered investment company funds. The fair value of investment funds and common andcollective trust funds have been classified as Level 2 assets above as their values were derived based on the underlying securities in the fund’s portfolio which istypically the amount which the fund might reasonably expect to receive for the security upon a current sale. Investments in individual bonds were measured at fairvalue based on the closing price reported in the active market in which the bond is traded and investments in pooled funds traded in a non-active market werevalued at bid price and classified as Level 2 assets above. 69Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Collective Trust Fund: Consists of separately ma naged accounts comprised of equity investments, fixed income securities, commodity future contracts, cash andother short-term securities. The fair value of collective trust funds have been classified as Level 2 assets above as their values were derived b ased on theunderlying securities in the fund’s portfolio which is typically the amount which the fund might reasonably expect to receive for the security upon a current sale . Equities: Consists of domestic and international investments in common and preferred stocks as well as investments in registered investment funds investing inequities tailored to institutional investors. Individual common and preferred stocks are valued at the closing price reported on the active market on which theindividual securities are traded and classified as Level 1 assets above. There are no readily available market quotations for registered investment company funds.The fair value, classified as Level 2 assets above, is based on the underlying securities in the fund’s portfolio which is typically the amount which the fund mightreasonably expect to receive for the security upon a current sale.High yield bonds: Consists of an investment in a registered investment fund investing in fixed income securities tailored to institutional investors. There are noreadily available market quotations for registered investment company funds. The fair value is based on the underlying securities in the fund’s portfolio which istypically the amount which the fund might reasonably expect to receive for the security upon a current sale.Real assets: Consists of a fund that has underlying investments in commodity futures contracts, as well as cash and fixed income instruments used as collateralinstruments against the commodity future contracts. The futures contracts are considered real assets as the underlying securities include natural resources such asoil or precious metals, livestock, or raw agricultural products. The fair value is based on the underlying securities in the fund’s portfolio which is typically theamount which the fund might reasonably expect to receive for the security upon a current sale.Real estate: Consists of both open-end and closed-end funds. There are no readily available market quotations for these real estate funds. These investments weremeasured at fair value using the NAV practical expedient.Other investments: Consists of investments in a group insurance annuity contract and a limited partnership. Investments in the group insurance annuity contractwere classified as Level 3 assets and measured at fair value by discounting the related cash flows based on current yields of similar instruments with comparabledurations while considering the credit-worthiness of the issuer. The investments in the limited partnership were measured at fair value using the NAV practicalexpedient.Cash and other short-term investments : Cash and short term investments consist primarily of cash and cash equivalents, and plan receivables/payables. Thecarrying amounts of cash and cash equivalents and receivables/payables approximate fair value due to the short-term nature of these instruments. Other payableand receivables consist primarily of margin on an account for a fund, accrued fees and receivables related to investment positions liquidated for which proceeds hadnot been received as of December 31. U.S. DEFINED BENEFIT RETIREE HEALTH AND LIFE INSURANCE PLANSWe fund postretirement benefits on a pay-as-you-go basis, with the retiree paying a portion of the cost for health care benefits by means of deductibles andcontributions.70Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The following tables summarize the balance sheet impact of the U.S. postretirement benefit pension plan, as well as the related benefit obligations, funded statusand rate assumptions. We use a December 31 measurement date for all our defined benefit postretirement benefit plans. 2017 2016 U.S. defined-benefit retiree health and life insurance plans Change in benefit obligation: Benefit obligation as of beginning of period $93.1 $190.3 Service cost 0.4 0.4 Interest cost 3.0 4.7 Plan participants' contributions 2.8 3.2 Plan amendments (1.1) - Actuarial (gain) (1.3) (7.7)Benefits paid (10.3) (11.5)Separation of AFI - (86.3)Benefit obligation as of end of period $86.6 $93.1 2017 2016 Change in plan assets: Fair value of plan assets as of beginning of period $- $- Employer contribution 7.5 8.3 Plan participants' contributions 2.8 3.2 Benefits paid (10.3) (11.5)Fair value of plan assets as of end of period $- $- Funded status of the plans $(86.6) $(93.1) 2017 2016 U.S. defined-benefit retiree health and life insurance plans Weighted-average discount rate used to determine benefit obligations at end of period 3.60% 4.10%Weighted-average discount rate used to determine net periodic benefit cost for the period 4.11% 4.17% The components of postretirement benefit (credit) cost are as follows: 2017 2016 2015 U.S. defined-benefit retiree health and life insurance plans Service cost of benefits earned during the period $0.4 $0.4 $0.9 Interest cost on accumulated postretirement benefit obligation 3.0 4.7 8.1 Amortization of prior service (credit) - (0.3) (0.6)Amortization of net actuarial gain (3.6) (6.1) (7.8)Net periodic postretirement benefit (credit) cost $(0.2) $(1.3) $0.6 Less: Discontinued operations - (0.2) 0.8 Net periodic postretirement benefit (credit), continuing operations $(0.2) $(1.1) $(0.2) 71Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) For measurement purposes, an average rate of annual increase in the per capita cost of covered health care benefits of 8.0% for pre-65 retirees and 9.2% to 10.9%for post-65 retirees (depending on plan type) was assumed for 201 7, decreasing ratably to an ultimate rate of 4.5% in 2026. Assumed health care cost trend ratescan have a significant effect on the amounts reported for the health care plans. A one percentage point change in assumed health care cost trend rates would h avethe following effects: One percentage point Increase Decrease U.S. defined benefit retiree health and life insurance benefits plans Effect on total service and interest cost components $(0.1) $0.1 Effect on postretirement benefit obligation (0.8) 0.7 Amounts recognized in assets (liabilities) on the consolidated balance sheets at year end consist of: U.S. Pension Plans Non-U.S. Pension Plan Retiree Health and LifeInsurance Benefits 2017 2016 2017 2016 2017 2016 Prepaid pension costs $88.3 $48.7 $- $- $- $- Accounts payable and accrued expenses (4.1) (3.9) (0.1) - (7.4) (8.3)Postretirement benefit liabilities  -   -   -   -  (79.2) (84.8)Pension benefit liabilities (54.6) (54.3) (2.6) (2.5)  -   - Net amount recognized $29.6 $(9.5) $(2.7) $(2.5) $(86.6) $(93.1) Pre-tax amounts recognized in accumulated other comprehensive (loss) income at year end consist of: U.S. Pension Plans Non-U.S. Pension Plan Retiree Health and LifeInsurance Benefits 2017 2016 2017 2016 2017 2016 Net actuarial (loss) gain $(520.2) $(553.5) $(8.9) $(22.4) $49.5 $51.7 Prior service (cost) credit - (1.5) (0.5) (0.6) 1.1 0.1 Accumulated other comprehensive (loss) income $(520.2) $(555.0) $(9.4) $(23.0) $50.6 $51.8 For U.S. pension plans, we expect to amortize $20.1 million of previously unrecognized prior service cost and net actuarial losses into pension cost in 2018 andexpect to contribute $4.0 million in 2018. For our non-U.S. pension plan, we do not expect to amortize any previously unrecognized net actuarial losses or unrecognized prior service cost into pension costin 2018 and do not expect to contribute any amounts in 2018. For our U.S. postretirement benefit plans, we expect to amortize $5.3 million of previously unrecognized net actuarial gains and prior service credits intopostretirement benefit cost in 2018 and expect to contribute $7.4 million in 2018.72Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid over the next ten years for our U.S. and non-U.Splans: U.S. PensionBenefits (1)  Non-U.S. PensionBenefits Retiree Healthand LifeInsuranceBenefits, Net 2018 $106.4 $0.1 $7.4 2019 105.3 0.1 7.4 2020 104.4 0.1 7.1 2021 102.4 0.1 6.9 2022 101.5 0.1 6.6 2023 - 2027 482.6 0.6 28.8 (1)We were not required and did not make contributions to the RIP during 2017, 2016 or 2015 as, based on guidelines established by the Pension BenefitGuaranty Corporation, the RIP had sufficient assets to fund its distribution obligations. Benefit payments to participants have been made directly from theRIP to participants from the assets of the plan. NOTE 17. FINANCIAL INSTRUMENTSWe do not hold or issue financial instruments for trading purposes. The estimated fair values of our financial instruments are as follows: December 31, 2017 December 31, 2016 Carryingamount Estimated fairvalue Carryingamount Estimated fairvalue Assets/(Liabilities), net: Total debt, including current portion $(850.2) $(850.8) $(873.6) $(873.7)Foreign currency contracts (0.8) (0.8) 1.3 1.3 Natural gas contracts (0.6) (0.6) 1.0 1.0 Interest rate swap contracts 8.9 8.9 6.9 6.9 The carrying amounts of cash and cash equivalents, receivables, accounts payable, accrued expenses, and short-term debt approximate fair value because of theshort-term maturity of these instruments. The fair value estimates of long-term debt were primarily based upon quotes from a major financial institution of recentlyobserved trading levels of our Term Loan A and Term Loan B debt. The fair value estimates of foreign currency contracts are estimated from market quotesprovided by a well-recognized national market data provider. The fair value estimates of natural gas contracts are estimated using internal valuation models withverification by obtaining quotes from major financial institutions. For natural gas swap transactions, fair value is calculated using NYMEX market quotes providedby a well-recognized national market data provider. For natural gas option based strategies, fair value is calculated using an industry standard Black-Scholes modelwith market based inputs, including but not limited to, underlying asset price, strike price, implied volatility, discounted risk free rate and time to expiration,provided by a well-recognized national market data provider. The fair value estimates for interest rate swap contracts are estimated by obtaining quotes from majorfinancial institutions with verification by internal valuation models. Refer to Note 18 for a discussion of the fair value and the related inputs used to measure fairvalue.The fair value measurement of assets and liabilities is summarized below: December 31, 2017 December 31, 2016 Fair value based on Fair value based on Quoted,activemarkets Otherobservableinputs Quoted,activemarkets Otherobservableinputs Level 1 Level 2 Level 1 Level 2 Assets/(Liabilities), net: Foreign currency contracts $(0.8) $- $1.3 $- Natural gas contracts - (0.6) - 1.0 Interest rate swap contracts - 8.9 - 6.9 73Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) We do not have any financial assets or liabilities that are valued using Level 3 (unobservable) inputs. NOTE 18. DERIVATIVE FINANCIAL INSTRUMENTSWe are exposed to market risk from changes in foreign exchange rates, interest rates and commodity prices that could impact our results of operations, cash flowsand financial condition. We use forward swaps and option contracts to hedge these exposures. Forward swaps and option contracts are entered into for periodsconsistent with underlying exposure and do not constitute positions independent of those exposures. At inception, derivatives that we designate as hedginginstruments are formally documented as either (1) a hedge of a forecasted transaction or “cash flow” hedge, or (2) a hedge of the fair value of a recognized liabilityor asset or “fair value” hedge. We also formally assess both at inception and at least quarterly thereafter, whether the derivatives that are used in hedgingtransactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If it is determined that a derivative ceases to be ahighly effective hedge, or if the anticipated transaction is no longer probable of occurring, we discontinue hedge accounting, and any future mark-to-marketadjustments are recognized in earnings. We use derivative financial instruments as risk management tools and not for speculative trading purposes.Counterparty RiskWe only enter into derivative transactions with established counterparties having an investment-grade credit rating. We monitor counterparty credit default swaplevels and credit ratings on a regular basis. All of our derivative transactions with counterparties are governed by master International Swap and DerivativesAssociation agreements (“ISDAs”) with netting arrangements. These agreements can limit our exposure in situations where we have gain and loss positionsoutstanding with a single counterparty. We do not post nor do we receive cash collateral with any counterparty for our derivative transactions. These ISDAs donot have any credit contingent features; however, a default under our bank credit facility would trigger a default under these agreements. Exposure to individualcounterparties is controlled, and thus we consider the risk of counterparty default to be negligible.Commodity Price RiskWe purchase natural gas for use in the manufacturing process and to heat many of our facilities. As a result, we are exposed to fluctuations in the price of naturalgas. We have a policy of reducing North American natural gas price volatility by purchasing natural gas forward contracts and swaps, purchased call options, andzero-cost collars up to 24 months forward. The contracts are based on forecasted usage of natural gas measured in mmBtu’s. There is a high correlation betweenthe hedged item and the hedge instrument. The gains and losses on these instruments offset gains and losses on the transactions being hedged. These instrumentsare designated as cash flow hedges. As of December 31, 2017 and December 31, 2016, the notional amount of these hedges was $9.2 million and $7.4 million,respectively. The mark-to-market gain or loss on qualifying hedges is included in other comprehensive income to the extent effective, and reclassified into cost ofgoods sold in the period during which the underlying gas is consumed. The mark-to-market gains or losses on ineffective portions of hedges are recognized in costof goods sold immediately. The earnings impact of the ineffective portion of these hedges was not material for the years ended December 31, 2017, 2016 and2015.Currency Rate Risk – Sales and PurchasesWe manufacture and sell our products in a number of countries throughout the world and, as a result, we are exposed to movements in foreign currency exchangerates. To a large extent, our historical global manufacturing and sales provide a natural hedge of foreign currency exchange rate movement, as foreign currencyexpenses generally offset foreign currency revenues. Upon completion of the sale of our EMEA and Pacific Rim businesses, and on a continuing operations basisas of December 31, 2017, our only major foreign currency exposure is to the Canadian dollar. We manage our Canadian cash flow exposures on a net basis andwhen possible, use derivatives to hedge our unmatched foreign currency cash inflows and outflows. We use Canadian dollar forward exchange contracts to reduce our exposure to the risk that the eventual net cash inflows resulting from the sale of products toCanadian customers will be adversely affected by changes in exchange rates. These derivative instruments are used for forecasted transactions and are classified ascash flow hedges. Cash flow hedges are executed quarterly, generally up to 15 months forward, and allow us to further reduce our overall exposure to Canadiandollar exchange rate movements, since gains and losses on these contracts offset gains and losses on the transactions being hedged. The notional amount of thesehedges was $18.9 million and $26.5 million at December 31, 2017 and December 31, 2016, respectively. Gains and losses on these instruments are recorded inother comprehensive income, to the extent effective, until the underlying transaction is recognized in74Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) earnings. The mark-to-market gains or losses on ineffective portions of hedges are recognized in SG&A expense immediate ly. The earnings impact of theineffective portion of these hedges was not material for the years ended December 31, 2017, 2016 and 2015.Interest Rate RiskWe utilize interest rate swaps to minimize the fluctuations in earnings caused by interest rate volatility. The following table summarizes our interest rate swaps asof December 31, 2017: Trade Date NotionalAmount Coverage Period Risk CoverageNovember 13, 2016 $250.0 November 2016 to March 2018 Term Loan ANovember 13, 2016 $200.0 November 2016 to March 2021 Term Loan AApril 1, 2016 $100.0 April 2016 to March 2023 Term Loan B In connection with the refinancing of our credit facilities in April 2016, $450.0 million of notional amount Term Loan B swaps with a trade date of March 27, 2012were settled and $10.7 million of losses recorded as a component of accumulated other comprehensive income were reclassified to interest expense in 2016. During the fourth quarter of 2016, we elected to change the floating rate basis for interest payments due under our Term Loan A credit facility from 3-monthLIBOR to 1-month LIBOR. In connection with the change in our underlying interest payments, in November 2016 we entered into $450.0 million forward-startingnotional amount basis rate swaps to convert the floating rate risk under our Term Loan A Swaps from 3-month LIBOR to 1-month LIBOR and jointly designatedthe basis swaps with our Term Loan A Swaps in cash flow hedging relationships. As a result of this transaction, $2.4 million of gains recorded as a component ofaccumulated other comprehensive income were reclassified as a reduction to interest expense during the fourth quarter of 2016. Since the basis rate swaps had anon-zero fair value upon designation as cash flow hedges, mark-to-market gains or losses on ineffective portions of these hedges are recorded as a component ofinterest expense. Under the terms of our Term Loan B swap with a trade date of April 1, 2016, we receive the greater of 3-month LIBOR or a 0.75% LIBOR Floorand pay a fixed rate over the hedged period. These swaps were designated as cash flow hedges against changes in LIBOR for a portion of our variable ratedebt. The mark-to-market gains or losses on the ineffective portion of hedges are recognized in interest expense immediately. The earnings impact of theineffective portion of these hedges was not material for the years ended December 31, 2017 and 2016. There was no earnings impact of the ineffective portion ofthese hedges for the years ended December 31, 2015. Financial Statement ImpactsThe following tables detail amounts related to our derivatives as of December 31, 2017 and December 31, 2016. We did not have any derivative assets or liabilitiesnot designated as hedging instruments for the years ended December 31, 2017 and 2016. The derivative asset and liability amounts below are shown in grossamounts; we have not netted assets with liabilities. Derivative Assets Derivative Liabilities Fair Value Fair Value Balance SheetLocation December 31,2017  December 31,2016  Balance SheetLocation December 31,2017 December 31,2016 Derivatives designated as hedging instruments Natural gas commodity contracts Other currentassets $- $1.0 Accounts payable andaccrued expenses $0.5 $- Foreign exchange contracts Other currentassets - 1.2 Accounts payable andaccrued expenses 0.7 - Interest rate swap contracts Other currentassets 0.2 - Accounts payable andaccrued expenses - - Natural gas commodity contracts Other non-currentassets - - Other long-termliabilities 0.1 - Foreign exchange contracts Other non-currentassets - 0.1 Other long-termliabilities 0.1 - Interest rate swap contracts Other non-currentassets 8.7 7.4 Other long-termliabilities - 0.5 Total derivatives designated as hedging instruments $8.9 $9.7 $1.4 $0.5 75Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Amount of (Loss) Gain Recognized inAccumulated Other ComprehensiveIncome (“AOCI”) (Effective Portion) Location of Gain (Loss)Reclassifiedfrom AOCI intoIncome (EffectivePortion) Gain (Loss) Reclassified fromAOCI into Income (EffectivePortion) 2017 2016 2015 2017 2016 2015 Derivatives in Cash Flow Hedging Relationships Natural gas commodity contracts $(1.3) $0.6 $(2.3) Cost of goods sold $0.3 $(1.2) $(4.4)Foreign exchange contracts – purchases (0.5) - 1.2 Cost of goods sold - - 1.8 Foreign exchange contracts – sales (1.8) (2.9) 4.7 Net sales 0.1 1.4 3.8 Interest rate swap contracts 2.2 6.8 (2.1) Interest expense (0.9) (8.3) (0.8)Total $(1.4) $4.5 $1.5 Total gain (loss) from continuing operations (0.5) (8.1) 0.4 Total (loss) gain from discontinued operations (0.1) 0.2 - Total gain (loss) $(0.6) $(7.9) $0.4 As of December 31, 2017, the amount of existing losses in AOCI expected to be recognized in earnings over the next twelve months is $1.3 million. NOTE 19. PRODUCT WARRANTIESWe provide limited warranties for defects in materials or factory workmanship, sagging and warping, and certain other manufacturing defects. Our productwarranties place certain requirements on the purchaser, including installation and maintenance in accordance with our written instructions. In addition to ourwarranty program, under certain limited circumstances, we will occasionally and at our sole discretion, provide a customer accommodation repair orreplacement. Warranty repairs and replacements are most commonly made by professional installers employed by or affiliated with our independentdistributors. Reimbursement for cost associated with warranty repairs are provided to our independent distributors through a credit against accounts receivablefrom the distributor to us.The following table summarizes the activity for the accrual of product warranties for December 31, 2017 and 2016: 2017 2016 Balance at beginning of period $0.2 $0.3 Current year warranty accruals 3.2 8.0 Reductions for payments (3.3) (8.1)Balance at end of period $0.1 $0.2 NOTE 20. OTHER LONG-TERM LIABILITIES December 31, 2017 December 31, 2016 Long-term deferred compensation arrangements $15.3 $15.9 Environmental liabilities 13.5 4.7 Long-term portion of derivative liabilities 0.2 0.5 Other 6.5 5.9 Total other long-term liabilities $35.5 $27.0 NOTE 21. SHARE-BASED COMPENSATION PLANSThe 2016 Long-Term Incentive Plan (“2016 LTIP”) authorizes us to issue stock options, stock appreciation rights, restricted stock awards, stock units,performance-based awards and cash awards to officers and key employees and expires on July 8, 2026, after which time no further awards may be made. The 2016LTIP authorizes us to issue up to 8,949,000 shares of common stock, which76Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) includes all shares that have been issued under the 2016 LTIP. As of December 31, 2017, 2,543,180 shares were available for future grants under the 2016 LTIP.The 2016 Directors Stock Unit Plan (“2016 Director’s Plan”) authorizes us to issue stock units to non-employee directors until July 2026. The 2016 Director’s Planauthorizes us to issue up to 550,000 shares of common stock, which includes all shares that have been issued under the 2016 Director’s Plans. As of December 31,2017, 202,535 shares were available for future grants under the 2016 Director’s Plan. The following table presents stock option activity for the year ended December 31, 2017: Number ofshares(thousands) Weighted-averageexercise price Weighted-averageremainingcontractualterm (years) Aggregateintrinsic value(millions) Option shares outstanding, December 31, 2016 1,350.6 $34.66 Option shares exercised (78.2) (41.62) Option shares outstanding, December 31, 2017 1,272.4 $34.23 3.4 $33.5 Option shares exercisable, vested and expected to vest, December 31, 2017 1,272.4 34.23 3.4 $33.5 We have reserved sufficient authorized shares to allow us to issue new shares upon exercise of all outstanding options. Options generally become exercisable inthree years and expire 10 years from the date of grant. When options are exercised, we may issue new shares, use treasury shares (if available), acquire shares heldby investors, or a combination of these alternatives in order to satisfy the option exercises. The following table presents information related to stock option exercises: 2017 2016 2015 Total intrinsic value of stock options exercised $0.9 $0.4 $3.5 Cash proceeds received from stock options exercised $3.3 $0.7 $6.4 Tax (expense) deduction realized from stock options exercised $(0.2) $(0.1) $0.4 The fair value of option grants was estimated on the date of grant using the Black-Scholes option pricing model. There were no option grants in 2017, 2016 or2015. Historically, we have also granted non-vested stock awards in the form of restricted stock, RSUs, performance restricted stock and PSUs. As of December 31, 2017and 2016, we have no outstanding restricted stock or performance restricted stock. A summary of the 2017 activity related to these awards follows: Non-Vested Stock Awards RSUs PSUs Number of shares(thousands) Weighted-average fair valueat grant date Number of shares(thousands) Weighted-average fair valueat grant date December 31, 2016 224.5 $44.94 290.4 $40.29 Granted 54.2 47.18 139.4 44.65 Vested (101.1) (46.23) (39.7) (47.19)Forfeited (6.0) (44.23) (10.4) (43.91)December 31, 2017 171.6 $45.27 379.7 $41.08 RSUs entitle the recipient to a specified number of shares of AWI’s common stock provided the prescribed service period is fulfilled. PSUs entitle the recipient toa specified number of shares of AWI’s common stock provided the defined financial targets are achieved at the end of the performance period. RSUs and PSUsgenerally had vesting periods of three years at the grant date. RSUs and PSUs earn dividends during the vesting period that are forfeitable if the awards do not vest. 77Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The table above contains 8,354 and 9,581 RSUs as of December 31, 2017 and 2016, respectively, which are accounted for as liability awards as they are able to besettled in cash. The table above contains 720 PSUs as of Decem ber 31, 2016, which are accounted for as liability awards as they are able to be settled incash. Employee liability awards outstanding for all periods represent awards to employees of our EMEA and Pacific Rim businesses. The underlying liability isrefl ected as a component of current liabilities from discontinued operations on our consolidated balance sheets. RSUs and PSUs with non-market based performance conditions are measured at fair value based on the closing price of our stock on the date of grant. In 2017 and2016, we granted 69,769 and 158,790 PSUs with market based performance conditions that are valued through the use of a Monte Carlo simulation. The weightedaverage assumptions for PSUs measured at fair value through the use of a Monte Carlo simulation is presented in the table below. 2017 2016 Weighted-average grant date fair value of market based PSUs granted (dollars per award) $43.29 $37.75 Assumptions Risk free rate of return 1.5% 0.8%Expected volatility 28.0% 28.0%Expected term (in years) 3.1 2.7 Expected dividend yield 0.0% 0.0% The risk free rate of return was determined based on the implied yield available on zero coupon U.S. Treasury bills at the time of grant with a remaining term equalto the expected term of the PSUs. The expected volatility was based on an average of the actual historical volatilities of the stock prices of AWI and a peer groupof companies. We elected to not rely solely on AWI’s actual historical stock price volatility due to the separation of AFI. The expected life represented theperformance period on the underlying award. The expected dividend yield was assumed to be zero because, at the time of each grant, we had no plans to declare adividend. In addition to the equity awards described above, as of December 31, 2017 we had 11,773 fully-vested phantom shares outstanding for non-employee directorsunder the 2006 Phantom Stock Unit Plan not reflected in the non-vested stock awards table above. These awards are settled in cash and had vesting periods of oneto three years. The awards are generally payable six months following the director’s separation from service on the Board of Directors. The total liability recordedfor these shares as of December 31, 2017 was $1.3 million which includes associated non-forfeitable dividends. The 2006 Phantom Stock Unit Plan is still inplace; however, no additional shares will be granted under the plan.As of December 31, 2017 and 2016, there were 191,725 and 189,237 RSUs, respectively, outstanding under the 2016 Directors Stock Unit Plan not reflected in theNon-Vested Stock Awards table above. In 2017 and 2016, we granted 22,433 and 25,714 restricted stock units, respectively, to non-employee directors. Theseawards generally have a vesting period of one year, and as of December 31, 2017 and 2016, 169,292 and 163,523 shares, respectively, were vested but not yetdelivered. The awards are generally payable six months following the director’s separation from service on the Board of Directors and earn dividends during thevesting period that are non-forfeitable. We recognize share-based compensation expense on a straight-line basis over the vesting period. Share-based compensation cost was $9.8 million ($5.9 million netof tax benefit) in 2017; $11.0 million ($6.6 million net of tax benefit) in 2016, and $10.2 million ($6.0 million net of tax benefit) in 2015. As of December 31, 2017, there was $12.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements. Thatcost is expected to be recognized over a weighted-average period of 1.6 years. 78Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 22. EMPLOYEE COSTS 2017 2016 2015 Wages, salaries and incentive compensation $191.0 $179.1 $185.1 Payroll taxes 14.2 13.9 14.0 Defined contribution and defined benefit pension plan expense, net 4.1 22.7 26.4 Insurance and other benefit costs 24.0 21.4 18.8 Share-based compensation 9.8 11.0 10.2 Total $243.1 $248.1 $254.5 NOTE 23. LEASESWe rent certain real estate and equipment. Several leases include options for renewal or purchase, and contain clauses for payment of real estate taxes andinsurance. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Rent expense was $6.7million in 2017, $5.2 million in 2016 and $5.2 million in 2015. Future minimum payments at December 31, 2017 by year and in the aggregate, having non-cancelable lease terms in excess of one year are as follows: TotalMinimumLeasePayments Scheduled minimum lease payments 2018 $2.4 2019 2.2 2020 1.8 2021 1.5 2022 1.1 Thereafter 4.3 Total $13.3 NOTE 24. SHAREHOLDERS' EQUITYCommon Stock Repurchase PlanOn July 29, 2016, the Company announced that its Board of Directors had approved a share repurchase program pursuant to which the Company is authorized torepurchase up to $150.0 million of its outstanding shares of common stock through July 31, 2018 (the “Program”). On October 30, 2017, we announced that ourBoard of Directors had approved an additional $250.0 million authorization to repurchase shares of our outstanding common stock under the Program. TheProgram was also extended through October 31, 2020. 79Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Repurchases under the Program may be made through open market, block and privately-negotiated transactions, including Rule 10b5-1 plans, at times and in suchamounts as management deems appropriate, subject to market and busines s conditions, regulatory requirements and other factors. The Program does not obligatethe Company to repurchase any particular amount of common stock and may be suspended or discontinued at any time without notice. During 2017, 1.8 millionshares were repurchased under the Program for a total cost of $80.4 million, or an average price of $43.58 per share. During 2016, 1.1 million shares wererepurchased under the Program for a total cost of $43.8 million, or an average price of $39 .45 per share. Since inception of the Program, we have repurchased 2.95million shares under the Program for a total cost of $124.2 million, or an average price of $42.03 per share.Accumulated Other Comprehensive (Loss)The balance of each component of accumulated other comprehensive (loss), net of tax as of December 31, 2017 and 2016 is presented in the table below. December 31, 2017 December 31, 2016 Foreign currency translation adjustments $(47.1) $(71.6)Derivative gain, net 3.5 3.8 Pension and postretirement adjustments (302.3) (336.0)Accumulated other comprehensive (loss) $(345.9) $(403.8) The amounts and related tax effects allocated to each component of other comprehensive income for 2017, 2016, and 2015 are presented in the table below. Pre-taxAmount Tax Benefit After-tax Amount 2017 Foreign currency translation adjustments $24.5 $- $24.5 Derivative (loss), net (0.8) 0.5 (0.3)Pension and postretirement adjustments 50.4 (16.7) 33.7 Total other comprehensive income $74.1 $(16.2) $57.9 Pre-taxAmount Tax Expense After-taxAmount 2016 Foreign currency translation adjustments $(33.2) $- $(33.2)Derivative gain, net 11.9 (4.4) 7.5 Pension and postretirement adjustments 75.7 (26.4) 49.3 Total other comprehensive income $54.4 $(30.8) $23.6 Pre-taxAmount Tax Benefit After-taxAmount 2015 Foreign currency translation adjustments $(25.5) $- $(25.5)Derivative gain, net 1.1 (0.4) 0.7 Pension and postretirement adjustments 50.7 (17.8) 32.9 Total other comprehensive (loss) income $26.3 $(18.2) $8.1 80Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The following table summarizes the activity, by component, related to the change in AOCI for December 31, 2017 and 2016: ForeignCurrencyTranslationAdjustments (1)  Derivative(Loss)Gain (1)  Pension andPostretirementAdjustments (1)  Total AccumulatedOtherComprehensive(Loss) (1) Balance, December 31, 2015 $(33.8) $(3.3) $(450.3) $(487.4)Separation of AFI, net of tax (benefit) of $-, $-, ($39.2), and ($39.2) (4.6) (0.4) 65.0 60.0 Other comprehensive (loss) income before reclassifications, net of tax expense (benefit) of $ -, ($1.8), ($10.9), and ($12.8) (33.2) 3.0 20.2 (10.0)Amounts reclassified from accumulated other comprehensive income  -  4.5 29.1 33.6 Net current period other comprehensive (loss) income (33.2) 7.5 49.3 23.6 Balance, December 31, 2016 (71.6) 3.8 (336.0) (403.8)Other comprehensive income (loss) income before reclassifications, net of tax expense (benefit) of $ -, $0.8, ($3.6), and ($2.8) 24.5 (0.7) 9.3 33.1 Amounts reclassified from accumulated other comprehensive income  -  0.4 24.4 24.8 Net current period other comprehensive income (loss) 24.5 (0.3) 33.7 57.9 Balance, December 31, 2017 $(47.1) $3.5 $(302.3) $(345.9) (1)Amounts are net of tax 81Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) The amounts reclassified from AOCI and the affected line item of the Consolidated Statement of Earnings and Comprehensive Income are presented in the tablebelow. Amounts Reclassified fromAOCI Affected Line Item in theConsolidated Statementof Earnings andComprehensive Income 2017 2016 Derivative Adjustments: Natural gas commodity contracts $(0.3) $1.2 Cost of goods soldForeign exchange contracts - purchases 0.1 (0.2) Cost of goods soldForeign exchange contracts - sales (0.1) (1.4) Net salesInterest rate swap contracts 0.9 8.3 Interest expenseTotal income from continuing operations, before tax 0.6 7.9 Tax impact (0.2) (2.8) Income tax expenseTotal income from continuing operations, net of tax 0.4 5.1 Total (loss) from discontinued operations, net of tax benefit of $- and ($0.3) - (0.6) Total income, net of tax 0.4 4.5 Pension and Postretirement Adjustments: Prior service cost amortization 0.9 0.6 Cost of goods soldPrior service cost amortization 0.6 0.6 SG&A expenseAmortization of net actuarial loss 7.4 20.7 Cost of goods soldAmortization of net actuarial loss 7.8 18.4 SG&A expensePartial settlement 12.5 - Cost of goods soldPartial settlement 8.3 - SG&A expenseTotal expense from continuing operations, before tax 37.5 40.3 Tax impact (13.1) (14.1) Income tax expenseTotal expense from continuing operations, net of tax 24.4 26.2 Total expense from discontinued operations net of tax expense of $- and $1.5 - 2.9 Total expense, net of tax 24.4 29.1 Total reclassifications for the period $24.8 $33.6 NOTE 25. SUPPLEMENTAL FINANCIAL INFORMATION 2017 2016 2015 Selected operating expense Maintenance and repair costs $42.5 $41.4 $42.2 Research and development costs 17.4 17.8 18.7 Advertising costs 6.0 5.4 5.5 Other non-operating (income)/expense Interest income $(1.8) $(1.0) $(0.6)Foreign currency transaction (gain)/loss, net of hedging activity (0.6) (9.4) 13.8 Other - (0.8) 4.6 Total $(2.4) $(11.2) $17.8 82Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) NOTE 26. RELATED PARTIESIn some markets, we purchase grid products from WAVE, our 50%-owned joint venture with Worthington Industries, for resale to customers. The total amount ofthese purchases was $18.2 million in 2017, $18.0 million in 2016 and $18.2 million in 2015. We also provide certain selling, promotional and administrativeprocessing services to WAVE for which we receive reimbursement. Those services amounted to $14.9 million in 2017, $9.1 million in 2016, and $8.8 million in2015. The net amount due to WAVE from us for all of our relationships was $2.6 million as of December 31, 2017 and $4.2 million as of December 31, 2016. SeeNote 9 to the Consolidated Financial Statements for additional information. NOTE 27. LITIGATION AND RELATED MATTERS ENVIRONMENTAL MATTERS Environmental ComplianceOur manufacturing and research facilities are affected by various federal, state and local requirements relating to the discharge of materials and the protection of theenvironment. We make expenditures necessary for compliance with applicable environmental requirements at each of our operating facilities. These regulatoryrequirements continually change, therefore we cannot predict with certainty future expenditures associated with compliance with environmental requirements. Environmental SitesSummaryWe are actively involved in the investigation, closure and/or remediation of existing or potential environmental contamination under the ComprehensiveEnvironmental Response, Compensation and Liability Act (“CERCLA”) and state Superfund and similar environmental laws at several domestically owned,formerly owned and non-owned locations allegedly resulting from past industrial activity. In a few cases, we are one of several potentially responsible parties and have agreed to jointly fund the required investigation and remediation, while preserving ourdefenses to the liability. We may also have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. We arecurrently pursuing coverage and recoveries under those policies with respect to certain of the sites, including the St. Helens, OR site, the Macon, GA site and theElizabeth City, NC site, each of which is summarized below. These efforts include two active and independent litigation matters against legacy primary and excesspolicy insurance carriers for recovery of fees and costs incurred by us in connection with our investigation and remediation activities for such sites. Other thandisclosed below, we are unable to predict the outcome of these matters or the timing of any recoveries, whether through settlement or otherwise. We are alsounable to predict the extent to which any recoveries might cover our final share of investigation and remediation costs for these sites. Our final share ofinvestigation and remediation costs may exceed any such recoveries, and such amounts net of insurance recoveries, may be material. In 2017 we entered settlement agreements totaling $30.5 million with legacy insurance carriers to resolve ongoing litigation and recover fees and costs previouslyincurred by us in connection with certain environmental sites. These settlements were recorded as an $11.2 million reduction to cost of goods sold and a $19.3million reduction to SG&A expenses during the third and fourth quarters of 2017, reflecting the same income statement categories where environmentalexpenditures were historically recorded. We obtained court approval of these settlements in January 2018 and now expect payments to be released to us fromescrow in the first quarter of 2018. We anticipate that we may enter into additional settlement agreements in the future that may or may not be material with otherlegacy insurers to obtain reimbursement or contribution for environmental site expenses.Estimates of our future liability at the environmental sites are based on evaluations of currently available facts regarding each individual site. We consider factorssuch as our activities associated with the site, existing technology, presently enacted laws and regulations and prior company experience in remediatingcontaminated sites. Although current law imposes joint and several liability on all parties at Superfund sites, our contribution to the remediation of these sites isexpected to be limited by the number of other companies potentially liable for site remediation. As a result, our estimated liability reflects only our expectedshare. In determining the probability of contribution, we consider the solvency of other parties, the site activities of other parties, whether liability is beingdisputed, the terms of any existing agreements and experience with similar matters, and the effect of our October 2006 Chapter 11 reorganization upon the validityof the claim. 83Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) Specific Material EventsSt Helens, ORIn August 2010, we entered into a Consent Order (the “Consent Order”) with the Oregon Department of Environmental Quality (“ODEQ”), along with KaiserGypsum Company, Inc. (“Kaiser”), and Owens Corning Sales LLC (“OC”), with respect to our St. Helens, OR facility, which was previously owned by Kaiser andthen OC. The Consent Order requires that we and Kaiser complete a remedial investigation and feasibility study (“RI/FS”) on the portion of the site owned by us(“Owned Property”), which is comprised of Upland and Lowland areas. The Consent Order further requires us, Kaiser and OC to conduct an RI/FS in the In-Waterarea of the adjacent Scappoose Bay. Costs and responsibilities for investigation, including the current RI/FS, for the Owned Property have been shared with Kaiserpursuant to a cost sharing agreement with Kaiser. Costs and responsibilities for the investigation with respect to the in-water areas that we do not own have beenshared with Kaiser and OC pursuant to a cost sharing agreement with Kaiser and OC. On September 14, 2016, the parties submitted a Feasibility Study to the ODEQ proposing remedial action options for the Upland area. We have participated in theinvestigation phase for the Lowland area of the Owned Property and the Scappoose Bay and worked with the ODEQ, Kaiser and OC to finalize the reports to moveto the Feasibility Study phase. On September 30, 2016, Kaiser filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the Western Districtof North Carolina (Case No. 16-31602). AWI, OC and the ODEQ have all been included on the master list of potential creditors filed with the Bankruptcy Courtfor notice purposes. By order dated October 14, 2016, the Bankruptcy Court formed a statutory committee of unsecured creditors, to which we were appointed toserve, along with OC and The Boeing Company. The Committee is charged with, among other things, maximizing recovery of all unsecured creditor claims,including claims of Kaiser and ODEQ. Noticed parties submitted claims to the Bankruptcy Court on September 13, 2017. The Chapter 11 case impacts Kaiser’songoing participation in the RI/FS process, as well as the ODEQ consent order and cost sharing agreements. In November 2017, we participated in voluntary mediation with ODEQ, OC and Kaiser to negotiate a resolution that would discharge Potentially ResponsibleParties (“PRPs”) liability for the site. As a result of the mediation, on February 1, 2018, ODEQ issued a Public Notice and a proposed Consent Judgmentrecommending that, in exchange for a release from ODEQ for all contamination claims against AWI, we would pay $8.6 million to the State of Oregon andperform a previously scoped remedial action for the Upland area of the site. During the fourth quarter of 2017, we increased our reserve for environmentalliabilities by $8.6 million as a result of this pending settlement with the State of Oregon. The Consent Judgment remains subject to a public comment period andsubsequent entry and approval by the Columbia County Circuit Court, which we expect to occur in 2018.Macon, GA The U.S. Environmental Protection Agency (“EPA”) has listed two landfills located on a portion of our facility in Macon, GA, along with the former Macon NavalOrdnance Plant landfill adjacent to our property, portions of Rocky Creek, and certain tributaries leading to Rocky Creek (collectively, the “Macon Site”) as aSuperfund site on the National Priorities List due to the presence of contaminants, most notably polychlorinated biphenyls (“PCBs”).In September 2010, we entered into an Administrative Order on Consent for a Removal Action with the EPA to investigate PCB contamination in one of thelandfills on our property, the Wastewater Treatment Plant Landfill (the “WWTP Landfill,” also known as “Operable Unit 1”). We concluded the investigativephase of the Removal Action for the WWTP Landfill and submitted our final Engineering Evaluation/Cost Analysis (“EE/CA”) to the EPA in 2013. The EPAsubsequently approved the EE/CA and issued an Action Memorandum in July 2013 selecting our recommended remedy for the Removal Action. In July 2014, weentered into an Administrative Order on Consent for Removal Action with the EPA for the WWTP Landfill. The EPA approved the Removal Action Work Plan onMarch 30, 2015 and the removal work commenced in the third quarter of 2015. The Operable Unit 1 response action for the WWTP Landfill is complete and thefinal report was submitted to the EPA on October 11, 2016. The EPA approved the final report on November 28, 2016, and a Post-Removal Control Plan (the“Plan”) was submitted to the EPA on March 28, 2017. That Plan will monitor the effectiveness of the WWTP Landfill response action and our estimate of futureliabilities includes these tasks.It is probable that we will incur field investigation, engineering and oversight costs associated with a RI/FS with respect to the remainder of the Superfund site,which includes the other landfill on our property, as well as areas on and adjacent to AWI’s property and Rocky Creek (the “Remaining Site,” also known as“Operable Unit 2”). On September 25, 2015, AWI and other PRPs received a Special Notice Letter from the EPA under CERCLA inviting AWI and the PRPs toenter into the negotiation of an agreement to conduct an RI/FS of Operable Unit 2. We, along with the other PRPs, submitted a good faith offer to the EPA inresponse to the Special Notice Letter to conduct RI/FS. We and the other PRPs are in negotiations with the EPA on the agreement to conduct an84Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) RI/FS for Operable Unit 2. We have not yet commenced an investigation of this portion of the site. We anticipate that the EPA will require significantinvestigative work for Operable Unit 2 and that we may ultimately incur costs i n remediating any contamination discovered during the RI/FS. The currentestimate of future liability at this site includes only our estimated share of the costs of the investigative work that, at this time, we anticipate the EPA will requirethe PRPs to perform. We are unable to reasonably estimate AWI’s final share of the costs or the total costs associated with the investigation work or any resultingremediation therefrom, although such amounts may be material. Elizabeth City, NCThis site is a former cabinet manufacturing facility that was operated by Triangle Pacific Corporation, now known as Armstrong Wood Products, Inc. (“TrianglePacific”), from 1977 until 1996. The site was formerly owned by the U.S. Navy (“Navy”) and Westinghouse, now CBS Corporation (“CBS”). We assumedownership of the site when we acquired the stock of Triangle Pacific in 1998. Prior to our acquisition, the NC Department of Environment and Natural Resourceslisted the site as a hazardous waste site. In 1997, Triangle Pacific entered into a cost sharing agreement with Westinghouse whereby the parties agreed to shareequally in costs associated with investigation and potential remediation. In 2000, Triangle Pacific and CBS entered into an Administrative Order on Consent toconduct an RI/FS with the EPA for the site. In 2007, we and CBS entered into an agreement with the Navy whereby the Navy agreed to pay one third of definedpast and future investigative costs up to a certain amount, which has now been exhausted. The EPA approved the RI/FS work plan in August 2011. In January2014, we submitted the draft Remedial Investigation and Risk Assessment reports and conducted supplemental investigative work based upon agency comments tothose reports. The parties have agreed upon tasks and timeframes to complete a feasibility study at the site, working toward a Proposed Plan and Record OfDecision in 2018. If remediation is required, the related costs may be material, although we expect these costs to be shared with CBS and the Navy. Summary of Financial PositionLiabilities of $13.5 million as of December 31, 2017 and $4.7 million as of December 31, 2016 were recorded for potential environmental liabilities that weconsider probable and for which a reasonable estimate of the probable liability could be made. During 2017, we recorded reserves for potential environmentalliabilities of $10.1 million, including $8.6 million of reserves recorded in the fourth quarter for the above referenced St. Helens settlement. During 2016, werecorded reserves for potential environmental liabilities of $2.9 million. Where existing data is sufficient to estimate the liability, that estimate has been used;where only a range of probable liabilities is available and no amount within that range is more likely than any other, the lower end of the range has been used. Asassessments and remediation activities progress at each site, these liabilities are reviewed to reflect new information as it becomes available, and adjusted to reflectamounts actually incurred and paid. These liabilities are undiscounted. The estimated liabilities above do not take into account any claims for recoveries from insurance or third parties. It is our policy to record insurance recoverieswhen probable. For insurance recoveries that are reimbursements of prior environmental expenditures, the income statement impact is recorded within cost ofgoods sold, SG&A expenses and/or discontinued operations, which are the same income statement categories where environmental expenditures were historicallyrecorded. Insurance recoveries in excess of historical environmental spending, if any, would be recorded on the balance sheet as a part of other long-term liabilitiesand released as future environmental spending occurs or the liability is settled.The estimated liabilities above do not take into account any claims for recoveries from insurance or third parties. It is our policy to record recoveries as assets inthe Consolidated Balance Sheets. Actual costs to be incurred at identified sites may vary from our estimates. Based on our knowledge of the identified sites, it is not possible to reasonably estimatefuture costs in excess of amounts already recognized. OTHER CLAIMSOn September 8, 2017, Roxul USA, Inc. (d/b/a Rockfon) filed litigation against us in the United States District Court for the District of Delaware alleginganticompetitive conduct seeking remedial measures and unspecified damages. Roxul USA, Inc. is a significant ceilings systems competitor with globalheadquarters in Europe and expanding operations in the Americas. We believe the allegations are without merit and are vigorously defending the matter.We are involved in various other lawsuits, claims, investigations and other legal matters from time to time that arise in the ordinary course of business, includingmatters involving our products, intellectual property, relationships with suppliers, relationships with85Armstrong World Industries, Inc., and SubsidiariesNotes to Consolidated Financial Statements(dollar amounts in millions, except share data) distributors, relationships with competitors, employees and other matters. From time to time, for example, we may be a party to litigation matters that involveproduct liability, tort liability and other claims under various allegations, including illness due to exposure to certain chemicals used in the workplace; or medicalconditions ari sing from exposure to product ingredients or the presence of trace contaminants. Such allegations may involve multiple defendants and relate tolegacy products that we and other defendants purportedly manufactured or sold. We believe that any current cla ims are without merit and intend to defend themvigorously. For these matters, we also may have rights of contribution or reimbursement from other parties or coverage under applicable insurance policies. Whenapplicable and appropriate, we will pursue co verage and recoveries under those policies, but are unable to predict the outcome of those demands. While completeassurance cannot be given to the outcome of these proceedings, we do not believe that any current claims, individually or in the aggregate, will have a materialadverse effect on our financial condition, liquidity or results of operations. NOTE 28. EARNINGS PER SHAREEarnings per share components may not add due to rounding.The following table is a reconciliation of net earnings to net earnings attributable to common shares used in our basic and diluted EPS calculations for the yearsended December 31, 2017, 2016, and 2015:  2017 2016 2015 Earnings from continuing operations $220.6 $99.3 $57.9 Earnings allocated to participating non-vested share awards (0.7) (0.3) (0.2)Earnings from continuing operations attributable to common shares $219.9 $99.0 $57.7 2017 2016 2015 (in millions) Basic shares outstanding 53.3 55.4 55.5 Dilutive effect of common stock equivalents 0.6 0.3 0.4 Diluted shares outstanding 53.9 55.7 55.9 Options to purchase 319,836, 632,799 and 203,527 shares of common stock were outstanding as of December 31, 2017, 2016, and 2015, respectively, but notincluded in the computation of diluted earnings per share, because the options were anti-dilutive. 86 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCO UNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENot applicable.ITEM 9A.CONTROLS AND PROCEDURESOur management, with the participation of our chief executive officer and our chief financial officer, performed an evaluation of our disclosure controls andprocedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (“Exchange Act”)) as of December 31, 2017. Our chief executiveofficer and our chief financial officer have concluded that our disclosure controls and procedures were effective insofar as they are designed to provide reasonableassurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized andreported, within the time periods specified in the Commission’s rules and forms, and (ii) accumulated and communicated to our management, including ourprincipal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met,and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2017 that have materially affectedor are reasonably likely to materially affect our internal control over financial reporting.Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm are incorporated byreference to Item 8.ITEM 9B.OT HER INFORMATIONNot applicable. 87 PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEExecutive Officers of the Company (as of February 26, 2018): Name Age Present Position and Business Experience During the Last Five Years* Victor D. Grizzle 56 Armstrong World Industries, Inc.President & CEO, Director since April 2016Executive Vice President & CEO, Armstrong Building Products (2011 to April 2016) Charles M. Chiappone 55 Armstrong World Industries, Inc.Senior Vice President, Ceiling Solutions since April 2016Vice President of Global Marketing & Commercial Excellence,Armstrong Building Products (January 2012 to April 2016) David S. Cookson 60 Armstrong World Industries, Inc.Senior Vice President, Americas since 2008 Mark A. Hershey 48 Armstrong World Industries, Inc.Senior Vice President, General Counsel since July 2011Chief Compliance Officer since February 2012Secretary (July 2011 to June 2014 and since April 2016) Brian L. MacNeal 51 Armstrong World Industries, Inc.Senior Vice President, Chief Financial Officer since April 2016Vice President, Global Finance and CFO, Armstrong Building Products (2014 to April 2016)Heartland Energy SolutionsInterim Chief Financial Officer (2013 to 2014)Campbell Soup CompanyVice President of Finance (2011 to 2013) Stephen F. McNamara 51 Armstrong World Industries, Inc.Vice President, Controller since July 2008 Ellen R. Romano 56 Armstrong World Industries, Inc.Senior Vice President, Human Resources since July 2013Vice President, Human Resources, Armstrong Building Products (2009 to 2013) *Information in parentheses regarding previously held positions indicates either the duration the Executive Officer held the position or the year in whichservice in the position began.All executive officers are elected by the Board of Directors to serve in their respective capacities until their successors are elected and qualified or until their earlierresignation or removal.Code of EthicsWe have adopted a Code of Business Conduct that applies to all employees, executives and directors, specifically including our Chief Executive Officer, our ChiefFinancial Officer and our Controller. We have also adopted a Code of Ethics for Financial Professionals (together with the Code of Business Conduct, the “Codesof Ethics”) that applies to all professionals in our finance and accounting functions worldwide, including our Chief Financial Officer and our Controller.The Codes of Ethics are intended to deter wrongdoing and to promote: •honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; •full, fair, accurate, timely and understandable public disclosures; •compliance with applicable governmental laws, rules and regulations;88 •the prompt internal reporting of violations of the Codes of Ethics; and •accountability for compliance with the Codes of Ethics.The Codes of Ethics are available at http://www.armstrongceilings.com/corporate/codes-policies.html and in print free of charge. Any waiver of the Company’sCode of Business Conduct, particularly its conflicts-of-interest provisions, which may be proposed to apply to any director or executive officer, must be reviewedin advance by the Nominating and Governance Committee of the Board of Directors, which would be responsible for making a recommendation to the Board ofDirectors for approval or disapproval. The Board of Directors’ decision on any such matter would be disclosed publicly in compliance with applicable legalstandards and the rules of the New York Stock Exchange. We intend to satisfy these requirements by making disclosures concerning such matters available on the“For Investors” page of our website. There were no waivers or exemptions from the Code of Business Conduct in 2017 applicable to any director or executiveofficer.Other information required by Item 10 is incorporated by reference to the sections entitled “Election of Directors,” “Corporate Governance,” and “Section 16(a)Beneficial Ownership Reporting Compliance” in the Company’s proxy statement for its 2018 annual meeting of shareholders to be filed no later than April 30,2018.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 11 is incorporated by reference to the sections entitled “Compensation Discussion and Analysis,” “Compensation CommitteeReport,” “Summary Compensation Table,” “Grants of Plan-Based Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and StockVested,” “Pension Benefits,” “Nonqualified Deferred Compensation,” “Potential Payments Upon Termination or Change in Control,” “Board of Directors –Board’s Role in Risk Management Oversight,” “Compensation Committee Interlocks and Insider Participation” and “Compensation of Directors” in theCompany’s proxy statement for its 2018 annual meeting of shareholders to be filed no later than April 30, 2018.ITEM 12.SECURITY OWNERSHIP OF CER TAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required by Item 12 is incorporated by reference to the sections entitled “Security Ownership of Certain Beneficial Owners,” “Security Ownershipof Management,” and “Equity Compensation Plan Information” in the Company’s proxy statement for its 2018 annual meeting of shareholders to be filed no laterthan April 30, 2018.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 13 is incorporated by reference to the sections entitled “Certain Relationships and Related Transactions” and “DirectorIndependence” in the Company’s proxy statement for its 2018 annual meeting of shareholders to be filed no later than April 30, 2018.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe information required by Item 14 is incorporated by reference to the sections entitled “Audit Committee Report” and “Relationship with Independent Auditors”in the Company’s proxy statement for its 2018 annual meeting of shareholders to be filed no later than April 30, 2018. 89 PART IVITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a)Listing of Documents 1.The financial statements and schedule of Armstrong World Industries, Inc. filed as a part of this 2017 Annual Report on Form 10-K is listed in the“Index to Financial Statements and Schedules” on Page 34. 2.The financial statements required to be filed pursuant to Item 15 of Form 10-K are:Worthington Armstrong Venture consolidated financial statements for the years ended December 31, 2017, 2016, and 2015 (filed herewith asExhibit 99.1). 3.The following exhibits are filed as part of this 2017 Annual Report on Form 10-K: Exhibit No. Description2.1 Armstrong World Industries, Inc.’s Fourth Amended Plan of Reorganization dated May 23, 2003 (as modified by modifications filed with theBankruptcy Court on October 17, 2003, November 10, 2003, December 3, 2004 and February 21, 2006) is incorporated by reference from theAnnual Report on Form 10-K, filed on February 24, 2006, wherein it appeared as Exhibit 2.3.2.2 Separation and Distribution Agreement, dated March 11, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. isincorporated by reference from the Current Report on Form 8-K filed on March 15, 2016, wherein it appeared as Exhibit 2.1.2.3 Plan of Division, adopted by Armstrong World Industries, Inc. on March 11, 2016 is incorporated by reference from the Current Report on Form 8-K filed on March 15, 2016, wherein in appeared as Exhibit 2.2.3.1 Amended and Restated Articles of Incorporation of Armstrong World Industries, Inc. is incorporated by reference from the Current Report on Form10-Q filed on May 1, 2017, wherein it appeared as Exhibit 3.1.3.2 Amended and Restated Bylaws of Armstrong World Industries, Inc., are incorporated by reference from the Current Report on Form 8-K filed onDecember 8, 2017, wherein it appeared as Exhibit 3.1.10.1 Amended and Restated Credit Agreement, dated April 1, 2016, by and among Armstrong World Industries, Inc., as Borrower, certain subsidiaries ofArmstrong World Industries, Inc. identified therein, as the Guarantors, Bank of America, N.A., as Administrative Agent and Collateral Agent, theother lenders party thereto, JPMorgan Chase Bank, N.A. and Citibank, N.A., as Co-Syndication Agents, Manufacturers and Traders Trust, The Bankof Nova Scotia, Fifth Third Bank, Citizens Bank of Pennsylvania, TD Bank National Association and Bank of Montreal, as Co-DocumentationAgents, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, JPMorgan Chase Bank, N.A. and Citibank, N.A., as joint lead arrangers and jointlead managers is incorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.8.10.2 Amended and Restated Security Agreement, dated April 1, 2016, by and among Armstrong World Industries, Inc., the grantors named therein andBank of America, N.A., as collateral agent. †10.3 Amended and Restated Pledge Agreement dated, April 1, 2016, by and among Armstrong World Industries, Inc., the pledgors named therein andBank of America, N.A., as collateral agent. †10.4 Amended and Restated Canadian Pledge Agreement dated, April 1, 2016, by and among Armstrong World Industries, Inc. and Bank of America,N.A., as collateral agent. †10.5 Receivables Purchase Agreement dated as of December 10, 2010, by and among Armstrong World Industries, Inc., as initial servicer and collectionagent, Armstrong Receivables Company LLC, as seller, Atlantic Asset Securitization LLC, as conduit purchaser, and Credit Agricole Corporate andInvestment Bank, as administrative agent, an issuer of letters of credit and related committed purchaser, is incorporated by reference from theCurrent Report on Form 8-K filed on December 14, 2010, wherein it appeared as Exhibit 10.1.10.6 Purchase and Sale Agreement dated as of December 10, 2010, by and among Armstrong World Industries, Inc., as originator and as initial servicer,Armstrong Hardwood Flooring Company, as originator, and Armstrong Receivables Company LLC, is incorporated by reference from the CurrentReport on Form 8-K filed on December 14, 2010, wherein it appeared as Exhibit 10.2. 90 Exhibit No. Description10.7 Omnibus Amendment to Receivables Purchase Agreement and Purchase and Sale Agreement dated as of August 1, 2011, by and among ArmstrongWorld Industries, Inc., Armstrong Receivables Company LLC, Armstrong Hardwood Flooring Company, Atlantic Asset Securitization LLC, andCredit Agricole Corporate and Investment Bank, is incorporated by reference from the Annual Report on Form 10-K filed on February 27, 2012,wherein it appeared as Exhibit 10.9.10.8 Second Omnibus Amendment to Receivables Purchase Agreement and Purchase and Sale Agreement dated as of December 21, 2011, by and amongArmstrong World Industries, Inc., Armstrong Receivables Company LLC, as seller, Armstrong Hardwood Flooring Company, as originator,Atlantic Asset Securitization LLC, as resigning conduit purchaser, Credit Agricole Corporate and Investment Bank, as resigning administrativeagent, resigning related committed purchaser and resigning LC bank, The Bank of Nova Scotia, as successor administrative agent, successor relatedcommitted purchaser and successor LC bank, and Liberty Street Funding LLC, as successor conduit purchaser, is incorporated by reference from theAnnual Report on Form 10-K filed on February 27, 2012, wherein it appeared as Exhibit 10.10.10.9 Third Omnibus Amendment Agreement, dated as of March 28, 2013, by and among Armstrong Receivables Company, LLC, Armstrong WorldIndustries, Inc., Armstrong Hardwood Flooring Company, The Bank of Nova Scotia, and Liberty Street Funding LLC, is incorporated by referencefrom the Quarterly Report on Form 10-Q filed on April 29, 2013, wherein it appeared as Exhibit 10.1.10.10 Fourth Amendment Agreement, dated as of December 18, 2014, by and among Armstrong Receivables Company, LLC, Armstrong WorldIndustries, Inc., Armstrong Hardwood Flooring Company, The Bank of Nova Scotia, and Liberty Street Funding LLC, is incorporated by referencefrom the Annual Report on Form 10-K filed on February 23, 2015, wherein it appeared as Exhibit 10.10.10.11 Fourth Omnibus Amendment Agreement, dated as of March 30, 2016, by and among Armstrong Receivables Company, LLC, Armstrong WorldIndustries, Inc., Armstrong Hardwood Flooring Company, The Bank of Nova Scotia, and Liberty Street Funding LLC, is incorporated by referencefrom the Annual Report on Form 10-K filed on February 27, 2017, wherein it appeared as Exhibit 10.11.10.12 Sixth Amendment Agreement, dated as of December 21, 2016, by and among Armstrong Receivables Company, LLC, Armstrong World Industries,Inc., The Bank of Nova Scotia, and Liberty Street Funding LLC, is incorporated by reference from the Annual Report on Form 10-K filed onFebruary 27, 2017, wherein it appeared as Exhibit 10.12.10.13 Seventh Amendment to Receivables Purchase Agreement, dated March 24, 2017, by and among Armstrong Receivables Company, LLC, ArmstrongWorld Industries, Inc., The Bank of Nova Scotia, and Liberty Street Funding LLC, is incorporated by reference from the Quarterly Report on Form10-Q filed on May 1, 2017, wherein it appeared as Exhibit 10.1.10.14 Amended and Restated Joint Venture Agreement, dated February 22, 2016 between Armstrong Ventures, Inc. and Worthington Ventures, Inc., isincorporated by reference from the Annual Report on Form 10-K filed on February 22, 2016, wherein it appeared as Exhibit 10.12.10.15 Transition Services Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. isincorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.1.10.16 Tax Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. is incorporatedby reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.2.91 Exhibit No. Description10.17 Employee Matters Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. isincorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.3.10.18 Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. isincorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.4.10.19 Transition Trademark License Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc.is incorporated by reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.5.10.20 Campus Lease Agreement, dated as of April 1, 2016, by and between Armstrong World Industries, Inc. and Armstrong Flooring, Inc. is incorporatedby reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.6.10.21 Share Purchase Agreement, dated November 17, 2017, by and between Armstrong World Industries, Inc. and Knauf International GmbH isincorporated by reference from the Current Report on Form 8-K filed on November 20, 2017, wherein it appeared as Exhibit 2.1.10.22 2006 Long-Term Incentive Plan, as amended February 23, 2009, is incorporated by reference from the Annual Report on Form 10-K, filed onFebruary 26, 2009, wherein it appeared as Exhibit 10.13.*10.23 Form of Stock Option Award under the 2006 Long-Term Incentive Plan is incorporated by reference from the Quarterly Report on Form 10-Q forthe quarter ended March 31, 2008, filed on May 1, 2008, wherein it appeared as Exhibit 10.37.*10.24 Form of Stock Option Award under the 2006 Long-Term Incentive Plan used in connection with award to Stephen F. McNamara is incorporated byreference from the Current Report on Form 8-K filed on April 6, 2010, wherein it appeared as Exhibit 10.2.*10.25 Form of Stock Option and Restricted Stock Unit Award under the 2006 Long-Term Incentive Plan used in connection with awards to Victor D.Grizzle in connection with new hire grant, is incorporated by reference from the Annual Report on Form 10-K filed on February 27, 2012, wherein itappeared as Exhibit 10.26.*10.26 Forms of Stock Option and Performance Restricted Stock Unit Award under the 2006 Long-Term Incentive Plan used in connection with March2011 grants to officers (except Donald R. Maier) and new hire grant for Mark A. Hershey, is incorporated by reference from the Annual Report onForm 10-K filed on February 27, 2012, wherein it appeared as Exhibit 10.27.*10.27 2011 Long-Term Incentive Plan, effective as of June 24, 2011, is incorporated by reference to Armstrong World Industries, Inc.’s Definitive ProxyStatement on Schedule 14A for the Armstrong World Industries, Inc 2011 Annual Meeting of Shareholders held on June 24, 2011 filed on April 28,2011, wherein it appeared as Exhibit A.*10.28 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Nonqualified Stock Options — U.S. (Executive Officer), is incorporatedby reference from the Quarterly Report on Form 10-Q filed on April 30, 2012, wherein it appeared as Exhibit 10.1.*10.29 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Nonqualified Stock Options — U.S.), is incorporated by reference fromthe Quarterly Report on Form 10-Q filed on April 30, 2012, wherein it appeared as Exhibit 10.2.*10.30 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Nonqualified Stock Options — Non-U.S. (Executive Officer)), isincorporated by reference from the Quarterly Report on Form 10-Q filed on April 30, 2012, wherein it appeared as Exhibit 10.3.*10.31 Form of 2011 Long-Term Incentive Plan Terms and Conditions, as amended for 2013 (Grant of Nonqualified Stock Options – U.S. (ExecutiveOfficer)), is incorporated by reference from the Quarterly Report on Form 10-Q filed on April 29, 2013, wherein it appeared as Exhibit 10.2.*10.32 Form of 2011 Long-Term Incentive Plan Terms and Conditions, as amended for 2013 (Grant of Nonqualified Stock Options – U.S.), is incorporatedby reference from the Quarterly Report on Form 10-Q filed on April 29, 2013, wherein it appeared as Exhibit 10.3.* 92 Exhibit No. Description10.33 Form of 2011 Long-Term Incentive Plan Terms and Conditions, as amended for 2013 (Grant of Nonqualified Stock Options – Non-U.S.), isincorporated by reference from the Quarterly Report on Form 10-Q filed on April 29, 2013, wherein it appeared as Exhibit 10.4.*10.34 Form of 2011 Long-Term Incentive Plan Terms and Conditions, as amended for 2014 (Grant of Nonqualified Stock Options – U.S.), is incorporatedby reference from the Quarterly Report on Form 10-Q filed on April 28, 2014, wherein it appeared as Exhibit 10.1.*10.35 Form of 2011 Long-Term Incentive Plan Terms and Conditions, as amended for 2014 (Grant of Nonqualified Stock Options – Non-U.S.), isincorporated by reference from the Quarterly Report on Form 10-Q filed on April 28, 2014, wherein it appeared as Exhibit 10.2.*10.36 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Time-Based Restricted Stock Units – U.S.), is incorporated by referencefrom the Quarterly Report on Form 10-Q filed on April 30, 2015, wherein it appeared as Exhibit 10.1.*10.37 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Time-Based Restricted Stock Units – Payable in Cash – Non-U.S.), isincorporated by reference from the Quarterly Report on Form 10-Q filed on April 30, 2015, wherein it appeared as Exhibit 10.2.*10.38 Form of 2011 Long-Term Incentive Plan Terms and Conditions (Grant of Time-Based Restricted Stock Units – Payable in Shares – Non-U.S.), isincorporated by reference from the Quarterly Report on Form 10-Q filed on April 30, 2015, wherein it appeared as Exhibit 10.3.*10.39 Form of 2016 Award Agreement for Performance-Based RSU Grants under the 2011 Long-Term incentive Plan is incorporated by reference fromthe Current Report on Form 8-K filed on April 14, 2016, wherein it appeared as Exhibit 10.1. *10.40 Form of 2016 Long-Term Time-Based Restricted Stock Unit Grant under the 2011 Long-Term Incentive Plan is incorporated by reference from theCurrent Report on Form 8-K filed on July 11, 2016, wherein it appeared as Exhibit 10.4.*10.41 Form of 2016 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Absolute TSR for Tier I) for SeniorExecutives under the 2011 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 8-K filed on July 11, 2016,wherein it appeared as Exhibit 10.5.*10.42 Form of 2016 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Absolute TSR for Tier II) under the 2011Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 8-K filed on July 11, 2016, wherein it appeared as Exhibit10.6.*10.43 Form of 2016 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Cumulative Free Cash Flow for Tier II)under the 2011 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 8-K filed on July 11, 2016, wherein itappeared as Exhibit 10.7.*10.44 Form of 2016 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Cumulative Free Cash Flow for Tier I) forSenior Executives under the 2011 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 8-K filed on July 11,2016, wherein it appeared as Exhibit 10.8.*10.45 Armstrong World Industries, Inc. 2016 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 8-K filed on July11, 2016, wherein it appeared as Exhibit 10.2.*10.46 Form of 2017 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Absolute TSR for Tier I) for SeniorExecutives under the 2016 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 10-Q filed on May 1, 2017,wherein it appeared as Exhibit 10.2.*10.47 Form of 2017 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Absolute TSR for Tier II) for SeniorExecutives under the 2016 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 10-Q filed on May 1, 2017,wherein it appeared as Exhibit 10.4.*93 Exhibit No. Description10.48 Form of 2017 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Cumulative Free Cash Flow for Tier I)under the 2016 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 10-Q filed on May 1, 2017, wherein itappeared as Exhibit 10.3.*10.49 Form of 2017 Long-Term Performance-Based Restricted Stock Unit Grant (Performance Goals Based on Cumulative Free Cash Flow for Tier II)under the 2016 Long-Term Incentive Plan is incorporated by reference from the Current Report on Form 10-Q filed on May 1, 2017, wherein itappeared as Exhibit 10.5.*10.50 Nonqualified Deferred Compensation Plan effective January 2005, as amended July 23, 2010, is incorporated by reference from the Annual Reporton Form 10-K, filed on February 28, 2011, wherein it appeared as Exhibit 10.4.*10.51 Retirement Benefit Equity Plan, effective January 1, 2005, as amended October 29, 2007 and December 8, 2008, is incorporated by reference fromthe Annual Report on Form 10-K, filed on February 26, 2009, wherein it appeared as Exhibit 10.2.*10.52 2006 Phantom Stock Unit Plan, as amended December 8, 2008, is incorporated by reference from the 2008 Annual Report on Form 10-K, filed onFebruary 26, 2009, wherein it appeared as Exhibit 10.18.*10.53 2006 Phantom Stock Unit Agreement is incorporated by reference from the Current Report on Form 8-K filed on October 26, 2006, wherein itappeared as Exhibit 10.3. A Schedule of Participating Directors is incorporated by reference from the 2006 Annual Report on Form 10-K, filed onMarch 30, 2007, wherein it appeared as Exhibit 10.36.*10.54 2007 Award Agreement under the 2006 Phantom Stock Unit Plan is incorporated by reference from the Current Report on Form 8-K filed onOctober 23, 2007, wherein it appeared as Exhibits 10.1.*10.55 Schedule of Participating Directors, is incorporated by reference from the Current Report on Form 8-K filed on October 23, 2007, wherein itappeared as Exhibits 10.2.*10.56 The 2008 Directors Stock Unit Plan, as amended December 8, 2008, November 30, 2010 and June 24, 2011 is incorporated by reference to theCurrent Report on Form 8-K filed on June 13, 2011, wherein it appeared as Exhibit 99.2.*10.57 Form of 2009 and 2010 Award under the 2008 Director Stock Unit Plan, as amended, is incorporated by reference from the Quarterly Report onForm 10-Q for the quarter ended September 30, 2009, filed on October 28, 2009, wherein it appeared as Exhibit 10.27.*10.58 Form of 2011, 2012, 2013 and 2014 Award under the 2008 Directors Stock Unit Plan, as amended, is incorporated by reference from the AnnualReport on Form 10-K filed on February 27, 2012, wherein it appeared as Exhibit 10.40.*10.59 Armstrong World Industries, Inc. 2016 Directors Stock Unit Plan, is incorporated by reference from the Current Report on Form 8-K filed on July11, 2016, wherein it appeared as Exhibit 10.1.*10.60 Form of 2016 and 2017 Stock Unit Grant Agreement under the Armstrong World Industries, Inc. 2016 Directors Stock Unit Plan, is incorporated byreference from the Current Report on Form 8-K filed on July 11, 2016, wherein it appeared as Exhibit 10.3.*10.61 Offer Letter to Victor D. Grizzle dated January 4, 2011, is incorporated by reference from the Current Report on Form 8-K filed on January 10,2011, wherein it appeared as Exhibit 99.2.*10.62 Offer Letter to Mark A. Hershey dated April 21, 2011, is incorporated by reference from the Current Report on Form 8-K filed on April 27, 2011,wherein it appeared as Exhibit 99.1.*10.63 Severance Agreement and Release, dated as of March 30, 2016, by and between Armstrong World Industries, Inc. and Matthew Espe is incorporatedby reference from the Current Report on Form 8-K filed on April 4, 2016, wherein it appeared as Exhibit 10.7.*10.64 Form of Indemnification Agreement for Officers and Directors of Armstrong World Industries, Inc. is incorporated by reference from the Report onForm 8-K filed on June 4, 2010, wherein it appeared as Exhibit 10.1.*10.65 Form of Severance Agreement with Certain Officers, approved for use on October 26, 2016 is incorporated by reference from the Report on Form 8-K filed on October 31, 2016, wherein it appeared as Exhibit 10.1.*11 Computation of Earnings Per Share .†12 Computation of Ratio of Earnings to Fixed Charges.† 94 Exhibit No. Description14 The Armstrong Code of Business Conduct, revised as of July 29, 2011, is incorporated by reference from the Current Report on Form 8-K filed onAugust 1, 2011, wherein it appeared as Exhibit 14.1.21 Armstrong World Industries, Inc.’s Subsidiaries.†23.1 Consent of Independent Registered Public Accounting Firm.†23.2 Consent of Independent Auditors.†31.1 Certification of Chief Executive Officer required by Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act.31.2 Certification of Chief Financial Officer required by Rule 13a-15(e) or 15d-15(e) of the Securities Exchange Act.32.1 Certification of Chief Executive Officer required by Rule 13a and 18 U.S.C. Section 1350 (furnished herewith).32.2 Certification of Chief Financial Officer required by Rule 13a and 18 U.S.C. Section 1350 (furnished herewith).99.1 Worthington Armstrong Venture consolidated financial statements as of December 31, 2017 and 2016 and for the years ended December 31, 2017,2016 and 2015.†99.2 Armstrong World Industries, Inc. Asbestos Personal Injury Settlement Trust Agreement dated as of October 2, 2006, by and among ArmstrongWorld Industries, Inc. and trustees, is incorporated by reference from the Current Report on Form 8-K filed on October 2, 2006, wherein it appearedas Exhibit 10.2.99.3 Stockholder and Registration Rights Agreement, dated as of October 2, 2006, by and between Armstrong World Industries, Inc. and the ArmstrongWorld Industries, Inc. Asbestos Personal Injury Settlement Trust is incorporated by reference from the Current Report on Form 8-K filed on October2, 2006, wherein it appeared as Exhibit 10.3.99.4 Nomination and Shareholder Agreement with the persons or entities identified on Schedule I attached thereto (collectively the “ValueAct Group”and each individually, a “member” of the ValueAct Group), and Gregory P. Spivy in his individual capacity and as a member of the ValueActGroup (the “ValueAct Designee”), is incorporated by reference from the Report on Form 8-K filed on December 15, 2014, wherein it appeared asExhibit 99.1.101 Interactive Data Files** *Management Contract or Compensatory Plan. †Filed herewith. **XBRL – Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the SecuritiesAct of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is notsubject to liability under these sections.95 SIGNA TURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized. ARMSTRONG WORLD INDUSTRIES, INC. (Registrant) By:/s/ Victor D. Grizzle Director, President and Chief Executive Officer Date:February 26, 2018 Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ Victor D. Grizzle Director, President and Chief Executive Officer February 26, 2018Victor D. Grizzle (Principal Executive Officer) /s/ Brian L. MacNeal Senior Vice President and Chief Financial Officer February 26, 2018Brian L. MacNeal (Principal Financial Officer) /s/ Stephen F. McNamara Vice President and Controller February 26, 2018Stephen F. McNamara (Principal Accounting Officer) /s/ Stanley A. Askren Director February 26, 2018Stanley A. Askren /s/ Tao Huang Director February 26, 2018Tao Huang /s/ Larry S. McWilliams Director February 26, 2018Larry S. McWilliams /s/ James C. Melville Director February 26, 2018James C. Melville /s/ James J. O’Connor Director February 26, 2018James J. O’Connor /s/ John J. Roberts Director February 26, 2018John J. Roberts /s/ Gregory P. Spivy Director February 26, 2018Gregory P. Spivy /s/ Roy W. Templin Director February 26, 2018Roy W. Templin /s/ Cherryl T. Thomas Director February 26, 2018Cherryl T. Thomas 96 SCHEDU LE IIArmstrong World Industries, Inc., and SubsidiariesValuation and Qualifying Reserves(amounts in millions)  Balance atbeginningof year Additionscharged toearnings Deductions Balanceat end ofyear 2015 Provision for bad debts $1.3 $- $(0.2) $1.1 Provision for discounts 2.0 15.8 (17.0) 0.8 Provision for warranties - 1.6 (1.3) 0.3 2016 Provision for bad debts $1.1 $- $(0.7) $0.4 Provision for discounts 0.8 16.9 (16.4) 1.3 Provision for warranties 0.3 8.0 (8.1) 0.2 2017 Provision for bad debts $0.4 $- $(0.1) $0.3 Provision for discounts 1.3 17.6 (17.4) 1.5 Provision for warranties 0.2 3.2 (3.3) 0.1 97Exhibit 10.2 A M ENDED AND R E S T A TED SE C UR I TY AGR EE M E N T T H I S A M ENDE D A N D R ES T A T E D SECUR I TY AG R EE M E N T ( t h i s “ S e c u r it y A g ree m e n t ” ) , d a te d a s o f A p ri l 1 , 20 1 6 , i s b y a n d a m on g t h e p a r ti e s i d e n ti f i e d a s “ G r a n t o rs ” o n t h e s i gn a t u r e p a g e s h er e to an d s u c h o t h e r p ar t ie s a s m a y be c o m e G r a n t o r s h e r e u nd e r af t e r t h e d at e h e r e o f (i n d i v i d u a l l y a “ G r a nt o r ” , a n d c o l l e c t i v e l y t h e “ G r a n t o r s ” ) an d BA N K O F A M ER I CA , N . A . , a s c o l la t er a l a g e n t (i n s u c h c ap aci t y , t h e “ C o l l at e ra l A g e n t ” ) f o r t h e h o l d e r s o f t h e S e c u r e d O b l i g at i o n s r e fe r e n c e d b el o w . W I T N E S S E T H W H E R E A S, r e v o l v i ng c r e d i t a nd t e r m l oan f a c i l i t i e s w e r e e s t ab l i s h ed i n f a v or of A r m s tr ong Wor l d I ndus t r i es, I nc., a P e nns y l v an i a c o r p o r a t i on ( t he “ B o r r o w e r ” ) , p u r s u ant t o t he t e r m s of t h at ce r t a i n am ended and r e s t a t ed c r e d i t a g r ee m ent d a t ed as o f Ma r ch 15, 2013 ( as a m ended a nd m od ifi ed p r i or t o t he C l os i ng Da t e, t he “ E x i s t i ng C r ed i t A g r ee m en t ” ) a m ong t he B o rr o w e r , A r m s t r ong Wood P r odu c t s, I nc., a D e l a w a r e co r p o r a ti on ( “ A WP ” ) , c e rt a i n o f t he i r r es pe c ti v e Su b s i d i a ri e s, a s g ua r a n t o r s t h e r eund e r , t he l end e r s pa r ty t h e r e t o and B ank of A m e ri ca, N . A ., a s a d m i n i s t r a t i v e a g ent a n d c o l l a t e r al a g ent f or t he l end e r s t h e r eu nde r ; W H E R E A S, i n c o nne c t i on w it h t he E x i s ti ng C r e d i t A g r ee m en t , t he B o rr o w e r , A WP, and ce r t a i n oft h e i r r esp e c t i v e Sub s i d i a ri e s e n t e r ed i n t o t h at c e r t a i n A m ended and R e s t a t ed S e cu r i t y A g r ee m ent da t e das of M a r ch 1 5, 2013 ( t he “ Ex i s ti ng Sec u r i t y A g r ee m e n t ” ) ; W H E R E A S, t he B o rr o w e r has r equ e s t e d c e r t a i n m od i f i c a ti o ns t o t h e r e v o l v i ng c r e d i t and t e rm l oan f a c i l i t i e s un d er t he E x i s t i ng C r ed i t A g r ee m en t ; W H E R E A S, t he L end e r s h a v e a g r eed t o t he r e q ue s t ed m od ifi c a ti o ns on t he t e r m s and co n d i ti o n s p ro v i ded i n t h a t c e r t a i n A m ended and R e s t a t ed C r e d i t A g r ee m en t , da t ed as o f t he da t e he r eof ( as a m ended and mod if i ed, t he “ C r e d i t A g r ee m en t ” ) , a m ong t he B o rr o w e r , ce r t a i n o f it s Sub s i d i a r i es, as g ua r an t o r s t h e r eund e r , t he l ende r s p a rt y t h e r e t o a nd B a nk of A m e ri ca, N . A ., as a d m i n i s t r a t i v e a g ent and co l l a t e r a l a g e n t f or t he l en d e r s t h e r eun d e r ; and W H E R E A S, t h i s Se c u r it y A g r ee m ent i s r equ i r ed und e r t h e t e r m s of t h e C r e d i t A g r ee m en t , a n d i sg i v en i n a m end m ent t o, r e s t a t e m ent o f and sub s t i t u ti on f or t he E x i s t i ng Secu r it y A g r ee m ent p r o v i ded i nconne c t i on wi t h t he E x i s ti n g C r ed i t A g r ee m en t . NOW, T HEREFORE, i n c o ns i d e r a ti o n of t h e se p r e m i s es and o t h er g ood a n d v a l u ab l e conside r at i on, the r e c e i p t a nd su f f iciency of which a r e he r e by ac k now l ed g ed, t he pa r t i e s h e r e t o a g r ee as f ol l ow s : 1. D e fi n it i o n s . ( a ) C a p i t al i z ed t e r m s used and not o t he r w i se de fi ned he r e i n sha l l have t he m ean i ngs p r ov ided i n t he C r ed i t A g r ee m en t . In add i t i on, t h e f o l l o w i ng t er m s, w h i ch ar e d e f i n e d i n t he UC C a s i n ef f ec t i n the S t a t e of N ew Y o rk on t h e d a t e h e r e o f, ar e u s e d as d e fi n e d t h ere i n : A c c e s s i o n, A c c ou n t , C h a t te l P a p e r,C o m m er ci al T o r t C l a i m , D e po si t A c c o u n t , D o c u m en t , E q u i p m e n t , F i x t u r e s, G e n e r a l I n t an g i b l e, G oo d s , I ns t r u m en t , I n v en t or y , I n v e s t m ent P r o p er t y , L e tt er - of - C r e d i t R i g h t , P r o c e e ds, S o f t w a r e , and S up p o rt i ng O b l i g at i o n . ( b )A s used here i n, t he f o ll o w i ng t e r m s sha l l have t he m ean i ng set f or t h be l o w : “ B o rro w e r ” h a s t h e m e a n i ng p r o v i d ed i n t h e r e ci t al s h e r e of. “ C o l l at e ra l ” h a s t h e m e a n i n g pro v i d e d i n S e ct i o n 2 h e re of .  “ C o l l at e ra l A g e n t ” h a s t h e m ean i ng p ro v i d e d i n t he i n tr od u c t o ry p ar a g r a ph h e r e o f, t o g e t he r w i t h s u c ce s s o r s a n d as s i gn s. “ C op y r i gh t L i c e n se ” m ea n s any w rit t e n a g r e e m e n t , na m i ng any G r a n t o r a s l i c e n s o r, g r a n ti ngany r i gh t un d e r any C o p y r i g h t . “ C op y r i gh t s ” m e a n s ( a ) a l l r e g i st e r ed U n i t e d S t a te s c op y r i g h t s i n al l W o r k s, now e x ist i ng or h e r ea f te r cr e at ed o r a c qu i r e d , al l re g i st r at i o ns a n d r ec o r d i n g s t h er e o f, a nd a l l a p p l i ca t i ons i n co n nec t i on t h er e w it h, i n c l ud i ng re g is t rat i o n s, re c o r d i n g s and a p p l i ca t i o n s i n t he U n i t e d S t at es C op y r i ght O f fi ce, a nd ( b) al l r e n e w al s t h e r e o f. “ C r e d i t A g re e m en t ” h a s t h e m ean i ng p ro v i d e d i n t he r e ci t al s h e r e o f . “ E v e n t o f D ef a u l t ” h a s t he m ean i ng p ro v i d e d i n S ec t i o n 7 h e r e o f . “ Ex i s t i ng C r ed i t A g r ee m en t ” h a s t h e m ean i ng p r o v i d e d i n t he r e c i t a l s he r eo f . “ Ex i s t i ng Secu r it y A g r ee m en t ” has t he m ean i ng p r o v i ded i n t he r e c i t a l s h e r e o f . “ G r a n t o r ” h a s t h e m e a n i ng p ro v i d e d i n t he i n t r o d u c t o ry p a r a g r aph h e r e o f. “ I nde m n i f i e d P ar t y ” h a s t h e m ean i ng p ro v i d e d i n S ec t i o n 8 ( b ) h e r e o f . “ P at e n t L i c e n se ” m ea n s any w r i tt en a g r ee m e n t p r o v i d i ng f o r t he g r a nt by o r t o a G r a n t o r ofany r i gh t un d e r a P a t e n t . “ P at e n t s ” m e a ns (a ) a l l le t ter s p a t e nt o f t h e U n i t ed S t at es and al l r ei s s u e s a n d e x t e n s i o ns t h er e o f, a nd ( b) al l a p p li c ati ons f o r l et t er s p a t e n t o f t h e U n it ed S ta t e s a n d al l d i v i s i o ns, c o n t i n u at i o n sand c o n t i n u at i o n s - i n - pa r t t h e r e o f . “ S e c u r e d O b li g at i o n s ” m e a n s, w i t h o u t du p li c at i o n , ( a) a l l O b l i ga ti ons and ( b) a l l cos t s andexpenses i ncu r red i n connec t i on wi t h en f orce m ent and co l l ec ti on of t he Secu r ed O b li ga t i ons, i nc l ud i ng r easonabl e a tt o r neys’ f ees and expenses. “ Sec u r i t y A g r ee m en t ” has t he m ean i ng p r o v i ded i n t he i n t r od u c t o r y pa r a g r a p h h er eo f , a s a mended and m od if i ed. “ T r a de m ar k L i c e n s e ” m ea n s an y w r i tt e n a g r ee m e n t p r o v i d i n g f o r t h e g r a n t b y o r t o aG r a n t o r o f an y r i g h t t o u s e a n y T r a d e m ar k . “ T r a de m ar k s ” m e a n s (a) all t ra d e m ar k s, t r a d e na m e s, c o r p o r a t e n a m es , co m p a n y n a m es ,bu si n e s s n a m es , f i ctit i o u s b u s i n e s s n a m es , tr a d e s t y le s , s e r v i ce m a r k s , l o go s a n d o t h er s o u rce o rbu si n e s s i d e n t if i er s , a n d t h e g ood w ill a s s o c i at e d t h e r e w it h , n o w e x i s ti n g o r h e re a ft e r ad op t ed o ra c q u i r e d , a ll r e g i s tr a ti o n s a n d re c o r d i n g s t h er e o f , a n d a l l ap p li c at i o n s in c o n n ec t i o n t h e r e w i th , w h e t h e r i n t h e U n i t e d S t at e s P a t e n t an d T r a de m ar k O f f ice o r in a n y s i m i lar o ff i ce o r a g e n c y o f th e U n it e d S ta t es o r a n y s t ate t h e r e o f a n d ( b ) a l l r e n e w a ls t h e r e o f . “ UCC ” m ea n s t h e U n if orm C o m m er ci al C o de a s i n ef f e ct i n t h e s t at e o f N ew Y ork f rom t i m e t oti m e. 2 “ W or k ” m ea n s an y w o r k t h a t i s s u b j ec t t o c op y r i gh t p r o t e ct i o n p u r s u a n t t o T it l e 1 7 o f t heU n it e d S ta t e s C o d e . 2. G r a n t o f S e c u r it y I n t e r e s t i n t h e C o ll a te r a l . T o s e c u re t h e p r o m pt pa y m ent a nd p erf o r m ance i n f u l l w h en d u e, w h et h e r by l a p se o f t i m e, a c ce l er a ti on, m and a t o ry p r e pa y m ent o r o t h e r w i s e, of th e S e c u r ed O b l i g at i o n s, e a c h G r a n t o r h e r eby g r a n t s t o t he C o l la t era l A g e n t , f o r t h e b e n ef i t o f t h e h o l der s of t he S e c u r ed O b l i g at i o n s, a c on t i n u i ng s e c u r i t y i n t e r e s t i n, a n d a r i gh t t o s et o f f a g a i n s t , a ny a n d a ll r i g h t , t i tl e and i n t er e s t of s u ch G ra n t or i n a n d t o al l of t he f o ll o w i n g , w h e t h er no w o w n ed o r e x i st i ng o r o wn ed, a c q u ir ed, o r a ris i ng h e r ea f te r ( c o ll e ct i v e l y , t he “ C o ll a te r al ” ) : ( a ) a l l A c co un t s ; ( b ) a l l c a sh a nd c u rr e n c y ; ( c )a l l C h a tt el P a p e r ;( d ) t h o s e C o m m er ci al T o r t C l a i m s i d e n t i fi ed on S c h e d u l e 2 ( d ) at t a ch ed h er e t o ; ( e ) a l l C op y r i gh t s ; ( f ) a l l C op y ri gh t L i c e n s e s ; ( g )a l l D e p o si t A c co un t s ; ( h )a l l D o c u m e n t s ;( i ) all E q u i p m en t; ( j )a ll F i x t u r es;( k ) a l l G e n er a l I n t an g i b l es ; ( l )a l l I n st ru m e n t s ;( m ) a l l I n v e n t o r y ; ( n ) a l l I n v e s t m e n t P r o p er t y ; ( o ) a l l L et t e r -of - C re d i t R i gh t s ; ( p )a l l P at e n t s ;( q ) a l l Pat e n t L i c e n s e s ; ( r )a l l S o f t w ar e;( s ) a l l S u pp o rt ing O b l i g a t i o n s ; ( t )a l l T r a d e m ar k s ;( u ) a l l T r a d e m ark L i ce n s e s ; 3 ( v ) a l l o t h e r p e r s o n a l p ro p e r t y o f s u c h G r a n t o r o f w h a t e v e r t y p e o rd e s cr i p t i o n ; a n d ( w ) t o t he e x t e n t n o t o t h er w i se i n c l u d e d, a l l A c c es s i o n s and a l l P r oce e d s o f any and al l of t he f o r e go i n g . N o t w i t h s t a n d i n g a n y t h i n g t o t h e c on t ra r y c o n ta i n e d h e rei n , t h e s e c u ri t y i n te r e s t s g r a n t e d u nd e r t h i sS e c u r i t y A g r ee m e n t s h a l l n o t e x t e n d t o , a n d t h e “ C o l l at e r a l ” s h a l l n o t i n cl u d e , an y Ex c l u d e d P r o p e rt y . T h e G r a n t o r s an d t h e C o ll a t e ra l A g e n t , o n b e h a l f o f t h e h o l d e r s o f t h e S e c u r e d O b l i g a ti o n s ,h e r e b y ac k no w l ed g e a n d a g r e e t h a t t h e s e c u r it y i n t e re s t cr e a t e d h e r e b y i n t h e C o ll a te r a l (i ) c on sti t u te s c on t i n u i n g c o l l a t er a l se c u r i t y f o r a l l o f t h e S e c u r e d O b l i g at i o n s , w h e t h e r n o w e x i st i n g o r h er e aft e r a ri s i n g a n d (i i ) i s n o t t o b e c o n s t r u e d a s a n a s s i gn m en t o f an y C op y r i gh t s , C o p y r i gh t L i c e n se s , P a te n t s , P a t e n t L i c e n s es , T r a d e m ar k s o r T r a d e m ar k L i c e n s e s . 3. P ro v i s i o n s R el a ti n g t o A cc o u n t s . ( a ) A n y t h i ng h e r e i n t o t h e c on t r ary no t w it h st an d i n g , e a c h o f t he G r an t o r s s h a l l r e m a i n l i a b l e un d e r e a ch o f t h e A c c ou n t s t o o b s e r v e a n d p er f o r m a l l t he c o n d it i o nsa nd o b li g a t i o n s t o b e ob se r v ed a n d p er f o r m ed by i t t h e r e un d e r, a l l i n a c c o r da n ce w i t h t h e t e r m so f any a g r ee m e n t g i v i ng r i s e t o e a c h s u c h A c c o u n t . N e it h e r t h e C o l la t er al A g e n t n o r any ho l d e ro f t h e S e c u r ed O b li g at i o ns s h a l l ha v e a ny o b l i g a t i on o r l i a b ili t y u n d e r any A c c ou n t ( or any a g r e em e n t g i v i ng ri se t h e r et o) by r e a s on o f o r ar i s i ng ou t o f t h i s S ec u ri t y A g r e e m ent o r t h e r e ce i p t by t he C o l la t er al A g e n t o r a ny h o l d er o f t h e S e c u r e d O b l i g a ti o n s o f any p a y m ent r e lati ng t o s u c h A c cou n t p u r s u a n t h er e t o, n o r s h a l l t h e C o ll a te r a l A g e n t o r any h o l d er o f t h e S e c u r e d O b l i g a ti o n s be o b l i g a t ed i n any m an n e r t o p er f o rm any o f t h e o b l i g a ti o n s o f a G r a n t o r u n d er o r p u r s u a n t t o a nyA c c o u nt ( o r a ny a g r ee m e nt g i v i ng r i s e t h e re t o ), t o m a k e a ny p a y m en t , t o m a k e any i n q u i ry as t o the n at u r e or t he s u ffi c i e n cy of a nypa y m ent r e ce i v ed by i t or a s t o t he s u ff i ci e n cy o f a ny p e r f o r m an c e by any p ar t y u n d e r any A c c o u n t (o r any a g r e e m ent g i v i ng r i s e t h e re t o ), t o p r e s e n t o r f il e a ny c la i m , t o t a k e a ny a ct i o n t o e n f o r ce any p e r f o r m an c e o r t o c o l le ct t he pa y m ent o f any a m o u n t s t h at m ay ha v e b e en a s s i g n e d t o i t o r t o wh i c h i t m ay be e n tit l e d a t any t i m e o r t i m es. ( b ) A t any ti m e a f te r t h e o c c u r re n c e a nd d u r i ng t h e c o n t i n u at i o n o f anE v e n t o f D e f a u l t , ( i ) t he C o l l at e ra l A g e n t s h al l ha v e t he r i gh t , b u t n o t t he o b l i g at i o n , t o m a k e t es t v eri f i c at i o ns o f t h e A c c ou n t s i n a ny m ann e r a n d t h r ou g h any m e d i um t h a t i t r e a s o n a b l y c o n s i der s ad v i s a b l e, a n d t h e G r a n t o rs s h al l f u r n i sh a l l s u c h a s sis t a n c e and i n f o r m a t i o n as t h e C o ll a te ra l A g e nt m ay r e a s o n a b l y r e q u i re i n co n n ec t i on w it h s uch te st v e rif i ca t i o n s, (i i ) up on t h e C o l la t e r al A g e n t ’s re qu es t and a t t he ex p e n se o f t h e G r a n t o r s, t h e G r a n t o rs s h al l f u r n i sh t o t h e C o ll a te r a l Ag e n t r e p o r t s s ho w i ng r e c o n cil i at i o ns, a g i ng a nd te st v e rif i ca t i o n s o f , a nd tr i a l b a l a n c e s f o r , t h eA c c ou n t s, a n d (iii ) t h e C o ll a te r a l A g e n t i n it s o w n na m e o r i n t h e n a m e o f o t h e rs m ay co mm un i c at ew i t h ac co un t d e b t o r s on t h e A c c ou n t s t o v e ri fy w it h t hem t o t h e C o l l ate r a l A g e n t’ s sat i s f act i on t hee x i s t e n c e, a m ount a n d t e r m s o f any A c c ou n t s. 4. R e p r e s e n t at i o n s a n d W a rr a n t i e s . E a ch G r a n t or h e r eby r e p r e s e n t s a nd w ar r a n t s to t h eC o ll a te r a l A g e n t , f o r t h e b e n e fi t o f t h e h o l d er s o f t h e S ec u r e d O b li g at i o n s , t h a t : ( a ) L e g a l N a m e ; C h ie f E x e c u t i v e O f fi c e . A s of t he d a t e h ere o f : ( i ) E a ch G r a n t o r ’s e x a ct l e g al n a m e , st a te o f i n c o rp ora t i o n o r f o r m a t i o n a n d c h i ef e x e c u ti v e o f f i c e are ( a n d f o r t h e p r i o r fo u r m o n t h s h asb e e n ) as s et f o rth i n S c h ed u le6. 2 0 (a ) (i ) a n d S c h ed u l e 6. 20 ( b ) t o t he C r e d i t A g r e e m en t . 4 ( i i ) O t h e r t h a n a s se t f o r t h o n S c he du l e 6 . 2 0 ( b ) o f t h e C r e d i t A g ree m e n t ,n o G r a n t o r h a s b e e n p ar t y t o a m er g er , c o n s o l i d at i o n o r o t h e r c h a n g e i n s t r u ct u r e i nt h e p r i o r f o u r m on t hs . ( b ) Ow n e r s h i p . E a c h G r a n t o r i s t he l e g a l a nd b en efi c ia l o w n er o f t h eC o lla t e r a l t h a t i t i s p l e d g i ng a n d h as t h e r i gh t t o p l e d g e, s el l , a s s i g n or t r a n s fe r t h e sa m e. ( c ) S e c u r i t y I n t er e st / P r i o r i t y . T h i s S e c u r i t y A g r ee m e n t c r ea t e s av al i d s e c u ri t y i n t e r es t i n f a v or o f t h e C o l la t e r a l A g e n t , f or t he b e n e fi t of t he h o l d e rs o f t h e S e cu r e d O b l i g ati on s , i n t he C o ll a te r a l of s u c h G r a n t o r a nd, w h en p r o p e r l y p e r fe c t ed by f i li n g , s h al lc o n st i t u t e a v a li d p e r f e ct ed s e c u r it y i n t e re st i n s u ch C o ll a te r a l , t o t h e e x t e n t s u ch s ec u ri t y i n ter es t c an b e p er f e c te d by f il i ng un d e r t h e UC C , f r ee a nd c l e ar o f a l l L i e ns e x c e p t f o r P er m it t ed L i ens. ( d ) A c c ou n t s . (i ) E a ch A c co un t of s u c h G r a n t o r and t h e p a p e r s a n d d o cu m en t s r e la t i ng t h e re t o a re g e n u i ne a nd i n al l m a te r ia l r e s p e c t s w h a t t hey p u r p o r t t o b e a n d ( i i ) each A c c ou n t o f s u ch G r a n t o r a ri s e s ou t o f ( A ) a b ona fi de s a l e of G o o d s s o l d and d e l i v er ed by s u ch G ra n t or ( or t o be s o l d and d e l i v er e d ) o r ( B ) s e r v i c e s t h e re t o f o r e ac t u a ll y r e n d e r ed by s u ch G ra n t or( o r t o be a c t u a ll y r e n d e r e d ) t o, t h e a c c o u n t d e b t or n a m ed t h e re i n. ( e ) C op y r i g h t s , P a t e n t s an d T r a de m ar k s . ( i ) S c h e d u le 6. 1 7 o f t h e C r e d it A g ree m e n t i n c l u d es a llm a t er i al C op y r i gh t s, C op y r i g h t L i c e n s e s , P a t e n t s , P a t e n t L i c e n s e s, T r a de m a r k s a nd T r a de m ar k L i c e n s e s o w ne d b y an y G r a n t o r i n its o w n n a m e , o r to w h i c h a n y G r a n t o ris a p a r t y , as o f t h e d ate h er e o f . ( i i) A ll re g is t rat i o n s o r l et t ers p er t a i n i n g m a ter i al C opy r i gh t s, P at e n ts a n d T r a d e m ar k s h a v e b e e n d u l y an d p r o p er l y fi l e d , a n d t o ea c h G r a nt o r ’ s k no w l e d g e , e ach m a t e r ial C op y r i g h t, P a t e n t a n d T r a d e m ar k o f s u c h G r a n t o r isv al i d , s u b s i st i n g , u n ex p i re d , e n f o r ce a b l e a n d h as n o t b een a b a n d on e d . ( i ii) E x c e p t a s set f o r t h in S c h e d u le 6 . 1 7 o f t h e C r e d it Ag ree m en t , n o n e o f su ch m a t e r ial C op y r i g h t s , P a t e n ts a n d T r a d e m ar k s i s t h e s u b j e c t o fan y l ic e n s i n g a g r ee m e n t o r s i m i l ar a r r an g e m e n t as o f t h e d a t e h e r e o f . ( i v ) E x c e p t a s c o u l d n o t r e a s o n a b l y b e e x p ec t e d t o ha ve a M a te r ial A d v e r s e E f f ec t , t o e a ch G r a n t o r ’ s kn o w l ed g e, n o ho l d i n g , d ec i s i o n o r j u d gm en t h as b e e n r e nd e r e d b y an y G o v e rn m e n t a l A u t h o rity t h at w o u ld l i m it , c a n c el o r qu est io n t h e v a l i d i t y o f s u c h C op y r i g h t, P a t e n t o r T r a d e m ar k . ( v ) N o ac t i on o r p r o c e e d i ng i s p en d i ng s e e k i ng t o li m i t , c a n c el o r q u e st i on t he v a l i d i t y of a ny C op y r i gh t , P a t e n t o r T r a de m a rk t h a t c o u l d re a s o n a b l y be e x p e ct ed t oha v e a M at e ri al A d v er se E ff e c t . 5. C o v en a n t s . E a ch G r a n t o r c ov ena n t s t h a t , so l ong a s any of t he S e c u r ed O b li g at i o ns re m a i n s o u t st an d i ng a n d un t i l al l o f t he co mm it m en t s r e la t i ng t h e r e t o h a v e b e en t er m i n a t e d, s uch G r a n t ors h all : ( a ) O t h e r L i e n s ; D i s p o sit i o n o f C o ll a te r a l . D e f e n d t h e C o lla t er al a ga i n s t t h e c l a i m s a nd de m an d s of al l o t h e r p art i e s c la i m i ng a n i n t er e s t t h e r ei n, k eep t h e C o l la t er alfr ee f rom a l l L i e n s , e x c e pt f or P er m it t e d L i e n s, and n ot se l l , e x c h an g e, tr a n s f e r, a s s i g n, le a s e o r o th er w is e d i sp o s e o f t he C o ll a te r a l or a ny i n t e r es t t h e r e i n ; p ro v i d e d , ho w e v e r , t h a t e a ch G r a n t o rs h al l b e p e r m i t t ed t o e ff e c tt h e d i s p o sit i o n s d e s cr i b e d i n c l a u s e s (i ) t h r ou g h ( i x ) o f t h e d e f i n i ti o n o f D i s p o s it i o n u nd e r t he C r e d i tA g ree m e n t a n d t o o t h er w i s e d i s po s e o f p r o p er t y a s p e r m i t t e d u n d e r t h e C r e d i t A g ree m en t . 5  ( b ) P e r f e ct i o n o f S e c u ri t y I n t e r e s t . E x e c u t e a n d d e li v e r t o t h e C o ll a te r a lA g e nt s u c h a g r e e m e n t s, a s s i g n m e n t s o r i n s t r u m en t s ( i n c l u d i ng a f f i d a v i t s, n o ti c e s, r e aff i r m a t io n s a n d a m end m e n t s a n d r es t at e m e n t s o f e x i st i ng d o cu m e n t s , a s t h e C o ll a te r a l A g e n t m ay re a s o n ab l y r e q u e st ) and d o a l l s u ch o t h e r t h i n g s a s t h e C o l la t er al A g e n t m ay r e a s o n a b l y d e em n e c e s sa r y ,ap p r o p r ia t e o r c o n v e n i e nt (i ) t o as s u re t o t h e C o lla t e r a l A g ent t he ef f e c t i v e n e ss a nd p r i o r it y of it s s ec u r it y i n t e re s t s h e r e u n d e r, i n c l u d i ng ( A ) f i li ng or a u t h o r i z i ng t h e C o ll a te r a l A g e n t t o fil e s u c h f in a n ci ng s t at e m en t s ( i n c l u d i ng r e ne w a l sta t e m e n t s ), a m end m e n t s and s u p p l e m e n t s or s u ch o t h e r i ns t r u m en t s as t he C o l l ate r a l A g e n t m ay f rom t i m e t o t i m e r e a s o n a b l y r e q u es t i n o r d er t o p e r f e c t a n dm a i n ta i n t he s e c u ri t y i n t er e s t s g r a n t e d h e r e un d e r i n a c c o r d a n ce w it h t h e UC C , ( B ) w i t h r e g a r d t om a t e r ia l C op y r i g h t s , e x e c u ti n g a n d d e li v er i n g a N o t i c e o f G r a n t o f S e c u r it y I n t e re s t i n C o p y r i g ht s f o r f i l i n g w i t h t h e U n i t e d S t a t e s C op y r i g h t O f fi c e i n t h e f o r m o f E xh i b i t 5 ( b ) - 1 at t a c h e d h er e t o, ( C) w i t hre g a rd t o m a t er i a l P a t e n t s , e x e c u t i ng a nd d el i v e r i ng a N o ti ce o f G r a nt o f S e c u r i t y I n t er e s t i n P a t en t s f o r f i li ng w i t h t he U n i t e d S t a t es P a t e n t a n d T r a d e m ark O f fi ce i n t h e f o rm o f E x h i b i t 5 ( b ) - 2 a tt ac h e dh e r e t o a nd ( D ) w i t h r e g a rd t o m a t e ri al T r a de m ar k s , e x e c u t i ng a n d d e li v er i ng a N o t i c e o f G r a n t ofS e c u r i t y I n t er e s t i n T r a de m a r k s f o r fi l i n g w i t h t h e U n i t e d S ta t e s P a t e n t a n d T r a de m a r k O f fi c e in t h e f o r m o f E x h i b i t 5 ( b ) - 3 at t ac he d h e re t o , ( ii ) t o c o n su mm a t e t h e t r a n s ac t i o n s c o n t e m p l a t e d he r eb y an d( i ii) t o o t h e r w i s e p r o t e ct a n d a s s u re t h e C o lla t e r al A g e n t o f its r i gh ts a n d i n t e r es t s h e r eu n d e r . T o t haten d , e a ch G r a n t o r a u t h o r i z es t he C o l la t er al A g e n t t o f il e one o r m o r e f i n a n c i ng s t ate m en t s ( w h i ch m ay des cr i b e t h e c o l l at e ra l a s “al l as s et s” o r “al l p e r s o n al p r o p e r t y ” ) d i s c l o si ng t he C o ll a te r a lA g en t’ s se c u r i t y i n t er e s t i n a n y o r al l o f t h e C o l l at e ra l o f s u c h G r a n t o r w i t h o u t s u c h G r a n t o r ’ ss i gn a t u re t h er eo n , and f u r t h e r e a ch G r a n t o r a l s o h e r e by ir re vo c a b l y m a k e s , c o n s t it u t es a n d ap po in t s t h e C o ll a te r a l A g e n t , i t s no m i nee o r any o t h e r P e r s on w hom t h e C o lla t e r a l A g e n t m ay d es i g n a t e, as s u ch G r a n t o r ’s at t o r n e y - i n - fa c t w i t h f u l l po w e r and f o r t he l i m i t ed p u r p o se t o s i g n i n t he na m eof s u ch G r a n t o r any s u ch f i n a n c i ng s t at e m en t s ( i n c l u d i ng r e n e w a l s t at e m en t s ) , a m en d m en t s a nd supp l e m e n t s , no t ic es o r any s i m i l a r d o cu m e n t s t h at i n t h e C o ll a te r a l A g e n t’ s r ea so n a b l e d i s cr e ti on wo u l d be n e c e s s a r y , a p p r o p r i at e o r c o n v e n i e n t i n o r d er t o p e rf e c t a n d m a i n t a i n p e rfe c ti on of t hes e c u r it y i n t e re s t s g r a n t ed h er eu n d e r, s u c h p o w er , b e i ng c ou p l ed w i t h a n i n t e r e s t , b e i n g and r e m a i ni ng i r r e v o c a b l e s o l o ng a s t h e S e c u r e d O b l i g at i o n s r e m a i n u n p a i d a n d u n t i l t he c o mm it m en t s r el a tingt h e re to s h al l h a v e b e e n te r m i n a t e d . I n t h e e v e n t f o r an y r e a s o n t h e L a w o f a n y U . S . j u r i s d i ct i o n o th e r t h a n t h e S t at e o f N e w Y or k b e co m e s o r is a pp l ic a b le t o t h e C o l la t er a l o f an y G r a n t o r o r an y p ar tt h e r e o f , o r to a n y o f t h e S e c u r e d O b li g at i o n s , s u c h G r a n t o r a g r ee s to e x e c u te a n d d el i v e r al l s u c hi n s t r u m en t s a n d to d o al l s u c h o t h e r t h i n g s a s t h e C o l la t er a l A g e n t in i t s s o l e d i s c r et i o n re a s o n a bly d e e m s n e c es s a r y , ap p r op r iat e o r c o n v e n i e n t to p r e s e r v e , p r o t e c t a n d e n f o r c e t h e s e c u ri ty i n ter e s t s o ft h e C o ll a te r a l A g e n t u n d e r t h e L a w o f s u c h o t h e r U . S . j u r i s d ic t i o n ( a n d , i f a G r a n t o r s h a l l f a i l t o doso p r o m p t l y u p on t he r e q u es t of t he C o l l at e ra l A g e n t , t h e n t he C o l l ate r a l A g e nt m ay e x e c u t e a ny a n da l l s u ch r e q u es t e d d o c u m e n t s o n b e h al f o f s u ch G r a n t or p u r s u a nt t o t h e po w er o f a t t o r n ey g r a n t edh e r e i n a b o v e ). ( c ) T r e a t m e n t o f A c co un t s . N ot g ra n t o r e x t e nd t he t i m e f o r pa y m ent o f a ny Ac c o u n t , or co m p ro m i s e or s e ttl e a ny A c c ou n t f or le ss t h a n t h e f u l l a m ou n t t h e r e o f, o r r e l e as e any P e rs o n o r p r o p e r t y , i n w h o l e or i n p ar t , f rom pa y m e n t t h e r e o f, o r a l l ow a ny c r e d i t o r d i s c o u nt t h e r e o n,o t h e r t h an i n t h e o r d i n a ry c o u r se o f a G r a n t o r ’ s b u s i n es s o r as r eq u i r e d by L a w . ( d ) C o v en a n t s R el a ti n g t o C o p y r i g h t s . N o t k n o w i n g l y do a n y a c t o r o m i t to do any a c t w h e r e by any m a ter i a l C op y r i g ht m ay r e a s o n a b l y b e ex p e c t ed t o b e co m e i n v al i d a t ed a nd ( i) n ot k no w i n g l y do a ny a c t o r o m i t t o do a ny a ct w h e r eby any m a t e r ia l C op y r i g ht m ay b ec o m e p ar t o f t hepu b l i c d o m a i n ( o t h e r t h a n p u r s u a n t t o t he n a t u r a l t erm t h e r e o f) ; ( i i ) p ro m p t l y n o ti fy t h e C o ll a te ra l A g ent i f i t k n o w s t h a t any m a te r ia l C op y r i gh t m ay b e c o m e p ar t o f t he p ub l i c do m a i n o r of a ny m a t e ria ll y ad v e r s e d et er m i n a ti on or d e v e l op m e n t ( i n c l u d i ng t he i n sti t u t i on o f, o r a n y su c h d e t e r m i n a t ion o r d e v e l op m e nt i n, any co u r t or t r i b u n a l i n t he U n i t ed S t at e s ) r e g a r d i ng a G r a n t o r ’s o w n er s h i p o fany s u c h C op y r i g ht o r i t s v al i d i t y ; (i i i ) t a k e s u ch ac t i o n s as i t s h a l l d e e m app r o p r i at e 6 un d e r t h e cir cu m s t a n c e s , t o m a i n ta i n a n d p u r s u e e a c h a p p li c at i o n (a n d t o o b ta i n t h e r e l e v a n t re gist r at i o n ) a n d t o m a i n ta i n e a c h r e g is t ra t i o n o f e a c h m a t er i a l C op y r i gh t o w n e d b y a G r a n t o r i n c l ud i n g fi l i n g o f ap p l i cat i o n s f o r r e n e w a l w h er e n e c e s s ar y ; a n d ( i v ) p ro m p t l y n o ti f y t h e C o l la t er a lA g en t o f an y m a t e ri a l i n f ri ng e m en t o f an y m a ter i a l C o py r i gh t o f a G r a n t o r o f w h i c h i t b e c o m e s a wa r e a n d t a k e s u c h a c ti o n s a s i t s h a l l r e a s o n a b l y d e e m a p p ro p r i at e un d e r t h e c ir cu m s t a n c e s t o p r ot e c t s u c h C o p y r i g h t , i n c l u d i n g , w h e r e a p p r o p ri a t e , t h e b r i n g i n g o f s u i t f o r i n fr i n g e m en t , se ek i n g i n j u n ct i v e r eli e f a n d s ee k i n g t o r e co v e r an y a n d al l d a m a g e s f o r s u c h i n fr i n g e m e n t . ( e ) C o v en a n t s R el a ti n g t o P a t e n t s a n d T r a d e m ar k s . ( i ) T o t h e e x t e n t r e a s o n a b l e un d er t h e c ir cu m s t a n c es , G r a n to r s h all ( A ) co n t i n u e to u se e a c h m a t er i al T r a d e m ar k o n e a ch a n d e v er y t ra d e m ar k c l a ss o f G oo d s ap p li ca b le t o its c u r r e n t li n e a s r e fl e ct e d in i t s c u r r e n t cat a l o g s , b r o ch u r e s a n d p ri c e li s tsi n o r d er t o m a i n t a in s u c h Tr a d e m ar k in f u ll f o r ce f r ee f ro m an y c la i m o f a b a n d o n m en t f o r n o n- u s e , ( B ) m a i n t a i n as i n t h e p a st t h e q u a li t y o f p r o d u cts a n d s e r v i c es o ff e r e d u n d er s u c h T ra d e m ar k , ( C ) e m p l o y s u ch T r a de m ar k w i t h t h e a p p r o p r i ate n o t i ce o f r e g i str a ti on , ( D ) n o tad op t o r u se an y m ar k t h a t i s c o n f u si n g l y s i m i lar o r a c o l o r a b l e i m i t a ti o n o f s u ch T ra de m ar ku n l e s s t h e C o l l at e ral A g e n t, f o r t h e r a t a b le b e n e f it o f t h e h o l d e rs o f t h e S e c u r e d O b l i g a tio n s , s h a ll o b t a in a p e r fe c t e d s e c u r it y i n t e r e st in s u c h m a r k p u r s u a n t t o t h is S e c u r i t y A g r ee m en t , an d ( E ) n o t ( a n d n o t p e r m i t an y li c e n see o r s u b li c e n s e e t h e r e o f t o ) k no w i n g l y d o any a ct o r o m i t t o d o a n y act w h e r e b y an y m a t e ri a l T r a de m ar k m ay be c o m e i n v a li d at ed . ( i i) T o t h e e x t e n t r e a s o n a b l e un d er t h e c ir cu m s t a n c es , G r a n t o r s h all no t d o an y ac t , o r o m it t o d o an y ac t , w h e r e b y an y m a te r ial P a t e n t m a y beco m e a b an d o n e d o r d e d i ca t ed t o th e p ub l i c . ( i ii) P ro m p tl y no t i f y t h e C o ll a ter a l A g e n t if it k no w s t h at an y a pp li c at i o n o r re g ist r at i o n r e l at i n g t o a n y m a t e r ial P a t e n t o r T r a d e m a rk m a y beco m e a b a n d o ne d o r de d i c at e d to t h e p u b l i c ( o t h er t h a n p u r s u a n t t o t h e n a t u r al t er m s t h e r e o f ) , o r o f a n y ma t er i al l y ad v e r se d e t e r m i n a t i o n o r d e v e l o p m en t (i n c l u d i n g t h e i n st i t u t i o n o f , o r a n y s u chd e t e r m i n a t i on o r d e v e l op m e nt i n, any p r o c e e d i ng i n t h e U n it ed S ta t e s P a t e n t a nd T r a de m arkO f fi c e o t h e r t h a n r o u t i n e p r o s e c u t i o n m a t t er s ) re g a r d i n g a G r a n t o r ’ s o w n e r s h i p o fa n y m a t e r ia l P a t e n t o r T r a d e m a r k o r i t s r i gh t t o r e g i s te r t h e s a m e o r t o k e e p a n d m a i n tai n t h e sa m e . ( i v ) T a k e s u c h a c t i o n s as it s h a ll r e a s o n a b l y d ee m a p p ro p ri ate u n d e r t h e c ir cu m s t a n c es , i n c l u d i n g i n an y p r o c e e d i n g b e f o re t h e U n it e d S ta t es P a t e n ta n d Tr a d e m ar k O f fi c e, t o m a i n t a in a n d p u rs u e e a c h a p p l i ca t i o n ( a n d t o o b ta i n t h e r e l e v an t r e g i s tr a ti o n ) a n d t o m a i n t a in e a c h r e g i s tr a ti o n o f t h e m a t e rial P a t e n ts a n d T r a d e m ar k s, i n c l ud i n g fil i n g o f ap p li c at i o n s f o r r e n e w al, affi da v its o f u se a n d aff i d a v i t s o f i n c o n te s t a bil it y . ( v ) P ro m p tl y no t i fy t h e C o ll a ter al A g e n t a fte r i t l e a r ns t h a t any m a t e r ia l P a t e n t or T r a d e m ark i n c l u d ed i n t h e C o ll a te r a l i s m a te r ia ll y i n fr i n g e d, m i s a p pro p ri a t ed o r d i l u t ed by a t h i rd p ar t y a nd t a k e s u c h ac t i o n s as i t s h al l r e a s o n a b l y d e em a p p r op r i at e u n d e r t he c ir cu m s t a n c e s t o s ue f o r i n fr i n g e m e n t , m i s a p p r o p ria t i on or d i l u t i o n , t o seek i n j u n ct i v e r el i e f w h e re a p p r o p ri a t e a n d t o r e c o v er any a n d al l da m a g es f o r s u ch i n fr i n g em e n t , m i sa p p r o p r i at i o n o r d i l u t i o n , or t o o t h e r w i se p r o t e c t s u c h P a t e n t o r T r a de m a r k . ( f ) C o m m er ci a l T o r t C l a i m s . ( i ) C on c u r r e n t l y w ith f i n a n cial s ta t e m e n ts u n d e r S e ct i o n 7 . 0 1( a ) o f t h e C r e d itA g ree m e n t , n o ti f y t h e C o l l at e ra l A g e n t i n w r i ti n g o f t h e i n it i at i o n o f an y C o mm erc ia l T o r t 7 C l a i m i n e x c e s s o f $ 5 , 00 0 , 0 0 0 b e f o r e a n y G o v e rn m e n t a l A u t h o ri t y b y o r i n f a v o r o f s uc hG r a n t o r . ( i i) E x e c u te a n d d e l i v er s u c h s t a t e m e n t s , d o cu m e nt s a n d n o ti c es an d d o a n d c a u se t o b e d o n e a ll s u c h t h i n g s as t h e C o l la t er a l A g e n t m a yre a so n a b l y d e e m ne c e s s a r y , ap p r o p r ia t e o r c o n v e n i e n t, o r a s a r e r e qu i r e d b y L a w ,t o c r e at e , p er f ect an d m a i n ta i n t h e C o ll a te r al A g e n t ’s s e c u ri t y i n t e re s t in an y C o mm erci a l T o rt C l a i m . 6. A d v an ce s b y H o l d er s o f t h e S e c u re d O b l i g a t i o n s . O n fai l u re o f any G r a n t o r t o p erf o r m any of t he c o v en a n t s a nd a g r ee m e n t s c o n t ai n e d h e r e i n , t h e C o ll a te r a l A g e nt m a y , a t i t s s o l e o p t i on a n d i n it s s o l e d i s cr e ti on, p e r f o rm t he s a m e a n d i n s o d o i ng m ay ex p e n d s u ch s u m s a s t h e C o ll a te r a l A gent m ay r e a s o n a b l y d e em ad v i s a b l e i n t he p e rf o r m ance t h e r e o f, i n c l u d i ng t he pa y m ent o f any i n s u r a n c e pre m i u m s, t he p a y m ent of any t ax e s, a p a y m ent t o o b ta i n a r el e a se o f a L i en o r p o t e n t i a l L i e n , ex p e nd i t u r e sm ade i n d ef en d i ng a g a i n s t any ad v e r s e c l a i m a n d al l o t h e r e x p e n d i t u r e s t h a t t h e C o ll a te r a l A g e n t m ay ma k e f o r t h e p r o te c ti on of t h e s e c u r it y h e r e o f o r m ay b e c o m p e l l ed t o m a k e by o p e r at i o n o f L a w . A l l s u ch su m s a nd a m ou n t s so ex p e n d e d s h a l l be r e pa y a b l e by t he G r a n t o r s on a j o i nt a nd se v er al b a si s p ro m p tl y up ont i m e l y n o ti ce t h er e o f and d e m and t h e r ef o r , s h al l c on sti t u t e a d d it i o n a l S e c u r e d O b l i g at i o n s a n d s h a l l ,s u b j ec t t o S ect i on 2 . 08 o f t h e C r e d i t A g r e e m e n t , b ea r i n t er e s t f rom t he d at e s a i d a m ou n t s ar e e x p e n d e d at t he ra t e t h en a p p li c a b l e t o R e v o l v i ng L o a n s t h a t a r e B a se R a t e L o a n s. N o s u c h p e r f or m a n ce o f any c o v en a n t or a g r e e m e n t by t h e C o ll a te r a l A g e n t o n b e h al f o f any G r a n t o r , and n o su c h a d v an c e or e x p en d i t u r e th e r ef or, s h al l r e li e v e t h e G r a n t o rs o f any d e f a u l t u n d e r t h e t e r m s o f t h i s S e c u r it y A g ree m e n t , t he o t h e rL o a n D ocu m e n t s o r any o t h e r do c u m en t s r e lat i ng t o t h e S e c u r e d O b l i g at i o n s. T he C o ll a te r a l A g e n t m aym a k e any pa y m ent h er eby a u t h o r i ze d i n a c c o r d a n c e w it h a ny b i ll , sta t e m e n t or es t i m a t e p r o c u r ed fr om t h ea p p r o p r ia t e p ub l i c o ff i c e or h o l d er o f t h e c l a i m t o b e d is c h ar g e d w i t h ou t i n q u i ry i n t o t he a c c u r acy of s uc h b il l , st a t e m e n t o r e s t i m a t e or i n t o t he v a l i d it y o f any t ax a s s e s s m e n t , s al e, f o r f ei t u r e, ta x l i e n , t itl e o rc l a i m e x c e p t t o t he e x t e nt s u c hpa y m ent i s b e i ng co n t e st ed i n g ood fai t h by a G r a n t o r i n ap p r o p r ia t e p r o c e e d i n g s a nd a g a i n st w h i ch a d e qu at e r e s e r v e s a r e b e i ng m a i n t a i n e d i n a c c o r d a n c e w i t h GA A P . 7. E v en t s of D e f a u lt . T he occu rr ence of an event t hat w ou l d cons t i t u t e an Event of D e f au l tunder t he C r ed i t A g r ee m ent sha l l be an Event of D efau l t he r eunder (an “ E v ent of D e f a u lt ” ) . 8. R e m ed i e s . ( a ) G e n e ra l R e m ed i e s . U p o n t h e o c c u r r e n ce o f an E v e n t of D e f a u l t an d d u ri ng t he co n t i n u at i o n t h e re o f , t h e C o l l at e ra l A g e nt a nd t he h o l d e rs of t h e S e c u r ed O b l i g a tio n s s h a l l ha v e , i n ad d it i o n t o t he r i gh t s a n d r e m ed i e s p r o v i d ed h e re i n, i n t he L o an D o c u m en t s, in any o t h e r d o cu m e n t s r el a ti ng t o t h e S e c u r ed O b l i g a ti o n s, or by L aw ( i n cl u d i ng l e v y of a t ta ch m en t and g a r n i s h m en t) , t h e r i g h t s and r e m e d i e s of a s e c u r ed p ar t y u n d e r t he UC C of t he j u ri s d i ct i o na p p li c a b l e t o t he af f ec t e d C o ll a te r a l a n d, f u r t h e r, t he C o ll a te r a l A g e nt m a y , w i t h o r w i t h ou t j ud ic i a l p r o ce ss o r t he a i d a n d a s s is t a n c e of o t h e r s , ( i ) e n t er on any p r e m i s es on w h i ch a ny of t he C o ll at e ra l m ay be l o c a t ed a nd, w i t h ou t r es i s t a n c e or i n t er f er e n ce by t he G r a n t o r s, t a k e p o s s e s s i o nof t he C o l l at e ra l , (i i ) d i s p o s e o f any C o l l at e ra l o n any su c h p re m i s e s, (i i i ) r e q u ir e t h e G r a n t o r s to a s s e m b l e and m a k e a v a il a b l e t o t h e C o ll a te r a l A g e n t a t t he e x p e n s e o f t he G r a n t o r s any C o ll ate r a l a t any p l ac e a nd t i m e d e s i gn a t ed by t h e C o ll a te r a l A g e n t t h a t i s r e a s o na b l y con v e n i e nt t o bo t h p a rti es, ( i v ) r e m o v e a ny C o ll a te r a l f rom any s u c h p r e m i s es f or t he pu r p o s e o f e f fe c ti ng s al e or ot h er d i s p o s i ti on t h e r e o f , an d / or ( v ) w it ho u t de m and a nd w i t h o u t ad v erti se m e n t , n o t i c e, h e ar i ngo r p r o c e s s o f L a w , a l l o f w h i ch e a c h o f t he G r a n t o rs h e r eby w a i v e s t o t he f u ll e s t e x t e n t p e r m i tted b y L a w , a t a ny p l ac e a nd t i m e or ti m e s , s el land d e l i v e r any o r al l C o ll a t e ra l h e l d by o r f o r i t at p u b li c o r p r i v at e sa l e , by o n e o r m ore co n t r ac t s , in one o r m o r e p a r ce l s , f o r c as h, u p o n c r e d i t or o t h e r w is e, at s u c h p r i ce s a nd u p on s u c h t er m s as t heC o ll a te r a l A g e n t d ee m s ad v i s a b l e , i n i t s s o l e d is c re t i o n (s u b j ec t t o an y an d al l m a n d at or y l e g a lr e q u i re m e n t s ). E a ch of t he G r a n t o rs a c k no w l e d g es t h a t any p r i v a t e s al e r ef e r e n c e d a bo v e m aybe a t p r i ce s a nd on t e r m s le ss f a v o r a b l e t o t h e s e ll er t h a n t h e p r i ce s a nd te r m s t h a t m i gh t ha v e b een 8 o b t a i n e d a t a pu b li c sa l e a n d w a i v es any c l a i m s a g a i n s t t he C o ll a t e r a l A g ent a ri s i ng by r eason t h a t anysuch p r i v a t e sa l e s h a l l not ha v e b e en m ade i n a c o m m e r c i a ll y r e aso n ab l e m anne r . T h e C o ll a te r a l A g e nt ’ s d is c la i m e r o f w ar r a n ti e s re l at i n g t o t h e C o ll a te r a l s h a l l n o t b e c o n s i d er e d t o ad v e r se l y a f f e c t th e c o m m e r c ia l r e a s o n a b l e n e s s o f an y s a l e . I n a d d it i o n t o a l l o t h e r s u m s du e t h e C o ll a te r a l A g e n ta n d t h e h o l d e r s o f t h e S e c u r e d O b l i g ati on s w i t h r e s p e c t t o t h e S e c u r e d O b li g at i o n s , t h e G r a n t o rs s h al l p a y t h e C o ll a te r a l A g e n t a n d e a c h o f t h e h o l d e r s o f t h e S e c u r e d O b l i g at i o n s a l l r e a s o n a b le d o c u m en t e d c o st s a n d e x p e n s e s i n c u r r e d b y t h e C o l la t er a l A g e n t o r a n y s uc h h o l d e r o f t h e S e c ur e d O b l i g a t i o n s ( i n c l u d i n g r e aso n ab l e a tt o r ne ys ’ f e es a nd ex p en s es a n d c o u r t c o st s ) i n o b t a i n i n go r l i q u i d a t i n g t h e C o ll a te r a l , i n e n f o r c i n g p a y m en t o f t h e S e c u r e d O b li g at i o n s , o r i n t h e p r o s e cu ti o n o r d e fe n s e o f a n y a c t i o n o r p r o c e e d i n g b y o r a g a i n s t t h e C o l l a t era l A g e n t o r t h e h o l d e r s o f th e S e c u r e d O b li g at i o n s o r t h e G r a n t o r s c o n c e r n i n g a n y m a tt e r a r is i n g ou t o f o r c o nn ec t e d w i t h t hi s S e c u ri t y A g r e e m e n t , a n y C o l l at e ra l o r t h e S e c u r e d O b l i g at i o n s , i n cl u d i n g a n y o f t h e f o r e g o in g a ri s i n g i n , a r is i n g u n d e r o r r e la t e d t o a c a s e u n d e r D e b t o r R e lie f L a w s . T o t h e e x t e n t t h e r i gh t so f n o t ic e c a n n o t b e l e g a ll y w ai v e d h e r e u n d e r , e a c h G r a n t o r a g r e e s t h a t a n y r e qu i r e m en t o f r e a so n a b l en o t ic e s h al l be m et i f s u ch n o ti ce i s p e r s o n a ll y s e r v ed on or m a i l e d, p o s t a g e p r e p a i d , t o t he B o r ro w eri n a c c o r d a n c e w i t h t he n o tic e p ro v i s i o ns o f S e c ti on 11 .0 2 o f t h e C r e d i t A g r ee m e n t a t l e as t t e n ( 1 0)B u s i n e s s D a y s b e f o r e t h e ti m e of s al e or o t h er e v e n t g i v i ng r is e t o t he r e q u ir e m ent o f s u ch n o t i c e. The C o l l at e ra l A g e n t a n d t h e h o l d er s of t he S e c u r ed O b l i g a t i o n s s h a l l n o t be o b l i g a t e d t o m a k e any sa l e o r o t h e r d i s p o s it i o n of t he C o l la t er al r e g a r d l es s o f n o ti ce ha v i ng b e e n g i v e n. To t he e x t e n t p e r mi tt ed by L a w , any h o l d e r o f t he S e c u r ed O b li g at i o ns m ay be a p u r c h a s er a t any s uch sa l e . T o t h e e x t e n t pe r m i t t e d by a pp l i c a b l e L a w , e a c h of t he G r a n t o rs h e reby w a i v es al l o f it s r i g h t s o fr e de m p ti on w i t h re sp ec t t o a ny s u ch s a l e. S u b j ec t t o t he p r o v i si ons o f a p p li c a b l e L a w , t he C o l l at e ra lA g ent a nd t h e h o l d e rs o f t h e S e c u r e d O b l i g at i o ns m ay p o s t p o n e o r c a u s e t he p o s t p o ne m e n t o f t he s al e o f a l l o r any p o rt i o n of t he C o l la t er al by a n n ou n c e m e n t at t h e ti m e a n d p l a c e of s uch sa l e , a nd s u ch s ale m a y , w it h o ut f u rt h er n o ti ce, t o t h e e x t e n t p e r m it t e d by L a w , b e m ade a t t he t i m e a n d p l a c e t o w h i c h th e s al e w as p o s t p o ne d , o r t he C o l l at e ra l A g e n t and t he h o l d er s o f t he S e c u r ed O b li g at i o ns m ay fu r t h e rp o s t p o n e s u ch s a l e by a n n o u n ce m e n t m a d e at s u c h t i m e a n d p l a c e. ( b ) R e m ed i e s r e l at i n g t o A c c ou n t s . U p on t he o c c u r r e n c e of an E v e n t o f Def a u l t and d u r i ng t he c o n t i n u a t i on t h er e o f, w h et h e r or n o t t he C o l l a t er al A g e n t h a s e x e rc i s ed a n yor a l l o f i t s r i g h t s and r e m e d i e s h e r e u nd e r , e a ch G r a n t o r w il l p r o m p t l y u p on r e q u es t o f t he C o llat e ra l A g e n t i n s t r u c t a l l a c c o u nt d e b t o r s t o r e m i t al l pa y m en t s i n r e s p e c t of A c c o u n t s t o a m a ili ng l o c at i o ns e l ec t e d by t h e C o l la t er al A g en t . I n a d d i t i on, t h e C o ll a t e ra l A g e n t s h al l h a v e t h e r i g ht t o e n f o r c e anyG r a n t o r ’ s r i g h t s a g a i n s t it s c u s t o m e r s a n d a c c o u n t d e b t o r s , a n d t h e C o ll a te r a l A g e n t o r i t s des i g n e e m a y no t i f y an y G r a n t o r’ s c u s t o m e r s a n d a c c o u n t d e b t o r s t h a t t h e A c c o u n t s o f s u c h G ra n t o r h a v eb e en a ss i g n e d t o t he C o l l a t er al A g e n t or o f t h e C o l la t e r a l A g en t’ s se c u r i t y i n t er e s t t h e r e i n , a n d m ay( ei t h e r i n it s o w n n a m e o r i n t he na m e of a G r a n t or o r bo t h ) de m a n d, c o l l ec t ( i n cl u d i n g by w ay of a l o c kbox ar r a n g e m en t ), re c ei v e, t a k e r e c e i p t f o r, s e ll , s ue f o r, co m p o un d , s ett l e , c o m pro m i s e a n d g i v e a c qu i t t a n ce f o r a ny a nd a l l a m oun t s d ue o r t o b e c o m e d u e o n any A c c o u n t , a nd, i n t h e C o ll a te r a l A g en t’ s di s c r et i o n, fi l e a ny c la i m or t a k e any o t h e r a ct i o n o r p r o c e e d i ng t o p r o t ec t a n d re a l i z e u p on t h e s e c u rit y i n t e re st o f t h e h o l d e rs o f t h e S e c u r e d O b l i g at i o n s i n t h e A c c o u n t s. E a ch G r a n t o r ac k no w l ed g e sand a g re es t h at t he P r o c e e d s of it s A c c o u n t s re m it t e d t o o r o n be h al f of t he C o l l at e ra l A g ent i n a c c o r d an ce w i t h t h e p ro v i s i o ns h e r e o f s h al l b e s o l e l y f o r t h e C o lla t e r a l A g en t ’s o w n con v e n i e n c e and t h a t su c h G r a n t o r sh al l n o t ha v e a ny r i g h t , t itl e o r i n te r e st i n s u ch A c c ou n t s o r i nany s u c h o t h e r a m ou n t s e x c e p t as e x p r e s s l y p ro v i d ed h e r e i n . T h e C o ll a te r a l A g e n t a nd t h e h o l d e rso f t h e S e c u r e d O b l i g a t i o n s s h al l ha v e no li a b i l i t y o r r e s po n s i b il it y t o a ny G r a n t o r f o r a c c e p t a n c eof ac h ec k , d ra ft o r o t h e r o rd e r f o r p a y m ent o f m oney b e a r i ng t he l e g e n d “ pa y m e n t i n f u ll ” o r w o r d s o f si m i l a r i m p o r t o r any o t h e r r e st r ict i v e l e g e nd or e n d o r s e m ent o r be r e sp o n si b l e f o r d e te r m i n i ng t hec o r re c t n e ss o f any re m it t a n c e. E a ch G r a n t or h e r eby a g r e es t o i n de m n i fy t h e C o l l ater al A g e n t a n d t h e ho l d e r s of t he S e c u r ed O b l i g a ti o n s f r om and a g a i n s t a l l li a b i l it i e s, d a m a g es, l o s s e s, act i o n s, cl a i m s, ju d g m en t s , co st s, e x p e n se s a nd c h ar g e s, i n cl u d i ng reasonab l e a t t orneys’ fees and expenses, s u f fe r e dor i n c u rr ed by t he C o l l at e ra l A g e n t o r t he h o l d e rs o f t h e S e c u red O b l i g a t i o n s ( e a c h, a n “ I nde m n i fi e d 9 P a r t y ” ) b e c a u s e o f t h e m a i n t e n a n c e o f t h e f o re go i n g a rra n g e m en t s e x ce p t a s r el a ti n g t o o r a ri si n g o u t o f t h e g r o s s n e g l i g en c e o r w i l l f u l m i s c o n d u c t o f a n I nd e m n i f i e d P a r t y o r it s o ff i c e r s ,e m p l o y e e s o r a g e n t s . I n t h e ca s e o f a n y i nv es t i g at i o n , l i t i g at i o n o r o t h e r p r o c e e d i n g , t h e f ore go i n g i nde m n it y s h a l l b e e f f e ct i v e w h e t h e r o r n o t s uc h i n v e st i g at i o n , l i t i g at i o n o r p r o c e e d in g i s b r o u g h t b y a G r a n t o r , i t s d i r ec t o r s , s h a r e ho l d e r s o r cr e d i t o r s o r a n I nde m n i fi e d P ar t y o ra n y o t h e r P er s o n o r a n y o t h e r I nde m n i f i e d P a r t y i s o t h e r w i s e a p ar t y t h er e t o . A l l a m o u n t s du eu n d e r t h i s s u b s e c ti o n s h a l l b e pa y a b l e w i t h i n t e n ( 1 0 ) B u si n e s s D a y s a f te r d e m an d t h er e f o r . ( c ) A c c e s s . I n a d d it i o n t o t he r i g h t s a n d r e m ed i es h e r e u n d e r , u p on the o c c u rr e n ce o f anE v en t o f D e f a u l t a n d d u r i n g t h e co n t i n u at i o n t h e r e o f , t h e C o ll a te r a l A g e n t s h al l ha v e t h e r i g ht t o e n t e r a n d re m a i n u p o n t h e v a r i o u s p re m i s e s o f t h e G r a n t o r s w i t h ou t c o s t o r c h ar g e t o t h e Co l la t er a l A g en t , a n d u s e t h e s a m e , t o g e t h e r w i t h m a t e ri a l s , s up p lie s , boo k s a n d r e c o r d s o f t h eG r a n t o r s f o r t h e p u rp o s e o f c o l l ect i n g a n d l i q u i d at i n g t h e C o ll a te r a l , o r f o r p r e p a ri n g f o r s a le a n d co nd u ct i n g t h e sa l e o f t h e C o l l at e ra l , w h e t h e r b y f o r e c l o s u r e , a u ct i o n o r o t h e r w i s e . I n ad d it i o n , t h e C o l l a t er a l A g e n t m a y re m o v e C o ll a te r a l , o r an y p ar t t h e r e o f , fr o m su c h p r e m i s e s and / o r an y r e c o r d s w i t h r e s p e c t t h e re t o , i n o r d e r t o ef f ec ti v e l y c o l le c t o r l i q u i d at e s u c h C o lla t er al . ( d ) N on e x cl u s i v e N a t u r e o f R e m ed i e s . F a il u r e by t he C o l l a t er al A g en t or t he h o l d er s o f t h e S e c u r e d O b l i g a t i o n s t o e x e r ci se any r i g h t , re m edy o r o p t i on u n d e r t h i s S ec u r it y A g ree m e n t , a ny o t h e r L o a n D o c u m en t , any o t h er d o c u m en t s r ela t i ng t o t h e S e c u r ed O b l i ga ti o n s, or a s p r o v i d ed by L a w , o r any d e l ay by t h e C o l l a t era l A g e n t o r t h e ho l d e r s of t he S e c u r ed O bli g at i o ns i n e x er c is i ng t h e sa m e, s h a l l n ot o p e r at e as a w a i v e r o f a ny s u c h r i gh t , re m edy or o p t i o n .N o w a i v e r h e r e un d e r s h a l lbe e f f e ct i v e u n l es s i t i s i n w ri t i n g , s i gn ed by t he p a r t y a g a i n s t w hom s u c h w a i v e r i s s ou g ht t o bee n f o r c ed a nd t h e n on l y t o t h e e x t e nt s p ec i fi c al l y s t at e d , w h i ch i n t h e c a se o f t h e C o l l a te r a l A ge n t o rt h e ho l d e r s o f t h e S e c u r e d O b l i g at i o n s s h a ll o n ly b e g r a n t e d a s p ro v i d e d h e r e i n . T o t h e e x t e nt p e r m i tt e d b y L a w , n e i t h e r t h e C o ll a te r a l A g e n t , t h e h o l d e r s o f t h e S e c u r e d O b l i g at i o n s , n or an y p a r tya ct i ng a s a t t o r n ey f o r t he C o l l a t era l A g e n t o r t h e ho l d e r s of t he S e c u r ed O b li g at i o n s , s h a l l be l i ab l e h e r e un d e r f o r any a c t s o r o m i ss i o ns o r f o r any er r o r of j u d g m ent o r m i s t a k e of fa ct o r L aw o t h er th a n t h e i r g r o ss n e g l i g en c e o r w i ll f u l m i s c o n d u c t h e r e u n d e r. T he r i gh t s a nd r e m ed i es o f t he C o lla t er alA g en t s an d t h e ho l d er s o f t h e S e c u r e d O b l i g a ti o n s u n d e r t h i s S e c u r it y A g r ee m e n t s h a l l b e cum u l a t i v e a n d n o t e x c l u s i v e o f an y o t h e r r i g h t o r re m e d y t h a t t h e C o l l at e ra l A g e n t o r t h e h o l de r s o ft h e S e c u r e d O b l i g a t i o n s m a y ha v e . ( e ) R e t e n t i o n o f C o l l at e ra l . To t he e x t e n t p e r m i tt ed u n d e r a p p li c a b le L a w , i n a d d it i o n t o t he r i gh t s a nd r e m ed i es h e r e u n d e r, u p on t he o c c u r r e n c e a nd c o n t i n u a n ce of an E v e nt o f D e f a u l t , t h e C o ll a te r a l A g e n t m a y , af t e r p ro v i d i ng t he n o ti c e s r e q u i r e d by S ec t i on s 9 - 620 a nd 9 - 621 o f t h e UC C o r o t h e r w i s e co m p l y i n g w i t h t h e r e q u i re m e n t s o f a p p l ic a b l e L awo f t h e r e l e v a n t j u r i s d i ct i o n, a c c e pt o r r e ta i n a l l o r any po r t i on o f t h e C o ll a te r a l i n sati s f a ct i o n oft he S ec u r ed O b li g a t i o n s. U n l e s s and u n ti l t h e C o l la t er al A g e nt s h al l h a v e p r o v i d ed s u c h n o t ic es,h o w e v e r, t he C o l l at e ra l A g e n t s h al l n o t b e d e e m ed t o h a v e a c c e p t e d o r re t a i n ed a ny C o l la t era l in sa t is f ac t i on o f a ny S e c u r ed O b li g at i o ns f o r any r e a s on. ( f ) D e fi c i e n c y . I n t h e e v e n t t h a t t h e p r o c e e ds o f any sa l e , c o ll e ct ion o r r e al i za t i on a re i n s u f f ic i e nt t o pay a l l a m ou n t s t o w h i ch t he C o l l ate r a l A g e n t o r t he h o l d er so f t h e S ec u r ed O b l i g at i o n s a re l e g a ll y e n t i tl ed, t he G r a n t o r s s h a l l b e j o i n t l y a n d se v e r al l y li ab l e f o r t h e d e f ic i e ncy ( s u b j ec t t o S ect i o n 2 5 h e r e o f ), t o g e t h e r w i t h i n t er e s t t h e r e on at t h e D e fa u l t R a t e, t o g et h e r w i t h t he c o s t s of c o ll e ct i o n and reasonab l e a t t o r neys’ f ees and expenses. A ny s u r p lu s re m a i n i ng aft er t he f u l l p a y m ent a n d s at i sf a ct i o n o f t h e S e c u r e d O b l i g at i o n s s h a l l b e r et u r ne d t o t he G ra n t o r s or t o w ho m soe v e r a c o u r t o f co m p e t e n t j u r i s d ic t i on s h al l d e t e r m i ne t o be e ntit l e d t h e re t o . 