Item 1.01
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Entry into a Material Definitive Agreement
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On June 26, 2020, Armstrong Flooring, Inc. (the “Company”) entered into: (i) a Lease Agreement (the “Headquarters Lease”) with HIGH PROPERTIES, a Pennsylvania limited partnership, as successor to HIGH PROPERTIES, a Pennsylvania general partnership (the “Landlord”), regarding a future location for the Company’s headquarters and design showroom (the “Headquarters”); and (ii) a Lease Agreement with the Landlord (the “Technical Center Lease” and, together with the Headquarters Lease, the “Leases”) regarding a future location for the Company’s light industrial, research and development, product testing and development operations (the “Technical Center”).
Under the terms of the Headquarters Lease, the Company will lease an aggregate of 58,500 square feet in two existing adjacent buildings in Greenfield, located in Lancaster, Pennsylvania. The term of the Headquarters Lease will be for ten (10) years and four (4) months (the “Headquarters Term”), with an anticipated commencement date of June 1, 2021. The Company has two (2) renewal options for five (5) years each at 95% of the fair market rental rate of the Headquarters premises. During the first sixteen (16) months of the Headquarters Term, the Company will pay the Landlord an initial monthly rental rate of $26.75 per square foot, plus operating expenses and real estate taxes, subject to a rent abatement period, with a gradual rate increase for each twelve (12) month period thereafter, culminating with a monthly rental rate of $31.97 per square foot, plus operating expenses and real estate taxes, during the final twelve (12) months of the Headquarters Term.
Under the terms of the Technical Center Lease, the Company will lease 32,143 square feet of an existing building also in Greenfield, Lancaster, Pennsylvania. The term of the Technical Center Lease will be for ten (10) years and seven (7) months (the “Technical Center Term”), with an anticipated commencement date of March 1, 2021. The Company has two (2) renewal options for five (5) years each at 95% of the fair market rental rate of the Technical Center premises. During the first sixteen (16) months of the Technical Center Term, the Company will pay the Landlord an initial monthly rental rate of $11.71 per square foot, plus operating expenses and real estate taxes, subject to a rent abatement period, with a gradual rate increase for each twelve (12) month period thereafter, culminating with a monthly rental rate of $13.30 per square foot, plus operating expenses and real estate taxes, during the final twelve (12) months of the Technical Center Term.
If not extended for three (3) months at the Company’s option with six (6) months’ advance notice, the Company’s current lease term for headquarters space expires on June 30, 2021. The Company’s current lease term for certain technical center space expires on April 30, 2021.
The foregoing summaries of the Leases do not purport to be complete and are subject to and qualified in their entirety by reference to the Headquarters Lease and Technical Center Lease, copies of which are filed as Exhibits 10.1 and 10.2 hereto and are incorporated herein by reference.