Item 1.01 Entry into Material Definitive Agreements
Armstrong Flooring, Inc., a Delaware corporation (the "Company") and its wholly
owned subsidiaries, Armstrong Flooring Latin America, Inc., a Delaware
corporation ("AFI Latin America"), Armstrong Flooring Canada Ltd., a British
Columbia corporation ("AFI Canada"), AFI Licensing LLC, a Delaware limited
liability company ("AFI Licensing"), and Armstrong Flooring Pty Ltd, an
Australian company limited by shares ("AFI Australia", and collectively with the
Company, AFI Latin America, AFI Canada, and AFI Licensing, the "Sellers")
conducted an auction for its international and U.S. assets (the "Auction") as
part of its U.S. Bankruptcy Code Section 363 sale process, which began on
June 27, 2022 and which the Sellers closed on July 11, 2022.
On July 10, 2022, following evaluation of all qualified bids and other proposals
received for the Company's North American assets, the Sellers cancelled the
Auction with respect to the North American assets and entered into a binding
Asset Purchase Agreement (the "North America Purchase Agreement") with a
consortium of buyers consisting of AHF, LLC, a Delaware limited liability
company ("AHF"), and Gordon Brothers Commercial & Industrial, LLC, a Delaware
limited liability company (together with AHF, the "North America Consortium
Buyers"), pursuant to which the North America Consortium Buyers will purchase
substantially all of the Company's North American assets for a purchase price of
$107 million in cash (subject to certain adjustments) and assumption of certain
specified liabilities, including certain cure claims and certain equipment
leases. Consummation of the transactions contemplated by the North America
Purchase Agreement is subject to certain closing conditions, including, among
other things, the consent of Armstrong World Industries, Inc. to the partial
assignment of that certain Trademark License Agreement, dated as of April 1,
2016, as amended (such consent, the "AWI Trademark License Consent") for the
relevant territory and business, certain agreements relating to the Company's
collective bargaining agreements with union employees in its Lancaster facility
and other customary closing conditions. Following consummation of the
transactions contemplated by the North America Purchase Agreement, AHF plans to
continue operating the Company's locations in Lancaster, Kankakee and Beech
Creek, and the Company would pursue an orderly winddown of its Jackson and
Stillwater locations on July 15, 2022.
After evaluating the qualified bids and other proposals received for the
Company's Australia and New Zealand business, the Company selected Braeside
Mills Investments Pty Ltd, Gippsland Lakes Victoria Holdings Pty Ltd and HS
McKendrick Family Nominees Pty Ltd as trustee of the Mills Unit Trust
(collectively, the "Cowes Bay Buyers"), as the successful bidder for
substantially all of the Company's and certain of its subsidiaries' assets used
in the business conducted in Australia and New Zealand. On July 11, 2022, the
Company and AFI Australia (AFI Australia together with Company, the "Australia
Sellers") entered into an Asset Purchase Agreement (the "Australia Purchase
Agreement") with the Cowes Bay Buyers, pursuant to which the Cowes Bay Buyers
will purchase substantially all of AFI Australia's assets for a purchase price
of $31 million in cash and the assumption of certain specified liabilities.
Consummation of the transactions contemplated by the Australia Purchase
Agreement is subject to execution of the AWI Trademark License Consent for the
relevant territory and business and other customary closing conditions. The
Company's Australian business will continue to operate as usual pending
consummation of the sale and remains committed to its customers and other
stakeholders.
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After evaluating the qualified bids and other proposals received for the
Company's Asia business, the Company selected Zhejiang GIMIG Technology Co.,
Ltd., a company established under the laws of the People's Republic of China
("Giant Buyer"), as the successful bidder for the equity interests of Armstrong
Flooring Hong Kong Limited ("AFI Hong Kong"), a private company limited by
shares incorporated in Hong Kong and wholly owned subsidiary of the Company,
whose direct and indirect subsidiaries conducted the Company's business in Asia.
On July 11, 2022, the Company entered into a Stock Purchase Agreement (the "Asia
Purchase Agreement") with Giant Buyer, pursuant to which Giant Buyer will
purchase the equity interests of AFI Hong Kong for a purchase price of
$59 million in cash. Consummation of the transactions contemplated by the Asia
Purchase Agreement is subject to the execution of the AWI Trademark License
Consent for the relevant territory and business, receipt of regulatory
approvals, and customary closing conditions.
The Australia Purchase Agreement, the Asia Purchase Agreement, and the North
America Purchase Agreement (collectively the "Purchase Agreements") reflect the
terms of sale transactions pursuant to Sections 363 and 365 of the U.S.
