Item 1.01 Entry into a Material Definitive Agreement

On December 31, 2021, Armstrong Flooring, Inc. (the "Company"), announced that it entered into an ABL Amendment (as defined below) and a Term Loan Amendment (as defined below), that became effective as of December 30, 2021 (the "Effective Date"), each of which is described in greater detail below. In connection with the Term Loan Amendment, Pathlight Capital LP, in its capacity as the Company's current term loan lender, loaned the Company and the Company's subsidiary, Armstrong Flooring Pty Ltd (the "Australian Borrower"), additional term loans in an aggregate principal amount of $35 million (the "Incremental Term Loan") to support the Company.

The Company also announced it retained Houlihan Lokey Capital, Inc. ("Houlihan") to assist with a process for the sale of the Company and with the consideration of other strategic alternatives. Based on all the factors deemed relevant by the Board of Directors of the Company (the "Board"), the Board determined this process to be in the best interests of the Company and that a sale of the Company or another strategic transaction are the best means to maximize value for the Company's stockholders and other stakeholders.

Please see below for a discussion of certain risks and uncertainties facing the Company in connection with the process for consideration of a sale of the Company and other strategic alternatives, the terms of the ABL Amendment and Term Loan Amendment, the Company's operational performance, and related matters. The Company undertakes no obligation to provide further disclosure, unless and until a definitive agreement is executed, regarding the status of the process for consideration of a sale of the Company and other strategic alternatives, and does not presently intend to make such disclosure.

Amended ABL Credit Facility

The Fifth Amendment to Credit Agreement and First Amendment to Pledge Agreement, dated as of the Effective Date (the "ABL Amendment"), by and among the Company, as borrower, the guarantors named therein, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent (in such capacities, the "ABL Agent"), as Australian security trustee and as letter of credit issuer and as swingline lender, amends (i) that certain Credit Agreement, dated as of December 31, 2018, by and among the Company, the guarantors named therein, the lenders party thereto, the letter of credit issuer, the swingline lender and the ABL Agent (as amended, restated, supplemented or otherwise modified from time to time, including by the ABL Amendment, the "Amended ABL Credit Facility") and (ii) that certain Pledge Agreement, dated as of December 31, 2018 (the "Existing ABL Pledge").

Among other things, the ABL Amendment amends the interest rates applicable to the loans under the Amended ABL Credit Facility, modifies certain financial maintenance and other covenants thereunder, as described in greater detail below, and includes the consent of the lenders under the Amended ABL Credit Facility to the making of the Incremental Term Loans. In connection with, and as a condition precedent to, the ABL Amendment, the Australian Borrower guaranteed the





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obligations of the Company under the Amended ABL Credit Facility. In addition, the Existing ABL Pledge was amended to require 100% of the equity interests in the Australian Borrower and certain other foreign subsidiaries of the Company to be pledged to secure the obligations of the Company under the Amended ABL Credit Facility. Previously, this was limited to a 65% pledge, in the case of voting equity of foreign subsidiaries.

Borrowings under the Amended ABL Credit Facility will bear interest at a rate per annum equal to, at the Company's option, a base rate or a Eurodollar rate equal to the London interbank offered rate ("LIBOR") for the relevant interest period, plus, in each case, an applicable margin determined in accordance with the provisions of the Amended ABL Credit Facility. The base rate will be the highest of (a) the federal funds rate plus 0.50%, (b) the prime rate of Bank of America, N.A. and (c) one month LIBOR plus 1.00%. The applicable margin for borrowings under the Amended ABL Credit Facility will be determined based on the Company's Consolidated Leverage Ratio (as defined in the Amended ABL Credit Facility) and will range from 2.25% to 3.50% with respect to base rate borrowings and 3.25% to 4.50% with respect to Eurodollar rate borrowings. The Amended ABL Credit Facility also contains customary "LIBOR replacement" provisions.

Pursuant to the ABL Amendment, the Company has elected to enter into a cash dominion period that will be effective as of February 1, 2022, and will continue until the obligations under the Amended ABL Credit Facility and the Amended Term Loan Facility (as defined below) (together, the "Amended Facilities") are paid in full. During this period, if the Company has cash in its disbursement accounts in excess of $500,000 on the last business day of any week, the Company will apply any such excess to prepay loans under the Amended ABL Credit Facility. This prepayment requirement does not apply to amounts in such accounts with respect to which a disbursement has been initiated or scheduled.