9. R e le a s e o f C o l l a t era l . U p o n r eq u e s t , t h e C o lla t e r a l A g e n t s h a l l p ro m p t l y d e li ve r t o t h e ap p li ca b l e G r a n t o r ( a t s uch G r a n t o r ’ s e x p e n s e) a p p r o p ri a t e r e l e as e d o c u m en ta t i on t o t he e x te n t t h e r e le a s e o f 10  t h e re t o ;( i x ) t o a d j u s t a n d s ett l e c l a i m s u nd e r an y i n s u r a n c e p o l i c y r e l at i n gC o ll a te r a l i s p e r m i tt e d u n d er , a n d o n t h e te r m s a n d c o n d it i o n s s e t f o rt h i n , t h e C r e d i t A g ree m e n t ; p r ov i d e d t h a t a n y s u c h r e l ea s e , o r t h e su b st i t u t i o n o f a n y o f t h e C o l l a t era l f o r o t h e r C o l la t er a l , w i l l n o tal t e r , v ar y o r d i m i n i s h i n an y w a y t h e f o rc e , e f f e c t , l i e n , p l ed g e o r se c u r it y i n t e r e s t o f t h i s S e c u ri t yA g ree m e n t a s t o an y an d al l C o lla t e r a l n o t e xp r es s l y r el e a s e d o r s u b s ti t u t ed , a n d t h i s S e c u r i t y A g r ee me n t s h a l l c on t i n u e a s a fi r s t p r i o ri t y l i e n ( su b j ec t t o P er m i t t e d L i e n s ) o n an y a n d al l C o ll a te r a l n o t e x pr e ss l y re l e a s e d o r s u b s t i t u t e d . 10. R i g h t s o f t h e C o ll a te r a l A g e n t . ( a ) P o w e r o f A t t o r n e y . I n a dd i ti on t o o t h e r p o w er s o f at t o r n ey c o n ta in ed h ere i n, e a c h G r a n t o r h e r e by d es i g n a t e s a nd a p p o i n t s t h e C o ll a te r a l A g en t , o n b e h a l f o f t h eh o l d er s o f t he S e c u r ed O b l i g at i o n s, a nd e a ch o f i t s d e s i gn e e s or a g e n t s, a s a tt o r ne y - i n - fa c t o f s uch G r a n t o r , i r r e v o c a b l y a nd w i t h po w er o f s u b sti t u t i o n , w i t h a u t h o r i t y t o t a k e any o r a l l o f t h e fo l l o w i ng a c ti ons up o n t h e o c c u r r e n ce a nd d u r i ng t h e c o n t i n u a t i on o f an E v e n t o f D e f a u lt : ( i ) t o de m a n d , c o ll e c t , s e ttl e , c o m pro m i s e a nd a d j u s t , a n d g i v e d i s c h a r g es a n d re l e a s e s c o n c e r n i n g t h e C o l l at e ra l , all as th e C o l la t er a l A g e n t m a y r e a s o n a b l y d ee m a p p ro p ri a t e ; ( i i) t o co mm enc e a n d p r o s e c u te an y ac t i o n s a t a ny c ou r t f o r t h e p u rp o s e s o f c o l le c t i n g an y o f t h e C o lla t e r al a n d e n f o r c i n g an y o th e r r i gh t i n r e s p ect t h e r e o f; ( i ii) t o d ef e n d , s ett l e o r co m p r o m i se an y a ct i on b r o u g h t a nd , in co n n ec t i o n t h er e w it h , g i v e s uc h d i s c h a r g e o r re l e a se a s t h eC o l la t er a l A g e n t m a y r e a s o n a b l y d ee m a p p ro p ri a t e ; ( i v ) t o r e ce i v e , o p e n a n d d i s p o se o f m ail a d d r e ss ed t o a G r a n t o r a n d en do r se c h ec k s , n o t e s, d ra f ts, a c c e p t a n c e s , m o n e y o r d e r s , bi lls o f l a d i n g , w a r e h o u se r e c ei p ts o r o t h er i n s t r u m en ts o r d o c u m en ts e v i d e n c i ng p a y m en t , s h i p m e n t o r s t o ra g e o f t h e G o o d s g i v i n g r i se t o t h e C o l la t er a l o n b e ha l f o f a n d i n t h e na m e o f s u ch G r a n t o r , o r s e c u r i n g , o r r e lat i n g t o s u c h C o l l at e ral; ( v ) t o pay or d i s c h a r g e t a x e s, lie ns, s e c uri t y i n t er e st s o r o t h e r e n cu m b r a n c e s l e v i e d o r p l ac ed on o r t h r ea t e n e da g a i n s t t he C o l la t er a l ; ( v i ) t o d i re ct a ny p art i e s l i a b l e f o r any p a y m ent in c on n e c ti on w i t h a ny of t he C o l l at e ra l t o m a k e p a y m ent o f a ny a nd a l l m on i es d u eand t o b e co m e d ue t h e r e u n d e r d i r ec tl y t o t he C o l l a t era l A g e n t o r a s t he C o l la t er alA g e n t s h a l l d i r ec t ; ( v i i ) t o r e ce i v e p a y m ent o f a nd re c e i p t f or a ny a nd a l l m o n i es, c l a i m s, and o t h e r a m o u n t s d u e and t o b e c o m e d u e a t a ny t i m e i n r e s pe c t o f o r a r is i ng ou t o f any C o l l at e ral ; ( v i i i ) t o s e ll , as s i gn , t r a n s f e r, m ake a ny a g r eem e n t i n r e s p e c t o f, o r o t h e r w i s e d e al w i t h or e x e r c i s e r i g h t s i n re s p e c t o f , anyC o ll a te r a l or t h e G o o d s or s e r v i c e s t h a t h a v e g i v e n r i s e t h e re t o , a s f u l l y a ndco m p l et e l y as t h o u g h t he C o ll a te r a l A g e n t w e r e t h e a b s o l u t e o w n e r t h e r e of fo r a l l p u rp o s e s ; 11 ( x ) t o e x e c u t e a n d d el i v e r a l l a s s i g n m en t s , c on v e y an c e s , st a t e m en t s , f i n a n ci n g s t at e m en t s , r e n e w a l fi n a n c i n g s ta t e m e n t s , s e c u r it yan d p l e d g e a g r e e m e n t s , a ff i d a v i t s , no t i c e s a n d o t h e r a g r e e m e n t s , i n s t ru m e n t san d d o cu m e n t s t h a t t h e C o ll a te r a l A g e n t m a y r ea so n a b l y d e e m a p p r o p r i at e i n o r de r t o p e rf e c t a n d m a i n ta i n t h e s e c u r it y i n t e re s t s a n d l i e n s g r a n t e d i n t h i s S e c u ri t yA g ree m e n t a n d i n o r d e r t o f u l l y c o n s u mm a t e al l o f t h e t r a n s a ct i o n s c o n t e m p l a t ed t h e re i n ; ( x i ) t o i n sti t u t e a ny f o r e cl o s u r e p r o c e e d i n g s t h a tt he C o l l at e ra l A g e nt m ay re a so n a b l y d e em ap p r o p r i ate ; a nd ( x i i ) t o do a nd p er f o rm a l l s u c h o t h e r a c t s a nd t h i n gs as t he C o l l a t era l A g ent m ay r e a s o n a b l y d e em a p p r o p r i at e o r c o n v e n i e n t i n c o nn e ct i o n w i t h t he C o ll a te r a l . T h i s po w e r o f a t t o r n e y i s a p o w e r co up l e d w i t h a n i n t e r e s t a n d s h al l b e i r r e v o c a b l e f o r so l o n g a s a n y o f t h e S e c u r e d O b l i g at i o n s s h a l l r e m a i n ou t s t a nd i n g a n d u n ti l al l o f t h e co mm it m en ts r el a ti n g t h e r et o s h al l ha v e b e e n t er m i n a t e d . T h e C o l la t er a l A g e n t s h a l l b e u n d e r n o d u t y t o e x e rci s e o r w i t h h o l d t h e e x erc i s e o f a n y o f t h e r i gh t s , p o w er s , p r i v i l e g e s a n d o p t i o n s e x p r e ssl y o r i mp l i cit l y g ra n t e d t o t h e C o l l at e ra l A g e n t i n t h i s S e c u ri t y A g r e e m en t , a n d s h al l no t b e l i a b l e f o r an yf ai l u r e t odo so o r a ny d e l ay i n d o i ng s o. T h e C o ll a te r a l A g e n t s h al l n o t b e l i a b l e f or a ny a ct o r o m i s s i o n or f o r anyer r o r of j ud g m ent o r any m i s t a k e of fa ct o r L aw i n i t s i n d i v i d u a l c ap aci t y or i t s c a p a c i t y a s a tt o r ne y - i n- fa c t e x c e p t ac t s or o m i ss i o n s r e s u lt i ng f r om i t s g r o ss n e g l i g e n ce o r w i l l f u l m i s c o n d u c t . T h i s po wer o f a t t o r n ey i s c o n f e rr ed on t he C o l l at e ra l A g e n t s o l e l y t o p r o t ec t , p re s e r v e a nd r e al i z e up o n i t s s ec u ri t y i n t e r es t i n t he C o l la t er a l . ( b ) P e r f or m a n c e b y t h e C o ll a ter a l A g e n t o f O b l i g a ti o n s . I f a ny G r a n t o r f ails t o p er f o rm any a g re e m ent o r ob li g at i o n co n ta i n e d h e r ei n, t he C o l la t e r a l A g e n t i ts e l f m ay p e rf or m , o rc a u s e p e r f o r m an c e o f, s u c h a g r ee m ent o r o b l i g a t i o n , a nd t he e xp e n se s o f t h e C o l la t er al A g e n t i n c ur r e d i n co n n ec t i on t h er e w it h s h a l l b e p a y a b l e by t h e G r a n t o rs o n a j o i nt a nd s e v e ra l b a si s ( s ub j e c t t oS e ct i o n2 5 h e r e o f ) . (c) A ssi g n m ent by t he C o l l a t e r al A g en t . T h e C o l l a te r al A g ent m a y assi g n theSecu r ed O b l i g at i ons a nd a n y portion t h ere o f a n d/ o r t he Pled g ed C o l l a t e ral and a ny por t ion the r eof to a su cce s sor co l l a t er a l a g ent app o in t ed p u rsu a nt to Se c ti o n 10.06 of the C red i t A g ree m ent, and t h e a s si g n e e sh all b e e n t i t l ed to a ll o f t he r i g hts and re m edi e s of t h e C ol l a t er a l A g ent under t h is P led g e A g ree m ent i n r e la ti o n t h e r eto. (d) T h e C o l l at e ra l A g e n t ’ s D u t y o f C ar e . O t h er t h a n t h e e x e r ci se o f r e a s o n ab l e ca re t o a s s u re t he sa fe c u s t o dy o f t h e C o ll a te r a l w h il e b e i ng h e l d by t he C o l l at e ra l A g e n t h er eu n d er, t he C o ll a te r a l A g e n t s h al l ha v e no d u t y o r l i a b ili t y t o p r e s e r v e r i g h t s p er t ai n i ng t h er e t o, i t b e i ngun d e r s t o od a n d a g r e ed t h a t t he G r a n t o r s s h al l be r e s p o n s i b l e f o r p r e se r v a ti on of al l ri g h t s i n t h e C oll a te r a l , a nd t he C o l l a t era l A g e n t s h al l be re l i e v ed o f al l r e s p o n s i b i l i t y f o r t h e C o llat e ra l u p o n s u r re n d er i ng i t o r t e n d er i ng t he s u r r e n d er o f i t t o t he G ra n t o r s. T he C o l l a t er al A g e n t s h a l l be d ee m ed t o hav e e x er c is ed r e a s o na b l e c ar e i n t he c u s t o dy a nd p res er v at i o n o f t he C o l l a t era l i n i t s p o s s e s si on i f s u chC o l la t er al i s a c c o r d e d t r ea t m ent s u b s t a n t i al l y e q u a l t o t h a t w h i c h t h e C o ll a te r a l A g ent a c c o r dsi t s o w n p r o p er t y , w h i c h s h all b e n o l e ss t h an t h e t re a t m e n t e m p l o y e d b y a r e a s o n a b le a n d p r u d e nt a g e n t i n t h e i n d u st r y , i t b e i n g un d e rs t o o d t h at t h e C o lla t e r al A g e n t sh all n o t ha v e r e s p on si b ili t yf o rt a k i n g a n y n e c es s a r y st e p s t o p r es er v e r i gh ts a g a i n s t an y p art i e s w i th r e s p ec t to an y o f t h e C o lla t e r al .In t h e e v e n t o f a p u b l i c o r p r i v a t e s a l e o f C o l l at e ra l pu r s u a n t t o S ect i o n 8 h er e o f , t h e C o ll a te r a l A g en t s h a l l ha v e n o o b l i g at i o n t o c l e a n , r e p ai r o r o t h er w i s e p r e p a r e t h e C o l l at e ra l f o r s al e . 12 11 . R i g h t s o f R eq u i r e d L e n d er s . A l l r i gh t s o f t h e C o lla t e r a l A g en t h e r e u n d e r , i f n ot e x er c i s e d b y t h e C o ll a te r a l A g e n t , m a y b e e x e r c i s e d b y t h e R e q u ir e d L en d e r s . 12. A p p l ic a ti o n o f P r o c e e d s . U pon t he o c c u rr e n ce a n d d u ri ng t h e c o n ti n u a ti on of an E v e n t o f D e f a u l t , any pa y m en t s i n res p e ct o f t h e S e c u r e d O b l i g ati ons a nd any p r o c e e ds o f t h e C o ll a te ra l , w h en r e c e i v e d by t h e C o lla t e r a l A g ent o r any o f t h e h o l d e rs o f t he S e c u r e d O b l i g at i o ns i n c a sh o r i t se qu i v a l e n t , w i l l b e ap p li ed i n re d u ct i o n of t he S e c u r ed O b li g at i o ns i n t he o r d e r s e t f o r t h i n S e c ti on 9. 03 o f t he C r e d i t A g ree m e n t as t h o u g h t h e w o rd “ O b l i g at i o n s ” t h e re i n w er e d e l et ed a n d r e p la c e d w i t h the p h r as e “ S e c u r ed O b l i g at i o n s , ” a n d ea ch G r a n t o r i r r e v o c a b l y w a i v e s t h e ri g ht t o d i r e c t t he a p p l ica t i on of s u ch p a y m en t s a ndp r o c e e ds a nd ac kn o w l ed g e s and a g re es t h a t t h e C o l la t era l A g e nt s h al l h a v e t he c on t i n u i ng a n d e x c l u s i v er i gh t t o a pp l y a n d r e a pp l y any a n d al l s u ch pa y m e n t s a n d p r o c e e d s i n t he C o l l at e ra l A g e n t ’s s o l e d i s cr e tion, n o t w it h st an d i ng any e n t ry t o t he c on t ra ry u p on any o f it s boo k s a nd r e c o r d s . 13. C o s t s o f C o u n s e l . A t al l t i m es h er e af t e r, w h e t h e r o r no t up o n t h e o c c u r r e n c e o fan Ev ent o f D e f a u l t , t he G r a n t o r s a g r e e t o p ro m p t l y p ay u p on d e m a n d a ny a n d a l l r e a s o n a b l e c o st s a nd ex p e n s e s ( i n cl u d i ng reasonab l e a t t o r neys’ f ees and expenses) o f t he C o l la t er al A g e n t a n d t h e h o l d e r s of t he S ec u r ed O b l i g at i o n s ( a) a s r e q u i r e d u nd e r S ec t i on 1 1 . 0 4 o f t he C r e d i t A g r ee m e n t a n d ( b ) as n e c e s s a ry t op r o t ec t t h e C o ll a te r a l or t o e x e r ci se any r i g h t s o r r e m ed ie s u n d er t h i s S e c u r it y A g r ee m e n t o r w i t h r e s pe ct t o any o f t he C o ll a te r a l . A l l o f t he f o r e go i ng c o st s a n d e x p e n s e s s h a l l co n st i t u t e S e c u r e d O b l i g at i ons h er eu n d e r. 14. C o n t i n u i n g A g r e e m en t . ( a ) T h i s S e c u r it y A g r ee m e n t s h a l l be a c o n t i n u i ng a g r ee m e nt i n e very r e s p e c t a nd s h a l l re m a i n i n f u l l f o r c e a n d ef f e ct s o l o ng as a ny o f t h e S e c u r e d O b l i g at i o n s r em a i n s o u t s t a n d i ng ( o t h e r t h an c on t i n g e n t i n d e m n it y o b l i g at i o n s t h a t a r e n o t y e t d u e a nd p a ya b l e ) a n d un t i l al l of t he co mm it m en t s r el a ti ng t h e r et o h a v e b e en t er m i n a t e d. U p on s u ch pa y m e n ta nd te r m i n a ti on, t h i s S e c u r i t y A g r ee m e n t s h a l l b e a u t o m at i c a l l y t e r m i n a t ed a n d t he C o l l ate ra l A g e nt s h al l , up o n t h e r e q u e s t a n d at t he e x p e n se o f t h e G r a n t o r s , f o r t h w i t h r e le a s e a l l o f i t sli e n s a nd s e c u rit y i n t er e s t s h e r e un d e r and s h al l e x e c u t e and d e l i v e r a l l UC C t er m i n at i on st a t e me n t s a n d / o r o t h e r do c u m en t s r e a s o n a b l y r e q u es t e d by t h e G r a n t o rs e v i d e n c i ng s u ch ter m i na tion. N o t w i t h s t a n d i ng t he f o r e g o i n g , a l l i n d e m n i t i es p ro v i d e d h er eu n d e r s h al l s u r v i v e t e r m i nat i on o f t h i s S e c u r i t y A g r ee m e n t . ( b ) T h i s S e c u r it y A g r ee m e n t s h a l l c on t i n u e t o b e ef f ect i v e o r b e a u t om a t i c a l l y r e i n s t at ed, a s t h e c as e m ay b e, i f at a ny t i m e p a y m en t , i n w h o l e o r i n p ar t , o f any o f t h e Se c u r ed O b l i g at i o n s i s r e s ci n d ed or m ust o t h e r w i s e be r e st o r ed o r r et u r n e d by t h e C o lla t e r a l A gent o r any h o l d er o f t h e S e c u r e d O b l i g a ti o n s a s a p re f e r e n c e, fr au d u l e n t c o n v e y a n ce o r o t h e r w ise u n d e r any ban k ru p t c y , i n s o l v e n cy o r si m il a r L a w , al l as t h o u g h s u c h p a y m ent h a d n ot b e e n m a de ; p r o v i d ed t h a t i n t he e v e nt p a y m ent o f al l o r any p a r t o f t h e S e c u r e d O b l i g a ti ons i s r e sc i n ded o rm u s t be r e s t o r ed o r r e t u r n e d, a l l re a s on a b l e c o st s a nd e x p e n s e s ( i n cl u d i ng reasonab l e a t t orneys’fees and expenses) i n c u r r e d by t h e C o lla t e r a l A g ent o r any h o l d e r of t h e S e c u r ed O b li g at i o ns i n d e f e nd i n g and e n f o rc i ng s u ch r e i n st a t e m e n t s h a l l be d ee m ed t o b e i n c l u d e d a s a p ar t o f t h e S e c u r e d O bl i g at i o n s . 15. A m end m en t s an d Wa i v e r s . T h i s S e c u r it y A g r ee m e n t a n d t he p ro v i s i o ns h e r e o fm ay n o t b e a m end e d, w a i v e d , m od ifi ed, c h an g e d, d i s c h ar g e d o r ter m i na t ed e x c e p t a s se t f o r t h i n S e ct i o n1 1. 0 1 of t he C r e d i t A g r e e m e n t ; p ro v i d e d t h a t a ny u p d at e o r r e v i s i on t o S c h ed u l e 2 ( d ) h e r e o f s h a l l n ot c o n s t it u t e an a m end m e n t f o r p u rp o s es o f t h i s S e ct i o n 1 5 or S e ct i o n 1 1 . 01 of t he C re d i t A g r e e m en t . 16. S u c c es s o r s i n I n t e r e st . T h i s S e c u r i t y A g r ee m e n t s h a l l cr e a t e a c o n t i n u i ng s ecu ri t y i n t e r e s t i n t h e C o ll a te r a l a n d s h a l l b e b i n d i ng u pon e a c h G r a n t o r, it s s u c ce s s o r s a n d as s i gn s, a n d sh a l l i n u r e , t o g e t h e r w i t h t he r i gh t s a n d re m e d i es of t h e C o ll a te r a l A g e nt a nd t h e ho l d e r s of t h e S e c u r edO b l i g at i o n s h e r e u n d e r, t o t h e b e n ef i t o f t h e C o lla t e r a l A g ent a nd t h e h o l d e rs o f t h e S e c u r e d O b l i g at i ons a n d t h e i r s u c ce s s o r s a n d p e r m i tt ed a ss i g n s ; p r o v i d e d , ho w e v e r, t h at n o ne o f t h e G r a n t o rs m ay a ss i gn it s r i g h t s or d el e g a t e it s d u ti es 13 h e r e un d e r w i t h o u t t h e p r i o r w r i tt e n c o n s e n t o f t h e r e q u i si t e L e n d e r s u n d e r t h e C r e d i t A g ree m en t ( o r i n a t ra n s a ct i o n p e r m i t t e d b y S ect i o n 8 . 0 4 o f t h e C r e d i t A g r e e m en t ) . 17. N o ti c e s . A l l n o ti c e s r e q u i r e d o r p e r m i tt ed t o b e g i v en u nd e r t h i s S e c u r it y A gr ee m e n t s h a l l be g i v e n as p ro v i d e d i n S ect i o n 1 1 . 02 of t he C r e d i t A g r e e m en t . 18. C ou n t e r p ar t s . T h i s S e c u ri t y A g ree m e n t m ay b e e x e c u t ed i n a ny nu m b e r of c o un te r p ar t s, e a ch o f w h i ch w h e n so e x ec u t ed a n d d el i v e r ed s h al l be a n o r i g i n a l , b u t a l l o f w h i ch s h al l c o ns t it u t e o n e and t h e sa m e i n s t r u m en t . I t s h a l l n o t be n e c e s s a ry i n m a k i ng p r o o f o f t h i s S e c u r it y A g r e em ent t o p r o du c e o r a c c o u n t f o r m o r e t h an o n e s uch c o u n te r p a r t . 19. H e a d i n g s . T h e h e a d i n g s o f t he s ect i o n s a n d su b s e ct i o n s h e r e of ar e p ro v i d ed f o rc on v e n i e n c e o n l y a n d s h a l l n o t i n any w a y a f f ec t t h e m e a n i ng o r c o n st ru ct i o n of a ny p ro v i s i on o f t h i s S e cu r i t y A g r ee m e n t . 20. G o v e r n i ng La w ; J u r i s d i c t i o n; W a i v er o f R i g ht t o T r i a l by J u r y ; E t c . (a) T H I S SE CU R I T Y AGR E E ME N T AN D T H E O T H ER L OA N DOCU ME N T S AN D AN YC LA I MS, CON T R OVE R S Y , D I SP U T E O R C AU SE O F AC T I ON (W H E T H ER I N CON T RAC T O R T OR T O R OT H E R W I SE) BA SED U P ON , A R I S I N G OU T O F O R R EL A T I N G T O T H I S SE CU R I T Y AGR EEME N T O R ANY O T H ER L OA N DOCU ME N T ( E X C E P T, A S T O AN Y O T H ER L OA N DOCU ME N T , A S EXP R ESSLY S E T F ORTH T H E R E I N ) AN D T H E T RAN S AC T I ON S CON T EMPL A T ED H E R E B Y AN D T H E R E B Y S H ALL B E GOVE RN ED BY , AN D CON S T RU ED I N ACCORDA N C E W I T H , T H E L A W O F T H E S T A T E O F N EW YOR K A PPLI C AB LE T O AGR EEME N T S M AD E A N D T O B E PE R F OR MED E N T I R ELY W I T H I N S U C H S T A T E;P RO V I D ED T HA T T H E C O LL A T E RA L AG E N T S H A LL R E T A I N A LL R I G H T S AR I S I N G UND ER FE D ERA L L A W. (b) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y AN D UNC O N D I T I ON ALLYAGR EES T HA T I T W I LL NO T CO MME NC E AN Y AC T I ON , L I T I G A T I ON OR P ROC EED I NG O F AN Y K I ND OR D ES C R I PT I ON , W H E T H ER I N L AW O R E Q U I T Y , W H E T H ER I N CON T RAC T O R I N T OR T O R O T H E RW I S E, AG A I N ST T H E CO LL A T E RA L AG E N T , O R A N Y R EL A T ED P AR T Y O F T H E F OR E GO I N G I N AN YW A Y R EL A T I NG T O T H I S SE CU R I T Y AG R EEME N T O R AN Y O T H ER L OA N DOCU ME N T O R T H E T RAN SA C T I ON S R EL A T I NG T H E R E T O O R T H E R E T O , I N AN Y F ORU M O T H ER T H A N T H E COUR T S O F T H ES T A T E O F N EW YOR K S I TT I N G I N N EW YOR K COUN T Y AN D O F T H E UN I T ED S T A T ES D I S T R I C TCOUR T O F T H E S OU T H E R N D I S T R I C T O F N EW YOR K, AN D AN Y A PPELL A TE COUR T F RO M AN Y T H E RE O F, AN D E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB LY A ND UNCON D I T I O NA LLY S UB M I T S T O T HE J UR I SD I C T I O N O F S U C H COUR T S AN D AGR E E S T H A T A LL C L A I MS I N R ESPE C T O F AN Y S UC H AC TI ON , L I T I GA T I O N O R P R O C EED I N G M A Y B E H E AR D A ND D ET E R M I N ED I N S U C H N EW YOR K S T A TE COUR T OR , T O T H E F U LLEST E X T E N T PE R M I T T ED B Y A PP L I CAB LE L A W, I N SU C H FE D E R AL COURT . E AC H O F T H E P AR T I ES H E R E T O A G R EES T H A T A F I NA L J UDG ME N T I N AN Y SU C H AC T I O N , L I T IGA T I ON O R P ROC EED I N G SH A LL B E CONC L U S I VE AN D M A Y B E E N F ORC E D I N O T H ER J UR I SD I C T ION S B Y SU I T O N T H E J UDG ME N T O R I N AN Y O T H ER M ANN ER P RO V I D ED B Y L A W. N O T H I N G I N T HI S SE C U R I T Y AGR EEME N T O R I N AN Y O T H ER L OA N D OCU ME N T S HA LL A FFE C T AN Y R I G H T T H A T TH E CO LL A T E RA L AG E N T M A Y O T H E R W I SE HA VE T O BR I N G A NY LE GA L AC T I O N O R P ROC EED I NGR EL A T I N G T O T H I S SE C U R I T Y AGR EEME N T O R AN Y O T H ER L OA N D O CU ME N T AGA I N ST T H EBORRO WE R , O R AN Y O T H ER L OA N P AR T Y O R T H E I R P R O PE R T I E S I N T H E COUR T S O F AN Y J UR I SD IC T I ON . (c) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y AN D UNC O N D I T I ON ALLYW A I VES, T O T H E F U LLEST E X T E N T PE R M I T T E D B Y A PP L I C A B LE LAW, AN Y OB J E C T I O N 14 T H A T I T M A Y NO W O R H E R E A F T ER HA V E T O T H E L AY I N G O F V E NU E O F AN Y AC T I O N O R P ROC EED I N G A R I S I N G OU T O F O R R EL A T I N G T O T H I S SE CU R I T Y A G R EEME N T O R AN Y O T H ER L OA NDOCU ME N T I N AN Y C OUR T R EFE RR ED T O I N P A RAG R A PH ( B ) O F T H I S SE C T I ON . E AC H O F T H E P ART I ES H E R E T O H E R E B Y I RR E V OCAB LY W A I V ES, T O T H E F U LLEST E X T E N T PE R M I TT ED B Y A PPL I CA B L E L A W, T H E D EFE N SE O F A NI NCON V E N I E N T F OR U M T O T H E M A I N T E NA N C E O F S UC H AC T I O N O R P ROC EE D I N G I N AN Y SUC H C O UR T . (d) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y CON SE N T S T O SE R V I C E O FP ROC ESS I N T H E M ANN ER P RO V I D E D F O R NO T I C ES I N SE C T I O N 11.02 O F T H E CR E D I T AGR EEME NT . N O T H I NG I N T H I S SE CU R I T Y A GR EEME N T W I LL A FFE C T T H E R I GH T O F AN Y P AR T Y H E R E T OTO SE R VE P ROC ESS I N A N Y O T H ER M ANN ER PE R M I TT ED B Y A PP L I CAB LE L A W. (e) E AC H O F T H E P AR T I ES H E R E T O H E R E B Y I RR E V OCAB LY W A I VES, T O T H E FU LLEST E X T E N T PE R M I TT ED B Y A PPL I C A B L E L A W, AN Y R I GH T I T M A Y HA VE T O A T R I A L B Y J URY I N AN Y LE GA L P ROC EED I N G D I R E C T LY O R I N D I R E C T LY A R I S I N G OU T O F O R R EL A T I NG T O T HI S SE CU R I T Y AGR EEME N T O R AN Y O T H ER L OA N DOCU ME N T O RT H E T RAN S AC T I ON S C ON TEMPL A TED H E R E B Y O R T H E R E B Y ( W H E T H ER BA SED O N CON T RAC T, TO R T O R AN Y O T H ER T H E ORY ) . E AC H P AR TY H E R ETO ( A ) C E R T I F I ES T HA T N O R EP R ESE N T A T I VE, AG E N T O R A TT ORN EY O F AN Y O T H ER PE R S O N HA S R EP R ESE N TE D , E X P R E SSLY O R O T H E R W ISE, T H A T S UC H O T H ER P E R S O N W OU LD NO T, I N T H E E V E N T O F L I T I G A T I ON , SEEK TO E N F ORC E TH E F OR E GO I N G W A I V ER AN D( B ) AC K NO WLE DG ES T HA T I T AN D T H E O T H E R P AR T I ES H E R E T O H AVE B EEN I N D UC ED T O E N T ERI N T O T H I S S E CU R I T Y AGR EEME N T AN D T H E O T H ER L OA N DOCU ME N T S BY , A M ON G O T H ER T H I NGS, T H E M U T UA L W A I V E R S AN D C E R T I F I CA T I O N S I N T H I S S E C T I ON . 21. S e v e ra b ili t y . I f any p r ov i s i on of t h i s Secur it y A g r ee m ent or any r e l a t ed docu m ent i s hel d t o be i l l ega l , i nva l i d or unen f orceab l e, ( a) t he l ega l i t y, va li d i t y and en f orceab i li t y of t he re m a i n i ng p r ov i s i onsof t h i s S ecu r i t y A g r ee m ent and any o t her re l a t ed docu m ent sha l l not be a f fec t ed or i m pa i red t hereby and (b) t he par t ies sha l l endeavor i n good f a it h nego ti a ti ons t o rep l ace t he i ll ega l , i nva l i d or unen f o r ceab l e p r ov i s i ons w it h va l i d p rov i s i ons t he econo m i c e f fect of w h i ch co m es as c l ose as poss i b l e t o t hat of t he i l l ega l , i nva l i d or unenfo r ceab l e p r ovi s i ons. T he i nva l i d i t y of a p r ov i s i on i n a par t i cu l ar j ur i sd i c ti on sha l l not i nva li da t e or r ender unenfo r ceab l e such pr ov i s i on i n any o t her j ur i sd i c t i on. 22. E n tir e t y . T h i s Secur it y A g r ee m en t , t he o t her Loan D ocu m en t s and t he o t her docu m en ts r e l a t i ng t o t he Secured O b li ga ti ons co m p ri se t he co m p l e t e and i n t eg r a t ed ag r ee m ent of t he pa r t i es on t he sub ject m a t t er hereof and t he r eof and supe r sedes a l l p r i or ag r ee m en t s, w r i t t en or ora l , on such sub j ect m a tt e r . T h i s Secur i t y A g r ee m ent w as draf t ed wi t h t he j o i nt pa r t i c i pa t i on of t he r espec t i ve par t i es t he r e t o and sha l l be cons trued ne i t her aga i nst nor i n favor of any pa rt y, but ra t her i n acco r dance w it h t he f a i r m ean i ng t he r eo f . 23. S ur v i v a l . A l l r ep r esen t a t i ons and w a r ran t i es m ade hereunder or o t her docu m ent de li veredpu r suant here t o or t he r e t o or i n connec t i on he r e w it h or t here wi t h sha l l su r v i ve t he execu ti on and de l i ve r y he r eof andt he r eo f . S uch r ep r esen t a t i ons and w a rr an t i es have been or w i l l be r e li ed upon by t he A d m i n i s t ra t i ve A gen t , t heC o ll a t e r al A gen t , and each Lender, r ega r d l ess of any i nves ti ga t i on m ade by t he A d m i n i s t ra t i ve A gen t , t he C o ll a te r al A gent or any Lender or on t he i r beha l f and no t wi t hs t and i ng t hat t he A d m i n i s t ra t i ve A gen t , t he C o ll a t e r al Agent or any Lender m ay have had no t i ce or kno w l edge of any D e f au l t at t he ti m e of any C r ed i t Ex t ens i on, and sha l l con t inue i n fu l l f o r ce and e f fect as l ong as any Loan or any o t her O b li ga t i on sha l l r e m a i n unpa i d or unsa t i sf i ed or any Le t ter of C r ed i t sha l l r e m a i nou t s t an d i n g . 15  24. O t h e r S e c u ri t y . T o t he e x te nt t h a t any of t he S e c u r ed O b l i g at i o n s a re now o r h e r ea ft er s e c u r e d by p r o p e r t y o t h e r t h an t h e C o l la t er al (i n c l ud i ng r e a l p r o p e r t y and s e c u r it i e s o w ned by a G r a nt o r) , o r by a g u ar a n t e e, e nd o r se m e n t or p r o p er t y o f any o t h e r P e r so n , t h en t he C o l l at e ra l A g e nt s h al l h a v e th e r i g ht t o p r o c e e d a g a i n s t s u ch o t h e r p r o p er t y , g u a r a n t e e o r e n d o rs e m ent u p on t he o c c u rr e n ce of any E ve n t o f D e f a u lt , and t he C o l l at e ra l A g e nt s h al l h a v e t h e r i g h t , i n it s s o l e d i sc r et i o n, t o d e t e r m i ne w h ic h r igh t s , s e c u r it y , li e n s, s e c u r it y i n t e re s t s or r e m e d i e s t h e C o ll a te r a l A g e n t s h al l at a ny t i m e p u r s u e, re l i nq u is h, su bo r d i n a t e, m od i fy o r t a k e w it h r e s p e c t t h er e t o, w i t h o u t i n a ny w ay m od i f y i ng or a f fe c ti ng any o f them o r t he S e c u r e d O b l i g at i o n s or any of t he r i gh t s o f t h e C o ll a te r a l A g e nt o r t h e h o l d er s o f t he S e c u r ed O bli g at i o ns u n d e r t h i s S e c u r i t y A g ree m e n t , u n d e r any of t he o t h e r L o an D o cu m e n t s o r u nd e r any o t h e r d o cum e n t r el a ti ng t o t h e S e c u r ed O b l i g at i o n s. 25. J o i n t a n d S e v e r a l O b l i g at i on s o f G r a n t o r s . ( a ) S u b j ec t t o s u b s e c ti o n ( c ) o f t h i s S e ct i o n 25 , e a c h of t he G r a n t o rs is a c c e p t i ng j o i n t and s e v e r a l l i a b i li t y h e r e u n d er i n c o n s i d e r at i o n o f t h e f i n a n c ia l a c co mm oda ti o n t o b e p r o v i d ed by t he h o l d e r s of t he S e c u r ed O b l i g a ti o n s, f o r t he m u t u al b e n e fi t , d i r e ct l y a ndi n d i r e c t l y , of e a ch o f t h e G r a n t o rs a nd i n c o n s i d e ra t i o n o f t h e u n d er t a k i n g s o f e a c h o f t h e G r an t o r s t o a cc e p t j o i nt a nd s e v e ra l l i a b ili t y f or t he o b l i g at i o n s o f e a ch o f t h e m . ( b ) S u b j ec t t o s u b s e c ti o n ( c ) o f t h i s S e ct i o n 25 , e a c h of t he G r a n t o rs jo i n tl y a n d se v e r al l y h e r eby i r r e v o c a b l y a n d u n c o n d it i o n al l y a c c e p t s j o i nt a nd s e v e ra l l i a b ili ty w i t h t he o t h er G r a n t o rs w it h r e s p e c t t o t h e pa y m ent o f al l of t h e S e c u re d O b l i g a t i o n s a ri s i ng u nd e r t h i s S e c u r i t y A g ree m e n t , t he o t h e r L o a n D ocu m e n t s and a ny o t h er do cu m e n t s re l at i ng t o t he Se c u r e d O b l i g at i o n s, i t b e i ng t h e i n t e n t i on o f t h e p a r ti es h e re t o t h a t a l l t h e p a y m ent S e c u r e d Ob l i g a t i o n s s h a l l be t h e j o i n t and s e v e r a l o b l i g a ti o n s o f e a ch of t h e G r a n t o rs w i t h o u t p r ef e r e n ce s or d i s t i n ct i on a m ong t he m . (c) N o t w i t h s t a n d i n g a n y p ro v isi o n t o t h e c o n t r a r y c o n t ai n e d h e r e in , i n a n y o t h e r o f t h e L o a n D o cu m e n t s o r i n an y o t h e r d o c u m en t s r ela t i n g t o t h e S e c u r e d O b l i ga ti o n s , the o bli g a t ions of each G u a ra n t o r u n d e r t h e C r e d i t A g r e e m e n t a n d t h e o t h e r L o a n D o cu me n t s sh a ll be li m ited to an a gg re g ate a m ount equal to t he l a r g est a m ount th a t w o u l d not ren d er s uch o b l i gati o ns su b je c t to a v oidance und e r Se c t ion 5 4 8 of t he B an k ru p tcy C ode o f t h e U n i ted S t a tes o r a ny other Deb t or R el i ef Law (i n cl u ding any co m parable pro v i s io n s of a ny appli c ab l e s t a te La w ) . 26. J o i n d e r . A t any t i m e a ft e r t he d a t e o f t h i s S ec u r i t y A g r ee m en t , one o r m o r e ad d i tional Pe r so n s m ay beco m e pa rt y he r e t o by ex e cu t i ng and d e l i v e ri ng t o t he C o l l a t e r a l A g ent a C o l l a t e r a l Jo i n der A g r ee m en t . I m m ed i a t e l y upon su c h ex e cu t i on and d e li v e r y of such C o l l a t e r al J o i n der A g r ee m ent ( and w itho u t any f u rt h er ac t i o n ) , each such add it i on a l P e r s o n w i l l be c o m e a pa r t y t o t h i s Sec u r i t y A g r ee m entas a “ G r a n t o r ” and ha v e a l l of t h e r i g h t s a nd o b li g a t i o n s of a G r a n t or he r eun d er an d t h i s S e cu r it yA g r ee m ent and t h e sc h ed u les h e r e t o s h all be d ee m ed a m ended by such Co l late r a l J o i n d er A g r ee m en t . 27. R ep l a c e m ent of E x i s t i ng Secu r i t y A g r ee m en t . A s of t h e da t e h e r e o f , t he E x i s t i ngSecu r it y A g r ee m ent sh a l l b e a m ended, r e s t a t e d and s u pe r s eded and r ep l ac e d i n i t s en t ir e t y by t h i s Secur it y A g r ee m en t . 27 8 . T e r m i n at i o n an d R el e a s e . (a) T h is S e cu r ity A g ree m ent a nd a l l s e cu r i ty int e re s ts g r a nted h e r eby sha l lt er m ina t e w hen ( i) a ll of the O b li g a ti ons un d er the L o an D ocu m ents (e x cl u ding co n tin g ent obli g a t io n s as tow hich no c l aim has b e en m ade) ha v e been pa i d in f u ll i n cash, ( i i ) a l l C o m m it m ents ha v e ter m in a ted o r ex p ir ed a n d ( i i i ) t h e a gg re g ate a m ount a v ai l ab l e to be d ra w n u n der L et t ers of C re d it 16 has b e en r edu c ed t o z e r o ( i nc l u d i ng as a r e s u l t of ob t a i n i ng t he c ons e nt o f t he a pp l i ca b l e L / C I ssuer t h r o ug h t he p r o v i s i o n of C a s h C o l l a t e r al o r o t h e r a r r an g e m ent s a t i s f a c t o r y t o t he app l i c ab l e L / C I ssue r )a nd no L / C I ssuer h a s any f u rt h er o b l i g a ti o n t o i ss u e or a m end Le t t e r s of C r e d i t und e r t he C r ed i t A g r ee men t . (b) A ll s ec u r i ty int e re s ts g r a nt e d he r eby sha l l a lso t e r m ina t e and b e r e l e ased atthe ti m e or t i m es and in t he m anner set f o rth in S e c t ion 1 0 . 10 of the C re d it A g ree m en t . (c) I n connecti o n w i t h any t er m ination o r r e l ease pu r sua n t to s ub s e c ti on ( a ) or ( b ) ofth i s Se c ti o n 28, the C o l l a t e r al A g ent s h a l l e x ec u te a nd de l i v er to any G rant o r, a t s uch G ra n t o r’s expen s e, a lldocu m ents th a t such G r an t or s ha l l rea s on a bly requ e st to e v i d ence su c h t e r m inati o n or re l ea s e so long as the a pp licab l e G ra n t o r sh a l l ha v e p r o v ided t h e C o l l a te r al A g ent such ce r t i fi c a t ions or d ocu m ents as t h e C o l l a t e ralA g ent sh a l l r e aso n ably r e que s t i n o r d e r to de m onstr a te c o m plian c e wi th t h is S e c ti on 28. A ny ex e cu t ion a n dd e li v ery of d o c u m ents by the C oll a t e r a l A g ent pu r sua n t t o th i s S e c t ion s h a l l be w it h out r eco u rse to o r w a rr anty by theCo ll a t e r a l A g en t . [Si g nat u res on F o llo w ing Pa g es] 17  99060020002500 GRANTOR S :ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvaniacorporation By: /s/ Brian L. MacNealName: Brian L. MacNealTitle: Senior Vice President and Chief FinancialOfficer ARMSTRONG REALTY GROUP, INC., a Pennsylvaniacorporation By: /s/ Stephen F. McNamara Name:Stephen F. McNamara Title: VicePresident ARMSTRONG VENTURES, INC., a Delawarecorporation By: /s/ Stephen F. McNamara Name:Stephen F. McNamara Title: VicePresident AWI LICENSING LLC,a Delaware limited liability company By: /s/ Stephen F. McNamaraName: Stephen F. McNamaraTitle: Vice President and Controller AMENDED AND RESTATED SECURITY AGREEMENT ARMSTRONGWORLD INDUSTRIES, INC. COLLATERAL AGENT:BANK OF AMERICA, N.A., as Collateral Agent By: /s/ Kimberly D. Williams Name: Kimberly D. WilliamsTitle: Vice President AMENDED AND RESTATED SECURITY AGREEMENT ARMSTRONG WORLDINDUSTRIES, INC.Accepted and agreed to as of the date first above written.  SCHEDUL E S S c h e d u l e 2 ( d ) C o m m er ci a l T o r t C l a i m s E X H I B I TS E x h i b i t 5 ( b) - 1 F or m o f N o ti c e o f G r a n t o f S e c u r i t y I n t er e s t i n Co p y r i g h t s E x h i b i t 5 ( b) - 2 F or m o f N o ti c e o f G r a n t o f S e c u r i t y I nt er e s t i n P a t e n t s E x h i b i t 5 ( b) - 3 F or m o f N o ti c e o f G r a n t o f S e c u ri t y I n t er e s t i n T r a de m a r k s  SCHEDUL E 2 ( d ) CO M M ERC I AL TO R T C L A I M S N on e .  E X H I B I T 5 ( b ) -1 FORM OFNOT I CEOFGRANT OF SECUR I TY I N TERE S T I NCOPYR I GHTS U n it e d S ta t e s C op y r i gh t O f f i c e L a d i e s a n d G e n t l e m e n : P l e a s e b e a d v i s e d t h a t p u r s u a n t t o t h e A m en d e d a n d R e s t at e d S e c u r it y A g re e m en t , d a t e d a s o fA p r i l1, 2 0 1 6 ( a s t h e sa m e m ay b e a m en d e d , m od if i e d, e x t e nd ed or re s ta t e d f r om t i m e t o ti m e, t h e “ S e c u ri t yA g ree m e n t ” ) , b y an d a m on g t h e G r a n t o r s p a r t y t h e r e t o ( e a c h a n “ G r a n t o r ” a n d c o lle c t i v e l y , t h e “ G ra n t o r s ” ) an d B a n k o f A m e ri ca , N . A . , a s C o l l a t er a l A g e n t ( t h e “ C o l l a t era l A g e n t ” ) f o r t h e ho l d e r s o f th e S e c u r e d O b l i g at i o n s r e fe r e n c e d t h e r e i n , t h e u n d e rs i g n e d G r a n t o r h a s g r a n t e d a co n t i nu i n g s e c uri t y i n te r es t i n a n d co n t i nu i n g li e n u p o n , t h e c o p y r i gh t s a n d c op y r i g h t a p p li c at i o n s s h o wn o n S c h ed u le 1 at t a c h e d h e re t o t o t h e C o ll a te r a l A g e n t f o r t h e r ata b l e b e n ef i t o f t h e h o l d e r s o f t h e S e c u r e d O b l i g at i o n s . T h e G r a n t o r s an d t h e C o ll a t e ra l A g e n t , o n b e h a l f o f t h e h o l d e r s o f t h e S e c u r e d O b l i g a ti o n s ,h e r e b y ac k no w l ed g e a n d a g r e e t h a t t h e s e c u r it y i n t e re s t i n t h e c o p y r i gh t s a n d c op y r i g h t a p p li c at i o ns s e t f o r t h o n S c h e d u l e 1 a tt a c h e d h e r e t o (i ) m a y o n l y b e t e r m i n at e d i n a c c o r d a n c e w i t h t h e t er m s o f th e S e c u r i t y A g ree m e n t a n d ( i i ) i s no t t o b e c o n st r u e d a s a n a ss i g n m en t o f an y c op y r i gh t o r c o p y ri g h t a pp l i cat i o n . V er y t r u l y y ou r s, [ G r a n t o r] ,a [ s ta t e ] [ e n t i t y t y pe ] B y :N a m e :T it l e: G r a n t o r ’ s A d d r es s : [i n s e rt ] [ S i g n a t u re p a g e s c on t i n u e o n f o l l o w i n g pa g e ]  A c k no w l e d g e d a n d A c c e p te d : BANK OF A M ER I CA, N . A . , a s C o l l a t er a l A g e n t B y : N a m e :T it l e : C o ll a te r a l A g e n t ’ s A d d r e s s : [ i n ser t ]  E X H I B I T 5 ( b )- 2 FORM OFNOT I CEOFGRANT OF SECUR I TY I N TERE S T I NP A TE NTS U n it e d S ta t e s P a t e n t a n d T r a de m ar k O f fi c eL a d i e s a n d G e n t l e m e n : P l e a s e b e a d v i s e d t h a t p u r s u a n t t o t h e A m en d e d a n d R e s t at e d S e c u r it y A g re e m en t , d a t e d a s of A p r i l1, 2 0 1 6 ( t h e “ S e c u r it y A g ree m en t ” ), by a nd a m ong t he G r a n t o rs p ar t y t h ere t o ( e a ch a n “ G r a n t o r ” a nd c o l le c t i v e l y , t h e “ G r a n t o r s ” ) a n d B ank o f A m e r i c a , N . A ., as C o l l at e ra l A g e nt (t he “ C o ll a te r a l A g e n t ” ) f o rt h eh o l d e r s of t he S e c u r ed O b l i g a ti o n s r e f er e n c e d t h e re i n , t h e u n d e rs i g n e d G r a n t o r h as g r a n t ed a c o n t i n ui ngs e c u r it y i n t e re st i n a n d c o n ti n u i ng l i en u p o n , t h e p a t e n t s and p a t e n t a p p l ic a ti o n s se t f o r t h on S c hed u l e 1 a tt a c h e d h e r e t o t o t h e C o l lat e ra l A g e n t f or t he ra t a b l e b e n e f i t o f t h e h o l d e r s of t h e S e c u r ed O b l i g at i o n s. T h e G r a n t o r s an d t h e C o ll a t e ra l A g e n t , o n b e h a l f o f t h e h o l d e r s o f t h e S e c u r e d O b l i g a ti o n s , he r e b y ac k no w l ed g e a n d a g r e e t h a t t h e s e c u r it y i n t e re s t i n t h e p a t e n t s a n d p a t e n t ap p l i cat i o n s s e t f o rt ho n S c h e du l e 1 a tt a c h e d h e r e t o (i ) m a y o n l y b e t er m i n a t e d i n a c c o r d a n c e w i t h t h e t er m s o f t h e S e c u rit yA g ree m e n t an d ( ii ) i s n o t t o b e c o n s tr u e d a s a n a s s i g n m en t o f an y p a t e n t o r p at e n t ap p li c at i o n . V er y t r u l y y ou rs , [ G r a n t or ] ,a [ s ta t e ] [ e n t i t y t yp e ] B y :N a m e :T it le : G r a n t o r ’ s A d d r es s : [i n s e rt ] [ S i g n a t u re p a g e s c on t i n u e o n f o l l o w i n g pa g e ]  A c k no w l e d g e d a n d A c c e p te d : BANK OF A M ER I CA, N . A . , a s C o l l a t er a l A g e n t B y : N a m e :T it l e :C o ll a te r a l A g e n t ’ s A d d r e s s : [ i n ser t ]  E X H I B I T 5 ( b )- 3 FORM OFNOT I CEOFGRANT OF SECUR I TY I N TERE S T I NT RA D E M AR K S U n it e d S ta t e s P a t e n t a n d T r a de m ar k O f fi c e L a d i e s a n d G e n t l e m e n : P l e a s e b e a d v i s e d t h a t p u r s u a n t t o t h e A m en d e d a n d R e s t at e d S e c u r it y A g re e m en t , d a t e d a s of A p r i l1, 2 0 1 6 ( t h e “ S e c u r it y A g ree m en t ” ), by a nd a m ong t he G r a n t o rs p ar t y t h ere t o ( e a ch a n “ G r a n t o r ” a nd c o l le c t i v e l y , t h e “ G r a n t o r s ” ) a n d B ank o f A m e r i c a , N . A ., as C o l l at e ra l A g e nt (t he “ C o ll a te r a l A g e n t ” ) f o rt h eh o l d e r s of t he S e c u r ed O b l i g a ti o n s r e f er e n c e d t h e re i n , t h e u n d e rs i g n e d G r a n t o r h as g r a n t ed a c on t i n u i ng s e c u r it y i n t e re st i n a n d c o n ti n u i ng l i en u p o n , t h e t ra d e m a r k s and t r a d e m ark a p p l i ca t i o nss e t f o rt h o nS c h e d u l e 1 a tt a c h e d h e r e t o t o t h e C o l l ate r a l A g e n t f o r t h e r at a b l e b e n e fi t o f t h e h o l d e r s o f t h e S e c u r edO b l i g at i o n s . T h e G r a n t o r s an d t h e C o ll a t e ra l A g e n t , o n b e h a l f o f t h e h o l d e r s o f t h e S e c u r e d O b l i g a ti o n s, h e r e b y ac k no w l ed g e a n d a g r e e t h a t t h e s e c u r it y i n t e re s t i n t h e tr a d e m ar k s an d t r a d e m ar k a p p li c at i on s s e t f o rt h o n S c h e d u l e 1 a tt a c h e d h e r e t o (i ) m a y o n l y b e t e r m i n at e d i n a c c o r d a n c e w i t h t h e t er m s o ft h e S e c u r i t y A g ree m e n t a n d ( i i ) i s no t t o b e c o n st r u e d a s a n a ss i g n m en t o f an y tr a d e m ar k o r t r a d e m ar kap p l i cat i o n . V er y t r u l y y ou rs , [ G r a n t or ] ,a [ s ta t e ] [ e n t i t y t yp e ] B y :N a m e :T it le : G r a n t o r ’ s A d d r es s : [ i n s er t ] [ S i g n a t u re p a g e s c on t i n u e o n f o l l o w i n g pa g e ]  A c k no w l e d g e d a n d A c c e p te d : BANK OF A M ER I CA, N . A . , a s C o l l a t er a l A g e n t B y : N a m e :T it l e : C o ll a te r a l A g e n t ’ s A d d r e s s : [ i n ser t ]Exhibit 10.3 A M ENDED AND R E S T A TED P L EDGE A G RE E M E NT T H I S A M ENDE D A N D R ES T A T E D PLED G E AGR E E M E N T ( t h i s “ P l ed g e A g r e e m en t ” ) , d at e d as o f A p ri l 1 , 2 0 1 6 , i s b y a n d a m on g t h e p a r ti e s i d e n t if i e d a s “ P l e d g o r s ” o n t h e s i gn a t u r e p a g e s h e re t oa n d s u c h o t h e r p art i e s a s m a y b e co m e P l e d g o r s h er eu n d e r a f t e r t h e d a t e h er e o f ( i n d i v i d u al l y a “ P l e dg o r ” , a n d c o l l e c t i v e l y t h e “ P l ed go r s ” ) an d BA N K O F A M ER I CA , N . A . , a s c o l la t er a l a g e n t (i n s u c h c ap aci t y , t h e “ C o l l at e ra l A g e n t ” ) f o r t h e h o l d e r s o f t h e S e c u r e d O b l i g at i o n s r e fe r e n c e d b el o w . W I T N E S S E T H W H E R E A S, r e v o l v i ng c r e d i t a nd t e r m l oan f a c i l i t i e s w e r e e s t ab l i s h ed i n f a v or of A r m s tr ong Wor l d I ndus t r i es, I nc., a P e nns y l v an i a c o r p o r a t i on ( t he “ B o r r o w e r ” ) , p u r s u ant t o t he t e r m s of t h at ce r t a i n a mended and r e s t a t ed c r e d i t a g r ee m ent d a t ed as o f Ma r ch 15, 2013 ( as a m ended a nd m od ifi ed p r i or t o t he C l os i ng D a te, t he “ E x i s t i ng C r ed i t A g r ee m en t ” ) a m ong t he B o rr o w e r , A r m s t r ong Wood P r odu c t s, I nc., a D e l a w a r e c o rp o r a ti on ( “ A WP ” ) , c e rt a i n o f t he i r r es pe c ti v e Su b s i d i a ri e s, a s g ua r a n t o r s t h e r eund e r , t he l end e r s pa r t y th e r e t o and B ank of A m e ri ca, N . A ., a s a d m i n i s t r a t i v e a g ent a n d c o l l a t e r al a g ent f or t he l end e r s t h e r eu n de r ; W H E R E A S, i n c o nne c t i on w it h t he E x i s ti ng C r e d i t A g r ee m en t , t he B o rr o w e r , A WP and ce r t a i nof t h e i r r esp e c t i v e Sub s i d i a ri e s e n t e r ed i n t o t h at c e r t a i n A m ended and R e s t a t ed P l e d g e A g r e e m ent d a ted as of M a r ch 1 5, 2013 ( t he “ Ex i s ti ng P l e d g e A g r ee m en t ” ) ; W H E R E A S, t he B o rr o w e r has r equ e s t e d c e r t a i n m od i f i c a ti o ns t o t h e r e v o l v i ng c r e d i t and t e rm l