Bankruptcy Code sought in the Chapter 11 cases of certain Sellers. The Purchase
Agreements were entered into in accordance with the bidding procedures approved
by the Bankruptcy Court. Each of the Purchase Agreements were approved by the
Bankruptcy Court on July 13, 2022, following a hearing on July 12, 2022. Subject
to satisfaction or waiver of the applicable closing conditions under each
Purchase Agreement, the closing of the transactions related to the Section 363
sale process for the Sellers' assets are expected to be concluded within 30
days.
The foregoing description of the Purchase Agreements do not purport to be
complete and are qualified in their entirety by reference to each respective
Purchase agreement, copies of which are attached hereto as Exhibit 10.1, Exhibit
10.2 and Exhibit 10.3 and incorporated herein by reference.
The Purchase Agreements have been filed with this Current Report on Form 8-K to
provide investors and security holders with information regarding each Purchase
Agreement's terms. They are not intended to provide any other factual
information about the Sellers or any buyer. The representations, warranties and
covenants contained in each Purchase Agreement were made only for purposes of
such Purchase Agreement and as of specific dates, were solely for the benefit of
the parties to each such Purchase Agreement, and may be subject to important
limitations agreed upon by the contracting parties, including being qualified by
confidential disclosures exchanged between the parties in connection with the
execution of the applicable Purchase Agreement. The representations and
warranties may have been made for the purposes of allocating contractual risk
between the parties to the agreement instead of establishing these matters as
facts, and may be subject to standards of materiality applicable to the
contracting parties that differ from those applicable to investors. Investors
are not third-party beneficiaries under the Purchase Agreements and should not
rely on the representations, warranties and covenants or any descriptions
thereof as characterizations of the actual state of facts or condition of the
Company or its subsidiaries. Moreover, information concerning the subject matter
of such
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representations, warranties and covenants may change after the date of the
applicable Purchase Agreement containing them, which subsequent information may
or may not be fully reflected in the Company's public disclosures.
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Item 8.01 Other Events
On July 10, 2022, the Company issued a press release announcing the signing of
the North America Purchase Agreement, as well certain other matters described
therein, and on July 11, 2022, the Company issued a press release announcing the
signing of the Asia Purchase Agreement and the Australia Purchase Agreement, as
well certain other matters described therein. Copies of the press releases are
filed as Exhibit 99.1 and Exhibit 99.2 hereto and are incorporated herein by
reference.
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Cautionary Information Regarding Trading in the Company's Securities.
The Company, together with AFI Latin America, AFI Canada, and AFI Licensing, are
debtors-in-possession having filed cases pursuant to chapter 11 of title 11 of
the United States Code in the United States Bankruptcy Court for the District of
Delaware (the "Chapter 11 Cases"). As described in greater detail in Item 1.01
above, the Company has agreed to sell substantially all of its assets. Following
consummation of these sales, the Company is expected to be wound down. Holders
of the Company's equity securities will likely be entitled to no recovery on
their investment following the Chapter 11 Cases, and recoveries to other
stakeholders cannot be determined at this time. The Company cautions that
trading in the Company's securities is highly speculative and poses substantial
risks. Trading prices for the Company's securities may bear little or no
relationship to the actual value to be realized, if any, by holders of the
Company's securities in the Chapter 11 Cases. Accordingly, the Company urges
extreme caution with respect to existing and future investments in its
securities.
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit
No. Description
10.1 Asset Purchase Agreement, by and among Armstrong Flooring, Inc.,
Armstrong Flooring Latin America, Inc., Armstrong Flooring Canada
Ltd., AFI Licensing LLC, AHF, LLC, and Gordon Brothers Commercial &
Industrial, LLC, dated as of July 10, 2022.
10.2 Asset Purchase Agreement, by and among Armstrong Flooring, Inc.,
Armstrong Flooring Pty Ltd, Braeside Mills Investments Pty Ltd,
Gippsland Lakes Victoria Holdings Pty Ltd and HS McKendrick Family
Nominees Pty Ltd as trustee of the Mill Unit Trust, dated as of
July 11, 2022.
10.3 Stock Purchase Agreement, by and among Armstrong Flooring, Inc. and
Zhejiang GIMIG Technology Co., Ltd., dated as of July 11, 2022.
99.1 Press Release of Armstrong Flooring, Inc., dated as of July 10, 2022
99.2 Press Release of Armstrong Flooring, Inc., dated as of July 11, 2022
104 Cover Page Interactive Data File (formatted as inline XBRL)
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