The Amended ABL Credit Facility includes certain milestones ("Milestones") related to the Company's consideration of a sale of the Company or other strategic alternatives. These milestones include: (i) a requirement that the Company deliver a confidential information memorandum regarding the sale process to potential buyers, investors and/or refinancing sources by January 14, 2022, (ii) a requirement that the Company cause Houlihan to provide a summary to the ABL Agent by February 18, 2022 of all written indications of interest regarding the acquisition of the Company or an alternative transaction that are received on or before that date, (iii) a requirement that the Company notify the ABL Agent by February 28, 2022 whether any binding letter of intent for the acquisition of the Company has been entered into prior to such date and, thereafter, providing copies of any such letter of intent entered into after such date (subject to any necessary redaction), (iv) a requirement that the Company enter into a definitive agreement for the acquisition of the Company by March 31, 2022 which provides for a purchase price in an amount sufficient to repay in full the outstanding loans under the Amended ABL Credit Facility and the Amended Term Loan Facility and otherwise be in form and substance reasonably satisfactory to the ABL Agent, and (v) a requirement that the Company consummate the sale of the Company or a similar transaction by no later than May 15, 2022. In addition, the





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Company agreed to provide bi-weekly updates to the ABL Agent and the other lenders under the Amended ABL Credit Facility regarding the potential sale transaction. The Company is required to refinance the Amended Facilities no later than June 30, 2022, even if a sale of the Company or other strategic transaction has not been consummated prior to such date. The Company will pay a sale process fee to its lenders under the Amended ABL Credit Facility upon the consummation of a sale of the Company or similar transaction, which fee will be $500,000 if such transaction closes before March 31, 2022, and $750,000, if it closes any time thereafter. Pursuant to the ABL Amendment, the Company must continue to retain a consultant to provide rolling 13-week cash flow reports and participate in weekly updates with the ABL Agent and the lenders under the Amended ABL Credit Facility.

In addition, the ABL Amendment amends certain financial covenants applicable to the Company and its subsidiaries (the "Financial Covenant Amendments"). Among other things, the Amended ABL Credit Facility requires that the Company and its subsidiaries (i) maintain minimum Availability (as defined in the Amended ABL Credit Facility) of $40 million during the months ending December 31, 2021 and January 31, 2022, $37.5 million during the month ending February 28, 2022, and $25 million thereafter, (ii) maintain minimum Consolidated Cash Flow (as defined in the Amended ABL Credit Facility) for each month, commencing with the month ending December 31, 2021, and calculated on a cumulative basis, ranging from negative $21 million as of December 31, 2021, to negative $40 million as of June 30, 2022 and (iii) maintain a minimum Formula Availability (as defined in the Amended ABL Credit Facility) in an amount ranging from $86.4 million during the month ending December 31, 2021 to $106.4 million during the month ending June 30, 2022.

Amended Term Loan Facility

The Second Amendment to Term Loan Agreement and First Amendment to Pledge Agreement, dated as of the Effective Date (the "Term Loan Amendment"), by and among the Company, as borrower, the Australian Borrower, the guarantors named therein, the lenders party thereto and Pathlight Capital LP, as administrative agent, collateral agent and Australian security trustee (in such capacities, the "Term Loan Agent"), amend (i) that certain Term Loan Agreement, dated as of June 23, 2020, by and among the Company, the guarantors named therein, the lenders party thereto and the Term Loan Agent (as amended, restated, supplemented or otherwise modified from time to time, including by the Term Loan Amendment, the "Amended Term Loan Facility") and (ii) that certain Pledge Agreement, dated as of June 23, 2020 (the "Existing Term Loan Pledge"). . . .

Item 7.01 Regulation FD Disclosure

On December 31, 2021, the Company issued a press release announcing that it had entered into the ABL Amendment and the Term Loan Amendment and certain related matters.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished herewith and shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing.





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Item 9.01 Financial Statements and Exhibits



(d) Exhibits



Exhibit No.                                  Description

10.1                Fifth Amendment to Credit Agreement and First Amendment to
                  Pledge Agreement, dated as of December 30, 2021, by and among
                  Armstrong Flooring, Inc., as borrower, the guarantors named
                  therein, the lenders party thereto and Bank of America, N.A., as
                  administrative agent, collateral agent, Australian security
                  trustee, swingline lender and letter of credit issuer.

10.2                Second Amendment to Term Loan Agreement and First Amendment to
                  Pledge Agreement, dated as of December 30, 2021, by and among
                  Armstrong Flooring, Inc., as borrower, Armstrong Flooring Pty
                  Ltd, as Australian borrower, the guarantors named therein, the
                  lender parties thereto and Pathlight Capital LP, as
                  administrative agent, collateral agent and Australian security
                  trustee.

99.1                Press Release of Armstrong Flooring, Inc., dated December 31,
                  2021.

104               Cover Page Interactive Data File (formatted as inline XBRL)




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