oan f a c i l i t i e s un d er t he E x i s t i ng C r ed i t A g r ee m en t ; W H E R E A S, t he L end e r s h a v e a g r eed t o t he r e q ue s t ed m od ifi c a ti o ns on t he t e r m s and co n d i ti o n s p ro v i ded i n t h a t c e r t a i n A m ended and R e s t a t ed C r e d i t A g r ee m en t , da t ed as o f t he da t e he r eof ( as a m ended and mod if i ed, t he “ C r e d i t A g r ee m en t ” ) , a m ong t he B o rr o w e r , ce r t a i n o f it s Sub s i d i a r i es, as g ua r an t o r s t h e r eund e r , t he l ende r s p a rt y t h e r e t o a nd B a nk of A m e ri ca, N . A ., as a d m i n i s t r a t i v e a g ent and co l l a t e r a l a g e n t f o rt he l en d e r s t h e r eun d e r ; and W H E R E A S, t h i s P l ed g e A g r ee m ent i s r eq u ir e d und e r t he t e r m s of t he C r e d i t A gr ee m en t , and i s g iv en i n a m end m ent t o, r e s t a t e m ent o f and sub s t i t u ti on f or t he E x i s t i ng P l ed g e A g r ee m ent p r o v i d e d i n connec t i on wi t h t he E x i s ti n g C r ed i t A g r ee m en t . NOW, T HEREFORE, i n c o ns i d e r a ti o n of t h e se p r e m i s es and o t h er g ood a n d v a l u ab l e conside r at i on, the r e c e i p t a nd su f f iciency of which a r e he r e by ac k now l ed g ed, t he pa r t i e s h e r e t o a g r ee as f ol l ow s : 1. D e fi n i t i o n s . (a) C api t a l i z ed t e r m s used a nd not o th e r w i s e d e fi n ed h e r e i n sh a ll h a v e the m eanin g s prov ided in the C r ed i t A g r e e m ent. I n additi o n, t h e f o l l o w i n g t er m s , w h i c h a r e d efi ne d i n t h e U C C a s i n e ff e c t in t h e S t at e o f N e w Y or k o n t h e d a t e h e r e o f , ar e u s e d a s d ef i n e d t h er e i n : A c c ess i on, F inan c i a l A s s et, Proc eeds a nd S e cu r it y . ( b)A s used h e r ein, the f o llo w i ng ter m s sha l l ha v e t h e m eaning set fo r th b elo w : “ B o rr ow e r ” has the m ean i n g pro v ided in the re c i t a l s h e reof. C H A R2 \ 1 77 2 67 5 v 2 “ C o l l a t e r a l A g en t ” h as t he m ean i ng p r o v i ded i n t he i n t r odu c t o r y p a r a g r aph h e r eof , t o g e t h e r wi t h i t s suc c es s o r s and a s s i g ns. “ C r e d i t A g r ee m en t ” has t he m ean i ng p r o v i ded i n t he r e c i t a l s h e r e o f . “ E v ent of D e f a u l t ” h a s t h e m ean i ng p r o v i ded i n S e c ti o n 8 he r eo f . “ Ex i s t i ng C r ed i t A g r ee m en t ” h a s t h e m ean i ng p r o v i d e d i n t he r e c i t a l s he r eo f . “ Ex i s t i ng P l ed g e A g r ee m en t ” h a s t h e m ean i ng p r o v i d e d i n t he r e c i t a l s he r eo f . “ P l ed g e A g r ee m en t ” h as t h e m ean i ng p r o v i ded i n t h e i n tr o d uc t o r y pa r a g r aph h e r e o f ,as a m ended and m od if i ed. “ P l e d g e d C o l la t er a l ” h a s t h e m ea n i ng p ro v i d e d i n S e ct i o n 2 h er e o f. “ P l e d g e d S h a r e s ” h a s t h e m e a n i ng p ro v i d e d i n S ec t i o n 2 ( a ) h er e o f. “ P l e d g o r s ” has t he m ean i ng p r ov i ded i n t he i n t r oduc t ory pa r ag r aph he r eo f . “ S e c u r e d O b li g at i o n s ” m e a n s, w i t h o u t du p li c at i o n , ( a) a l l O b l i ga ti ons and ( b) a l l cos t sand expenses i ncu r red i n connec t i on wi t h en f orce m ent and co l l ec ti on of t he Secu r ed O b li ga t i ons, i nc l ud i ngr easonab l e a tt o r neys’ f ees and expenses. “ UCC ” m eans t he U n if o r m C o m m e r c i al C ode as i n e f f ect i n t he s t a t e o f N ew Y o r k fr om ti m et o t i m e. 2. P l ed g e and G r a n t of S ec u r it y I n t e r e st . T o s e cu r e t he pr o m pt pay m ent and p e rf o r m ancei n f u l l w hen d ue, w h e t h e r by l apse o f t i m e, acc e l e r a ti on, m anda t o r y p r epa y m ent or o t he r w i s e , of t he S ec u r ed Ob li g a t i ons, each P l e d g or h e r eby g r an t s , p l ed g es and a ss i g ns t o t h e C o l l a t e r al A ge n t , f o r t he b en e f i t of t he hol d e r s o f t he S e cu r ed O b li g a ti ons, a co n t i nu i ng s e cu r i t y i n t e r e s t i n, a n d a r i g ht t o se t - o f f a g a i n s t , any and a ll ri g h t , t i t l e a n d i n t e r e s t o f such P l ed g or i n and t o t he f o l l o w i n g , w he t her now o w ned or ex i s t i ng or o w ned, a cqu i r ed, or a r i s i ng he r e a f t er ( c o l l e c ti v e l y , t he “ P l ed g ed C o ll a t e r a l ” ) : (a) P l ed g ed Sh a r e s . ( i) O ne h u ndred pe r ce n t (1 0 0 % ) ( o r, i f l e ss, the fu l l a mount o w ned by such P led g or) of the iss u ed a n d o u ts t an d ing C api t al S tock o w ned by s u ch Pl e d g or of each M ate r i a l D o m estic S u bsi d iary s e t f o r th on S che d u l e 2 ( a ) a t t a ched h e r eto and ( i i) s i x ty - fi v e per c ent (6 5%) (o r , i f l ess, t he f u ll a m ount o w ned by s u ch Pl e d g or) o f t h e i ssu e d a n d out s ta n ding v oting C apit a l S tock(or 1 0 0% o f t h e non - v oting C api t al S t oc k ) o w ned by s u ch P l ed g or of e ach Ma t e r ial F i rst - T i er F o r e i g nSubsi d i a ry and e a ch Ex c lu d ed Sub s id i ary s e t f o r t h on S ched u l e 2 ( a) at t ach e d h e re t o, i n e a ch c as e to g eth er wi th the ce r t i f i c a tes (or ot h er a g r e e m ents or in s tru m ent s ), i f an y , rep r ese n t i ng such C a p i tal S toc k ,and a l l o p t i ons an d oth e r r i g hts, con t r a ct u al o r ot h er w ise, w ith res p e c t t h er e to (c o ll e c t i v el y , to g eth e rw i t h t h e C a p it a l S tock des c r i bed in Se c ti on 2 ( b ) and2 ( c) b e l o w , t h e “ P l ed g ed S ha r e s ” ) , i n c l u d i ng t he f o ll o w i n g : ( A ) a ll sh a res, se c u r i t ies, m e m b ers h ip in t er e s t s or ot h er eq u ity i n te r es t s rep r es e n t ing a di v ide n d on any of the Pl e d g ed Sha r es, or r e pr e se n ting a d i s t r ib uti o n or ret u rn o f c ap i t a l upon or in res p ect of the P led g ed S h a r es, or r e su l t i ng from a stock sp l it, re visi o n, r ec l as s i f i c a t ion o r oth e r e x chan g e t h er e f o r, a n d any subs c ri p t i ons, w a r r a n ts, ri g hts or o p t i ons iss u ed to t he ho l der of, o r o th e r w i s e i n re s pe c t of, t h e Pl e d g ed S h are s ; and 2 C H A R2 \ 1 77 2 67 5 v 2  ( B ) w itho u t a f f ec t ing the ob l i g atio n s of t h e Pl e d g ors un d er any pro v ision proh i b iting su c h a c t i on h er eund e r or und e r t h e C r e d i t A g ree m ent, in t h e e v ent o f any cons o li d a t ion or m er g er in v ol v ing the i ss u er o f any Pl e d g ed Shares and in w h ich s uch iss u er is n o t the s ur v i v ingent i t y , all C ap i t a l S t ock of t h e su c ces s or e n t ity f o r m ed by or res u l t ing from such cons o l i da tion o r m er g er. (b) A dd i t i on a l Sh a r e s . ( i) O n e hundr e d p e rce n t ( 10 0 %) (o r , if le s s, t he fu l l a m ount o w ned by such P led g or) of the iss u ed a n d o u ts t an d ing C api t al S tock o w ned by s u ch Pl e d g or ofany Person th a t h e re a f t er be co m es a M a te r i a l D o m estic Subsi d i a ry and ( i i ) s ixt y - fi v e perce n t (65 % ) (or, if l e ss, the fu l l a m ount o w ned by such P l e dg or) of the iss u ed a nd o u ts t anding v oting C api t al S tock ( o r 10 0% o f t he non - v oting C apit a l St ock ) o w ned by such P l ed g or of any Pe r son th a t h e re a ft e r b eco m es a M at e ria l F ir s t - T i e r Fo r ei g n S ubsi d i a ry or an E x cl u ded S ubsi d i a r y , in c lud i ng the c e r t i fi c a t es (o r ot h er a gree m ents o r i n s t r u m ents) r e pr e se n ting su c h C ap i tal S toc k . (c) A cce s s i o n s and P r o c eed s . A ll A c c es s ions and a l l Pr oc eeds o f any and a ll of t h e fore g oin g . W i t ho u t l i m iti ng t he g en e r a l i t y of t h e f o r e g o i n g , i t i s h e r eby sp e c i fi c a l l y unde r s t o od and a g r e edt h a t a P l ed g or m ay fr om ti m e t o ti m e he r e a f t er de l i v er add i ti o nal C ap i t a l S t ock t o t he C o l l a t e r a l A g ent as col l a t e r a l s ec u r i t y f or t he S ecu r ed O b l i g a t i ons. U p o n de l i v e r y t o t h e C o l l a t e r al A g en t , such ad d i t i on a l Cap i t al S t ock sh a l l be d ee m ed t o b e p a r t of t he P l ed g ed C o ll a t e r a l of such P l ed g or and s h a l l be su b j e c t t o t he t e rm s of t h i s P l ed g e A g r ee m ent w h e t h e r or not S c h edu l e 2 ( a) i s a m ended t o re f er t o s uch a dd i t i on a l C ap i t al S toc k . N o t w it h s t an d i ng an y t h i ng t o t he con t r ar y con t a i n ed h e r e i n, t he s ec u r i t y i n t e r e s t s g r a n t ed under t h is P l ed g e A g r ee m ent s h a l l n o t e x t end t o, and t he “P l ed g ed C o l l a t e r a l ” sh a l l n o t i n c l ude, any Exc l u d ed P r oper t y . 3. S e c u r i t y f o r S e c u re d O b l i g at i o n s . T h e s e c u r i t y i n t er e s t c r ea t e d h e r e b y i n t h e Pl ed g e dC o ll a te r a l o f ea c h P l ed go r c on sti t u t e s c on t i n u i n g c o l l ate r a l s ec u ri t y f o r al l o f t h e S e c u r e d O b li g at i o n s . 4. D e l i v e r y o f t h e P l ed g e d C o ll a te r a l . T o t h e e x t e n t t h a t P l e d g e d C o lla t e r a l i s c erti fi c ate d , e a c hP l ed go r h e r e b y a g r e e s t h a t : ( a ) Such P l edgor sha l l ( sub j ect t o t he p r ov i s i ons of Sec t i on 7.14 of t he C r ed it A g r ee m en t ) de l i ver t o t he C o ll a t e r al A gent ( i ) s i m u lt aneous l y w it h or pr i or t o t he execu t i on and de l ive r y of t h i s P l edge A g r ee m en t , a l l cer t i fi ca t es represen ti ng t he P l edged Shares of such P l edgor and ( i i ) prom p tl y upon t he r ece i pt t he r eof by or on beha l f of such P l edgo r , a l l o t her cer t i fi ca t es and i ns t r u m en t s const i t u t i ng P l edged C o ll a t e r al of such P l edgo r . Pr i or t o de li ve r y t o t he C o ll a t e r al A gen t , a l l such ce r t i f ica t es and i ns tr u m en t s cons t i t u t i ng P l edged C o ll a t e r al of a P l edgor sha l l be he l d i n t rust by such P l edgor for t he benef i t of t he C o l l a t e r al A gent pu r suanthe r e t o. A l l s uch c e r t i f i ca t e s sh a l l be d e li v e r ed i n s u i t a b l e f o r m f or tr a ns f er by d e l i v e r y or sha l lbe acco m pan i ed by du l y exec u t ed i n s tr u m en t s of tr a ns f er or a s s i g n m ent i n b l an k , su b s t a n t i a l l y i n t heform pro v ided in Ex h i b i t 4( a) a t t ached h e re t o. (b) A dd i t i on a l S e cu r i t i e s . I f such Pl e d g or sh a ll re c ei v e by v irtue o f its be i ng or ha v ing been t h e o w n e r of a ny Pled g ed C ol l at e r a l, any (i) c e r t i f ic a te, in c lu d ing any ce r t i f ica t e rep r es e n t ing a di v ide n d or di s t r ibu t ion in c onn e c t ion w ith a ny inc r ea s e or red u c ti on of c ap i t a l, rec la s s i fi c a t ion, m er g er, c o nso l id a ti o n, s a le o f a ss e ts, c o m bination of sha r es o r o t h er e q u i ty in t er e sts , s tock sp l i t s, s p in - off o r s p l i t - off, p r o m issory notes or o th e r in s tru m ent s ; ( i i) o p t i on o r ri g ht, w h eth e r as an a dd i t i o n to, s ub s t i tu t ion for, or an exchan g e f or, any Pled g ed C oll a t e r a l or oth e r w i s e; ( i i i ) di v idends p a y able i n s e cu r i t ie s ; o r ( i v ) di s t r ibu t io n s of sec u r it ies in conn e c t ion 3 C H A R2 \ 1 77 2 67 5 v 2 w it h a pa r t i al or t o t al l i qu i d a t i on, d i ss o l u ti on or r ed u c ti on of c ap i t a l , c ap i t a l s u r p l u s or p a i d - i nsu r p l us, t hen su c h P l e d g or sha l l r ec e i v e such c e r t i f i c a t e, i n s t r u m en t , op t i on, ri g ht or d i s t ri b u t ion i n t r u s t f or t he b en e f i t of t h e C o l l a t e r a l A g en t , s ha l l seg r e g a t e i t f r om such P l ed go r’ s o t h er p rop e rt y and sh a l l d e l i v er i t f o r t h wi t h t o t h e C o l l a t e r al A g ent i n t he e x a c t f o r m r e c e i v ed t o g e t h erw it h a ny nece s sa r y end o r s e m ent and / o r ap p r o p ri a t e s t o ck po w er du l y ex e cu t ed i n b l an k , sub s t a n ti all y i n t he f o r m p r o v i ded i n E xh i b i t 4 ( a ) , t o b e he l d by t he C o l l a t e r a l A g ent a s P l ed g ed C o ll a t e r a land as f u r t h e r c o l l a t e r a l s ec u r i t y f or t he S ec u r ed O b li g a t i ons. (c) F i nan c i ng S t a t e m en ts . E a c h Pled g or a uth o ri z es t h e C o ll a t e r a l A gent to f i le one or m ore f i nan c ing st a te m ents ( w h ich m ay desc r ibe the C oll a t e r a l as “a l l a ss e t s ” or “a l l p erso n al prop e rt y ”) d i s cl o sing t h e C ol l at e r a l A g ent ’ s s e cu r ity i n te r est in the P led g ed C o l l a t er a l. Ea c hPled g or s h a l l e x ec u te a n d d eli v er to the C o l l at e r a l A g ent s u ch o ther ap p l i ca b le f i n ancing st a te m ents and o ther f i l in g s as m ay be reaso n ably r e q u est e d by the C o l l at e r a l A g ent in or d er to per f e c t and pr o te c t the s ec u r i ty int e re s t c re a ted he r eby in t h e P l ed g ed C o l l a te r al o f such P led g or. 5. R e p r e s e n t at i o n s a n d W a rr a n t i e s . E a c h P l e d g o r h e r eb y r e p r e s e n t s a n d w ar r an t s t o t h e C o ll a te r a l A g e n t , f o r t h e b e n e fi t o f t h e h o l d er s o f t h e S ec u r e d O b li g at i o n s , t h a t s o l on g a s any o f t h e S e c u r e d O b l i g at i o n s r e m a i n s o u t st a n d i n g a n d un t i l al l o f t h e c o m m it m en t s r el a ti n g t h e r et o ha v e b e e n te r m i n at e d : ( a ) A u t ho r i z a t i on o f P l e d g ed Sha r e s . T he P l edged Sha r es a r e du l y au t hori zed and va li d l y i ssued, are f u ll y pa i d and nonassessab l e and are not sub j ect t o t he pree m p ti ve ri gh t s of any Pe rson. (b) T i t l e . E a ch P led g or h a s g ood and ind e fe a si b le t i t l e t o t he Pl e d g ed Col l a t er a l o f such P led g or a n d i s t h e l e g al a n d be n e f ic i al o w ner of s uch P l ed g ed C o l la t er a l fr e e and cle a r of any Lien, o th e r t h an P e r m itted L iens. T h e re e x i s ts n o “ad v erse c l ai m ” w it h in the m eaning of Sec tion 8 - 102 of the UC C w ith res p e c t to the P led g ed Shar e s of such P led g or. (c) Exe r c i s i ng of R i g h ts . T he exe r ci s e by the C o l l a t er a l A g ent of i tsri g h t s and re m edies h er e und e r wi ll no t v iol a te any Law or g o v ern m ental re g u l a t ion o r any m at e ri a lcon t ra c tu a l r e s t r ic t ion b in d i ng on or a f fe c t i ng a Pled go r or any of i ts p rop e rt y . (d) P l ed g o r ’ s A u t h o r it y . N o a u tho r i z a t ion, a ppro v al or a c ti on b y ,and no n o t i ce o r f i ling w ith any G o v ern m ental A u t ho r ity or w ith the i ss uer o f any Pled g ed S h ar e s i s re q u irede i t her ( i ) f or t he p l ed g e m ade by a P l ed g or o r f or t he g r an t i ng of t he sec u r i t y i n t e r est by a P l ed g or pu r su ant t o t h i s P l ed g e A g r ee m ent ( e x ce p t as ha v e be e n a l r eady ob t a i n ed) or ( i i ) f or t h e e x e r c i s eby t he C o l l a t e r al A g ent o r t he ho l de r s of t he Sec u r ed O b li g a t i ons of t h e i r ri g h t s a n d r e m ed i es her e u nd e r ( e xce p t a s m ay b e r e q u i r ed by La w s a f f ec t i n g t he o f f e r i ng and s a l e of se cu r it i e s ) . (e) Secu r it y I n t e r e s t/ P ri o r i t y . T h is P led g e A g ree m ent c re ates a v al i d s ecu r ity i n t e re s t in f a v or of the C o l l at e r a l A g ent for the ben e f i t o f t h e h old e rs o f t h e Se c ur e d O b l i g at ions, in t he Pled g ed C o l l a te r al. T he t ak ing of posse s si o n, in t h e S ta t e of N ew Y or k , by the C ol l at e r a l A g entof t h e c e r t i f i c a t e s r ep r ese n t i ng t he P l e d g ed Sha r es, t o t he e x t e n t co n s t it u t i ng Secu r i t i es, and a ll o t h e r c e r t i f i c a t e s and i n s t ru m en t s con s t i t u t i ng P l ed g ed C o ll a t e r a l , wi l l p e r f e c t and es t a b li sh t hefi r st p r io r ity of the C o l l a t e r al A g ent ’ s s e cu r ity i n t e re s t in t h e P l ed g ed Sh a res and, w hen pro p e r lype r f e c t ed by f i l i ng or r e g i s t r a t i on, i n a l l o t h er P l ed g ed C o ll a t e r a l r e p r e se n t ed by s uch P l ed g edSha r e s and i n s t r u m en t s s ec u ri ng t h e Sec u r ed O b l i g a ti o ns. Ex c ept as s et f o r t h i n t h i s S e c t i on 5 ( e)he r e o f , no a c ti on i s ne c es sa r y t o pe r f e ct o r o t he r w i se p r o t e ct such se c u r it y i n t e r es t . (f) Pa rt n e r s h i p and M e m be rs h i p I n t e r e s t s . Ex c ept as p re v i ously di s cl osed to theCo ll a t e r a l A g en t , no n e of the P l e d g ed Sha r es c o nsist i n g of pa r tne r ship or li m it e d l i a b i l it y 4 C H A R2 \ 1 77 2 67 5 v 2 co m pany i n t e r e s t s ( i ) i s d e a l t i n o r t r ad e d on a se c u r i t i e s exc h an g e or i n a sec u r i t i e s m a r k e t , ( i i )by it s t e r m s exp r e ss l y p r o v i des t h a t i t i s a s ec u r i t y g o v e r ned by A rti c l e 8 of t he UCC , ( i i i ) i s an i n v est m ent co m pany secu r i t y , (i v ) i s h e l d i n a s ec u r i ti e s ac c ount or ( v ) con s t i t u t es a Sec u r i t y or a F i nan c i a lA s s e t . ( g ) N o O t her I n t e r e s ts . A s o f t he C lo s ing D ate, pu r sua n t t o the t e r m s ofthe C re d it A g ree m ent, no Pled g or is r equ i red to p led g e any C ap it al S t ock in any Sub s i d iary oth e r t h an a s s e tfo r th on S ched u l e 2 ( a ) a t t a c hed h e r e to or as p led g ed p u rsua n t to any ot h er p led g e ag ree m ent by any Pled gor to the C o l la t e r al A g ent t o s e cu r e t h e Se cu red O b li g a t ions. 6. C o v en a n t s . E a c h P l ed go r h e r e b y co v e n a n t s , t h a t s o l o n g a s an y o f t h e S e c u r e dO b l i g at i o n s re m a i n s o u ts t a n d i n g a n d u n ti l al l o f t h e c o mm it m en t s r el a ti n g t h e r e t o h a v e b e e n t er m i na t e d , s u c h P l ed go r s h a ll : ( a ) B oo k s and R ec o r d s . U pon t he r easonab l e r equest of t he C o l l a t e r al A gent , m a r k it s books and r eco r ds ( and sha l l cause t he i ssuer of t he P l edged Sha r es of such P l edgor t o m a r k it s booksand reco r ds) t o r e fl ect t he secur it y i n t e r est g r an t ed t o t he C o ll a t e r al A gen t , for t he benef i tof t h e h o l d e r s o f t h e Se c u r e d O b li g a t i on s , pu r sua n t t o t h i s P l ed g e A g r ee m en t . (b) D e f en s e of T i tl e . W a r r ant and d e fend t it le t o and o w n ers h ip o f t h e P l edg ed C oll a t e r a l of such P led g or a t i ts o w n expe n se a g a i nst t h e c l ai m s and de m ands o f a ll oth e r p a r t ies cl ai m ing an int e r e st th e re i n, k eep the P led g ed C o l l a t e r a l f ree from a l l Li e ns, e xce p t for P er m it t ed Liens, andn ot s e l l, e x chan g e, t r an s f e r, a s si g n, l ease or oth e r w i s e d i spo s e of P led g ed C o l la t e r al o f such P led g or or any i n te r e s t th e re i n, e x ce p t as p er m i t t e d und e r t h e C re d i t A g ree m ent and theo t h e r Loan D o cu m en t s. (c) Fu rt h er A s s u r anc e s . P r o m ptly ex e cu t e and de l i v er a t i ts e x pen s e a ll fu rth e r in s tru m ents and d o cu m ents and t a k e a l l f u rt h er ac t ion t hat m ay be nece s sary and d es i ra b le o r t h at the Co ll a t e r a l A g ent m ay reasona b ly req u est in ord e r to ( i ) p e rf e ct and p ro t ect t h e s ecu r ity i n t e re s t cre a ted he reby in t he P led g ed C o l la t e r al o f s u ch P l ed g or ( in c lu d ing any and a l l a c tion ne c es s aryto s a t i sfy t h e C o l l a te r al A g ent th a t t h e C o l l a te r al A g e n t has ob t ai n ed a f i r s t p r i o r it y perfe c ted sec u ri ty int e r e st in a ll P led g ed C o l la t e r a l ); ( i i) ena b le t h e C ol l a t er a l A g ent to e x er c i se and en f or c eits ri g h t s and re m edi e s h e r e under in res p e c t of the P le dg ed C oll a te r al of s uch P le dg or; and ( i i i )o t h e r w i s e e f f e ct t he p u r p os es of t h i s P l ed g e A g r ee m en t . (d) A m end m en ts . N ot m a k e or cons e nt to any a m end m ent or o t her m odifi c a tion o r w ai v er wi th r esp e ct to a ny of t h e P l ed g ed C o l la t e r al o f such P led g or o r e n t e r i n to any a g ree m entor a llow to e x i s t any r e s t r i c tion w ith r e spe c t to any of t he Pl e d g ed C ol l a t er a l o f s u ch Pl e d g or oth e r t han p u rs u ant he r eto or as m ay be per m it t ed u nd er t he C r ed i t A g ree m ent. (e) C o m p li ance wi t h S ecu r i ti e s La w s . F i le a l l r e po r ts and oth e r i n f o r mation now o r her e a f ter re q u i red to be f i l e d by such P l ed g or w i t h t h e SEC and any ot h er s t a te, f e der a l o r f o re i g n a g ency in conn e c t ion wi th t he o w ne r sh i p of the Pl e d g ed C ol l at e r a l o f su c h Pl e d g or. (f) I ss uance or A c q u i s i ti on of C ap i t al S t ock C on s is t i ng of an I n te r e s t i n aPa rt n e r s h i p or a L i m it ed L i ab i l i t y C o m pa n y . N o t , w i t hout e xec u t i ng and d e li v e r i n g , or cau s i ng t obe ex e cu t ed a n d d e li v e r e d, t o t h e C o l l a t e r al A g ent su c h a g r ee m en t s, d o cu m en t s a nd i n s t r u m en t sas t h e C o l l a t e r al A g ent m ay r eq u i r e, i ssue or a cq u ir e a n y C ap it al S t o ck of a Su b s i d i a r y co n s i s t i ngof an i n t e r est i n a p a rt n e r sh i p or a l i m it ed l i ab i l i t y co m pany t hat ( i ) i s d e a l t i n or t r aded on a sec ur i ti e s e x chan g e or i n a sec u r i ti e s m a r k e t , ( i i ) by it s t e r m s ex p r e s s l y p r o v i d e s t hat i t i s a 5 C H A R2 \ 1 77 2 67 5 v 2 sec u r i t y g o v e r ned by A r t i c l e 8 of t he UCC , ( i i i ) i s an i n v es t m ent co m pany secu r it y , (i v ) i s h e l d i n a sec u r i t i es acc o unt o r ( v ) c ons t it u t e s a S e cu r it y or a F i nanc i al A ss e t . 7. A d v an ce s b y H o l d er s o f t h e S e c u re d O b l i g a t i o n s . O n fai l u r e o f an y P l ed go r t o p er fo r m an y o f t h e c o v en a n t s a n d a g r ee m e n t s c o n t ai n e d h e r e i n a n d u p o n p r i o r w rit t e n no t i c e t o t h e P l ed go r, t h e C o l l at e ra l A g en t m a y , a t i t s s o l e op t i o n a n d i n it s s o l e d i sc r et i o n , p e r f o r m t h e sa m e a n d i n s o d o i n gm a y exp e n d s u c h su m s a s t h e C o l la t er a l A g e n t m a y re a s o n a b l y d e e m ad v is a b l e i n t h e p er f o r m an c e t h er eo f , i n c l u d i n g t h e pa y m en t o f a n y i n s u r a n c e p r e m i u m s , t h e p a y m en t o f a n y t a x e s , a p a y m en t t o o b ta i n ar e le a s e o f a L i e n o r p o t e n ti a l L i e n , e x p e n d i t u r e s m ad e i n d ef en d i n g a g a i n s t a n y ad v e r s e c l a i m a n d a l lo t h e r e x p en d i t u r e s t h a t t h e C o ll a te r a l A g e n t m a y m a k e f o r t h e p r o t e c ti o n o f t h e s e c u r it y h e r e o f o r m ay b e c o m p el l e d t o m a k e b y op er a ti o n o f L a w . A l l s u c h su m s a n d a m ou n t s s o e x p e n de d s h al l b e r e p a y a b l eb y t h e P l e d g o r s o n a j o i n t a n d se v e r a l b as i s p ro m p t l y u p o n t i m e l y n o ti c e t h e r e o f a n d d e m an d t h er e f o r, s h a l l c o n s ti t u t e a d d i t i o n a l S e c u r e d O b l i g at i o n s a n d s h a l l , s u b j ec t t o S ect i o n 2 . 0 8 o f t h e C r e d i t A g ree m e n t , b e a r i n t e re s t f ro m t h e d at e s a i d a m ou n t s a r e e x p en d e d a t t h e r a t e t h e n a p p l i c a b l e t o R e vo l v i ng L o a n s t h a t a r e B a s e R a t e L o a n s . N o s u c h p e r f o r m an c e o f an y co v e n a n t o r a g r ee m e n t b y t h e C o l l at e ral A g e n t o n b e h a l f o f a n y P l ed go r , a n d n o s u c h ad v a n c e o r e x p e n d i t u r e t h er e f o r , s h a l l re l i e v e t h e P l edgo r s o f an y d e f a u l t u n d e r t h e te r m s o f t h i s P l ed g e A g ree m e n t , t h e o t h e r L o a n D ocu m e n t s o r an y o t h e r d oc u m en t s r el a ti n g t o t h e S e c u r e d O b li g at i o n s . T h e C o ll a te r a l A g e n t m a y m a k e an y p a y m en t h e r e b y a u t ho riz e d i n a cc o r d a n c e w i t h an y b il l , s t at e m en t o r e st i m a t e p r o c u r e d f ro m t h e a p p r o p ria t e p ub l i c o ffi c e o rho l d e r o f t h e c l a i m t o b e d i s c h a r g e d w i t h o u t i n q u i r y i n t o t h e a c c u r a c y o f s u c h b i ll , sta t e m e n t o r e s t im a t e o r i n t o t h e v al i d i t y o f a n y t a x a s s e s s m e n t , s a l e , f o r f ei t u r e , t a x l i e n , t i tl e o r c l a i m e x c e p t t o t h e ex t e n t s u c h p a y m en t i s b e i n g co n t e st e d i n g o o d f ai t h b y a P l ed go r i n a pp ro p r i at e p r o c e e d i n g s a n d a g ai n st w h i c h a d e q u at e r e s e r v e s ar e b ei n g m a i n t a i n e d i n a c c o r d a n c e w i t h GAAP . 8. E v en t s of D e f a u lt . T he occu rr ence of an event t hat w ou l d cons t i t u t e an Event of D e f au l tunder t he C r ed i t A g r ee m ent sha l l be an Event of D efau l t he r eunder (an “ E v ent of D e f a u lt ” ) . 9. R e m ed i e s . (a) G ene r a l R e m ed i e s . U pon t he oc c ur r en c e of an E v ent of D e f au l t a n ddu r ing the con t inu a t i on t h e r eof, the C ol l at e r a l A g ent and t h e ho l d ers o f t he S e cu r ed O b l i g at i ons s h a ll ha v e, in ad d i t ion to the ri g hts and re m edies p ro v ided he r ei n , in t h e Loan D ocu m ents, in any other docu m ents re l a t ing to t h e S ecu r ed O b l i g at i ons, or by Law (i n cl u ding le v y of a t ta c h m ent and g arnish m ent), the r i g hts an d re m edies of a se c ur e d p ar ty under the UC C of t h e j ur is d ic t ion app l ica b le to the a f fe c ted P l ed g ed C ol l ate r a l. (b) Sa l e o f P l ed g ed C o l l a t e r a l . U pon the occ u r r en c e of an E v ent of D e fa u lta nd during t h e co n t inu a ti o n t h e r eof, wi tho u t li m it i ng the g ener a l i ty of t his S e c ti on 9 a n d w ith o ut not i ce,the C o l l at e r a l A g ent m a y , in i t s s o le d is c r e ti o n, se l l or ot h er wi se d is p ose o f or r ea l i z e upon the P led g edC o l l a t e ral, or a ny part t he r eof, in o ne o r m ore p ar c el s , at pu b lic or p r i v ate s a le, a t any exchan g e o r bro k e r ’sb oa r d or e lse w h ere, at such p r ice or p r i c es a n d on s uch o th e r ter m s as the C oll a t e r a l A g ent m ay de e m co mm ercia l ly re a sona b le, f or c a sh, c re d it or for fu t ure de l i v ery or oth e r w i s e in ac c ord a nce w i th ap p l i ca b le Law . T o t h e exte n t p er m it t ed by La w , a ny holder o f the Secu r ed O b l i g at i ons m ay in such e v e n t, b i d f o r t he pur chase of such sec u r i t i es. E ach P l ed g or a g rees th a t, to the e x te n t n o ti c e of s a le s ha l l be re q u i r e d by Lawand has not been w ai v ed by such Pled g or, any r e qu i re m ent o f r e aso n ab l e n o ti c e s h a l l be m et if n o ti c e, s p e cif y ing t h e pl a ce o f any pub l ic s ale or the ti m e a f t e r w hich a ny pri v ate s a le i s t o be m ade, is p er s on a lly s e r v edon o r m ailed, po s ta g e p r ep a id, to such P led g or, in a c co r dan c e w ith the no t i c e pro v i s io n s of Se c t i on11.02 of t h e C r e d i t A g r ee m ent a t l ea s t t en ( 10) da y s b e f o r e t h e t i m e of such s a l e. T he C o l l a t e r alA g ent shall n o t be obl i g a t e d t o m a k e any sa l e of P l e d g ed Col l ate r al o f s u ch Pled g or r e g a r d l e ss o f no tice o f s a l e ha v i ng been g i v en. T he C o l la t e r a l A g ent m ay ad j o u r n any pu b li c or p ri v ate s a l e 6 C H A R2 \ 1 77 2 67 5 v 2 fr om ti m e t o t i m e by announce m ent at t he t i m e and p l a ce f i xed t h e r e f o r , and such sa l e m a y , w it ho ut f u r t h e r no t i c e, be m ade at t he t i m e and p l a ce t o w h i ch i t w as so ad j o u r n e d. (c) P ri v a t e S a l e . U pon the o c c urr e nce o f an E v ent of D ef a ult and d u r i ng thecon t inu a t i on t h e r eof, the P l ed g ors r e co g ni z e th a t the C ol l at e r a l A g ent m ay deem it i m prac t ica b le to e ffe ct a pu b l i c s a le o f a ll or any pa r t o f t h e P l ed g ed S har e s or any of t he s ecu r i ti e s con s t i t u ting Pled g ed C o ll a te r al and th a t the C o ll a t e r a l A g ent m a y , ther e fo r e, d e t e r m ine to m ake one o r m ore pri v ate s a les of a nysuch P l ed g ed C ol l at e r a l t o a r e s t r i c ted g roup o f p u rc h as e rs w h o w i l l be obli g a t ed t o a g ree, a m ong other t h in g s, to acq u i r e s u ch Pled g ed C o l l a te r al for t h e i r o w n acco u nt, for in v est m ent a n d n o t wi th a v iewto the d i s t r ib u tion o r r e s a le t he r eof. Each P le dg or hereby w ai v es any cl a i m s a g ainst t he C o l la t e r al A g enta r is i ng by reason th a t any su c h p r i v ate s a le s h a l l not ha v e b e en m ade in a c o m m ercially r e aso n ab l e m annera nd t h at the C o l la t er a l A g ent sha l lha v e no ob l i g a t i on t o d e l ay sa l e of any such P l ed g ed C o l l a t e r a l f o r t he p e r i od o f ti m e necess a r y t o pe rm i t t h e i ss u er o f s u ch P l ed g ed C o l l a t e r a l t o r e g i s t e r such P l ed g ed C o l l a t e r al f o r pub l i c s a l e undert he S ec u r i t i es A c t of 1933, as a m ended ( t he “ Se c u r i t i es A c t ” ) . Each P l ed g or f u r t h e r ac k no w l ed g esand a g r ees t hat a ny o ff e r t o s e l l such P l ed g ed C o l l a t e r a l t hat has be en ( i ) p u b l i c l y ad v e rt i sed on a b o nafi d e b as i s i n a ne w s p ap e r or o t h er pub l i c a ti o n of g en e r a l c ir c u l a ti on i n t he fi n a nc i al co m m un it y of Ne w Y o r k , N ew Y o r k (t o t h e ex t e n t t h a t s u ch o f f e r m ay be ad v e r ti s ed w it ho u t p ri o r r e g i s t r a t i on under t he S ec u r i ti e s A c t ) , o r ( i i ) m ade p r i v a t e l y i n t h e m anner de s c r i bed abo v e sh a l l b e dee m ed t o i nvo l v e a “pub l i c s a l e” un d er t he UCC , n o t w i t hs t an d i ng t hat s uch s a l e m a y not con s t i t u t e a “pu b l i c o f f er i n g ” und e r t he S e cu r i ti e s A c t , and t he C o l l a t e r a l A g ent m a y , i n such e v e n t , b i d f o r t he p u r c hase o fs u ch P l ed g ed C o l l a t e r a l . (d) R e t e n ti o n of P l ed g ed C o ll a t e r a l . T o the ex t ent p er m i t t e d und e r ap pl i ca b le La w , in ad d i t ion to the ri g hts and re m edies h e r eund e r, up o n t he oc c ur r en c e and co n tin ua nce o f anE v ent of D e fa u lt, the C o l l a t er a l A g ent m a y , after p ro v i ding the n o t ic e s r e qu i red by Sec t ions 9-620 and 9 - 621 of t he UC C or o t he r w i se co m p l y i ng w it h t he r eq u i r e m en t s of ap p l i cab l e Law o f t he r e le v ant j u r i s d i c ti on, a c cept or r e t a i n a l l o r any po r t i on o f t h e P l ed g ed C o l l a t e r al i nsa t i s f a c ti on of t he S ec u r ed O b li g a t i ons. U n l e ss a n d u n t i l t h e C o l l a t e r al A g ent sh a l l ha v e p r o v i dedsuch n o t i ces, ho w e v e r , t he C o ll a t e r a l A g ent sh a l l not b e dee m ed t o h a v e acc e p t e d or r e t a i n e d anyP l ed g ed C o l l a t e r al i n s a t i sf ac t i on o f any Sec u r ed O b l i g a ti ons f or any r e a son. (e) D e fi c i e n c y . I n the e v ent t h at t he p roc e eds o f any s a le, co l le c ti o n or rea li za ti o n are ins u f f i c ie n t to pay a l l a m ounts to w h i ch t he C o ll a t er a l A g ent or the ho l de r s of the S e cu r edO bli g a t ions are le g a l ly en t i t led, the P led g ors sh a ll be j o in t ly and se v e r a l ly lia b le f o r t h e def i c i ency (sub j e ct to S e c ti on 25 h e re o f), to g et h er wit h in t e r est t h ere o n a t t h e D e f au l t R a t e, to g eth e r wi th t he c o s ts of c ol l ec t ion and rea s ona b le a tt orne y s’ fe e s and expe n se s . A ny surplus re m aining a f t e r t h e f u ll pa y m entand s a t i sf a c t ion o f t h e Secu r ed O b l i g at i ons sh a ll be r e t u rned to the P led g ors o r to w ho m soe v er a co u rtof c o m petent j uri s di c t ion s h a l l d e t e r m ine to be en t i t led the r et o . 10. R i g h t s o f t h e C o ll a te r a l A g e n t . ( a ) Po w er of A t t o r n e y . I n add i ti on t o o t her po w e r s of a t t o r ney con t a i nedhe r e i n, each P l edgor he r eby des i gna t es and appo i n t s t he C o l l a t e r al A gen t , on beha l f of t he ho l de r s of t heSecured O b l i ga t i ons, and each of i t s des i gnees or agen t s, as a tt o r ney - i n - f act of such P l edgo r , ir revocab l y andw it h po w er of subs t i t u t i on, wi t h au t hor it y t o t ake any or a l l of t he fo ll o w i ng ac t i ons upon t he occu rr enceand du r i ng t he con t i nua t i on of an Event of D efau l t : 7 C H A R2 \ 1 77 2 67 5 v 2 (i ) t o de m and, c o l l ec t , s e t t l e, c o m p r o m i se and a d j u s t ,and g i v e d i sch a r g es and r e l e as e s co n ce r n i ng t h e P l ed g ed C o l l a t e r a l , a l l a s t he C o l l a t er al A g ent m ay r ea s ona b l y deem app r op r i a t e; ( i i) to co mm ence and pr o sec u te any act i ons at a ny court f o r the pu rp o ses o f co l le c ting any of the P led ge d C ol l at e r a l a n d e n for c ing a ny other ri g ht in r esp e ct th ereo f ; ( i i i ) to d e fend, s e t t le o r co m pr o m ise any act i on b r ou g ht a n d, in c onn e c t ion the r ewi th, g i v e such d i s ch a r g e or r el e ase as the C o l l at e ral A g ent m ay reaso n ably d eem appro p r i a t e; (i v ) to pay or d i s char g e tax e s, li ens, s ec u r i ty int e re s ts or o ther e ncu m branc e s le v ied o r p l ac e d on o r t h r ea tened a g ain s t the P led g ed C ol l at e r a l; ( v ) to d i r e ct a ny par t i e s l ia b le f or any pa y m ent in con n e c t ion w ith any of t he Pled g ed C o l l a te r al to m a k e pay m ent of a ny and a l l m onies due a nd t o be c o m e duethe r eun d er d i r ec t ly to the C ol l at e r a l A g ent or as the C o ll a t e r a l A g ent sh a l l d i re c t; ( v i) to r ec e i v e pa y m ent of and r ece i pt for any and a ll m on ies, c lai m s, and oth e r a m ounts d u e a n d to b eco m e due at any ti m e in r e spe c t of or a r i sing o u t of a ny Pled g ed C o l l a te r a l ; ( v ii) to s i g n and en d or s e any dr a fts, as s i g n m ents, pro x ie s, s t ock po w ers, v erif i c a tio n s, n o t i ces and o t her d o cu m ents r e l a t ing to t he Pl e d g ed C ol l at er a l; ( v ii i ) to e x ec u te a n d d e li v er a l l a s si g n m ents, con v e y ances,s t ate m ents, fin a nc i ng st a te m ents, ren e w al f ina n cing s t a t e m ents, s ecu r ity and p led g e a g r e e m ents,af f ida v i t s, n o t i ces and o th e r a g ree m ents, i ns t ru m ents an d docu m ents th a t t h e C o l l a t er a l A g entm a y reason a bly de e m appropr i ate in o rd e r t o p er f ect and m ain t ain t h e s ec ur i ty in t er e sts and l i ens gra n ted i n th i s P l ed g e A g ree m ent a n d in o rd e r to f u lly con s u m m ate all of t h e t ra n sa c ti o ns c o ntem pla t ed t he r ei n ; (i x ) to e x chan g e any of the P le dg ed C oll a te r al or o th e r p r o perty upon any m er g er, conso l id a ti o n, r eo rg ani z ation, re c ap i t a li z a t ion or o t her r e a d j u st m ent o f t he iss u er the r eof and, in c onne c t ion t here w ith, dep o s i t any of the Pled g ed C o l l a t e ral w ith a n y co m mittee, d epo s i t or y , t r a n sf e r a g ent, re g i s tr a r o r o t her desi g n a ted a g ency upon s u ch ter m s as the C o ll at e r a l A g ent m ay reasona b ly deem approp r i a t e ; (x) to v ote f or a sh a re h ol d er r e sol u ti o n, or to si g n an in s t r um ent in w r i t in g , san c tio n ing the t ran s f e r of a ny or all of the P led g ed C o l la t er a l into t h e na m e of the C oll a t e r a l A g ent or one o r m ore of the ho l de r s of the S ecu r ed O b l i g at i ons o r i nto t he na m e ofany tra n s f er e e to w hom the Pled g ed C o l l a t e ral or any pa r t the r eof m ay be sold purs u ant to S e c t i on9 he r e o f; a nd (x i ) to do a nd p e rf o rm all such oth e r a c ts and thin g s a s t h e Coll a t e r a l A g ent m a y reasona b ly deem app r opr i ate or con v eni e nt in c o nnec t ion w ith t h e Pl e d g edC oll a t e r a l. T h i s po w er o f a tt o r ney i s a po w er c o up l ed wi t h an i n t e r e s t and sh a l l be i r r e v ocab l e f or so l ongas any of t he S ec u r ed O b li g a t i ons sh a l l r e m a i n o u t s t an d i ng and u n t i l a l l o f t h e co m m it m en t s r e l a t ing t h e r e t o sh a l l ha v e b een t e r m i na t ed. T h e C o l l a t e r a l A g ent s h a l l be u nd e r n o du t y t o 8 C H A R2 \ 1 77 2 67 5 v 2 exe r c i s e or w i t hho l d t h e e x e r c i se of a ny of t he r i g h t s, po w e r s, p r i v il e g es a n d o p t i ons ex p r e s s l y ori m p li c i tl y g r an t ed t o t h e C o ll a t e r a l A g ent i n t h i s P l ed g e A g r ee m en t , and s h a l l n o t b e l i ab l e f o rany f a i l u r e t o do so or a ny de l ay i n d o i ng so. T h e C o ll a t e r al A g ent sh a l l not be li a b l e f or any act or o m i ssi o n or f o r any e r r or of j u d g m ent or any m i s t a k e of f a c t or Law i n i t s i nd i v i du a l c a pa c it y or i t s c ap a c i ty as a t t o r ne y - i n - f act exc e pt ac t s or o m i ss i ons r es u l t i ng fr om it s g r o s s ne g li g ence o rw il l f u l m i scondu c t . T h i s p ower of at t o r ney i s con f e r r e d on t h e Col l a t e r al A g ent s o l e l y t o p r o t e c t , pr e s e r v e and r e a li z e u pon its se c u r it y i n t e r est i n t he P l e d g ed Co ll a t e r al. (b) A ssi g n m ent by t he C o l l a t e r al A g en t . T h e C o l l a te r al A g ent m a yassi g n the Secu r ed O b l i g at i ons a nd a n y portion t h ere o f a n d/ o r t he Pled g ed C o l l a t e ral and a ny por t ionthe r eof to a su c ce s sor co l l a t er a l a g ent app o in t ed p u rsu a nt to Se c ti o n 10.06 of the C red i t A g ree m ent,and t h e a s si g n e e sh a ll b e e n t i t l ed to a ll o f t he r i g hts and re m edi e s of t h e C ol l a t er a l A g ent under t h isP led g e A g ree m ent i n r e l a ti o n t h e r eto. (c) T he C o l l a t e r al A g en t ’ s D u t y of C a r e . Ot her t h an t h e e xer c ise of re asona b le ca r e to a s su r e t h e s a fe cu s tody of t h e Pl e d g ed C ol l a t er a l w h ile be i ng held by t h e C o l l a t er a l Ag ent here u nd e r, t h e C o l l a te r al A g ent sh a ll h a v e no duty or li ab i l i ty to p r es e r v e ri g hts p e rt a i n ing the r eto , i t b e ing unde r st o od and a g re e d t h at the P led go rs s h a l l be re s pon s i b le f or p res e r v at i on of all ri g h t s inthe Pl e d g ed C oll a t e r a l, and the C o l la t e r al A g ent sha l l be r e l i e v ed of a ll res p on s ib i l i ty for the P led g ed Co ll a t e r a l u pon s u rre n de r ing it or ten de ring the su r re n der of it to t h e Pled g o r s. T he C o l la t e r al A g ent sh a llbe dee m ed to ha v e ex e rc i s e d re a sona b le ca r e i n t h e c us tody and pre s er v a t ion o f t h e P l ed g ed C oll a t e r a lin i ts p o ss e ss i on if s uch P led g ed C o l l a t e ral i s ac c ord e d tr e at m ent s u bs t an t i a lly eq u al t o t h at w h ich theC o l la t e r al A g ent a cc o rds its o w n p r ope r t y , w hich sha l l be no l ess th a n t h e t r e at m ent e m plo y ed by a rea sonab l e and pru d ent a g ent in the ind u s t r y , it being und e r s tood th a t t h e C ol l at e r a l A g ent s h a l l n o t h av erespon s i b i l ity f o r ( i) as c er t ai n ing or ta k ing ac t ion wi th res p e c t t o ca l ls, con v er s io n s, ex c h a n g es, m aturit i e s, t end e rs o r oth e r m att e rs re l a t ing to any Pl e d g ed C o l la t er a l, w h e th e r o r n o t t h e C oll a t e r a l A g enthas or is d ee m ed to ha v ekno w l edge of such m a tt ers, or ( i i ) t ak i ng any necessa r y s t eps t o prese r ve ri gh t s aga i nst any par t i es w it h r espectt o any of t he P l edged C o l l a t era l . (d) V o t i ng R i g h t s i n R e s pe c t o f t h e P l e d g ed C o l l a t e r a l . (i) So long as no E v e n t of D e f au l t sh a ll ha v e oc c ur r ed an d beco n t i nu i n g , to the e xt e nt p er m it t ed by L a w , each P led g or m ay exerc i se any and a l l v oting and o t herconse n su a l r i g hts p e r ta i ni n g to the P led g ed C o l l a t e ral of s u ch P l ed g or or any pa r t the r eof for any purpo s e n o t i n con s i ste n t wi th the ter m s of th i s Pled g e A g ree m ent or the C red i t A g ree m ent; and ( i i) U pon the occ u r r ence and d uring t h e co n t i nuan c e of an E vent of D e fa u lt and n o ti c e f rom the C o l l a t e ral A g ent to the app l i c ab l e Pled g or t hat t h e C o l l a te ral A g ent in t ends to e xe r ci s e i ts ri g h t s purs u ant to th i s p a r a g r aph ( i i) , a l l r i g hts o f a P led g or t oexe r ci s e t he v oting and ot h er c o nse n su a l r i g hts th a t i t w ould o th e r w ise be e n t i t led to exe r ci s e pu rsu a nt to p a r a gr aph ( i ) o f th i s su b se c ti o n s h all ce a se a nd a ll such ri g hts sha l l the r eupon beco me v ested i n the C o l l a t er a l A g ent, w h i ch sh a ll th e n ha v e t h e s o le r i g ht to exe r ci s e s u ch v otingand o t her c onse n su a l r i g hts. (e) D i v i d e n d R i gh t s i n R e s p ec t o f t h e P l e d g e d C o l la t er a l . ( i ) So l ong as no E v e n t of D e f au l t sh a l l ha v e oc c u r r ed an dbe co n t i nu i ng and su b j e ct t o S e c t i on 4 ( b) he r e o f , e ach P l ed g or may r ece i v e a n d r e t a i n a nyand a l l d i v i den d s ( o t h e r t h an s t ock d i v i den d s and o t h e r d i v i de n ds co n s t it u t i ng P l ed g ed Co l l a t e r a l 9 C H A R2 \ 1 77 2 67 5 v 2 add r e ss e d h e r e i nabo v e) o r i n t e r e s t p a i d i n r esp e ct o f t h e P l ed g ed C o l l a t e r a l t o t h e ex t en t t hey a r e a l l o w ed u nd e r t h e C r ed i t A g r ee m en t . ( i i) U pon the occ u r r ence and d uring t h e co n t i nuan c e of an E v ent of D e fa u lt and n o ti ce f rom the C o l l a t e ral A g ent to the app l i c ab l e Pled g or t hat t h e C o l l a te r al A g ent in t ends to e xe rci s e i ts ri g h t s purs u ant to th i s p a r a g r aph ( e ) : ( A ) a ll ri g h t s of a P l ed g or to r ec ei v e the di vid e nds a nd i n t er est pay m ents t h at it w o uld ot he r w ise be a uth o ri z ed to rec e i v e and r e ta i npu r sua n t to pa r a g r a p h ( i ) o f t his sub s e c t ion s h a l l c e ase and a l l su c h ri g hts sh a ll th ereup o n be v ested i n t h e C o l l a te r al A ge nt, w h i ch s h a l l t hen h a v e t h e so l e r i g ht to r e ceiv e a n d hold a s P l ed g ed C o l la t e r al s uch di v i d ends and in t er e st pay m ents; and ( B ) a ll di v ide n ds a nd i n t e re s t p ay m ents t hat are re c ei v ed b y a Pled g or c o n t rary to the pr ov isions o f p a r a g r a p h ( A ) of th i s su b se c tio n sh a l l be rec e i v ed in t r ust f o r t h e be n ef i t o f t h e C o l l a te r al A g ent, sha l l be se g re gat e d f rom oth e r p r ope r ty or f unds o f s uch P l ed g or, and sh a ll be fo rth wi th p aid o v er to theC oll a t e r a l A g ent as P led ge d C ol l at e r a l i n t h e e x act f or m recei v ed, to b e h e ld by the Co ll a t e r a l A g ent as P l e d g ed C oll a t e ral and as f u r t h er c o l l a t er a l s ec u r i ty for the S ecu r ed O b l i g at i ons. (f) R e le a s e o f P l e d g e d C o l la t er a l . T h e C o ll a te r a l A g e n t m a y r e l e a s ean y o f t h e P l e d g e d C o ll a te r a l f ro m t h i s P l ed g e A g ree m e n t o r m a y su b st i t u t e a n y o f t h e P l ed g e dC o ll a te r a l f o r o t h e r P l ed g e d C o l l at e ra l w i t h o u t al t er i n g , v a r y i n g o r d i m i n i s h i n g i n a n y w a y th e f o r c e , e f fe c t , l i e n , p l ed g e o r s e c u ri t y i n t e r es t o f t h i s P l ed g e A g re e m en t a s t o a n y P l ed g e d Co l l at e ra l no t ex p r e ss l y re l e a s e d o r su b st i t u t e d , a n d t h i s P l e d g e A g ree m e n t s h a l l c o n t i n u e a s a fi rs t p r i o ri t y li e n o n al l P le d g e d C o lla t e r a l n o t e x p r e ss l y r e l e as e d o r s u b s ti t u t ed . 11. R i g h t s o f R eq u i r e d L e n d er s . A l l r i gh t s o f t h e C o lla t e r a l A g ent h e r e u n d e r , i f n ote x er c i s e d by t h e C o ll a te r a l A g e n t , m ay b e e x e r c i s ed by t h e R e q u ir ed L en d e r s . 12. A pp li c a t i on o f P r oc e ed s . U pon t he occur r ence and dur i ng t he con ti nua t i on of an E vent ofD e f au lt , any pay m en t s i n r espect of t he Secu r ed O b li ga ti ons and any p r oceeds of t he P l edged C o l l a t e r a l , w hen r ece ived by t he C o l l a t eral A gent or any of t he ho l ders of t he Secu r ed O b l i ga ti ons i n cash or i t s equ i va l en t , w i l l be app li ed in r educ t i on of t he Secured O b li ga t i ons i n t he o r der set f or t h i n Sec t i on 9.03 of t he C red i t A g r ee m ent as t hough t he w or d “ O b l i ga t i ons” t he r e i n w e r e de l e t ed and rep l aced w it h t he ph r ase “Secu r ed O b li ga t i ons,” and each P l edgor i r revocab l y w a i ves t he r i ght t o d i rect t he app li ca t i on of such pay m en t s and p r oceeds and ackno w l edges and ag r ees t hat t heC o l l a t e r al A gent sha l l have t he con t i nu i ng and exc l us i ve r i ght t o app l y and reapp l y any and a l l such pay m en t s andproceeds i n t he C o l l a t e r al A gen t ’s so l e d i scre t i on, no t wi t hs t and i ng any en tr y t o t he con tr a r y upon any of i t s booksand r eco r ds. 13. C o st s o f C ou n s e l . A t a l l ti m es he r ea f t e r , w h e t h e r or n ot upon t h e oc c u r r en c e of a nE v ent of D e f au l t , t he P l ed g o r s a g r ee t o p r o m p tl y pay upon d e m and any and a l l r e a son a b l e co s t s a nd ex p en s es (in c l u d i ng r e a sona b l e a t t o r ne y s’ f e es a n d ex p ens e s) of t he C o l l a t e r a l A g ent and t h e ho l d e r s of t he S ec u r ed Ob li g a t i ons ( a ) as r eq u i r ed under S e c ti on 11.04 o f t he C r ed i t A g r ee m ent and ( b ) a s ne c ess a r y t o p r o t ectthe P led g ed C o l l a t e ral or to exe r c i se any r i g hts o r re m edies und e r t h is P led g e A g r e e m ent or wi th r esp e ct to any ofthe P led g ed C o ll a te r al. A ll o f the fo r e g oing cos t s and exp e ns e s sh a ll c o ns t it u te S e cu r edOb li g at i ons h e r eund e r . 10 C H A R2 \ 1 77 2 67 5 v 2 14. C on ti n u i ng A g r ee m en t . (a) T h is P led g e A g ree m ent sh a ll b e a c on t in u ing a g ree m ent in e v ery resp e ctand sha l l r e m ain in fu l l for c e a n d ef f e c t s o l o n g a s a n y o f t h e S e c u r e d O b l i g a ti o n s re m ai n s o u t st a nd i n g ( o t h e r t h a n c on t i n g e n t i n d e m n it y o b l i g at i o n s n o t y e t d u e a n d p a y a b l e ) a n d un t i l al l o f t he co mm it m en t s r el a ti n g t h e r et o h a v e b e e n t er m i n a t e d . U p on such pa y m ent and t e r m ina t ion, th i s Pledg e A g ree m ent sh a ll be auto m at i ca l ly ter m in a ted a n d the C o l l a t er a l A g ent s h a ll , upon t he requ e st and a t thee xpe n se of t h e P l ed g ors, fo r th wi th r ele a se a l l of i t s l ie n s and s e cur i ty in t e r es t s here u nd e r and sh a ll exe cute and d e li v er a l l UC C t e r m inat i on s ta t e m ents a n d/ o r o t h er d o cu m ents rea s ona b ly requ e s t ed by the Pled gors e v iden c ing such t er m ina t ion. N o t w i t hs t an d i ng the fore g oin g , a ll inde m ni t ies p ro v ided h ere u nd e r sh al l s urv i v e ter m inati o n of t h is P l e d g e A g re e m ent. (b) T h is P led g e A g ree m ent sh a ll c on t inue to b e e ff e c t i v e o r be a uto m at i ca lly rei n s t at e d, as t h e c a se m ay be, i f a t any ti m e pa y m ent, in w ho l e or in p a r t, o f any o f t h e Sec u red O bli g a tions is re s cin d ed o r m ust other w ise be re s to r ed or r e t u rned by the C o l l a t e r a l A g ent or any hold e r o f t h e Secu red O b l i g at i ons a s a p r e fe r en c e, f ra u dule n t c o n v e y ance or o th er w ise u n der any ban k ruptc y , i n sol vency or s i m ilar La w , a l l a s th o u g h s u ch pa y m ent had n o t be e n m ade; pro v id e d th a t in the e v ent p ay m ent o fa l l o r any pa r t o f t h e Se cu red O b li g a t ions is re s ci n d e d or m ust be re s to r ed or r e tu r ned, a l l r e a sona b le cos t s and exp e ns e s (in c lu d ing re a sona b le a t to r ne y s’ f e es a n d expen s e s ) i n cu r red by t h e C ol l at e r a l A gent or any hol d er of t h e Sec u red O b l i g ati o ns in de f end i ng and e n fo r cing su c h r e in s t a t e m ent sha l l b e dee med to b e in c lu d ed as a p a rt of the S ecu r ed O bli g a t ions. 15. A m end m en t s an d Wa i v e r s . T h i s P l ed g e A g r e e m e n t an d t h e p r o v i si o n s h e r e o fm a y no t b e a m end e d , w a i v e d , m od ifi ed , c h an g e d , d i s c h ar g e d o r ter m i na t e d e x c e p t a s se t f o r t h i n S e ct io n 1 1. 0 1 o f t h e C r e d i t A g r e e m e n t ; p ro v i d e d t h a t a n y u p d at e o r r e v i s i o n t o S c h ed u l e 2 ( a ) h e r e o f s hal l n o t c o n s t it u t e a n a m end m e n t f o r p u rp o s e s o f t h i s S e ct i o n 1 5 o r S e ct i o n 1 1 . 0 1 o f t h e C re d i t A g r e em en t . 16. Succe s s o r s i n I n t e r e s t . T h i s P l edge A g r ee m ent sha l l c r ea t e a con ti nu i ng secu r i t y i nt erest i n t he C o l l a t e r al and sha l l be b i nd i ng upon each P l edgo r , i t s successo r s and ass i gns, and sha l l i nu r e, t oge t herwi t h t he r i gh t s and r e m ed i es of t he C o ll a t e r al A gent and t he ho l de r s of t he Secu r ed O b li ga t i ons he r eunde r , t o t hebenef i t of t he C o ll a t e r al A gent and t he ho l ders of t he S ecu r ed O b li ga t i ons and t he i r successo r s and pe r m itt ed ass igns; p r o v i ded, ho w eve r , t hat none of t he P l edgo r s m ay ass i gn i t s r i gh t s or de l ega t e i t s du t i es hereunder w i t hout t hepr i or w r i t t en consent of t he r equ i s i t e Lende r s under t he C r ed i t A g r ee m en t . 17. N o ti c e s . A l l n o t i ces r e qu i r ed or p e r m i t t ed t o be g i v en under t h i s P l ed g e A g r ee ment s h a l l be g i v en as p r o v i d ed i n Se c ti on 11.02 o f t he C r ed i t A g r ee m en t . 18. C oun t e r p a rt s . T h i s P l ed g e A g r ee m ent m a y be execu t e d i n any nu m ber of cou n t er pa rt s, each o f w h i ch w hen so e xe cu t ed and d e l i v e r ed sh a l l b e an o r i g i na l , b u t a l l o f w h i c h sh a l l c on s t i t u t e oneand t h e sa m e i n s t r u m en t . I t sha l l n o t be ne c es s a r y i n m a k i ng p r oof o f t h i s P l ed g e A g r ee m ent t o p r o duce ora c cou n t f o r m o r e t h an o n e such cou n t e r pa r t . 19. H ead i n g s . T he he a d i n g s of t he s e c ti o n s a n d su b se c ti on s he r eof a r e p r o v i d ed fo r con v en i e n ce o n l y and s h a l l not i n any w ay a ff e ct t he m ean i ng or con s t r uc t i on of a ny p r o v i s i on o f t h i s P led g e A g r ee m en t . 11 C H A R2 \ 1 77 2 67 5 v 2 20. G o v e r n i ng La w ; J u r i s d i c t i o n; W a i v er o f R i g ht t o T r i a l by J u r y ; E t c . (a) T H I S PLE DG E AGR EE M E N T AN D T H E O T H ER L OA N DOCU ME N T S AN D AN Y CLA I MS, CON T RO VE R S Y , D I SP U T E O R CAU SE O F AC T I O N (W H E T H ER I N CON T RAC T O R T O R T O R O TH E R W I SE) BA SED U P ON , A R I S I NG OU T O F O R R EL A T I N G T O T H I S PLE DG E AGR EEME N T O R AN Y O TH ER L OA N DOCU ME N T ( E X C E P T , A S T O A N Y O T H ER L OA N DOCU ME N T , A S EXP R E SSLY SET F O R T HT H E R E I N ) AN D T H E T RAN S AC T I ON S CON T EMPL A T ED H E R E B Y AN D T H E R E B Y S H ALL B E GO VERN ED BY , AN D CON S T RU ED I N ACCORDA N C E W I T H , T H E L A W O F T H E S T A T E O F N EW YOR K A PPL I CAB LE T O AGR EEME N T S M AD E A N D T O B E PE R F OR MED E N T I R ELY W I T H I N S U C H S T A T E;P RO V I D ED T HA T T H E C O LL A T E RA L AG E N T S H A LL R E T A I N A LL R I G H T S AR I S I N G UND ER FE D ERA L L A W. (b) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y AN D UNC O N D I T I ON ALLYAGR EES T HA T I T W I LL NO T CO MME NC E AN Y AC T I ON , L I T I G A T I ON OR P ROC EED I NG O F AN Y K I ND OR D ES C R I PT I ON , W H E T H ER I N L AW O R E Q U I T Y , W H E T H ER I N CON T RAC T O R I N T OR T O R O T H E RW I S E, AG A I N ST T H E CO LL A T E RA L AG E N T , O R A N Y R EL A T ED P AR T Y O F T H E F OR E GO I N G I N AN YW A Y R EL A T I NG T O T H I S PLE DG E A G R E E ME N T O R AN Y O T H ER L OA N DOCU ME N T O R T H E T RAN S AC T I ON S R EL A T I NG T H E R E T O O R T H E R E T O , I N AN Y F ORU M O T H ER T H A N T H E COUR T S O F T H E ST A T E O F N EW YOR K S I TT I N G I N N EW YOR K COUN T Y AN D O F T H E UN I T ED S T A T ES D I S T R I C T COURT O F T H E S OU T H E R N D I S T R I C T O F N EW YOR K, AN D AN Y A PPELL A TE COUR T F RO M AN Y T H E R E O F,AN D E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB LY A ND UNCON D I T I O NA LLY S UB M I T S T O T H E JUR I SD I C T I O N O F S U C H COUR T S AN D AGR E E S T H A T A LL C L A I MS I N R ESPE C T O F AN Y S UC H AC T ION , L I T I GA T I O N O R P R O C EED I N G M A Y B E H E AR D A ND D ET E R M I N ED I N S U C H N EW YOR K S T A TE COUR T OR , T O T H E F U LLEST E X T E N T PE R M I T T ED B Y A PP L I CAB LE L A W, I N SU C H FE D E R AL COURT . E AC H O F T H E P AR T I ES H E R E T O A G R EES T H A T A F I NA L J UDG ME N T I N AN Y SU C H AC T I O N , L I T IGA T I ON O R P ROC EED I N G SH A LL B E CONC L U S I VE AN D M A Y B E E N F ORC E D I N O T H ER J UR I SD I C T ION S B Y SU I T O N T H E J UDG ME N T O R I N AN Y O T H ER M ANN ER P RO V I D ED B Y L A W. N O T H I N G I N T HI S PL E DG E AGR EEME N T O R I N AN Y O T H ER L OA N DO C U ME N T S HA LL A FFE C T AN Y R I G H T T HA T T H ECO LL A T E RA L AG E N T M A Y O T H E R W I SE HA VE T O BR I N G A NY LE GA L AC T I O N O R P ROC EED I NG R ELA T I N G T O T H I S PL E DG E AGR EEME N T O R AN Y O T H ER L OA N DOC UME N T AGA I N ST T H E BORRO WE R , OR AN Y O T H ER L OA N P AR T Y O R T H E I R P R O PE R T I E S I N T H E COUR T S O F AN Y J UR I SD I C T I ON . (c) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y AN D UNC O N D I T I ON ALLY WA I VES, T O T H E F U LLEST E X T E N T PE R M I T T E D B Y A PP L I C A B LE LAW, AN Y OB J E C T I O N T H A T I T MA Y NO W O R H E R E A F T ER HA VE T O T H E L AY I N G O F VE NU E O F AN Y AC T I O N O R P ROC EED I NG A R I S IN G OU T O F O R R EL A T I N G T O T H I S PLE DG E A G R E EME N T O R AN Y O T H ER L OA N DOCU ME N T I N AN YC OUR T R EFE RR ED T O I N PA RAG R A PH ( B ) O F T H I S SE C T I ON . E AC H O F T HE P AR T I ES H E R E T O H E RE B Y I RR EV OCAB LY W A I VES, T O T H E F U LLEST E X T E N T PE R M I TT ED B Y A PPL I C A B L E L A W, T H E DEFE N SE O F A NI NCON V E N I E N T F OR U M T O T H E M A I N T E NA N C E O F S UC H AC T I O N O R P ROC EE D I N G I N AN Y SUC H C O UR T . (d) E AC H O F T H E P AR T I ES H E R E T O I RR EV OCAB L Y CON SE N T S T O SE R V I C E O FP ROC ESS I N T H E M ANN ER P RO V I D E D F O R NO T I C ES I N SE C T I O N 11.02 O F T H E CR E D I T AGR EEME NT . N O T H I NG I N T H I S PLE DG E AG R EEME N T W I LL A FFE C T T H E R I GH T O F AN Y P AR T Y H E R E T O T OSE R VE P ROC ESS I N A N Y O T H ER M ANN ER PE R M I TT ED B Y A PP L I CAB LE L A W. 12 C H A R2 \ 1 77 2 67 5 v 2  (e) E AC H O F T H E P AR T I ES H E R E T O H E R E B Y I RR E V OCAB LY W A I VES, T O T H E FU LLEST E X T E N T PE R M I TT ED B Y A PPL I C A B L E L A W, AN Y R I GH T I T M A Y HA VE T O A T R I A L B Y J URY I N AN Y LE GA L P ROC EED I N G D I R E C T LY O R I N D I R E C T LY A R I S I N G OU T O F O R R EL A T I NG T O T HI S PLE DG E AGR EEME N T O R AN Y O T H ER L OA N DOCU ME N T O R T H E T RAN S AC T I ON S CON T EMPL A T EDH E R E B Y O R T H E R E B Y (W H E T H ER BA SED O N CON T RAC T , T O R T O R AN Y O T H ER T H E ORY ). E AC HP AR T Y H E R E T O ( A ) C E R T I F I ES T HA T N O R EP R ESE N T A T I VE, AG E N T O R A T T ORN EY O F AN Y O T HER PE R S O N HA SREPRESEN T ED, E X PR E SSLY OR O T HERW I SE, T H A T SUCH O T HER P E RSON WOULD NO T , I N T HE E V ENT OFL I T I G A T I ON, SEEK T O ENFORCE T HE FOREGO I NG W A I V ER AND( B ) AC K NO WLE DG ES T HA T I T AN D T H E O T H E R P AR T I ES H E R E T O H AVE B EEN I N D UC EDTO E N TER I N TO T H I S PLE DG E AGR EEME N T AN D T H E O T H ER L OA N DOCU ME N TS BY , A M ON G O T H ERT H I N G S, T H E M U T UA L W A I V E R S AN D C E R T I F I CA T I O N S I N T H I S SE C T I ON . 21. S e v e ra b ili t y . I f any p r ov i s i on of t h i s P l edge A g r ee m ent or any r e l a t ed docu m ent i s he ld t o be i l l ega l , i nva l i d or unen f orceab l e, ( a) t he l ega l i t y, va li d i t y and en f orceab i li t y of t he re m a i n i ng p r ov i s i onsof t h i s P l edge A g r ee m ent and any o t her r e l a t ed docu m ent sha l l not be a ff ec t ed or i m pa ir ed t hereby and (b) t he par t i essha l l endeavor i n good f a it h nego ti a ti ons t o rep l ace t he i ll ega l , i nva l i d or unen f o r ceab l e p r ov i s i ons w it h va l i d p r ovi s i ons t he econo m i c e f fect of w h i ch co m es as c l ose as poss i b l e t o t hat of t he i l l ega l , i nva l i d or unenfo r ceab l e p r ov i si ons. T he i nva l i d i t y of a p r ov i s i on i n a par t i cu l ar j ur i sd i c ti on sha l l not i nva li da t e or r ender unenfo r ceab l e such p rov i s i on i n any o t her j ur i sd i c t i on. 22. E n tir e t y . T h i s P l edge A g r ee m en t , t he o t her Loan D ocu m en t s and t he o t her docu m en t sr e l a t i ng t o t he Secured O b li ga ti ons co m p ri se t he co m p l e t e and i n t eg r a t ed ag r ee m ent of t he pa r t i es on t he sub ject m a t t er hereof and t he r eof and supe r sedes a l l p r i or ag r ee m en t s, w r i t t en or ora l , on such sub j ect m a tt e r . T h i s P ledge A g r ee m ent w as d r a f t ed wi t h t he j o i nt par t i c i pa t i on of t he r espec t i ve par t i es t he r e t o and sha l l be cons tr uedne i t her aga i nst nor i n favor of any pa rt y, but ra t her i n acco r dance w it h t he f a i r m ean i ng t he r eo f . 23. S ur v i v a l . A l l r ep r esen t a t i ons and w a r ran t i es m ade hereunder or o t her docu m ent de li veredpu r suant here t o or t he r e t o or i n connec t i on he r e w it h or t here wi t h sha l l su r v i ve t he execu ti on and de l i ve r y he r eof andt he r eo f . S uch r ep r esen t a t i ons and w a rr an t i es have been or w i l l be r e li ed upon by t he A d m i n i s t ra t i ve A gen t , t heC o ll a t e r al A gen t , and each Lender, r ega r d l ess of any i nves ti ga t i on m ade by t he A d m i n i s t ra t i ve A gen t , t he C o ll a te r al A gent or any Lender or on t he i r beha l f and no t wi t hs t and i ng t hat t he A d m i n i s t ra t i ve A gen t , t he C o ll a t e r al Agent or any Lender m ay have had no t i ce or kno w l edge of any D e f au l t at t he ti m e of any C r ed i t Ex t ens i on, and sha l l con t inue i n fu l l f o r ce and e f fect as l ong as any Loan or any o t her O b li ga t i on hereunder sha l l r e m a i n unpa i d or unsa t i s fi ed orany Le t t er of C r ed i t sha l l r e m a i n ou t s t and i ng. 24. O t her S ec u r i t y . T o t he ex t e nt t h at any of t he S e cu r e d O b li g a t i ons a r e now or he re a f ter sec u r ed by p r o pe r t y o t h e r t han t h e P l ed g ed C o l l a t e r al ( i n c l ud i ng r eal and o t h e r p er sonal p r o pe r t y o w nedby a P l ed g o r) , o r by a g ua r a n t ee, end o r se m ent o r p r op e rt y of any o t her P e r son, t h e n t he C o l l a t e r a l A g ent sha l lha v e t he ri g ht t o p r oc e ed a g a i n s t s u ch o t h e r p r op e rt y , g ua r an t ee o r en d o r s e m ent upon t h e oc c u r r en c e of anyE v ent of D e f a u l t , a n d t he C o l l a t e r a l A g ent s h a l l ha v e t he ri g h t , i n it s so l e d i sc r e t i on, t o d e t e r m i ne w h i chri g h t s, sec ur it y , l i en s , sec u r i t y i n t e r e s t s or r e m ed i es t he C o l l a t e r a l A g ent s ha l l a t a ny ti m e pu r s u e, r e l i nqu i sh, sub o r d i na t e, m od if y or t a k e w i t h r e sp e ct t h e r e t o, wi t ho u t i n any w ay m od if y i ng or a ff e c t i ng any of t hemor t he S e cu r ed O b li g a t i ons o r any of t he r i g h t s of t he C o ll a t e r a l A g ent or t h e h o l d e r s o f t he Secu r ed O b l i g a t ions u n der t h i s P l e d g e A g r ee m en t , un d er any of t he o t h er L o an D o cu m en t s or u nd e r any o t h e r do c u m ent r e l a t ing t o t he Sec u r ed O b li g a t i o n s. 13 C H A R2 \ 1 77 2 67 5 v 2 25. J o i n t and Se v e r a l O b l i g a ti o ns of P l ed g o r s . (a) Su b j e c t to s u b s e c t i on ( c) o f th i s Se c t i on 25, each of the Pled g ors is acc e p ting joi n t a n d se v e r al l i ab i l i ty h e reun d er in c o ns i de r a t ion o f the fi n an c ial ac c o m m odati o n to be pro v idedby t h e h o ld e rs o f t he Sec u red O b li g a t io n s, f o r the m utu a l be n e f it, d i r e c tly and i n d i re c tl y , of e a ch o f t he P l ed g ors a n d in co n si d e r a t ion o f t h e un de rta k in g s of ea c h of the P le dg ors to a cce p t joi n t a n d se v e r al l iab i l i ty f o r t h e ob l i g a t ions o f e ach o f the m . (b) Su b j e c t to s u b s e c t i on ( c) o f th i s Se c t i on 25, each of the Pled g ors j o in t lyand se v era l ly her e by ir r e v ocab l y and uncon d i t ion a lly a c c e pts joi n t a nd se v e r al l i ab i l it y w ith the ot h erPled g ors w ith re s pe c t t o t h e pay m ent of a l l of the S ec ur ed O b l i g atio n s a ri s ing und e r t h is P led g e A g ree ment, the o th e r Loan D ocu m ents and any oth e r d ocu m ents r el a t i ng to t h e S e cured O bli g a t ion s , i t b e ing the i n ten t ion o f t h e p a r t ies he r eto th a t a l l the p ay m ent Sec u r e d O bli g a t ions sha l l be the j o int and se v er a l ob l i g at ions o f e ach o f t he Pled g ors w ith o ut p r e fe r en c es or di s ti n c t ion a m ong the m . (c) N o t w i t h s t a n d i n g a n y p ro v isi o n t o t h e c o n t r a r y c o n t ai n e d h e r e in , i n a n y o t h e r o f t h e L o a n D o cu m e n t s o r i n an y o t h e r d o c u m en t s r ela t i n g t o t h e S e c u r e d O b l i ga ti o n s , the o bli g a t ions of each G u a ra n t o r u n d e r t h e C r e d i t A g r e e m e n t a n d t h e o t h e r L o a n D o cu me n t s sh a ll be li m ited to an a gg re g ate a m ount equal to t he l a r g est a m ount th a t w o u l d not ren d er s uch o b l i g atio ns su b je c t to a v oidance und e r Se c t ion 5 4 8 of t he B an k ru p tcy C ode o f t h e U n i ted S t a tes o r a ny other ap p l ica b le D ebtor R e l i e f Law ( in c lu d i ng any c o m parab l e pro v i s i o ns of any app l ica b le s t ate l a w ). 26. J o i n d e r . A t any t i m e a ft e r t he d a t e o f t h i s P l ed g e A g r e e m en t , one o r m o r e add it i onal Pe r so n s m ay beco m e pa rt y he r e t o by ex e cu t i ng and d e l i v e ri ng t o t he C o l l a t e r a l A g ent a C o l l a t e r a l Jo i n der A g r ee m en t . I m m ed i a t e l y upon su c h ex e cu t i on and d e li v e r y of such C o l l a t e r al J o i n der A g r ee m ent ( and w itho u t any f u rt h er ac t i o n ) , each such add it i on a l P e r s o n w i l l be c o m e a pa r t y t o t h i s P l ed g e A g r ee m ent asa “P l ed g o r ” a n d ha v e a l l o f t he ri g h t s and o b li g a t i o n s o f a P l ed g or h e r eu n der and t h i s P l ed g e A g r ee m entand t h e s c hed u l es he r e t o s h a l l be d e e m ed a m ended by such C o ll a t e r a l J o i nd e r A g r ee m en t . 27. C on s e n t of I ss ue r s of P l e d g ed Sh a r e s . E ach i s s uer of P l ed g ed Sh a r es pa r t y t o t h i s Pl ed g e A g r ee m ent he r eby ac k no wl ed g es, con s en t s and a g r ees t o t h e g r ant of t he sec u r i t y i n t e r e s t s i n s u ch P l edg ed Sh a r es by t he a p p li cab l e P l ed g o r s p u r s u ant t o t h i s P l ed g e A g r ee m en t , t o ge t her w i t h a l l ri g h t s acco mpan y i ng such s e cu r i t y i n t e r est as p r o v i ded by t h i s P l ed g e A g r ee m ent and a p p l i ca b l e l a w , no t wi t h s t an d i ngany an t i - ass i g n m ent p r o v i s i o ns i n any ope r a t i ng a g r ee m en t , li m it e d pa r t n e r s h i p a g r ee m ent or s i m il ar o r gan i z a ti on a l o r g o v e r nance d o c u m en t s of s u ch i ss u e r . 28. R ep l a c e m ent of E x i s t i ng P l ed g e A g r ee m en t . A s of t he da t e he r eo f , t h e Ex i s t i ngP l ed g e A g r ee m ent sha l l be a m ended, r e s t a t ed and s up e r se d ed and r ep l aced i n i t s e n t i r e t y by t h i s P l ed g e A g ree m en t . 27. T e r m i n at i o n an d R el e a s e . (a) T h is P led g e A g ree m ent and all se c u r ity i n te r e s ts g ra n t e d he r eby sha l l t erm ina t e w hen ( i) a ll of the O b li g a ti ons un d er the L o an D ocu m ents (e x cl u ding co n tin g ent obli g a t io n s as to which no c l aim has b e en m ade) ha v e been pa i d in f u ll i n cash, ( i i ) a l l C o m m it m ents ha v e ter m in a ted o r ex p i red a n d ( i i i ) t h e a gg re g ate a m ount a v ai l ab l e to be d ra w n u n der L et t ers of C re d it has b e en r edu c ed t o z ero (i nclu d ing as a re s u l t of ob t a i ning the c ons e nt o f t he a pp l ica b le L /C I ssuer thr o u g h the p ro v is i o n of C a s h Co l l a te r al o r o th e r a r ran g e m ent s a t i sf a ct o ry t o the app l i c ab l e L/C I ssuer) a nd no L /C I ssuer h a s any f u rt her o b l i g ati o n to iss u e or a m end Le t te r s of C r e d i t und e r the C r ed i t A g ree m ent. 14 C H A R2 \ 1 77 2 67 5 v 2  (b) A ll s ec u r i ty int e re s ts g r a nt e d he r eby sha l l a lso t e r m ina t e and b e r e le ased at the ti m e or t i m es and in t he m anner set f o rth in S e c t ion 1 0 . 10 of the C re d it A g ree m en t . (c) I n connecti o n w i t h any t er m ination o r r e l ease pu r sua n t to s ub s e c ti on ( a ) or( b ) of th i s Se c ti o n 29, the C o l l a t e r al A g ent s h a l l e x ec u te a nd de l i v er to any Pled g or, a t s uch P l ed g or’sexpen s e, a ll docu m ents th a t such P led g or s ha l l r ea s on a bly requ e st to e v i d ence su c h t e r m inati o n or re l ea s eso long as the a pp li cab l e P l ed g or sh a ll ha v e p r o v ided t h e C o l l a te r al A g ent such ce r t i fi c a t ions or d ocu ments as t h e C o l l a t e ral A g ent sh a l l r e aso n ably r e que s t i n o r d e r to de m onstr a te c o m plian c e wi th t h is S e c tion 29. A ny ex e cu t ion a n d d e li v ery of d o c u m ents by the C oll a t e r a l A g ent pu r sua n t t o th i s S e c t ion s h a l lbe w it h out r eco u rse to o r w a rr a nty by theCo ll a t e r a l A g en t . [Si g nat u res on F o llo w ing Pa g es] 15 C H A R2 \ 1 77 2 67 5 v 2  99060020002500 PLEDGOR S :ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvaniacorporation By: /s/ Brian L. MacNealName: Brian L. MacNealTitle: Senior Vice President and Chief FinancialOfficer ARMSTRONG REALTY GROUP, INC., a Pennsylvaniacorporation By: /s/ Stephen F. McNamara Name:Stephen F. McNamara Title: VicePresident ARMSTRONG VENTURES, INC., a Delawarecorporation By: /s/ Stephen F. McNamara Name:Stephen F. McNamara Title: VicePresident AWI LICENSING LLC,a Delaware limited liability company By: /s/ Stephen F. McNamaraName: Stephen F. McNamaraTitle: Vice President and Controller AMENDED AND RESTATED PLEDGE AGREEMENT ARMSTRONGWORLD INDUSTRIES, INC. Accepted and agreed to as of the date first above written. COLLATERAL AGENT:BANK OF AMERICA, N.A., as CollateralAgent By: /s/ Kimberly D. Williams Name:Kimberly D. Williams Title: VicePresident AMENDED AND RESTATED PLEDGE AGREEMENT ARMSTRONGWORLD INDUSTRIES, INC.  S CH E DU LES Sched u l e 2 ( a) P l ed g ed S t o ck E X H I B I T S Exh i b i t 4 ( a ) Fo r m of S t ock Po w er C H A R2 \ 1 77 2 67 5 v 2 Sched u l e 2 ( a) to A m ended and R es t a t ed P l e d g e A g re e m entdated as o f A p r il 1, 20 1 6in f a v or of B ank of A m er i c a, N . A ., asC o l l a te r al A g entPLE DG ED S T OC K M a t e r i al D o m e sti c S u b s i d i a ri e s Pledgor Is s uer N u m ber o f Sha res Cer t i f icat eN u m ber PercentO w ned PercentPledgedA r ms t ron g Wor ldI n d us tri e s , In c. A r ms t ron g R eal t y G ro up , I n c. 1,000 1 100% 100%A r ms t ron g Wor ldI n d us tri e s , In c. A r ms t ron g V e n t u r e s , In c. 505 1 100% 100%A r ms t ron g Wor ldI n d us tri e s , In c. A W I Lic e n s i n g L LC 1,000 N / A 100% 100% M a t e r i al F i rst - T i er F o r e i g n Sub si d i a r y Pledgor Is s uer N u m ber o f Sha res Cer t i f icat eN u m ber PercentO w ned PercentPledgedA r ms t ron g Wor ldI n d us tri e s , I nc.A r ms t ron g W or ld I n d ust r iesCana d a L t d . 500C - 1 (175),C - 2 (325) 100% 65% Exc l u d ed Su b si d i a ri e s Pledgor Is s uer N u m ber o f Sha res Cer t i f icat eN u m ber PercentO w ned PercentPledgedA r ms t ron g Wor ldI n d us tri e s , I nc.A r ms t ron g W or ld I n dus t r ies(Del a w are) LLC N / A N / A 100% 65% D C B 1 H / 8 A 6 9 R 8 3 2 4 2 \ 3 1 . 2 779634v1 and i r r e v ocab l y app o i n t si t s a g e n t and a tt o r ne y - i n - f act t o Exh i b i t 4 ( a ) to A m ended and R es t a t ed P l e d g e A g re e m entdated as o f A p r il 1, 20 1 6in f a v or of B ank of A m er i c a, N . A ., as Co l l a te r al A g ent Fo r m of I rr e v ocab l e S t ock Po w er F O R V A L U E R E C E I V E D , t he u n de r s i g ned h e r e by se l l s, a s s i g ns and t r a n s f e r s t o t he f o l l o w i ng sh a r e s of ca p i t al s t o ck of [ ISS UER ] , ac o rp o ra t io n : N o. of Sh a r es C e r t if i c a t e N o. tr a n s f er a l l or any pa r t of s u ch ca p i t al s t o ck and t o t a k e a l l ne c es s a r y and a p p r o p r i a t e a c t i on t o e ff e ct any suchtr a ns f e r . The a g ent a n d a t t o r n ey - i n - f act m a y subs t i t u t e and app o i nt one o r m o r e p e r s o ns t o a c t f or h i m . T hee f f e c ti v ene s s of a tr a ns f er p u r s ua n t t o t h i s s t o ck po w er sh a l l be s u b j ect t o any and a l l tr a n s f er r e s t r i c t i o n s re f e r e n ced on t he f a ce o f t h e c e r t i f i c a t e s ev i denc i ng su c h i n t e r e s t o r i n t he ce r t i f i c a t e o f i nc o r po r a t i on o rb y l a w s o f t he su b j e c t c o r p o r a ti on, t o t he e x t e n t t h ey m a y fr om ti m e t o ti m e ex i s t . [H O LDE R ] B y :N a m e :T it l e : C H A R2 \ 1 77 2 67 5 v 2Exhibit 10.4 A M ENDED AND R E S T A TED CANAD I AN PLED G E AGRE E M E N T T H I S A M ENDE D AN D RES T A TE D CANAD I A N PLEDG E AGRE E M E N T ( t h i s “ P l ed g e A g ree m e n t ” ), d at e d a s o f A p ri l 1 , 20 1 6 , i s b y a n d a m on g AR M S T RON G W OR L D I NDUS T R I ES , I NC . , a Penn s y l v an i a c o rpo r a t i on ( t h e “ P l ed go r ” ) , a n d BA N K O F A M ER I CA , N . A . , a s c o l l a t er a l a g e n t ( i n s u c h c a p a c i t y , t h e “ Co ll a te r a l A g e n t ” ) f o r t h e h o l d er s o f t h e S e c u r e d O b l i g a ti o n s r e f er e n c e d b e l o w . W I T N E S S E T H W H E R E A S, r e v o l v i ng c r ed i t a nd t e r m l oan f a c i l i t i es w e r e e s t a b l i s hed i n f a v o u r of t he P l ed g orpu rs u ant t o t he t e r m s of t h at c e r t a i n a m ended and r e s t a t ed c r e d i t a g r ee m ent d a t e d as o f M a r ch 15, 20 1 3 ( as a mended and m od i f i e d p r i or t o t he C l o si ng D a t e, t he “ Ex i s t i ng C r ed i t A g r ee m en t ”) a m ong t he P l ed g o r , A r m strong Wood P r odu c ts , I nc., a D e l a w a r e co r p o r a ti o n , ce r t a i n of t h e i r r e s p e c t i v e Sub si d i a r i e s , as g ua r a n t o r s th e r eund e r , t he l e nde r s p a rt y t h e r e t o an d B ank of A m e ri ca, N . A ., as ad m i n i s t r a t i v e a g ent and c o l l a t e r a l a gent f or t h e l end e r s t h e r eu n de r ; W H E R E A S, i n conne c ti o n w it h t he Ex i s t i ng C r ed i t A g r ee m en t , t he P l ed g or en t e r ed i n t o t h a t ce r t a in A m ended and R e s t a t ed C a na d i an P l ed g e A g r ee m ent da t ed as o f M a r c h 15, 2013 (t h e “ E x is t i ng P l ed g e A g r eem en t ” ) ; W H E R E A S, t he P l e d g or h a s r e que s t ed c e r t a i n m od i f i c a t i ons t o t he r e v o l v i ng c r e d i t and t e r m loan f a c i l i t i es und e r t he E x is t i ng C r ed i t A g r ee m en t ; W H E R E A S, t he L end e r s h a v e a g r eed t o t h e r e que s t ed m od ifi c a t i ons on t h e t e r m s and c o nd i ti on s p r ov i ded i n t h a t ce r t a i n A m ended and R e s t a t ed C r ed i t A g r ee m en t , da t e d as of t he d a t e he r eof (a s a m ended andm od i f i ed, t h e “ C r e d i t A g r ee m en t ” ) , a m o n g t he P l ed g o r , c e rt a i n of i t s S ub s i d i a r i e s , as g ua r an t o r s t h e reun d e r , t he l end e r s p a r t y t he r e t o and B ank of A m e ri ca, N . A ., as a d m i n ist r a t i v e a g ent a n d co l l a t e r a l a g e n t fo r t he l en d e r s t h e r eun d e r ; and W H E R E A S, t h i s P l e d g e A g r ee m ent i s r equ i r ed un d er t he t e r m s of t he C r e d i t A g r ee m en t , and i s g i ven i n a m end m ent t o, r e st a t e m ent of and s ub s t i t u ti on f or t he Ex i s t i ng P l ed g e A g r e e m ent p r o v i ded i n conne c t ion wi t h t he E x i s ti n g C r ed i t A g r ee m en t . NO W , T H EREF O RE, i n c o n s i d e rat i o n o f t h es e p re m i s e s a n d o t h e r g o o d a n d v a l u a b l e c o n si d e r ati on , t h e r e c ei p t a n d s u ff i ci e n c y o f w h i c h a r e h e r eb y ac kn o w l ed g e d , t h e p ar t i e s h e r e t o a g r e e a s f o l l o w s: 1. D e fi n i t i o n s . (a) C api t a l i z ed t er m s used and not o th e r w i s e d e fi n ed h e r e i n sh a ll h a v e the m eanin g s a sc r ibed to such te r m s in t h e d e f in i tio n s in S e c tion 1.01 o f t h e C r e d i t A g ree m ent pro v i d ed ho w e v er t hat f or t h e purpo s es h e r eof,any r e fe re nces to the “ U n i form C o m m ercial C o de” or “ UCC ” i n such d e fi n i t ions s h a l l and s ha l l b e d ee m ed to m ean “the UCC , t h e PPSA o r the S T A , as ap p l i ca b le ” . I n ad d i t ion, t h e f o l l o w i n g t e r m s w h i c h a r e d e fi n e d , a s a pp l i ca b l e , i n (i ) t h e UC C ; (i i ) t h e P P SA ; o r (i i i ) t h e S TA ar e u s e d a s d e f i n e d t h e re i n : A cce s s i on, F ina nc ial A ss e t,I n v est m ent Pro p ert y , P r oce e ds and S ec u r it y . For g re a ter c e r t ai n t y , w here any su c h t e rm is defi n ed i n m ore than o neo f the UCC , PPSA or S T A (ea c h, an “ A p p l i ca b l e S t a t u t e ”), i ts m eaning f o r t he p u rpo s es o f a ny pro v is i on of t h is Ag ree m ent w h e r e su c h t erm is u sed sh a l l be t h e m eaning asc r ib e d to such term in t he A p p li c ab l e Sta t ute t h at a pp l i e sto such pro v is i on. (b) A s used h e r ein, the f o llo w i ng ter m s sha l l ha v e t h e m eanin g s s e t f o rth b e lo w : “ C o l l a t e r a l A g en t ” h as t h e m ean i ng p r o v i d ed i n t he i n t r odu c t o r y pa r a g r aph he r eo f , t o g e th e r wi t h i t s s uc c e s s o r s and a s si g n s . “ C r e d i t A g r ee m en t ” has t he m ean i ng p r o v i ded i n t he r e c i t a l s h e r e o f . “ E v ent of D e f a u l t ” h a s t h e m ean i ng p r o v i ded i n S e c ti o n 8 he r eo f . “ Ex i s t i ng C r ed i t A g r ee m en t ” h a s t h e m ean i ng p r o v i d e d i n t he r e c i t a l s he r eo f . “ Ex i s t i ng P l ed g e A g r ee m en t ” h a s t h e m ean i ng p r o v i d e d i n t he r e c i t a l s he r eo f . “ P l ed g e A g r ee m en t ” h as t he m ean i ng p r o v i ded i n t h e i n tr o du c t o r y pa r a g r aph h e r e o f , a s am ended and m od if i ed. “ P l e d g e d C o l la t er a l ” h a s t h e m ea n i ng p ro v i d e d i n S e ct i o n 2 h er e o f. “ P l e d g e d S h a r e s ” h a s t h e m e a n i ng p ro v i d e d i n S ec t i o n 2 ( a ) h er e o f. “ P l e d g o r ” has t he m ean i ng p r ov i ded i n t he i n t r oduc t ory pa r ag r aph he r eo f . “ PPS A ” m eans t he P e r s o n al P r op e rt y Se c u r it y A ct a s i n f o r ce f r om ti m e t o ti m e i n t he r e l e vant p r o v i nce o r t e r r i t o r y of C anada. “ S e c u r e d O b l i g a t i o n s ” m e a n s, w it h o ut d u p l i cat i o n , ( a) a l l O b li ga t i ons and (b) a l l co st sand expenses i ncu rr ed i n connec t i on wi t h en f orce m ent and co l l ec t i on of t he Secured O b li ga t i on s , i ncl ud i ng r easonab l e l egal f ees and expen s e s . “ S T A ” m eans t he S e cu r i t i es T r an s f er A ct as i n f o r c e f r om ti m e t o ti m e i n t h e r e l e v ant p r o v ince or t e r r i t o r y of C a n ada. “ UCC ” m eans t he U n if o r m C o m m e r c i al C ode as i n ef f e c t i n t he s t a t e o f N ew Y o r k fr om ti m e to t i m e. 2. P l ed g e and G r a n t of S ec u r it y I n t e r e st . T o s ecu r e t he pr o m pt pay m ent and p e rf o r m ance i n f u l l when due, w he t h er by l ap s e of t i m e, acce l e r a t i on, m anda t o r y p r epa y m ent or o t he r w is e , of t he Se c u r e d O b li g a t ion s , t h e P l ed g or h e r eby g r an t s , p l ed g es and a s si g ns t o t he C o l l a t e r a l A ge n t , f or t h e b en e f i t o f t he ho l d e r s of t he Se c u r e d O b l i g a ti o n s , a c on t i n u i ng s ec ur it y i n t e r e s t i n any and a l l r i g h t , t i tl e and i n t e r e s t o f t he P l edg or i n a n d t o t he f o ll o w i n g , w he t h er now o w ned o r e x i s t i ng or o w n ed, a cq u ir e d , o r a r i si ng he r e a f t er ( c o l l e cti v e l y , t he “ P l ed g ed C o ll a t e r a l ” ) : (a) P l ed g ed Sh a r e s . Si x t y - fi v e per c ent (6 5 %) ( o r, i f l es s , the fu l l a m ount o w n ed by the P l ed gor) o f t h e i s sued and ou t st a nding v oting C ap i tal S tock (or 1 00% of the non - v oting C api t al S toc k ) o w n ed by t hePl e d g or of each M a t e r i al F ir s t - T i e r Fo r ei g n Sub s i diary and ea c h Exclu d ed Su b si d i a ry for m ed or e x i sting und e r t he l a w s of C an a da, o r any pro v ince or te r r i t o ry the r eo f , set fo r th on Sc h e d u l e 2 ( a) a t t ach e d he reto, in each c a se to g et h er wi th t h e ce r t i f i ca t es ( o r oth e r a g ree m ents o r i n s t r u m ents), i f an y , re p re s en t i ng such C api t al S toc k , and all o p t ions and oth e r ri g hts, co n t r a c tu a l o r oth e r w i s e, wi th r e spe c t th e reto ( co l le c t i v el y , to g eth e r w ith the C a p i t a l Stock des c r i bed in S e c t i on 2 ( b) and 2 ( c) b e lo w , t h e “ P l ed g ed Sha r es ” ), i n cl u ding t he f o llo w in g : 2 ( A ) a l l s h a r e s , s ec u r i ti e s , m e m be rs h i p i n t e r e s t s o r o t h er e qu i t y i n t e r e s t s rep r e s e n t i ng a d i v i de n d on any of t he P l ed g ed S h a r e s , or r e p r e s en t i ng a d i s t r i b u ti o n o r r e tu r n o f c ap i t a l u p on o r i n r e s p e c t of t h e P l ed g ed Sh a r e s , or r e s u l ti ng f r om a st o ck s p l it , r e visi o n, r e c l a s s i fi c a t i on o r o t her e x chan g e t he r e f o r , and any s ub s c r i p t i on s , w a r r an t s , ri g h ts or op t i o n s iss u ed t o t he ho l d er o f , or o t he r w is e i n r e s pe c t o f , t he P l ed g ed Sha r es ; and ( B ) w itho u t a ff e c t ing the o b li g ations o f t he P l ed g or u n der any pro v i s ion proh i b i tingsuch a c ti o n h e reun d er or un d er the C r e d it A g ree m ent, in the e v ent of any cons o li d a t ion or m er g er inv ol v ing the i ssu e r of any Pled g ed S h ar e s and in w h i ch s u ch iss u er i s not t h e sur v i v ing en t it y , all Ca p it a l St o ck of the suc c ess o r en t ity for m ed by or res u l t ing from such cons o l i da t ion o r m er g er. (b) A dd i t i on a l S h a r e s . S ixt y - f i v e per c ent (6 5 %) ( o r, i f l e ss, t he f u l l a m ount o w n e d by thePled g or) of the iss u ed and ou t s t and i ng v oting C api t al S tock (or 10 0 % of the non - v oting C api t al S toc k ) o w n edby t he Pl e d g or of any Pers o n t hat h er e a f ter be c o m es a M at e ri a l F ir s t - T i e r Forei g n S u bs i di a ry or an E xclud ed S u bs i di a r y , f o r m ed or e x i s ting un d er the l a w s of C an a da, or any pro v ince or t e r r it o ry t here o f, in c lu ding the c e r t i f ic a tes ( o r o th e r a g r e e m ents or in s tru m ent s ) rep r es e n t ing such C a p i t al S toc k . (c) P r oc e ed s . A ll P ro c eeds of any and a l l o f t h e f o re g oin g . W i t ho u t li m it i ng t he g ene r a l i t y of t he f o r e g o i n g , i t i s he r eby s pec i f i c a ll y unde r s t ood and a g r ee d t h at t he P l ed g or m ay fr om ti m e t o ti m e h e r e a f t er de l i v er a dd i ti o nal C a p it a l S t ock t o t he C o l l a t e r a l A g ent as co l la t e r al s e cu r it y f or t h e Secu r e d O b li g a t i on s . U pon de li v e r y t o t he C o l l a t e ra l A g en t , s uch add i ti o n a l C ap i t alS t ock s ha l l be d e e m ed t o be pa r t of t he P l e dg ed C o ll a t e r a l of t h e P l ed g or and s h a l l be s ub j e ct t o t he t e r m s of t hi s P l ed g e A g r ee m ent w he t h er or n ot S ched u l e 2 ( a ) i s a m ended t o r e f er t o s u ch a d d i ti o n a l C ap i t al S t oc k . N o tw it h s t a nd i ng an y t h i ng t o t h e co n t r a r y con t a i ned h e r e i n, t he s ecu r it y i n t e r e s t s g r an t ed under t h i s P l ed g e Ag r ee m ent s h a l l n o t e x t end t o, a n d t he “P l ed g ed C o ll a t e r a l ” s ha l l n o t i n c l u d e, any Exc l u d ed P r ope r t y . 3. S e c u r i t y f o r S e c u r e d O b l i g a ti o n s . T h e s e c u ri t y i n t e r e s t c r e at e d h er e b y i n t h e P l ed g e dC o ll a te r a l o f t h e P l ed g o r c o n s ti t u t e s c o n t i n u i n g c o l l at e ra l s e c u r it y f o r a l l o f t h e S e c u r e d O b l i g a t i on s . 4. D e l i v e r y o f t h e P l ed g e d C o ll a te r a l . T h e P l e d g o r h er eb y a g re e s t h a t : ( a ) T o t h e e x t e nt t h a t P l ed g e d C o ll a te r a l i s ce r tif i ca t e d, t he P l edgor s ha l l ( s ub j ect t o t hep r ov is i ons of Sec t i on 7.14 of t he C r ed i t A g r ee m en t ) de li ver t o t he C o l l a t e r al A gent ( i ) si m u lt aneous l yw it h or p ri or t o t he execu t i on and de l i ve r y of t h i s P l edge A g r ee m en t , a l l cer t i fi ca t es repre s en t i ng t he P ledged Sha r es of t he P l edgor and ( i i ) p r o m p tl y upon t he r ece i pt t hereof by or on beha l f of t he P l edgo r , a l l o t hercer t i f i ca t es and i ns t ru m en t s cons t it u ti ng P l edged C o ll a t e r al of t he P l edgo r . T he C o ll a t e r al A gent he reby ackno w l edges t hat t he cer t i f i ca t e r epre s en t i ng t he P l edged S ha r es of t he P l edgor as of t he da t e he r eof was prev i ou sl y de l i ve r ed t o it s coun s el i n connec t i on w it h t he Ex is t i ng P l edge A g r ee m en t . P ri or t o de l i ve ry t o t he C o l l a t e r al A gen t , a l l s uch cer t i f i ca t es and i n s t r u m en t s cons t i t u ti ng P l edged C o l l a t e r al of the P l edgor sha l l be he l d i n tr u s t by t he P l edgor f or t he bene f i t of t he C o l l a t e r al A gent pu rs uant he r e t o. A l ls uch cer t i fi ca t es sha l l be de li vered i n s u i t ab l e f o r m f or t r an sf er by de l i ve r y or s ha l l be acco m pan i ed by dul y execu t ed i ns tr u m en t s of t r ans f er or a s s i gn m ent i n b l ank, s ub st an t i a l l y i n t he f o r m p r ov i ded i n Ex h ib i t 4 ( a) a t t ached here t o. 3 ( b) A dd i t i on a l S ec u r i t i e s . I f t h e P l ed g or s ha l l r e c e i v e by v i r t ue of i t s be i ng or h a v i ngbeen t he o w n e r of any P l ed g ed C o l l a t e r a l , a ny (i ) ce r t i f i c a t e, i n c l ud i ng any ce r t i f i c a t e r ep r e s e n t ing a d i v i d end o r d i s t r i b u ti o n i n co n ne c ti o n w it h any i n c r e a s e or r e du c t i on o f c ap i t a l , r e c l a s s i fi ca t i on, m e r g e r , con s o l i d a t i on, s a l e of a ss e t s , co m b i na t i on of s h a r e s or o t h e r eq u it y i n t e r e st s , st ock s p l i ts , s p i n - o f f o r s p l i t - o ff , p r o m iss o r y no t es o r o t her i n s t r u m en t s ; ( i i ) op t i on o r ri g h t , w h e th er as an add iti on t o, s u b s t i t u t i on f o r , o r an e x chan g e f o r , any P l e dg ed C o ll a t e r a l o r o t h e r w i s e; ( i i i) d i v i den d s pa y ab l e i n s ec u r i t i e s ; o r ( i v ) d is t ri b u t i ons o f s ec u r it i e s i n con n ec t i o n w it h a pa r t i al ort o t al li q u i da t i on, d is s o l u ti o n or r ed u c t i on of ca p i t a l , ca p it a l s ur p l us o r p a i d - i n s u r p l u s , t h en t heP l ed g or s ha l l r ec e i v e s u c h c e r t i fi c a t e , i n s t r u m en t , o p ti o n , r i g ht o r d is t r i bu t i on i n tr u s t f o r t hebe n e f i t o f t he C o ll a t e r a l A g en t , s ha l l s e g r e g a t e i t fr om t he P l ed g o r’ s o t h e r p r op e rt y and s h a l l d e li v er i t f o rt h w i t h t o t h e C o l l a t e r a l A g ent i n t he ex a ct f o r m r ec e i v ed t og e t her wi t h any nece s s a r y endor s e m ent a n d / or ap p r o p r i a t e s t ock po w er d u l y ex e cu t ed i n b l an k , s ub s t a n t i a l l y i n t he f o r m p r o v ided i n E xh i b i t 4 ( a ) , t o b e h e l d by t he C o ll a t e r a l A g ent as P l ed g ed C o l l a t e r a l and a s f u r t h e r c o l l a te r a l s e cu r it y f or t h e Se c u r e d O b l i g a ti o n s . (c) F i nan c i ng S t a t e m en ts . T o the ex t ent r equ i red by appl i ca b le la w , t h e Pled go r auth o ri z es t heC ol l a t er a l A g ent to fi l e one or m ore fi n ancing st a te m ents d i s c lo s i n g the C ollat e r a l A g ent’s s e cu r ity i n te re s t in the P l ed g ed C o l la t er a l. The Pled g or s ha l l e x ec u te a nd de l i v er to t h e C oll a t e r a l A g ent s uch o th e rapp l i c ab l e f in a nc i ng st a t e m ents, ot h er f i l i n g s and o t h er d o cu m ents a s m a y be reasona b ly requ e s t ed bythe C oll a t e r a l A g ent in or d er to p e r fe c t and p ro t ect t he s e cu r ity in t er e st cr e at e d h e reby in t h e Pled g ed C ol l at e r a l of the Pled g or. 5. R e p r e s e n t at i o n s a n d Wa r ra n ti es . T h e P l ed go r h er e b y rep re se n t s a n d w a r r a n t s t o t h e C o lla te r a l A g e n t , f o r t h e b e n e f i t o f t h e h o l d e r s o f t h e S e c u r e d O b l i g a ti o n s , t h a t s o l on g a s an y o f t h e S e c ur e d O b l i g at i o n s r e m a i n s o u t st a n d i n g a n d un t i l al l o f t h e c o m m it m en t s r el a ti n g t h e r et o h a v e b e e n te r m in at e d : ( a ) A u t ho r i z a t i on o f P l ed g ed Sha r e s . T he P l edged Shares have been du l y au t hor i zed and va l i dl y i ss ued, a r e f u ll y pa i d and non - a ss e ss ab l e and a r e not s ub j ect t o t he p r e - e m p ti ve ri gh t s of any Per s on. (b) T i t l e . T he P l ed g or has g o o d and in d ef e a s ib l e t i t l e to t h e Pled g ed C o l l a te r al o f the Pled gor and is t he l e g al a nd ben e fi c i a l o w n e r of s u c h Pled g ed C o l l a te r al f r e e a nd cl e ar o f any Lien, ot h er t h anP e r m itt e d Liens. W i th re s pe c t to the Pled g ed S h ar e s o f the P le dg or, th e re ex i s t s no “ad v erse c lai m ” w ith i nt he m eaning of (i) Sec t ion 8 - 102 of the UC C or (ii) any corr e spon d ing pro v is i on of the PPS A . (c) Exe r c i s i ng of R i g h ts . T h e ex e rc i se by the C o l l at er al A g ent of i t s r i g hts a n d re m edies h ere u nd e r w i l l not v iol a te a ny Law or g o v ern m ental r e g ula t ion or any m ateri a l con t ra c tu a l r e s t r ic t ion b in d ing on or a f fe c t i ng the P led g or or any of i ts p ro p e r t y . (d) P l ed g o r ’ s A u t ho r it y . N o a utho r i z a t ion, ap p ro v al o r a ct i on b y , a n d no n o t i ce o r f i lingw it h , any G o v ern m e nt a l A uth o r i ty or t he i ss ue r of any Pled g ed Sh a res, i ts d ir e ct o rs o r sha r eho l de r s is r equ i red e it her ( i ) f o r the p l ed g e m ade by the Pled g or or for t he g ranting of t h e sec u r i ty i n te r est by t h e P l e d g orpu r sua n t to t h is P led g e A g ree m ent ( ex c ept as h av e been a l ready obt a ine d ) or ( i i) f o r t h e ex e rc i se by the C ol la t e r al A g ent or t he ho l de r s of t he Se c ured O b l i g at i o n s of th e ir r i g hts a nd re m edies he r eun d er (e x ce p t as m ay be r eq u ir e d by La w s a f fe c ti ng the o f f e r ing and s ale of s e cu r i t ie s ), ex c ept for su c h a u th o ri z a t ion,appro v a l s o r a c t i ons as hav e alr e ady been obt a ined or p e r for m ed and are in fu l l for c e a n d e f f e ct. W i tho u t l im iting t h e g ene r a l ity of t h e fore g oin g , th e re are no r e s t r ic t io n s in a ny of the O r g ani z a t ion D o cu m ents of th e i ssu e r of t h e Pled g ed Sh a r e s w h i ch w o uld li m it o r re s t r i c t the g rant of s e cu r ity i nt e re s t h ereu n der or th e 4 exe r c i s e o f t he ri g h t s and r e m ed i es co n f e r r ed h e r eby e x cept s u c h r e s t r i c t i ons as h av e a lr e ady be e n com p li ed wi t h. (e) Secu r it y I n t e r e s t / P r i o r i t y . T h is P l ed g e A g ree m ent creates a v a l id se c u r ity in t er es t in fav our of t h e C ol l a t er a l A g ent for the be n e f it of t he holde r s of the S e cu r ed O bli g a t ions, i n t h e Pled g ed C ol l at er a l. T h e t ak ing of possess i on by the C ol l at e r a l A g ent or i t s duly autho r i z ed a g e n t of the ce r t i f i c a tes re pres e n t ing the Pl e d g ed Shar e s, or the ac k no wl ed g e m ent by s uch a g ent t h at i t holds s u ch ce r t i f i c a tes f o r theA g ent, to g et h er w i t h duly e x ec u ted i n s t ru m en t s of t ra n sf e r or assi g n m ent in b l an k , sub s t an t ia l ly in the fo rm pro v ided in Sch e du l e 4 ( a) a t ta c h e d he r eto, and a l l oth e r c e r t i f ic a t e s and in s t r u m ents con s t i tu t ingPled ge d C oll a t e r a l, w i l l p e r f e c t a nd es t ab l ish the fi r st p ri o r i ty of the C o l l at er al A g ent’s s ec u r i ty int e res t in the P led g ed Sh a res, a nd such po s se s si o n w ill e s t ab l ish the f i r st p ri or ity of such s ec u r i ty int e re s t in a l lot h er P l ed g ed C ol l a t er a l re p re s en t ed by such Pled g ed Sh a r e s a n d in s tru m ents sec u r i ng the Secu r ed O b l ig ati o ns. E x c e pt as s e t f o rth in th i s S e c t i on 5 ( e ) , no ac t ion is n e ce s sary a t t h is ti m e t o pe r f e ct or ot h er wise pr o t e ct such s e cu r ity in t er e st. (f) Pa rt n e r s h i p and M e m be r s h i p I n t e r e sts . A s of t h e date he r eof, none of the Pled g ed Sh a resc o n s ist o f p art n e r ship o r l i m ited li a b i l it y c o m pany inter e sts. E x c e pt as p re v iou s ly dis c lo s ed to the C o l l at er a l A g ent, none of the P led g ed Shar e s con s i s t i ng of pa r t n ers h ip o r l i m ited li a b i l i ty co m pany inte r es t s (i)is de a lt in or tr a ded o n a sec u r i ti e s ex c han g e or in a sec u r i t i es m ar k et, (ii) by its t e r m s expre s sly pro v ides t hat i t is a secu r ity g o v erned by A rti c le 8 of the UC C or a ny co r res p ond i ng pro v i sio n s o f the S T A , ( i i i ) is an in ve s t m ent co m pany sec ur it y , ( i v ) i s h eld in a s ec u r i t i es a ccou n t o r ( v ) co n s t it u tes a S e cu r ity or a Finan c i a lA s s et. ( g ) N o O t her I n t e r e s ts . A s of the C l o sing D ate, p u rsu a nt to the t er m s of the C r ed i t A g ree m ent,the Pled g or is not re q u i red to p led g e any C api t al S t ock in any Subsidiary oth e r t h an as s e t fo r th on Sc h edu l e 2 (a) a t t ached h er e to o r as pl e d g ed pursu a nt t o a ny other pl e d g e a g ree m ent by the P l ed g or t o the C o l l a t er a l Ag ent to s e cure the S ec u red O b li g a t i o ns. (h) N one of t h e i s sue r s of the Pled g ed Sha r es a re u n li m i t ed l i ab i l i ty co m panies and ne i ther the Co l l a t er a l A g ent nor any other pe r son s h a l l be l ia b le for the o b l i g ati o ns of a ny iss ue r of the P l ed g ed Shares a sa res u lt of the g rant of s e cu r i ty inte r est h e reu n der o r the exer c ise of t he ri g hts and r e m edies c on f e rr ed h e reb y . 6. C o v en a n t s . T h e P l ed go r h e r e b y c o v en a n t s , t h a t s o l on g a s an y o f t h e S e c u r e d O b li g a t i on s re m a i n s o u ts t a n d i n g a n d u n ti l al l o f t h e c o mm it m en t s r el a ti n g t h e r e t o h a v e b e e n t er m i n a t e d , th e P l ed go r s h a ll : ( a ) B oo k s and R eco r d s . U pon t he r ea s onab l e reque s t of t he C o ll a t e r al A gen t , m a r k it s booksand r eco r ds (and s ha l l cause t he i s s uer of t he P l edged Sha r es of t he P l edgor t o m a r k i t s books and r eco r ds) t oref l ect t he s ecu r i t y i n t erest g r an t ed t o t he C o l l a t e r al A gen t , f or t he benef i t of t he ho l de r s of t he Secu r edO b li ga t i ons, pur s uant t o t h i s P l edge A g r ee m en t . (b) D e f en s e of T i t l e . Wa r ra n t and d efe n d t i t le to and o w ners h ip o f t h e Pl e d g ed C oll a t e r a l of the P led g or a t i ts o w n expe n se a g ain s t t he c l a i m s and d e m ands of all o t her p a r t ies cl a i m ing an int e r e st the r e i n , k eep the P led g ed C o l l at er al f r e e f rom all L iens, ex ce pt f o r P e r m itt e d Liens, and n o t s e l l, e x cha ng e,tran s f e r, a s si g n, l ease o r ot h er wi se d isp o se o f P l e dg ed C oll a te r al o f the P led g or or any in t er e st the r ei n , exc ept as p e r m itt e d under the C re d it A g ree m ent and the o th e r Loan D ocu m ents. 5 ( c) Fu rt h er A s s u r anc e s . P r o m p tl y execu t e and de l i v er at i t s ex p en s e a l l f u r t h e r i n s tr u men t s a nd docu m en t s and t a k e a l l f u rt h er a c t i on t h a t m ay be nece s s a r y and de s i r a b l e o r t h a t t he C o l l a te r al A g ent m ay r ea s ona b l y r equ e s t i n o r d er t o (i ) p e r f e c t and p r o t e c t t he s ecu r it y i n t e r e s t c r e a t edhe r eby i n t he P l ed g ed C o l l a t e r al o f t he P l ed go r ( i n c l ud i ng any and a l l a c t i on n e ce s s a r y t o s a t isf y t he C o l l a t e r a l A g ent t h at t he C o l l a t e r al A ge nt has o b t a i n e d a f i r s t pr i o r it y pe r f e c t ed s ec u r i t y i n t er e s t i n a l l P l e dg ed C o ll a t e r a l ) ; ( i i ) e n ab l e t he C o l l a t e r a l A g ent t o ex er c is e and e n f o r ce it s ri g h t sa n d r e m ed i es h er eund e r i n r e s pe c t of t he P l ed g ed C o ll a t e r al o f t he P l ed g o r ; and ( i ii ) o t h e r w i s e e f fe ct t he p u r p os es of t h i s P l ed g e A g r ee m en t . (d) A m end m en ts . N o t m a k e or c o nse n t to any a m end m e nt o r o th e r m odi f ic a t i on o r w ai v er with r es p ect to any of the P led g ed C ol l a t er a l of the Pled g or o r en t er i n to a ny a g ree m ent or al l ow to e x i s t anyres t r i c ti on w ith r es p ect to any of t he Pled g ed C o l l a te r al o f t h e Pled g or o t h e r than p ur s ua n t h e re t o or as ma y be per m itt e d und e r t he C red i t A g ree m ent. (e) C o m p li ance wi t h S ec u r i ti e s La w s . F i le a l l r epo r ts and oth e r i nf o r m ation now or her e a f terreq u i r ed t o be f i l ed by the P l ed g or w ith the SE C , the O n t a r io Se c u r i ti es C o m m issio n , and any other s t a te, pr o v inci a l, t e r r i t o r ia l , fed e r a l o r fo r ei g n a g ency in connec t ion wi th t h e o w ners h ip o f t he P led g ed C ol l ate r a l of the Pl e d g or. (f) I ss uance or A cq u i s i t i on of C a p i t al S t o ck C on s i s t i ng of an I n t e r e s t i n a Pa rt n e r s h i p or a L i m it ed L i ab i l i t y C o m pan y . N ot, w ithout ex e cu t ing and deli v e r i n g , or causing to be ex e cu t ed and d e l iv ered, to the C o l l a t er a l A g ent s u ch a g ree m ents, docu m ents and i ns t ru m ents as the C o l l a t er a l A g ent m ayrequ i re, i s sue or acq u i r e a ny C apit a l S tock of a S ub s i diary c o ns i s t ing of an i n te r est in a pa r tn e r s hip or a l i mited l ia b i l ity co m pany that ( i ) is d e a l t in or tra d ed on a sec u r i ti e s exch a n g e or in a s e cu r i t i e s m ar k et, ( i i ) by its t e r m s expr e s s ly pro v ides t h at i t is a sec u r i ty g o v erned by A r t i c le 8 o f t he UC C or the S T A , (i i i) is an inv est m ent c o m pa n y secu r it y , (i v ) i s h e ld i n a s ec u r i t i es a ccou n t or ( v ) co n s t it u t e s a Secu r ity or a Fi n an ci a l A s s et. 7. A d v an ce s b y H o l d er s o f t h e S e c u r e d O b li g at i o n s . O n f a il u r e o f t h e P l ed go r t o p e r f or m an yo f t h e c o v e n a n t s a n d a g r ee m en t s c o n ta i n e d h e r ei n a n d up o n p r i o r w rit t e n n o ti c e t o t h e P l e d g o r , t h e C ol la t era l A g en t m a y , a t i t s s o l e o p ti o n a n d i n i t s s o l e d i s cr e ti on , p e r f o r m t h e s a m e an d i n s o do i n g m a yexpen d s u c h su m s a s t h e C o l l at e ra l A g e n t m a y r e a s o n a b l y d ee m a d v i s a b l e i n t h e p e rf or m a n c e t h er e o f , in c l u d i n g t h e pa y m en t o f an y i n s u r a n c e p re m i u m s , t h e pa y m en t o f a n y t a x e s , a pa y m en t t o o b ta i n a r e l eas e o f a L i e n o r p o t e n ti a l L i e n , e x p e n d i t u r e s m ad e i n d e fe nd i n g a g a i n s t an y ad v e r s e cl a i m an d a l l o t h e re x p e n d i t u r e s t h a t t h e C o ll a te r a l A g e n t m a y m ak e f o r t h e p r o t e ct i o n o f t h e s e c u ri t y h er e o f o r m a y b e com p el l e d t o m a k e b y op er a ti o n o f L a w . A l l s u c h su m s a n d a m ou n t s s o e x p e n de d s h al l b e r e p a y a b l e b y t he P l ed g o r p ro m p tl y u p o n t i m e l y n o ti c e t h e r e o f an d d e m an d t h er e f o r , s h a l l c o n s tit u t e ad d it i o n a l S e c u re d O b li g a t i o n s a n d s h a l l , s u b j ec t t o S e ct i o n 2 . 0 8 o f t h e C r e d i t A g r e e m en t , b e a r i n t er e s t f ro m t h e d a t esa i d a m ou n t s a r e e x p e n d e d a t t h e r at e t h e n a pp l i c a b l e t o R e v o l v i n g L oa n s t h a t a r e B a s e R a t e L o a n s . N o s u c h p er f o r m an c e o f an y c o v e n a n t o r a g r e e m e n t b y t h e C o ll a te r a l A g en t o n b e h a l f o f t h e P le d g or , an d n o s u c h a d v an c e o r e x p e n d i t u r e t h er e f o r , s h a l l r el i e v e t h e P l e d g o r o f an y d e f a u l t u n d e r t h e t er m s of t h i s P l ed g e A g r ee m e n t , t h e o t h e r L o a n D o cu m e n t s o r a n y o t h e r d o c u m en t s re l at i n g t o t h e S e c u r e d Ob l i g a t i on s . T h e C o l l a t era l A g en t m a y m a k e an y pa y m en t h e r e b y a u t h o r i z e d i n a c c o r d a n c e w i t h a n y b il l , st a t e m en t o r est i m a t e p r o c u r e d f r o m t h e a p p r o p r i at e p u b li c o ff i c e o r h o l d e r o f t h e c lai m t o b e d i s c har g e d w it ho u t i n qu i r y i n t o t h e a c c u r ac y o f s u c h b i l l , s t at e m en t o r e st i m a t e o r i n t o t h e v al i d i t y o f an y t ax a s se ss m e n t , s al e , f o r f ei t u r e , t a x l i e n , t itl e o r cl a i m e x c e p t t o t h e e x t e n t s u c h pa y m en t i s b e i n g c o n t e st e d i n g o o d f ai t h b y t h e P l e d g o r i n a p p r o p r i at e p r o c e e d i n g s an d a g ai n s t w h ic h a d eq u a t e r e se r v e s a r e be i n g m a i n ta i n e d i n a c c o r d a n c e w i t h GAAP . 6 8 . E v en t s of D e f a u l t . T he o c cu r r en c e of an e v ent t h at w ou l d co n s t it u t e an E v ent of D e f au l t under t he C r e d i t A g r ee m e n t s h a l l be a n E v ent o f D e f a u l t h e r e und e r ( an “ E v ent of D e f a u lt ” ) . 9. R e m ed i e s . (a) G ene r a l R e m ed i e s . U pon the occ u r r en c e of an E v ent of D efau l t and du r ing the con t inu a t i onth e re o f, t h e C ol l at e r a l A g ent and t h e ho l ders o f the S e cu r ed O b l i g atio n s sh a ll h a v e, in add it ion to t h e ri ghts a nd re m edies pro v i d ed he r ein, in t he Loan D ocu m ents, in any ot he r docu m ents r el a t ing to t h e Secu r ed O b l ig ati o ns, or b y Law (incl u ding le v y of at t ach m ent a n d g arnish m ent), t h e r i g hts an d re m edies of a s ec u red p a r tyunder the UC C or the P PS A , as t he c a s e m a y be, of t h e j u r i s d ic t i o n app l i c ab l e to t h e e n fo rc e m ent of s e cur i ty int e re s ts in t he a f f ec t ed Pled g ed C o l l a te r al. (b) Sa l e o f P l e d g ed C o l l a t e r a l . U pon the o c cu r re n ce o f an E v ent of D e f au l t a n d during t he con t inu a t ion t h ere o f, wi tho u t li m it i ng the g enera li ty of t h is Se c ti o n 9 and w it h out not i ce, the C o l l a t e ral A gent m a y , in its s o le d is c r e ti o n, se l l or o th e r w i s e d i spo s e of or r e a l i z e upon the P l ed g ed C o l la t er a l, o r any part t h er e of, in one o r m ore p a rc e ls, at pu b l ic or p r i v ate sa l e, a t any exchan g e or b ro k er ’ s bo ar d or e l se w he re, a t su c h p r i ce or p ri c es a n d on such o t her t er m s as the C oll a t e r a l A g ent m a y de e m co m m ercially rea s onab l e, for c a sh, c r ed i t or f or f utu r e de l i v ery or oth e r w i s e in a c cor d ance wi th ap p l ica b le L a w . T o the exte n t per m it t ed by La w , a ny holder of t h e Secu r ed O b l i g ati o ns m ay in such e v e n t, bid for the purc h ase o f s u ch s e cu ri t i e s. T h e P l ed g or a g rees th a t, to t h e e xt e nt n ot i ce o f s a le sh a ll be r e qu i r ed by Law and has n o t b e e n w aiv ed by the Pled g or, any req u i r e m ent o f r eas o na b le no t ice s h a l l b e m et if n o t i ce, spe c if y ing t he p la c e o f anypub l ic s ale or the ti m e a f t er w h i ch any p r i v ate s a l e is t o be m ade, i s p e rso n a ll y ser v ed on or m ailed, po s ta g epr e pa i d, to the P led g or, i n ac c or d ance w ith the n o t i ce p ro v isi o ns o f Se c tion 11. 0 2 of the C r ed i t A g ree m entat lea s t t en (1 0 ) da y s bef o re t he ti m e of such sa l e or s uc h oth e r no t ice a s m a y be req u ir e d by app l ic a ble La w. T he C o l l at e r a l A g ent sh a ll n ot b e o b li g a t ed t o m a k e any sa l e of Pled g ed C o l la t er a l of the Pl e d g or re gard l ess o f noti c e of s a le ha v ing been g i v en. T he C oll a t e r a l A g ent m ay a d j o urn a ny pub l ic or p r i v ate s ale fr om ti m e to ti m e by a nnounce m ent at the ti m e and pl a ce fi x ed t h er e for, and such s a le m a y , w itho u t fu r th e r n ot i ce, b e m ade at t h e ti m e and p l ace to w h ich it w a s s o a d j o ur n ed. (c) P ri v a t e S a l e . U pon the occu r re n ce of an E v ent of D efa u lt and d u ring t h e con t inu a t i on th e reo f, the P l ed g or reco g ni z es th a t t h e C ol l at e r a l A g ent m ay deem i t i m prac t ica b l e to ef f e c t a pu b l i c sa l e o fa l l or any p a rt of t he Pled g ed Shar e s or any of the sec u r it ies co n s t it u t i ng Pled g ed C o l la t e r al a n d th a t the C ol l a te r al A g ent m a y , the r ef o re, d e t e r m ine to m a k e one or m ore pri v ate s a les of any such Pled g ed C o l l a t e ralto a r e st r i c ted g ro u p of pu r cha se rs w ho w i l l be obli g a t ed to a g r e e, a m ong oth e r t hin g s, to a cqu i re su c hPled g ed C o l l at e r a l f or t h eir o w n a c cou n t, for in v est m ent and n ot w i th a v iew to t h e d i s t ri b u ti on or r e sa le the r eof. T he Pled g or h e r eby w ai v es any c l a i m s a g ainst the C o l la t er a l A g ent a ri s i n g by reason t h at any suc h pri v ate s ale s h a l l not ha v e been m ade in a co m m ercia l ly reasona b le m anner a n d a g rees t h at t h e C oll a t e r a lA g ent sha l l h a v e no o b li g a t ion t o de l ay sa l e of any such Pled g ed C o l l a t e ral f o r the pe r iod o f ti m e nece s s ary to p er m it the i s s uer of such P l ed g ed C o l l a t er a l to re g is t er su c h P led g ed C o l l a t e ral f o r pub l ic s a le unde r the Se cu r i ti e s A ct of 1933, a s a m e nded ( t he “Sec u r it ies A c t ”) or qual i fy such Pled g ed C o l la t e r al f or s aleunder the a pp l ic a ble L aw a s in f o r c e f r om ti m e to ti m e in t h e r e le v a n t pro v ince or t e r r it o ry of C a nada. TheP led g or fu r th e r ac k no w led g es a n d a g re e s t hat any of f er t o se l l s u ch P l ed g ed C o l la t e r al t hat has b een ( i )pu b l i cly ad v er t ised on a b o na fide ba s is in a ne w spa p er or ot h er pu b li ca tion of g ene r al c i rc u l a ti o n in the finan c i a l co m m unity of N ew Y or k , N ew Y ork (to the ex t ent t hat su c h of f er m ay be adver t is e d w it h out p ri o r reg i s t ra t ion un d er t he Secu r i t ies A ct or the ap p l i cab l e Law a s in f or c e f r o m ti m e to ti m e in the r e l ev ant pro vin c e o r 7 t e r r i t o r y of C ana d a ) , o r ( ii ) m ade p ri v a t e l y i n t he m anner de s c r i bed abo v e s h a l l b e d e e m ed t o i n v o l v e a“pub l i c s a l e” u n der t he UC C and t h e PP S A , as app l i c ab l e, no t w it h s t and i ng t h a t s u ch s a l e m ay not co n s t it u te a “ pub l i c o f f e r i n g ” un d er t he Secu r i t i es A c t o r t he ap p l i cab l e Law as i n f o r c e fr om t i m e t o ti m e i n t he r e le v ant p r o v i nce or t er r i t o r y of C a n ada, and t h e C o ll a t e r a l A g ent m a y , i n s uch e v e n t , b i d f o r t he p u r c h a s eof s uch P l ed ge d C o l l a t e r a l . (d) R e t e n ti o n of P l ed g ed C o l l a t e r a l . T o the ex t ent p e r m itted u nd e r ap p l i ca b le L a w , in ad d i tion t o the ri g hts a nd re m edies h er e und e r, u p on the o c cu r re n ce and c o nti n uan c e of an E v ent of D efa u lt, t h e C ol l ate ral A g ent m a y , aft e r p r o v iding the not i ces r eq u ir e d by Sections 9-620 and 9 - 621 of t he U C C or Se c ti o n 65 o f t h e P PSA ( O n t a ri o ) as ap p l i ca b l e, o r o t he r w is e co m p l y i ng w it h the r e qu i r e m en t s of app l i ca b l e Law o f t he r e l e v ant j u r is d i c ti on, acce p t or r e t a i na l l o r any po r ti o n of t he P l e d g ed C o ll a t e r al i n s a t is f a c t i on of t he Se c u r e d O b l i g a ti o n s . U n l e s s a n d un ti l t he C o l l a t e r al A g ent s ha l l ha v e p r o v i ded s u ch n o t i ce s , h o w e v e r , t h e C o l l a t e r a l A g ent s h a l lnot be d e e m ed t o ha v e ac c ep t ed o r r e t a i ned any P l ed g ed C o l l a t e r a l i n s a t i s f a c ti o n of any Secu r edOb li g at i ons f or any r e a s on. (e) D e fi c i e n c y . I n the e v ent t hat the p ro c eeds of any sa l e, c o ll e c t ion o r r e a li z a t i o n are i ns u f f ic ient to pay a l l a m ounts to w h i ch t h e C o ll at e ral A g ent o r t h e ho l de r s of the S ecu r ed O bli g a t ions a r e le g a l ly e n t itl e d, the Pl e d g or s h a l l b e l ia b le f o r the d e fi c ie n c y , to g et h er wi th in t er e st t he r eon at the D e fa ult R a te, to g et her wi th t h e cos t s of c o ll e c t ion and re as onab l e le g al f ees and exp e nse s . A ny surp l us re m aining a f ter the f u l l pay ment and sa t i s fa c t i on of the S e cu r ed O bli g a t ions sh a ll be r et u r n ed to the Pl e d g or or to w h o m soe v er a cou r t o f com pete n t ju r is d i c ti o n sha l l d e t e r m ine to b e e n t i t l e d th e r e to. 10. R i g h t s o f t h e C o ll a te r a l A g e n t . ( a ) Po w er of At t o r n e y . I n add i t i on t o o t her po w e r s of a tt o r ney con t a i ned he r e i n, t he P l edgorhereby des i gna t es and appo i n t s t he C o ll a t eral A gen t , on beha l f of t he ho l ders of t he Secured O b l i ga t i on s , and eachof i t s des i gnees or agen ts , as a t t o r ney - i n - f act of t he P l edgo r , ir revocab l y and w it h po w er of s ub s t it u t i on, wi t hau t hor it y t o t ake any or a l l of t he fo l l o w i ng ac t i ons upon t he occu rr ence and du r i ng t he con t i nua t i on of an Event ofD efau l t : (i) to de m and, col l ec t , se t t l e, co m pro m ise and a d j u s t, a n d g i v e dischar g es and re l ea s escon c er n ing the P led g ed C o l la t er a l, a ll as t h e C o l l a t e ral A g ent m ay rea s ona b ly deem approp r i a t e; ( i i) to co mm ence and pro s ec u t e any ac t ions at a ny court for the p u rp o ses o f co l le c ting any ofthe P led ge d C ol l at e r a l a n d e n for c ing a ny other ri g ht in r esp e ct th e reo f ; ( i i i ) to de f end, s e t t le o r co m pro m ise any action br o u g ht and, in co n ne c ti o n the r e wi th, g i v esuch d is ch ar g e or r e l ease as the C o l l at e ral A g ent m ay reaso n a b ly deem appro p r i a t e; (i v ) to pay o r d isc h ar g e tax e s, l iens, s e cu r ity i nt e re s ts or o ther e n cu m brances le v ied o r p lac e d on o r t h r ea tened a g ain s t the P led g ed C ol l at e r a l; ( v ) to d i re c t any par t i e s l ia b le f or any pay m ent in con n ec ti on w ith any of t h e Pled g ed C ol l at er a l to m ake pay m ent of any and all m onies due and to bec o m e due the r eun d er d i r ec t ly to the C ol l at e r a l Ag ent or as the C o ll a t e r a l A g ent sh a l l d i re c t; 8 ( v i ) t o r e c e i v e pay m ent of and r ec e i p t f o r any and a l l m on i e s , c l a i m s , and o t h e r a moun t s d ue a n d t o beco m e due a t any t i m e i n r e s pe c t of or a r is i ng out of any P l ed g ed C o l l a t e r a l ; ( v ii) to s i g n and end o r s e any dra f ts, as s i g n m ents, pro x ies, st o ck po w er s , v erif i c a tio n s, n ot i ces and o t her d o cu m ents r e l a t ing to t he Pl e d g ed C ol l a t er a l; ( v ii i ) to ex e cu t e and d e li v er all a s s i g n m ents, con v e y ances, s t a te m ents, fin a nc i ngst a te m ents, ren e w al f ina n cing s ta t e m ents, sec u r i ty and p led g e a g r e e m ents, af f ida v i t s, n o ti c es and oth e r a g ree m ents, i n s t ru m ents and docu m ents th a t the C o ll a t e r a l A g ent m ay reasonably de e m approp r i ate in o rd e r to per f e c t and m aint a in t h e s ecu r ity in t er e sts a n d li e ns g r a nt e d i n t h is P l ed g e A g ree m enta nd in o rd e r to fu l ly con s u m m ate a l l of t h e t ra n sa c ti o ns c o nte m pla t ed t he r ei n ; (i x ) to e xchan g e any of the P l ed g ed C o l la t er a l o r o th e r prop e rty upon any m er g er, conso l ida ti o n, r e o rg ani z ation, re c ap i t a li z a t ion or ot h er rea d j u st m ent of t h e is s u e r the r eof and, i n con n e c tionthe r e wi th, de p os i t any of the P l ed g ed C ol l a t er a l w ith a ny co m m ittee, dep o s i tor y , tr a nsf e r a g e n t, re gis t r a r o r o t her de s i g nated a g ency u p on s u ch ter m s as the C o l l at e r a l A g ent m ay reasona b ly deem appropr i a t e ; (x) to v ote f o r a sh a reh o ld e r r esol u t ion, o r to si g n an i ns tru m ent in w r i tin g , san c tio n ing thet r an s fer o f any or all of the Pled ge d C oll a te r al i n to t h e na m e of the C oll a t e r a l A g ent or o n e or m ore ofthe h o ld e rs o f t h e Sec u red O b l i g a t ions o r i nto t h e na m e of any transf e r e e to w hom the Pled g ed C oll a te ral or any pa r t th e re o f m ay be so l d purs u ant to S e c t i on 9 he r e o f ; a nd (x i ) to do and p e r f orm all such oth e r a c ts and th i n g s as t h e C ol l a t er a l A g ent m a y reaso nably deem a p prop r i a te or con v eni e nt i n con n ec t ion w i t h t he P led g ed C oll a t e r a l. T h i s po w er o f a tt o r ney i s a po w er c o up l ed wi t h a n i n t e r e s t and s h a l l be i r r e v ocab l e f o r s o l ong asany of t he Secu r ed O b li g a t i ons s h a l l r e m a i n ou t s t an d i ng and un t i l a l l of t he co m m it m en t s r e l a t i ng t h e r e to s h a l l ha v e been t e r m i na t ed. The C o l l a t e r a l A g ent s h a l l be u nder no d u t y t o exe r c i s e or w it h ho l d t he e x er c is e of any of t he r i g h ts , po w e rs , p r i v i l e g es and op t i ons exp r e s s l y or i m p li c i tl y g r an t ed t o t he C o l l a t e r al A g ent i n t h i s P l e d g e A g r ee m en t , and s h a l l not be li a b l e f o r any f a i l u r e t o d o s o o r any de l ay i n d o i ng s o.The C o l l a t e r a l A g ent s h a l l n o t b e l i ab l e f o r any a c t or o m issi on or f o r any e rr o r of j ud g m ent or any m ist a k eof f act or Law i n i t s i n d i v i dual c apa c it y or i t s c a pa c it y as a tt o r ne y - i n - f act exce p t a c t s o r o m is s i ons r e s u l ti ng fr om it s g r o s s ne g li g ence o r w ilf u l m is condu c t . T h i s p o w er o f a t t o r ney i s co n f e r r ed on t h e C o l l a t e r al A g ent s o l e l y t o p r o t e c t , p r e s e r v e and r e a li z e u pon it s s e c u r it y i n t e r e s t i n t he P l e d g ed C o ll a t e r a l . (b) A ssi g n m ent by t he C o l l a t e r a l A g en t . T he C o l l a t er al A g ent m ay assi g n t h e Secu r ed Obli g a t io n s and any porti o n th e re o f an d / o r the P l ed g ed C ol l at e r a l and any por t ion the r eof to a s ucc e ss o r c o ll at e r a l a g ent ap p oi n ted p ursu a nt to Se c ti o n 10.09 of the C re d i t A g ree m ent, and the as s i g nee s h a l l b e e n t i t l ed toa l l o f t h e ri g hts and re m edi e s o f t h e C o ll a t e r a l A g ent under t h is P led g e A g ree m ent i n r e l a ti o n t h e r eto. (c) T he C o l l a t e r al A g en t ’ s D u t y of C a r e . O t h er than the exe r ci s e of r e ason a ble c ar e to a s su r e t he s a fe c u stody and pr e s e r v ation of the P led g ed C o l l a te r al w h ile b e ing held by the C oll a t e r a l A g ent h e re u nde r ,the C o l la t e r al A g ent sh a ll ha v e no d u ty or li a b i l i ty to pre s er v e r i g h t s 9 pe r t a i n i ng t h e r e t o, i t b e i n g unde r s t ood and a g r eed t h a t t he P l ed g or s h a l l be r e s p o n s i b l e fo r p r e s e r v a ti on o f a l l r i g h t s i n t he P l e d g ed C o l l a t e r a l , a n d t he C o l l a t e r al A g ent s h a l l be r e l i e v ed of a l l r e s pon s i bi l it y f o r t he P l e d g ed C o ll a t e r a l upon s u rr en de r i ng i t o r t en d e r i ng t he s u rr e n der of i t t o t he P l ed g o r . T he C o l l a t er al A g ent s h a l l be d ee m ed t o ha v e exe r c i s ed r e a s o n ab l e c a r e i n t h e cu st o dy and p r e s e r v a t i on of t he P l ed g ed C o ll a t e r a l i n it s po s s e s s i on i f s uch P l e dg ed C o ll a t e r al i s acc o r ded t r e a t m ent s u b s t a n t i al l y equ a l t o t h a t w h i c h t h e C o ll a t e r a l A g ent a cco r d s i t s o w n p r op e rt y , w h i ch s h a l l be n o l e s s t han t hetr e a t m ent e m p l o y ed by a r ea s o na b l e and p r ude n t a g ent i n t he i nd u s t r y , i t b e i ng und e rst o od t h a t t he C o l l at e r al A g ent s h a l l n o t ha v e r e sp on si b i l it y f or ( i ) a s c e r t a i n i ng or t a k i ng ac t i o n w it h r e s pe c t t o c a l l s , conv e rsi on s , ex c han g e s , m a t u r i t i e s , t e n de r s o r o t h e r m a tt e r s r e l a t i ng t o a ny P l ed g ed C o l l a t e r a l , w h et h e r o r not t h e C o l l a t e r a l A g ent h a s o r i s dee m ed t o ha v e k no w l ed g e of s uch m a t t e r s , or ( i i ) t a k i ng anynece ss a r y st e p s t o p r e s e r v e ri g h t s a g a i n s t any pa r ti e s wi t h r e s pect t o a ny of t h e P l ed g ed C o ll a t e r a l . (d) V o t i ng R i g h t s i n R e s pe c t o f t h e P l e d g ed C o l l a t e r a l . (i) So long as no E v ent of D ef au l t s h a l l ha v e o c cu r red a n d be c on t in u in g , to the ex t ent p er m itted by L a w , t h e P l ed g or m ay exe r cise any and a ll v oting a n d ot h er conse n su a l r i g hts pe r t a in i n g tothe Pled g ed C o l la t e r al of the P l ed g or or any pa r t the r eof for any purpo s e not i n con s is t ent wi th t h e ter m sof th i s Pled g e A g ree m ent or the C red i t A g ree m ent; and ( i i) U pon the oc c u r ren c e and d uring t h e c o n t inua n ce o f a n E v ent of D ef a u l t and n o t i ce fr om the C o ll a t er a l A g ent to the P l ed g or t hat the C o l l a te r al A g ent i n tends t o exe r ci s e i t s ri g hts p u rs uant to this p a r a g r a p h ( i i) , a ll r i g hts of the Pl e d g or to ex er cise the v oting and ot h er c ons e nsu a l r i g hts t hat it w o uld o th er w ise be e n t i tl e d to ex e rc i se purs u a n t to pa r a g r aph ( i ) of t his s u b sec t ion s h a l l ce a seand a ll such r i g hts sh a ll t he r eupon beco m e v ested i n t h e C o l la t e r al A g ent, w hich sh a ll then hav e the s o ler i g ht to ex e r c i se su c h v oting and ot h er con s ensu a l r i g hts. (e) D i v i d e n d R i gh t s i n R e s p ec t o f t h e P l e d g e d C o l la t er a l . ( i ) So l ong as no E v ent of D e f a u l t s h a l l ha v e o c cu r r ed and be co n ti n u i ng and s u b j e c t to Se c ti o n 4 ( b) he r eo f , t he P l e d g or m ay r ece i v e and r e t a i n any and a l l d i v i den d s ( o t h e r t h an s t ockd i v i dends and o t h e r d i v i de nds co n s t it u t i ng P l ed g ed C o l l a t e r a l add r e ss e d h e r e i nabo v e) or i n t er e s t pa i d i n r e s p ect of t he P l ed g ed C o l l a t e r al t o t h e e x t e n t t hey a r e a l l o w ed u nd e r t h e C r ed i t Ag r eemen t . ( i i) U pon the oc c u r ren c e and d uring t h e c o n t inua n ce o f a n E v ent of D ef a u l t and n o t i ce fr om the C o ll a t er a l A g ent to the P l ed g or t hat the C o l l a te r al A g ent i n tends t o exe r ci s e i ts ri g hts pu r suan t to t h is pa r a g raph ( e ) : ( A ) all ri g h t s of the P led g or t o re c ei v e t h e di v i d ends a nd i n te r e s t pay m ents t h ati t w o u ld ot h er w i s e be a u th o ri z ed t o r ec ei v e and r e t a in p u rsu a nt to pa r a g r a p h ( i ) of th i ssu b se c tion sh a ll c ea s e and a ll s u c h ri g hts s ha l l t h e r eupon b e v ested in the C o l la t e r al A g ent,w h ich s h a l l t hen ha v e t he s o le ri g ht to r ec e i v e a n d hold a s P l ed g ed C o l la t e r al s uch di v i dends and in t er e st pay m ents; and ( B ) all d i v iden d s and i n te r e s t pay m ents th a t are r ec e i v ed by the Pled g or c o n trary to the p r o v isions of p a r a g r a ph ( A ) of t h is sub s e c tion sh a ll be rec e i v ed in t ru s t for the b enef i t of t he C o l l a te r al A g ent, sh a ll be s e g re g ated f r o m 10 o t h e r p r op e rt y or f un d s of t he P l ed g o r , and s h a l l b e f o r t h wi t h p a i d o v er t o t h e C o lla t e r a l A g ent a s P l ed ge d C o l l a t e r a l i n t he ex a ct f o r m r ece i v ed, t o be h e l d by t he C o lla t e r a l A g ent as P l ed g ed C o l l a t e r a l and as f u rt h e r c o l l a t e r a l s ec u r i t y f or t he S e cur ed O b l i g a t i on s . (f) R e le a s e o f P l ed g e d C o l la t er a l . T h e C o ll a te r a l A g e n t m a y re l e a s e an y o f t h e P l ed ge d C o ll a te r a l f ro m t h i s P l ed g e A g r e e m en t o r m a y s u b st i t u t e an y o f t h e P l ed g e d C o l l at e ra l f o r o th e r P l ed g e d C o l l at e ra l w i t h ou t a lt e ri n g , v ar y i n g o r d i m i n is h i n g i n a n y w a y t h e f o r c e , e f fe c t , li e n , p l ed g e o r s e c u ri t y i n t er e s t o f t h i s P l e d g e A g re e m en t a s t o an y P l ed g e d C o ll a te r a l n o t e xp r es s l y r e le a s e d o r su b st i t u t e d , a n d t h i s P l ed g e A g ree m e n t s h al l c o n t i n u e a s a f i rs t p r i o ri t y l i e n on a l l P l ed g e d C o lla t e r a l n o t e x p r e ss l y r e l e as e d o r s u b s ti t u t ed . 11. R i g h t s o f R e qu i r e d L e n d e r s . A l l r i gh t s o f t h e C o l l at e ra l A g ent h er eu n d e r, i f no t e x er c i s e dby t h e C o ll a te r a l A g e n t , m ay b e e x e r c i s ed by t h e R e q u ir ed L en d e r s . 12. A pp li c a t i on o f P r o c ee d s . U pon t he occu rr ence and dur i ng t he con ti nua t i on of an E vent of D e f au lt ,any pay m en t s i n re s pect of t he Secured O b li ga ti ons and any p r oceeds of t he P l edged C o l l a t era l , w hen r ece i ved by t he Co l l a t e r al A gent or any of t he ho l de r s of t he Secu r ed O b li ga t i ons i n cash or it s equ i va l en t , w i l l be app l i ed i n reduc t ion of t he Secured O b li ga t i ons i n t he o r der s et f or t h i n S ec t i on 9.03 of t he C r ed i t A g r ee m ent as t hough t he w ord “ O b liga t i on s ” t here i n w e r e de l e t ed and r ep l aced wi t h t he phra s e “Secu r ed O b li ga t i on s ,” and t he P l edgor i rr evocab l y w ai ves t he r i ght t o d ir ect t he app l i ca t i on of such pay m en t s and p r oceeds and ackno w l edges and ag r ees t hat t he C o l l a t eralA gent sha l l have t he con ti nu i ng and exc l us i ve ri ght t o app l y and r eapp l y any and a l l s uch pay m en t s and p r oceeds i n t heC o l l a t e r al A gen t’ s s o l e d i scre t i on, no t wi t hs t and i ng any en tr y t o t he con tr a r y upon any of i t s books and r eco r ds. 13. C o st s o f C oun s e l . A t a l l ti m es he r ea f t e r , w he t h er o r not upon t he o c cu r r en c e of a n E v ent of D e fa u lt , t h e P l ed g or a gr ee t o p r o m p tl y pay upon d e m and any and a l l r ea s o na b l e co s t s and expe n s e s (i n c l u d i ng r e as ona b l e l e g al f ees and e x pen s e s ) of t he C o ll a t e r a l A g ent and t he ho l d e r s o f t h e Se c u r e d O b li g a t i ons ( a ) a s requ i r ed under Se c t i on 11 . 04 o f t h e C r e d i t A g r ee m ent and ( b ) as ne c e s s a r y t o p r o t ec t t he P l e d g ed C o ll a t e r al or t o exe r c i s e any ri g h t s or r e m ed i es under t h i s P l ed g e A g r ee m ent or w it h r e s pe c t t o any of t he P l ed g ed C o ll a t e ra l . A l l of t he f o r e g o i ng co st s and e x pen s es s ha l l con s t i t u t e Secu re d O b li g a t i ons h e r eund e r . 14. C on ti n u i ng A g r ee m en t . (a) T h is P led g e A g ree m ent s h all be a con t in u ing a g re e m ent in e v ery res p ect and sha l l re m ain in fu l l fo r ce a nd eff e ct s o l on g a s a n y o f t h e S e c u r e d O b l i g at i o n s re m a i n s o u t st a n d i n g ( o t h e r t h a n co n t i n g e n t i nd e m n it y o b l i g a t i o n s n o t y e t d u e a n d pa y a b le ) a n d u n t i l al l o f t h e co mm it m en t s r e lat i n g t h e re t o ha v e b e e n te r m i n at ed . U pon such p ay m ent and t er m ina t ion, t h i s Pled g e A g ree m ent shall b eauto m at i ca l ly ter m ina t ed and the C o l l a te r al A g ent sha l l, upon t h e requ e st a nd a t the expe n se of the P led g or,fo r th wi th re l ea s e and d isc h ar g e a l l of i ts l ie n s and sec u r i ty int e r e sts h e reun d er and s h a l l e x ec u te and d eli v er all UC C t e r m inat i on s t ate m ents, PPSA disc h ar g es an d /or ot h er docu m ents re a sona b ly r e ques t ed by the Pled g or e v idenc i ng such ter m in a tion, r e le a se and d i sch a r g e and sh a ll r e - deli v er t h e ce r t i f ic a tes e v i d en c ing the Pled g ed Shar e s to t h e Pled g or o r t o such ot h er P e rson a s the Pled g or sh a ll d ir e ct. N o tw ith s ta n ding t h efore g oin g , a ll inde m ni t ies p ro v ided h ere u nd e r sh a l l s urv i v e ter m inati o n of t h is P l e d g e A g re e m ent. (b) T h is P l ed g e A g ree m ent sha l l co n tin u e to b e e f fe c ti v e or be auto m at i c a lly rei n s t at e d, a sthe c a se m ay be, if at any t i m e pa y m ent, in w ho l e o r in p a r t, o f any of t h e S e cu r ed O bli g a t ions is re s ci n ded or m ust oth e r w ise be re s t o red or r et u rned by the C o l l at er al A g ent o r any 11 ho l d e r o f t he S e cu r e d O b l i g a ti ons as a p r e f e r e n ce, f ra udu l e n t con v e y ance or o t he r w is e un d er any bank r up t c y , i n s o l v ency or si m il ar La w , a l l a s t hou g h s uch pa y m ent had n o t been m ade; p r o v i d e d t h a t i n t he e v ent pa y m ent of a l l or any pa r t of t h e Secu r ed O b li g a t i o n s i s r e s c i nded or m u s t be r e s t o r ed or r e t u rne d , a l l r ea s o n ab l e co s t s and e xp e n s es ( i n c l u d i ng r ea s o na b l e l e g al f e e s and expen s e s ) i n c u r r ed byt he C o ll a t e r a l A g ent or any ho l der of t he S e cu r ed O b l i g a t i ons i n d e f e n d i ng and en f o r c i ng s uch r e i n s ta t e m ent s h a l l b e dee m ed t o be i n c l u ded as a pa r t of t he S ecu r ed O b li g a t i on s . 15. A m end m en t s a n d W a i v e r s . T h i s P l ed g e A g r e e m e n t a n d t h e p r o v i si o n s h e r e o f m a y no t b ea m end e d , w a i v e d , m od if i e d , ch a n g e d , d is c h ar g e d o r t er m i na t e d e x c e p t a s se t f o r t h i n S ec t i o n 1 1. 0 1 o f th e C r e d i t A g r e e m en t ; p ro v i d e d t h a t an y u p d a t e o r r e v i si o n t o S c he du l e 2 (a ) h e r e o f s h a l l n o t co n st i t u te a n a m end m e n t f o r p u rp o s e s o f t h i s S e ct i o n 1 5 o r S e ct i o n 1 1 . 0 1 o f t h e C re d i t A g r e e m en t . 16. Succe s s o r s i n I n t e r e s t . Th i s P l edge A g r ee m ent s ha l l c r ea t e a con t i nu i ng s ecu r i t y i n t e r e s t i n the C o ll a t e r al and s ha l l be b i nd i ng upon t he P l edgo r , i t s s ucces s ors and a ssi gn s , and s ha l l i nure, t oge t her w it h t he r igh t s and r e m ed i es of t he C o l l a t eral A gent and t he ho l de r s of t he Secu r ed O b li ga t i ons he r eunde r , t o t he benef i t of t heC o l l a t e r al A gent and t he ho l de r s of t he Secu r ed O b li ga t i ons and t he i r s ucce ss o r s and pe r m it t ed a ssi gns; p r o v ided, ho w eve r , t hat t he P l edgor m ay n ot a ssi gn i t s ri gh t s or de l ega t e i t s du t i es hereunder wi t hout t he p ri or w r i t t enconsent of t he r equ i s it e Lenders under t he C r ed i t A g r ee m en t . 17. N o ti c e s . A l l n o t i ces r equ i r ed or pe r m i t t ed t o b e g i v en under t h i s P l ed g e A g r ee m ent s h a l l be gi v en as p r o v i d ed i n Se c ti on 11.02 o f t he C r ed i t A g r ee m en t . 18. C oun t e r p a rt s . T h i s P l ed g e A g r ee m ent m ay be execu t ed i n any n u m ber of coun t e r p a r t s , each of w hi ch w hen s o e x e cu t ed a nd d e li v e r ed s ha l l b e an o ri g i n a l , b u t a l l of w h i ch s h a l l con s t i t u t e one and t h e s a m e i ns tr u m en t . I t s h a l l not b e ne c e s s a r y i n m a k i ng p r oof of t h i s P l e d g e A g r ee m ent t o p r o duce or a c cou n t f o r m o re t h an o n e s uch cou n t e r pa r t . 19. H ead i n g s . T h e h ea d i n g s of t he s e c t i ons and s u b s ec t i o n s h e r e o f a r e p r o v i ded f or con v en i e nce on l y and s h a l l n o t i n any w ay a f f e c t t he m ean i ng or con s tr u c t i on of a ny p r o v i s i on o f t h i s P l ed g e A g r ee m en t. 20. G o v e r n i ng La w ; J u r i s d i c t i o n; W a i v er o f R i g ht t o T r i a l by J u r y ; E t c . (a) T H I S PLE DG E A GR EEME N T AN D AN Y C LA I MS, CON T RO VE R S Y , D I SPU T E O R CAU SE O FAC T I O N (W H E T H ER I N C ON T RAC T O R T OR T O R O T H E R W I SE) BA SED U PO N , A R I S I N G OU T O F O R REL A T I N G T O T H I S PL E DG E AGR EEME N T AN D T H E T RAN S AC T I O NS CON T EMPL A T ED H E R E B Y S HALL B E GO VE R NED BY , AN D CON S T R UED I N ACC O RDANC E W I T H , T H E L A WS O F T H E P RO V I NC E O F ONT A R I O AN D T H E FE D E RA L L A WS O F CANAD A A PP L I CAB LE T H E R E I N . (b) E AC H O F T H E P AR T I ES H E R E T O I RR EV OC A B LY AN D UNCO ND I T I ONA LLY AGR EES T HAT I T W I LL NO T CO M ME NC E AN Y AC T I ON , L I T I GA T I O N O R P ROC EED I NG O F AN Y K I N D OR D ES C R I PTI ON , W H E T H ER I N L AW O R E Q U I T Y , W H E T H ER I N CON T RAC T O R I N T OR T O R O T H E R W I SE, AG A I NST T H E CO LL A T E RA L AG E N T , O R AN Y R EL A T ED P AR TY O F T H E F OR E G O I N G I N AN Y W A Y R EL A T IN G T O T H I S PLE DG E A GR EEME N T O R AN Y O T H ER L OA N DOCU ME N T O R T H E T RAN S AC T I ON S R EL A TI N G T H E R E T O , I N AN Y F ORU M O T H ER T HA N T H E COUR T S O F T H E P R O V I N C E O F ON T AR I O O R T HE COUR T S O F T H E S T A T E O F N E W YOR K S I TT I N G I N N EW Y O R K COUN T Y AN D O F T H E UN I T ED S T A TE S 12 D I S T R I C T COUR T O F T H E S OU T H E R N D I S T R I C T O F N EW YO R K , A N D AN Y A PPELL A T E COUR T F ROM AN Y T H E R E O F, AN D E AC H O F T H E P AR T I ES H E R E T O I RR E V OCAB LY AN D UNCON D I T I O NA LLY SUB M I T S T O T H E J UR I S D I C T I O N O F S UC H C OUR T S AN D AGR EES T H A T A LL C L A I M S I N R ESPE C T O FAN Y S UC H AC T I ON , L I T I GA T I O N O R P ROC EE D I N G M A Y B E H E A R D A N D D E T E R M I N ED I N S U C HN EW YOR K S T A T E COUR T OR , T O T H E F U LLEST E X T E N T PE R M I TT ED B Y A PP L I CA B LE L A W, I N S UC HF E D E RA L COUR T . E AC H O F T H E P AR T I ES H E R E T O AGR EES T HA T A F I NA L J UDG M E N T I N AN Y S UCH AC T I O N , L I T I GA T I O N O R P ROC E E D I N G S HA LL B E CON C L U S I V E AN D M A Y B E E N F ORC ED I N O TH ER J UR I S D I C T I ON S B Y S U I T O N T H E J UDG M E N T O R I N AN Y O T H ER M ANN ER P RO V I D ED B Y L A W.NO T H I N G I N T H I S PLE DG E AGR EE M E N T O R I N A N Y O T H E R L OA N DOCU M E N T S HA LL A FFE C T AN YR I GH T T HA T T H E CO LL A T E RA L AG E N T M A Y O T H E R W I SE HA V E T O B R I N G AN Y LE GA L A CT I O N OR P ROC EE D I N G R EL A T I N G T O T H I S P LE DG E AGR EE M E N T O R AN Y O T H ER L O A N DOCU M E N T AG A IN ST T H E BORRO WE R , O R AN Y O T H ER L OA N P AR T Y O R T H E I R P RO P E R T I ES I N T H E COUR T S O F AN YJ UR I S D I C T I O N . ( c ) E AC H O F T H E P AR T I ES H E R E T O I RR E V OC A B LY AN D UNCO ND I T I ONA LLY W A I V ES, TO T H E F U LLEST E X T E N T PE R M I T TED B Y A PPLI CAB LE L A W, AN Y O B J E C T I O N T H A T I T M A Y NO W OR H E R E A F T ER HA V E T O T H E L AY I N G O F V E N U E O F AN Y AC T I O N O R P ROC EE D I N G A R I S I N G OU TO F O R R EL A T I N G T O T H I S PLE DG E A GR EE M E N T I N A N Y COUR T R EFE RR ED T O I N P ARAG R A PH ( B ) OF T H I S S E C T I O N . E A C H O F T H E P AR T I ES H E R E T O H E R E B Y I R R E V OCAB LY W A I V ES, T O T H E F ULLEST E X TE N T PE R M I T T ED B Y A PP L I CAB LE L A W, T H E D EFE N SE O F A N I N C ON V E N I E N T F ORU M TOT H E M A I N T E NANC E O F S UC H AC T I O N O R P ROC EE D I N G I N A N Y S U C H COUR T . ( d ) E AC H O F T H E P A R T I ES H E R E T O I RR E V OCAB LY CON SE N T S T O SE R V I C E O F P ROC ESSIN T H E M A N N ER P RO V I D ED F O R N O T I C ES IN S E C T I O N 1 1 .02 O F T H E CR E D I T AGR EE M E N T . N O T HI N G IN T H I S PLE DG E A G R EE M E N T W I LL A FFE C T T H E R I GH T O F AN Y P AR T Y H E R E T O T O SE R VE P ROC ESS I N AN Y O T H ER M ANN ER PE R M I TT ED B Y A PP L I CAB LE L A W. ( e ) E AC H O F T H E P AR T I E S H E R E T O H E R E B Y I R R E V OCAB LY W A I V ES, T O T H E F U LLESTE X T E N T PE R M I TT ED B Y A PPL I CA B LE L A W, AN Y R I G H T IT M A Y HA V E T O A T R I A L B Y J UR Y IN AN YLE GA L P ROC EE D I N G D I R E C T LY O R I ND I R E C T LY A R I S I N G O U T O F O R R EL A T I N G T O T H I S PLE DGE AGR EE M E N T O R T H E T RAN S AC T I ON S CON T E M PL A T ED H E R E B Y ( W H E T H ER B A SED O N CON TRAC T , T O R T O R AN Y O T H E R T H E ORY ) . E AC H P AR T Y H E R E T O ( A ) C E R T I F I ES T HA T N O R EP R ESEN T A T I V E, AG E N T O R A TT ORN EY O F AN Y O T H ER PE R S O N HA S R EP R ESE N T E D , E X P R ESSLY O R O T HE R W I SE, T HA T S UC H O T H ER PE R S O N W OU LD NO T , I N T H E E V E N T O F L I T I G A T I O N , SEEK T O E N FORC E T H E F OR E G O I N G W A I V ER AN D ( B ) AC K NO WLE D G ES T H A T I T AN D T H E O T H ER P AR T I ES H ER E T O HA V E B EEN I NDUC ED T O E N T ER I N T O T H I S PLE DG E AG R EE M E N T BY , A M ON G O T H ER T H I N GS, T H E M U T UA L W A I V E R S AN D C E R T I F I C A T I O N S I N T H IS SE C T I ON . 21. Se v e r ab i l i t y . I f any p r ov isi on of t h i s P l edge A g r ee m ent or any r e l a t ed docu m ent i s he l d t o be i l lega l , i nva l i d or unen f o r ceab l e, ( a) t he l ega l it y, va li d it y and en f o r ceab i l it y of t he r e m a i n i ng p r ov is i ons of t h i s P ledge A g r ee m ent and any o t her r e l a t ed docu m ent s ha l l not be a ff ec t ed or i m pa i red t hereby and ( b) t he par ti es s ha l lendeavor i n good fa i t h nego t i a ti ons t o r ep l ace t he il l ega l , i nva l i d or unen f o r ceab l e prov isi ons w it h va l i d prov isi ons the econo m i c e ff ect of w h i ch co m es as c l ose as po s s i b l e t o t hat of t he i l l ega l , i nva l i d or unen f o r ceab l e p r ov i s i on s .T he i nva l i d it y of a p r ov isi on i n a par t i cu l ar j ur is d i c ti on s ha l l not i nva li da t e or r ender unenfo r ceab l e s uch p r ov i s ion i n any o t her j ur is d i c t i on. 13 22. En t i r e t y . T h i s P l ed g e A g r ee m en t , t h e o t h e r L o an D o cu m en t s a n d t he o t h er do c u m en t s r e l at i ng t o t he S e cu r e d O b l i g a ti o n s co m p ris e t h e c o m p l e t e and i n t e g r a t ed a g r ee m ent of t he pa r t i es on t h e s u b je ct m a tt e r h e r e o f a nd t he r eof and s u p e r s ed e s a l l p ri o r a g r e e m en ts , w r i t t en or o r a l , on s uch s u b j e ct m a tt e r .T h i s P l ed g e A g r ee m ent w as d r a f t ed w it h t he j o i n t pa r t i c i pa t i on of t he r e s pe c ti v e pa r t i es t h e r e t o and s ha l lbe con s tr u ed n e it her a g a i n s t n o r i n f a v our o f any p a rt y , b u t r a t h e r i n a cco r d an c e wi t h t he f a i r m ean i ng t he r e of . 23. Su r v i v a l . A l l r e p r e s en t a ti o n s and w a rr a n t i es m ade he r eund e r or o t h e r d ocu m ent de l i v e r edp u rs u a nt h e r e t o o r t h e r e t o or i n co n ne c ti o n h e r e wi t h o r t h e r e w it h s h a l l s u r v i v e t he ex e cu t i on a nd de l i v er y he r e of and t h e r e of . Su c h r e p r e s e n t a t i ons and w a r r a n ti e s h a v e been o r w i l l b e r e l i ed upon by t h e A d m i n istr a t i v e A g en t , t he C o ll a t e r a l A g ent and ea c h Lende r , r e g a r d l e s s of any i n v e sti g a t i on m ade by t he A d m i n ist r at i v e A g en t , t h e C o ll a t e r a l A g ent o r a ny Lender or on t h e i r beh a l f and no t wi t h s t an d i ng t h at t h e A d m i n ist r a t i ve A g en t , t he C o ll a t e r a l A g ent or any L ender m ay ha v e had n o t i c e or k no w l ed g e o f any D e f a u l t at t h e ti m e of any Cr ed i t E x t e n si o n, a nd s h a l l con t i nue i n f u l l f o r c e a nd e ff e ct as l ong a s a ny Loan or any o t h e r O b l i g a ti o n he r eunde r s h a l l r e m a i n un p a i d or un s a t is f i ed o r any Le t t e r of C r ed i t s h a l l r e m a i n ou t s t an d i n g . 24. O t her Se c u r it y . T o t he e x t ent t h at any of t he Sec u r ed O b li g a ti o n s a r e now or h e r e a ft e r s ec u r ed byp r op e rt y o t h er t han t he P l ed g ed C o ll a t e r a l (i n c l u d i ng r e al and o t h e r p e rs o n al p r o p e r t y o w ned by t he P l ed go r ) , o r by a g ua r an t ee, end o rs e m ent o r p r o pe rt y of any o t h e r P e rs on, t hen t h e C o l l a t e r al A g e n t s ha l l ha v e t he ri g ht t o p r oc eed a g a i n s t s uch o t h e r p r o p e rt y , g ua r a n t ee or e n do r s e m ent upon t he occ u r r ence of any E v ent of D e fau l t , a n d t he C o l l a t e r al A g ent s h a l l ha v e t he r i g h t , i n i t s s o l e d is c r e ti o n , t o d e t e r m i ne w h i ch ri g h ts , s e c ur it y , l i e n s , s e c u r it y i n t e r e s t s o r r e m ed i e s t h e C o l l a t e r al A g ent s ha l l a t any t i m e pu rs u e, r e l i nq u is h, s ub or d i n a t e, m od if y or t a k e wi t h r e s p ect t he r e t o, w it h o ut i n a ny w ay m od if y i ng or a f f e c ti ng any of t hem or t h e S e cur ed O b li g a t i o n s o r any of t he ri g h t s of t h e C o l l a t e r a l A g ent or t h e h o l d e r s of t h e Secu r ed O b li g a t i ons und e r th i s P l ed g e A g r ee m en t , u n der any of t he o t h er L oan D ocu m en t s or un d er any o t h e r do c u m ent r e l a t i ng t o t he Sec ur ed O b li g a t i o n s . 25. R ep l a c e m ent of Ex i s t i ng P l ed g e A g r ee m en t . A s of t he da t e he r eo f , t he E x is t i n g P l ed g e A g r eem ent s ha l l be a m ended, r e s t a t e d and s up e rs e ded and r e p l a c ed i n i t s en t ir e t y by t h i s P l ed g e A g r ee m en t . [Si g nat u res on F o llo w ing Pa g es] TO R 01 : 6 24 9 206 : v 4 14 Each of the parties hereto has caused a counterpart of this Pledge Agreement to be duly executed and delivered as of the date first abovewritten. PLEDGOR:ARMSTRONG WORLD INDUSTRIES, INC., a Pennsylvaniacorporation By: /s/ Brian L. MacNealName: Brian L. MacNealTitle: Senior Vice President and Chief Financial Officer ARMSTRONG WORLD INDUSTRIES, INC. AMENDED ANDRESTATED CANADIAN PLEDGE AGREEMENT Accepted and agreed to as of the date first above written. COLLATERAL AGENT:BANK OF AMERICA, N.A., as CollateralAgent By: /s/ Kimberly D. Williams Name:Kimberly D. Williams Title: VicePresident ARMSTRONG WORLD INDUSTRIES, INC. AMENDED ANDRESTATED CANADIAN PLEDGE AGREEMENT  S CH E DU LES Sched u l e 2 ( a) P l ed g ed Sh a r es E X H I B I T S Exh i b i t 4 ( a ) Fo r m of S t ock Po w er Sched u l e 2 ( a) to A m ended and R es t a t ed C a n adian Pl e d g e A g ree m ent datedas o f A p ri l 1 , 20 1 6in f a v our of B a nk of A m erica, N . A ., as C ol l a te r al A g ent PLE DG ED S HAR ES Sub si d i a r yC l a s s of S h a re sN u m ber he l d by P l edg or A r m str ong Wo r ld I ndu st r i e s Cana da L t d. Com m on 500 t he f o l l o w i ng s h a r e s of ca p i t al st o ck of [ I SS UER ] , ac o r p o r a t i o n :and i r r e v ocab l y app o i n t si t s a g ent and a tt o r ne y - i n - f act t oExh i b i t 4 ( a ) to A m ended and R es t a t ed C a n adian Pl e d g e A g ree m entdated as o f A p ri l 1 , 20 1 6in f a v our of B a nk of A m erica, N . A ., as Co l l a te r al A g ent Fo r m of I rr e v ocab l e S t ock Po w er F O R V A L U E R E C E I V E D , t he u n de r si g ned h e r e by s e l ls , a s s i g ns and t r a n s f e r s t o N o. of Sh a r es C e r t if i c a t e N o. tr a n s f er a l l o r any pa r t o f s uch c ap i t a l s t o ck and t o t a k e a l l ne c e s s a r y and ap p r o pr i a t e a c t i on t o e f f e ct any such tr a n s f e r . T he a g ent a nd a t t o r ne y - i n - f act m ay s u b s t it u t e and a ppo i nt o ne o r m o r e pe rs o ns t o a ct f o r h i m . The e f f e c ti v en e s s o f a t r an s f e r p u rs ua n t t o t h i s s t ock po w er s h a l l be s u b j ect t o a ny and a l l t r an s fe r r e s t r i c t i on s r e f e r en c ed on t he f ace o f t h e c e r t i f i c a t es e v i denc i ng s uch i n t e r e s t or i n t he c e r t i fi c a t e o f i nc o r po r a t i ono r b y l a w s o f t he s u b j e c t c o r p o r a ti on, t o t he e x t e n t t h ey m a y fr om ti m e t o ti m e ex i s t . AR M ST R O NG W O RLD I NDUSTR I E S , I NC. B y :N a m e :T it l e :Exhibit No. 11Armstrong World Industries, Inc. and SubsidiariesComputation of Earnings Per Share(amounts in millions, except per share data) 2017 2016 2015 Basic earnings per share from continuing operations  Earnings from continuing operations $220.6 $99.3 $57.9 Earnings allocated to participating non-vested share awards (0.7) (0.3) (0.2)Earnings from continuing operations attributable to common shares $219.9 $99.0 $57.7  Basic weighted average number of common shares outstanding 53.3 55.4 55.5  Basic earnings per share from continuing operations $4.12 $1.79 $1.04  Diluted earnings per share from continuing operations  Earnings from continuing operations $220.6 $99.3 $57.9 Earnings allocated to participating non-vested share awards (0.7) (0.3) (0.2)Earnings from continuing operations attributable to common shares $219.9 $99.0 $57.7  Basic weighted average number of common shares outstanding 53.3 55.4 55.5 Dilutive effect of common stock equivalents 0.6 0.3 0.4 Diluted weighted average number of common shares outstanding 53.9 55.7 55.9  Diluted earnings per share from continuing operations $4.08 $1.78 $1.03 Exhibit No. 12Armstrong World Industries, Inc. and SubsidiariesComputation of Ratio of Earnings to Fixed Charges(dollar amounts in millions) 2017  2016  2015  2014  2013 Determination of Earnings Earnings from continuing operations before income taxes $222.1 $150.6 $94.6 $154.5 $116.0 Equity earnings from joint venture (67.0) (73.1) (66.1) (65.1) (59.4)Earnings from continuing operations before income taxes and equity earnings $155.1 $77.5 $28.5 $89.4 $56.6 Add: Fixed charges 38.9 51.5 47.1 48.9 73.0 Distributed income from equity affiliates (1) - - - - - Amortization of capitalized interest 0.1 0.2 0.2 - 0.3 Less: Capitalized interest (1.3) (0.3) (0.8) (0.6) (0.4)Total earnings as defined $192.8 $128.9 $75.0 $137.7 $129.5 Fixed charges Interest expense $35.4 $49.5 $44.6 $46.6 $71.0 Capitalized interest 1.3 0.3 0.8 0.6 0.4 Estimate of interest included in rent expense (2) 2.2 1.7 1.7 1.7 1.6 Total fixed charges $38.9 $51.5 $47.1 $48.9 $73.0 Ratio of Earnings to Fixed Charges 5.0 2.5 1.6 2.8 1.8 (1)Includes only return on investment, not return of investment(2)One-third of rental expense is considered to be representative of the interest factor in rental expense. Exhibit No. 21Subsidiaries of Armstrong World Industries, Inc.December 31, 2017The following is a list of subsidiaries of Armstrong World Industries, Inc., omitting certain subsidiaries, which, when not considered in the aggregate, but as asingle subsidiary, would not constitute a significant subsidiary. U.S. SubsidiariesJurisdiction ofIncorporationArmstrong Cork Finance LLCDelawareArmstrong Ventures, Inc.DelawareArmstrong World Industries (Delaware) LLCDelawareAWI Licensing CompanyDelaware Non U.S. SubsidiariesJurisdiction ofIncorporationArmstrong World Industries LTDUnited Kingdom Exhibit No. 23.1Consent of Independent Registered Public Accounting FirmThe Board of DirectorsArmstrong World Industries, Inc.: We consent to the incorporation by reference in the registration statements (Nos. 333-138034, 333-154765, 333-177072, and 333-212457) on Form S-8 and in theregistration statement (No. 333-202253) on Form S-3 of Armstrong World Industries, Inc. of our reports dated February 26, 2108, with respect to the consolidatedbalance sheets of Armstrong World Industries, Inc. and subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of earnings andcomprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes and financialstatement schedule of valuation and qualifying reserves (collectively, the “consolidated financial statements”), and the effectiveness of internal control overfinancial reporting as of December 31, 2017, which reports appear in the December 31, 2017 annual report on Form 10‑K of Armstrong World Industries, Inc./s/ KPMG LLPPhiladelphia, PennsylvaniaFebruary 26, 2018Exhibit No. 23.2Consent of Independent AuditorsThe Board of DirectorsWorthington Armstrong Venture: We consent to the incorporation by reference in the registration statements (Nos. 333-138034, 333-154765, 333-177072 and 333-212457) on Form S-8 and in theregistration statements (No. 333-202253) on Form S-3 of Armstrong World Industries, Inc. of our report dated February 19, 2018, with respect to the consolidatedbalance sheets of Worthington Armstrong Venture and its subsidiaries as of December 31, 2017 and 2016, and the related consolidated statements of income andcomprehensive income, partners’ deficit, and cash flows for each of the years in the three-year period ended December 31, 2017, and the related notes, which reportappears in the December 31, 2017 annual report on Form 10-K of Armstrong World Industries, Inc./s/ KPMG LLPPhiladelphia, PennsylvaniaFebruary 26, 2018Exhibit No. 31.1I, Victor D. Grizzle, certify that:1)I have reviewed this report on Form 10-K of Armstrong World Industries, Inc.;2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4)The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5)The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant's ability to record, process, summarize and report financial information; and a)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls overfinancial reporting. Date:February 26, 2018 /s/ Victor D. Grizzle Victor D. Grizzle Director, President and Chief Executive Officer Exhibit No. 31.2I, Brian L. MacNeal, certify that:1)I have reviewed this report on Form 10-K of Armstrong World Industries, Inc.;2)Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3)Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4)The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,the registrant’s internal control over financial reporting; and5)The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant's ability to record, process, summarize and report financial information; and b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls overfinancial reporting. Date:February 26, 2018 /s/ Brian L. MacNeal Brian L. MacNeal Senior Vice President and Chief Financial Officer Exhibit No. 32.1Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.I certify to the best of my knowledge and belief that the Annual Report on Form 10-K of Armstrong World Industries, Inc. (the “Company”) containing itsfinancial statements for the fiscal year ended December 31, 2017 fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of1934, as amended, and that information contained in that report fairly presents, in all material respects, the financial condition and results of operations of theCompany as of that date. /s/ Victor D. Grizzle Victor D. GrizzleDirector, President and Chief Executive OfficerArmstrong World Industries, Inc. Dated: February 26, 2018 Exhibit No. 32.2Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.I certify to the best of my knowledge and belief that the Annual Report on Form 10-K of Armstrong World Industries, Inc. (the “Company’) containing itsfinancial statements for the fiscal year ended December 31, 2017 fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of1934, as amended, and that information contained in that report fairly presents, in all material respects, the financial condition and results of operations of theCompany as of that date. /s/ Brian L. MacNeal Brian L. MacNealSenior Vice President and Chief Financial OfficerArmstrong World Industries, Inc. Dated: February 26, 2018 Exhibit No. 99.1WORTHINGTON ARMSTRONG VENTUREConsolidated Financial StatementsDecember 31, 2017 and 2016(With Independent Auditors’ Report Thereon) WORTHINGTON ARMSTRONG VENTURETable of Contents Page Independent Auditors’ Report 1 Consolidated Balance Sheets, December 31, 2017 and 2016 2 Consolidated Statements of Income and Comprehensive Income, Years ended December 31, 2016, 2015, and 2014 3 Consolidated Statements of Partners’ Deficit, Years ended December 31, 2017, 2016, and 2015 4 Consolidated Statements of Cash Flows, Years ended December 31, 2017, 2016, and 2015 5 Notes to Consolidated Financial Statements 6  Independent Auditors’ ReportThe Board of DirectorsWorthington Armstrong Venture: We have audited the accompanying consolidated financial statements of Worthington Armstrong Venture and its subsidiaries, which comprise the consolidatedbalance sheets as of December 31, 2017 and 2016, and the related consolidated statements of income and comprehensive income, partners’ deficit, and cash flowsfor each of the years in the three year period ended December 31, 2017, and the related notes to the consolidated financial statements. Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally acceptedaccounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidatedfinancial statements that are free from material misstatement, whether due to fraud or error. Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditingstandards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The proceduresselected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidatedfinancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financialstatements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Worthington ArmstrongVenture and its subsidiaries as of December 31, 2017 and 2016, and the results of their operations and their cash flows for each of the years in the three year periodended December 31, 2017 in accordance with U.S. generally accepted accounting principles./s/ KPMG LLPPhiladelphia, PennsylvaniaFebruary 19, 2018 3 WORTHINGTON ARMSTRONG VENTUREConsolidated Balance SheetsDecember 31, 2017 and 2016(Dollar amounts in thousands) Assets 2017 2016 Current assets: Cash and cash equivalents $26,856 $34,387 Short-term investments 6,897 5,782 Accounts receivable, net 27,751 23,523 Receivables from affiliates 2,594 4,212 Inventory, net 32,586 28,196 Other current assets 97 172 Current assets of discontinued operations held for sale (Note 3) 36,439 16,863 Total current assets 133,220 113,135 Property, plant, and equipment, net 24,311 24,830 Goodwill 8,037 8,037 Other assets 218 41 Non-current assets of discontinued operations held for sale (Note 3) — 17,373 Total assets $165,786 $163,416 Liabilities and Partners' Deficit Accounts payable $11,810 $14,117 Accounts payable to affiliates 1,145 751 Accrued expenses 5,021 4,095 Taxes payable 158 172 Short-term borrowings — 14,000 Current liabilities of discontinued operations held for sale (Note 3) 8,095 8,173 Total current liabilities 26,229 41,308 Long-term liabilities: Long-term debt 243,508 239,522 Other long-term liabilities 3,104 4,489 Total long-term liabilities 246,612 244,011 Total liabilities 272,841 285,319 Partners’ deficit: Accumulated deficit (94,421) (102,870)Accumulated other comprehensive loss (12,634) (19,033)Total partners’ deficit (107,055) (121,903)Total liabilities and partners’ deficit $165,786 $163,416 See accompanying notes to consolidated financial statements. 4 WORTHINGTON ARMSTRONG VENTUREConsolidated Statements of Income and Comprehensive IncomeYears ended December 31, 2017, 2016, and 2015(Dollar amounts in thousands) 2017 2016 2015 Net sales $344,483 $330,717 $309,670 Cost of sales (151,820) (138,321) (137,528)Gross margin 192,663 192,396 172,142 Selling, general, and administrative expenses (40,053) (31,857) (28,659) 152,610 160,539 143,483 Other (expense), net (239) (183) (185)Interest income 31 13 4 Interest expense (7,873) (6,878) (6,533)Income from continuing operations before income tax expense 144,529 153,491 136,769 Income tax expense (239) (1,604) (300)Net income from continued operations 144,290 151,887 136,469 Discontinued Operations (Note 3) Net income from discontinued operations, net of tax expense 4,159 6,976 7,963 Total Net Income 148,449 158,863 144,432 Other comprehensive income (loss): Change in pension plan 461 (234) (182)Change in cash flow hedge 1,154 522 (259)Foreign currency adjustments 4,784 (3,623) (5,496)Total other comprehensive income (loss) 6,399 (3,335) (5,937)Total comprehensive income $154,848 $155,528 $138,495 See accompanying notes to consolidated financial statements. 5 WORTHINGTON ARMSTRONG VENTUREConsolidated Statements of Partners’ DeficitYears ended December 31, 2017, 2016, and 2015(Dollar amounts in thousands) Contributed capital The Accumulated Armstrong Worthington other Total Ventures, Steel Accumulated comprehensive partners’ Inc. Company deficit income (loss) deficit Balance, December 31, 2014 $— $— $(99,187) $(9,761) $(108,948)Net income — — 144,432 — 144,432 Distributions — — (131,000) — (131,000)Change in pension plan — — — (182) (182)Change in cash flow hedge — — — (259) (259)Foreign currency translation adjustments — — — (5,496) (5,496)Balance, December 31, 2015 — — (85,755) (15,698) (101,453)Net income — — 158,863 — 158,863 Other — — 22 — 22 Distributions — — (176,000) — (176,000)Change in pension plan — — — (234) (234)Change in cash flow hedge — — — 522 522 Foreign currency translation adjustments — — — (3,623) (3,623)Balance, December 31, 2016 — — (102,870) (19,033) (121,903)Net income — — 148,449 — 148,449 Distributions — — (140,000) — (140,000)Change in pension plan — — — 461 461 Change in cash flow hedge — — — 1,154 1,154 Foreign currency translation adjustments — — — 4,784 4,784 Balance, December 31, 2017 $— $— $(94,421) $(12,634) $(107,055) See accompanying notes to consolidated financial statements. 6 WORTHINGTON ARMSTRONG VENTUREConsolidated Statements of Cash FlowsYears ended December 31, 2017, 2016, and 2015(Dollar amounts in thousands) 2017 2016 2015 Cash flows from operating activities: Net income $148,449 $158,863 $144,432 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,160 4,681 4,173 Deferred income taxes 476 388 27 Changes in assets and liabilities: Change in receivables (102) (5,392) 6,131 Change in inventory (4,879) (3,633) 5,933 Change in payables and accrued expenses 1,065 3,702 (2,405)Other (4,986) 71 (312)Net cash provided by operating activities 145,183 158,680 157,979 Cash flows from investing activities: Purchases of property, plant, and equipment (4,444) (4,924) (8,329)Sale of property, plant, and equipment 34 38 (83)Short-term investments (1,115) (348) 840 Acquisition of business, net of cash acquired - - (8,400)Net cash used in investing activities (5,525) (5,234) (15,972)Cash flows from financing activities: Proceeds from revolving credit facility 176,000 264,000 132,000 Issuance of short-term debt — 14,000 — Repayment of short-term debt (14,000) — — Repayment of revolving credit facility (171,500) (267,500) (126,500)Financing cost (832) — — Distributions paid (140,000) (176,000) (131,000)Net cash used in financing activities (150,332) (165,500) (125,500)Effect of exchange rate changes on cash and cash equivalents 3,143 (1,577) (4,159)Net increase (decrease) in cash and cash equivalents (7,531) (13,631) 12,348 Cash and cash equivalents at beginning of year 34,387 48,018 35,670 Cash and cash equivalents at end of year $26,856 $34,387 $48,018 Supplemental disclosures: Interest paid $7,873 $6,961 $6,736 Income taxes paid 168 2,728 2,457 See accompanying notes to consolidated financial statements. 7WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) (1)Description of BusinessWorthington Armstrong Venture (the Company) is a general partnership, formed in June 1992, between Armstrong Ventures, Inc. (Armstrong), asubsidiary of Armstrong World Industries, Inc., and The Worthington Steel Company (Worthington), a Delaware corporation (a subsidiary of WorthingtonIndustries, Inc.). Its business is to manufacture and market suspension systems for commercial and residential ceiling markets throughout the world. TheCompany has manufacturing plants located in the United States, France, the United Kingdom, the People’s Republic of China, and India.On November 17, 2017, Armstrong World Industries, Inc. entered into a Share Purchase Agreement (the Purchase Agreement) with Knauf InternationalGmbH (Knauf) to sell certain subsidiaries comprising its business in Europe, the Middle East, Africa (EMEA) and the Pacific Rim. The sale also includesthe corresponding businesses and operations of the Company, which was approved by both Armstrong and Worthington. The consideration to be paid byKnauf for the Company’s businesses is approximately $90 million, subject to certain adjustments as provided in the Purchase Agreement, includingadjustments based on the economic impact of any required regulatory remedies and a working capital adjustment. The transaction, which is subject toregulatory approvals and other customary conditions, is currently anticipated to close in mid-2018. EMEA and Pacific Rim’s financial results have beenreflected in the Company’s Consolidated Financial Statements as discontinued operations for all periods presented. Refer to Note 3 for additionalinformation.(2)Summary of Significant Accounting Policies (a)Use of EstimatesThese consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America(U.S. GAAP) and include management estimates and judgments, where appropriate. Actual results could differ from those estimates. Significantitems subject to such estimates and assumptions include the carrying amount of property, plant, and equipment and goodwill, valuation allowancesfor receivables and inventories, valuation of derivatives, and assets and obligations related to employee benefits.The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions havebeen eliminated.(b) Revenue RecognitionThe Company recognizes revenue from the sale of products when title transfers, generally on the date of shipment and collection of the relevantreceivable is probable. At the time of shipment, a provision is made for estimated applicable discounts and losses that reduce revenue. TheCompany’s standard sales terms are “Free On Board” (FOB) shipping point. The Company has some sales terms that are FOB destination.Sales taxes collected from customers and remitted to governmental authorities are accounted for on a net basis and, therefore, are excluded fromrevenues in the consolidated statements of income and comprehensive income. (c)Derivative Instruments and Hedging ActivitiesThe Company recognizes all derivative instruments as either assets or liabilities in the balance sheet at their respective fair values. For derivativesdesignated in hedging relationships, changes in the fair value are recognized in accumulated other comprehensive income, to the extent thederivative is effective at offsetting the changes in cash flows being hedged until the hedged item affects earnings. For derivatives not designated ashedges or that do not meet the criteria for hedge accounting, all changes in fair value are recorded immediately to profit or loss. (d)Advertising CostsThe Company recognizes advertising expense as incurred. Advertising expense was $1,243, $1,170, $1,116 for the years ended December 31, 2017,2016, and 2015, respectively.8WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) (e)Research and Development ExpendituresThe Company recognizes research and development expense as expenditures are incurred. Total research and development expense was $4,653,$4,305 and $3,998 for the years ended December 31, 2017, 2016, and 2015, respectively. (f)TaxesThe Company is a general partnership in the United States, and accordingly, generally, U.S. federal and state income taxes are the responsibility ofthe two general partners. The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not ofbeing sustained. Recognized income tax benefits are measured at the largest amount that is greater than 50% likely of being realized. Changes inrecognition or measurement are reflected in the period in which the change in judgment occurs. (g)Cash and Cash EquivalentsShort-term investments that have original maturities of three months or less when purchased are considered to be cash equivalents. (h)Short Term InvestmentsShort-term investments that have maturity dates greater than three months consist primarily of one year certificates of deposits. (i)Trade Accounts ReceivableTrade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accountsfor estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses,current receivables aging, and existing industry and national economic data. Account balances are charged off against the allowance after all meansof collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off‑balance‑sheet creditexposure related to its customers. (j)InventoriesInventories are valued at the lower of cost or market. Cost is determined on the first‑in, first‑out method. (k)Long‑‑Lived AssetsProperty, plant, and equipment are stated at cost, with accumulated depreciation and amortization deducted to arrive at net book value. Depreciationcharges are determined generally on the straight‑line basis over the useful lives as follows: buildings, 30 years; machinery and equipment, 5 to15 years; and leasehold improvements over the shorter of 10 years or the life of the lease. Impairment losses are recorded when indicators ofimpairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If animpairment exists, the asset is reduced to fair value. (l)GoodwillGoodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a purchase business combination.Goodwill is tested for impairment at least annually. The impairment tests performed in 2017, 2016, and 2015 did not result in an impairment of theCompany’s goodwill.9WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) (m)Foreign Currency TranslationGains and losses on foreign currency translation are recognized in accumulated other comprehensive income in the accompanying consolidatedbalance sheets. (3)Discontinued OperationsAs discussed in Note 1, Armstrong World Industries, Inc. entered into a Purchase Agreement with Knauf to sell certain subsidiaries comprising its businessin Europe, the Middle East, Africa (EMEA) and the Pacific Rim. The sale also includes the corresponding businesses and operations of the Company.Accordingly, the assets and liabilities and results of operations of our EMEA and Pacific Rim businesses have been reported as discontinued operations inthe accompanying consolidated financial statements.The Company and Knauf will also enter into an agreement related to the mutual supply of certain products and a license agreement relating to the use ofcertain intellectual property. The following table presents the carrying amounts of major classes of assets and liabilities of the discontinued operations held for sale in the consolidatedbalance sheets as of December 31, 2017 and 2016:Assets 2017 2016 Accounts receivable, net $5,190 $7,269 Inventory, net 9,629 8,647 Other current assets 2,030 947 Property, plant and equipment (1) 16,504 15,312 Other non-current assets 3,086 2,061 Total Assets of discontinued operations held for sale (2) 36,439 34,236 Liabilities Accounts payable 4,587 4,088 Accrued expenses 2,985 2,695 Other liabilities 523 1,390 Total liabilities of discontinued operations held for sale (2) 8,095 8,173 Total net assets 28,344 26,063 (1)Presented as "Non -current assets of discontinued operations held for sale" on the consolidated balance sheet as of December 31, 2016. (2)Presented as "Current Assets / liabilities of discontinued operations held for sale" on the consolidated balance sheet as of December 31,2017. 10WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) The following table represents the results of our discontinued operations: 2017 2016 2015 Net sales $63,222 $63,024 $64,744 Cost of sales 51,400 46,764 49,496 Selling, general, and administrative expenses 8,004 6,279 5,529 Interest income, expense, other, net (309) (733) (505)Income from discontinued operations before tax expense 4,127 10,714 10,224 Income tax benefit (expense) 32 (3,738) (2,261)Net income from discontinued operations, net of tax expense 4,159 6,976 7,963 The following is a summary of total depreciation and amortization and capital expenditures of our discontinued operations, which are presented ascomponents of operating and investing activities in our consolidated statement of cash flows: 2017 2016 2015 Depreciation and Amortization $1,958 $1,896 $1,867 Purchase of property, plant and equipment 1,753 1,285 2,360 (4) Accounts ReceivableThe Company sells its products to select, preapproved customers whose businesses are directly affected by changes in economic and market conditions. TheCompany considers these factors and the financial condition of each customer when establishing its allowance for losses from doubtful accounts. Theallowance for doubtful accounts was $136 and $147, at December 31, 2017 and 2016, respectively.(5)Inventory 2017 2016 Finished goods $11,841 11,014 Goods in process 94 564 Raw materials 18,114 14,179 Supplies 2,537 2,439 Total inventory, net of reserves $32,586 28,196 (6)Derivative Instruments and Hedging ActivitiesThe Company uses variable-rate London Interbank Offered Rate (LIBOR) debt to finance its operations. The debt obligations expose the Company tovariability in interest payments due to changes in interest rates. Management believes that it is prudent to limit the variability of a portion of its interestpayments. To meet this objective, management enters into LIBOR based interest rate swap agreements to manage fluctuations in cash flows resulting fromchanges in the benchmark interest rate of LIBOR. The swap changes the variable‑rate cash flow exposure on the debt obligations to fixed cash flows.Under the terms of the interest rate swaps, the Company receives LIBOR‑based variable interest rate payments and makes fixed interest rate payments,thereby creating the equivalent of fixed‑rate debt for the notional amount of its debt hedged.On July 16, 2013, the Company entered into a LIBOR‑based interest rate swap agreement to manage fluctuations in cash flows resulting from changes inthe benchmark interest rate of LIBOR. The swap has a notional amount of $50,000 maturing in July 2020, under the terms of which the Company pays afixed rate of 2.136% and receives one‑month LIBOR. This swap is designated as a cash flow hedge.On April 28, 2017 the Company entered into another swap with a notional amount of $50,000 maturing in February 2022, under the terms of which theCompany pays a fixed rate of 1.9365% and receives one-month LIBOR. This swap is designated as a cash flow hedge. 11WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) As of December 31, 2017 and 2016, the total notional amount of the Company’s outstanding interest-rate swap agreements that were entered into to hedgeoutstanding or forecasted debt obligations were $100,000 and $50,000, respectively.The fair value of derivatives designated as hedging instruments held as of December 31, 2017 and 2016 are as follows: 2017 2016 B/S Location Fair value B/S Location Fair value Interest rate swap Other assets $165 Other assets $— Long-term liabilities — Long-term liabilities (977)Total derivatives $165 $(977) The amount of gain (loss) recognized in accumulated other comprehensive income was $177 and $(977), respectively as of December 31, 2017 and 2016.(7)Property, Plant, and Equipment 2017 2016 Land $673 673 Buildings 13,143 12,836 Machinery and equipment 57,391 53,037 Computer software 1,328 1,316 Construction in process 2,595 5,713 75,130 73,575 Accumulated depreciation and amortization (50,819) (48,745)Total property, plant, and equipment, net $24,311 24,830 Depreciation and amortization expense was $3,202, $2,785 and $2,306 for the years ended December 31, 2017, 2016 and 2015, respectively.(8)Fair Value of Financial InstrumentsThe Company does not hold or issue financial instruments for trading purposes. The carrying amounts of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable approximate their fair value due tothe short‑term maturity of these instruments. The carrying value and estimated fair value of debt was $243,508 and $243,529 respectively, at December 31,2017. The carrying value and estimated fair value of debt was $239,522 and $239,400, respectively, at December 31, 2016.The fair value of the Company’s debt is based on the amount of future cash flows discounted using rates the Company would currently be able to realize forsimilar instruments of comparable maturity.Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or mostadvantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes athree‑level fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of inputs used to measure fair value are as follows:Level 1 – Quoted prices in active markets for identical assets or liabilities.Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quotedprices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observablemarket data.12WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Thisincludes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.The Company’s derivatives are valued using Level 2 inputs. The fair values are disclosed in Note 6. The Company does not have any significant financialor nonfinancial assets or liabilities that are valued using Level 3 inputs.(9)Debt The Company had a $200,000 revolving credit facility (Facility) with PNC Bank and other lenders that was due to expire on February 21, 2019. On March22, 2017, the Company refinanced the Facility with PNC Bank and other lenders increasing the size of the revolver from $200,000 to $250,000 andextending the terms to March 22, 2022. At the same time, the Company paid off their $50,000 private floating rate debt with New York Life InsuranceCompany. As of December 31, 2017 and 2016 there was $194,500 and $140,000, respectively, outstanding under the Facility. The Company can borrow atrates with a range over LIBOR of 1.125% to 1.75%, depending on the Company’s leverage ratio, as defined by the terms of the Facility. As ofDecember 31, 2017 and 2016, the rate was 2.82% and 1.86%, respectively.On December 23, 2011, the Company issued $50,000 of 10‑year private placement notes (Prudential Notes) with Prudential Insurance Company thatmature in December 2021. At December 31, 2017 and 2016, there was $50,000 outstanding. The Prudential Notes bear interest at 4.9% that is paid on aquarterly basis.The debt agreements contain certain restrictive financial covenants, including, among others, interest coverage and leverage ratios. The Company was incompliance with its covenants during the years ended and as of December 31, 2017 and 2016.(10)Pension Benefit ProgramsThe Company contributes to the Worthington Industries Deferred Profit Sharing Plan for eligible U.S. employees. Costs for this plan were $1,399, $1,413,and $1,258 for 2017, 2016, and 2015, respectively. The Company also has a U.S. defined‑benefit pension plan for eligible hourly employees that worked in its former manufacturing plant located in Malvern,Pennsylvania. This plan was curtailed in January 2004 due to the consolidation of the Company’s East Coast operations, which eliminated the expectedfuture years of service for participants in the plan. The following tables set forth the defined‑benefit pension plan’s benefit obligations, fair value of planassets, and funded status at December 31, 2017 and 2016: 2017 2016 Projected benefit obligation at beginning of year $11,005 11,185 Interest cost 417 457 Actuarial (gain) loss 353 322 Benefits paid (630) (959)Projected benefit obligation at end of year $11,145 11,005 2017 2016 Benefit obligation at December 31 $11,145 11,005 Fair value of plan assets as of December 31 9,065 8,222 Funded status at end of year $2,080 (2,783)Amounts recognized in the balance sheets consist of: Other long-term liabilities $(2,080) (2,783)Accumulated other comprehensive loss 6,141 6,602 Net amount recognized $4,061 3,819 Amounts recognized in accumulated other comprehensive loss represent unrecognized net actuarial losses.13WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) The components of net periodic benefit cost (benefit) are as follows: 2017 2016 2015 Interest cost $417 457 451 Expected return on plan assets (593) (600) (643)Recognized net actuarial loss 334 332 343 Net periodic benefit cost $158 189 151 The accumulated benefit obligation for the U.S. defined‑benefit pension plan was $11,145 and $11,005 at December 31, 2017 and 2016, respectively. Theunrecognized net loss for the defined‑benefit pension plan that will be amortized from accumulated other comprehensive income into net periodic benefitcost over the next fiscal year is $250.The valuations and assumptions reflect the Society of Actuaries updated RP-2014 mortality tables with MP-2017 generational projection scales as ofDecember 31, 2017.Weighted average assumptions used to determine benefit obligations for the years ended and as of December 31, 2017 and 2016 are as follows: 2017 2016 Weighted average assumptions for the year ended December 31: Discount rate 3.95% 4.13%Expected long-term rate of return on plan assets 7.25 7.25 Weighted average assumptions as of December 31: Discount rate 3.52% 3.95%Expected long-term rate of return on plan assets 7.25 7.25 Pension plan assets are required to be disclosed at fair value in the consolidated financial statements. Fair value is defined in Note 8 – Fair Value ofFinancial Instruments.The U.S. defined‑benefit pension plan assets’ fair value measurement level within the fair value hierarchy is based on the lowest level of any input that issignificant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservableinputs.The following tables set forth by level within the fair value hierarchy a summary of the plan’s assets measured at fair value on a recurring basis as ofDecember 31, 2017 and 2016, respectively: 2017 Fair value based on Quoted active Observable markets inputs Fair value (Level 1) (Level 2) Investment: Cash and money market funds $332 332 — Debt Securities 2,799 — 2,799 Common stocks 5,934 5,934 — $9,065 6,266 2,799 14WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) 2016 Fair value based on Quoted active Observable markets inputs Fair value (Level 1) (Level 2) Investment: Cash and money market funds $1,844 1,844 — Debt Securities 1,342 — 1,342 Common stocks 5,036 5,036 — $8,222 6,880 1,342 Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used atDecember 31, 2017 and 2016.Cash: Consists of cash and cash equivalents. The carrying amounts of cash and cash equivalents approximate fair value due to the short‑term maturity ofthese instruments.Money market funds: The money market investment consists of an institutional investor money market fund, valued at the fund’s net asset value (NAV),which is normally calculated at the close of business daily. The fund’s assets are valued as of this time for the purpose of computing the fund’s NAV. Debt securities: Consist of investments in individual corporate bonds, municipal bonds, or government bonds. These bonds are each individually valuedusing a yield curve model, based on observable inputs, which may also incorporate available trade and bid/ask spread data where available.Common stocks: Consist of investments in common stocks that are valued at the closing price reported on the active market on which the individualsecurity is traded.In developing the 7.25% expected long‑term rate of return assumption, the Company considered its historical returns and reviewed asset class returnexpectations and long‑term inflation assumptions.The primary investment objective of the defined‑benefit pension plan is to achieve long‑term growth of capital in excess of 7.25% annually, exclusive ofcontributions or withdrawals. This objective is to be achieved through a balanced portfolio comprising equities, fixed income, and cash investments.Each asset class utilized by the defined‑benefit pension plan has a targeted percentage. The following table shows the asset allocation target and theDecember 31, 2017 and 2016 position: Position at December 31 Target weight 2017 2016 Equity securities 65% 74% 62%Fixed income securities 35 22 16 Cash and equivalents — 4 22 The Company made contributions of $400, $500, and $510 to the U.S. defined‑benefit pension plan in 2017, 2016, and 2015 respectively. The Companyexpects to contribute $400 to the plan in 2018.15WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) The benefits expected to be paid in each of the next five years and in the aggregate for the five years thereafter are shown in the following table: Expected future payments for the year(s) ending December 31: 2018 $660 2019 662 2020 667 2021 655 2022 670 2023-2027 3,250 The expected benefits are based on the same assumptions used to measure the Company’s benefit obligation at December 31, 2017.(11)Income TaxesThe Company is a general partnership in the United States, and accordingly, U.S. federal and state income taxes are generally the responsibility of the twogeneral partners. Therefore, no federal income tax provision has been recorded on U.S. income.(12)LeasesThe Company rents certain real estate and equipment. Several leases include options for renewal or purchase and contain clauses for payment of real estatetaxes and insurance. In most cases, management expects that in the normal course of business, leases will be renewed or replaced by other leases. Minimumrent payments under operating leases are recognized on a straight‑line basis over the term of the lease including any periods of free rent. Rent expenseduring 2017, 2016, and 2015 amounted to $2,258, $2,309 and $2,134, respectively.Future minimum payments by year and in the aggregate for operating leases having noncancelable lease terms in excess of one year are as follows: Year: 2018 $2,429 2019 1,848 2020 1,698 2021 1,659 2022 1,087 Thereafter — Total $8,721 (13)Accumulated Other Comprehensive Income (Loss) 16WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) The following table summarizes the activity, by component, related to the change in AOCI for December 31, 2017 and the balances for accumulated othercomprehensive income (loss): Accumulated Foreign other currency Cash flow comprehensive translation hedge Pension plan (loss) Balance, December 31, 2015 $(7,830) (1,499) (6,369) (15,698)Other comprehensive (loss) income before reclassifications (3,623) 522 (466) (3,567)Amounts reclassified from accumulated other comprehensive income — — 232 232 Net current period other comprehensive (loss) income (3,623) 522 (234) (3,335)Balance, December 31, 2016 (11,453) (977) (6,603) (19,033)Other comprehensive (loss) before reclassifications 4,784 1,154 231 6,169 Amounts reclassified from accumulated other comprehensive income — — 230 230 Net current period other comprehensive (loss) 4,784 1,154 461 6,399 Balance, December 31, 2017 $(6,669) 177 (6,142) (12,634) The amount reclassified from AOCI was recorded in cost of goods sold in the consolidated statements of income and comprehensive income.(14)Related PartiesArmstrong World Industries, Inc. provides certain selling, promotional, and administrative processing services to the Company for which it receivesreimbursement. Armstrong purchases grid products from the Company, which are then resold along with Armstrong inventory to the customer. 2017 2016 2015 Services provided by Armstrong $14,878 9,098 8,828 Sales to Armstrong 18,224 18,004 18,194 Armstrong owed the Company $2,594 and $4,212 for purchases of product as of December 31, 2017 and 2016, respectively. The Company owed $1,145and $751 to Worthington and affiliates of Worthington as of December 31, 2017 and 2016, respectively, which are included in accounts payable toaffiliates.Worthington, and affiliates of Worthington, provide certain administrative processing services, steel processing services, and insurance‑related coveragesto the Company for which it receives reimbursement. 2017 2016 2015 Administrative services by Worthington $1,382 501 509 Insurance-related coverage net of premiums by Worthington 840 824 656 Steel processing services by Worthington and affiliates of Worthington 1,656 3,394 292 (15)AcquisitionOn March 6, 2015, the Company acquired the assets utilized by Fry Reglet Corporation (Fry) in the manufacturing of two product lines (the Business).Assets of the Business and the results of the Business’s operations have been included in the consolidated financial statements since the acquisition date.Prior to the acquisition, Fry was the sole supplier of those products to the Company. The Company concluded that the assets met the definition of a businessunder Accounting Standard Codification section 805, Business Combinations , and therefore the transaction has been accounted for as a businesscombination. As a result of the acquisition, the Company has vertically integrated the customer service, design and drawing, and manufacturing processes ofthe Business.17WORTHINGTON ARMSTRONG VENTURENotes to Consolidated Financial StatementsDecember 31, 2017 and 2016(Dollar amounts in thousands) The total purchase price of $8,400 was paid in cash. The estimated fair value of the identifiable assets acquired at the acquisition date were Property, Plantand Equipment of $363, and the remainder recorded as Goodwill in the amount of $8,037.In connection with the acquisition, the Company paid Fry a $500 consulting fee for transition services. The Company incurred acquisition related costs of$240. These consulting fees and acquisition related costs are included within Selling, General, and Administrative expenses.(16)Legal ProceedingsThe Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimatedisposition of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations, or liquidity.(17)Business and Credit ConcentrationsApproximately 22%, 20%, and 20% of net sales were to the Company’s largest third‑party customer for 2017, 2016, and 2015, respectively. TheCompany’s 10 largest third‑party customers accounted for approximately 77%, 74%, and 64% of the Company’s net sales for 2017, 2016, and 2015respectively, and approximately 73% and 66% of the Company’s accounts receivable balances at December 31, 2017 and 2016, respectively. See Note 14for sales to and amounts owed to the Company from Armstrong World Industries, Inc.(18)Subsequent EventsManagement has evaluated subsequent events through the date the annual consolidated financial statements were available to be issued, February 19, 2018.18

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