Item 1.01. Entry into a Material Definitive Agreement.
Real Estate Sale and Leaseback
On August 30, 2022, Air & Liquid Systems Corporation ("ALS"), a wholly owned
subsidiary of Ampco-Pittsburgh Corporation ("Ampco"), and Store Capital
Acquisitions, LLC (the "Purchaser") consummated a sale and leaseback
transaction, valued at approximately $15,500,000, pursuant to which Purchaser
purchased from ALS certain of ALS's properties, including manufacturing
facilities located in Lynchburg, Virginia and Amherst, Virginia (collectively,
the "ALS Facilities").
In connection with the sale and leaseback transaction, Union Electric Steel
Corporation ("UES" or the "Lessee") and Purchaser entered into an Amended and
Restated Master Lease Agreement (the "Restated Lease"), dated August 30, 2022
(the "Effective Date"), which amended and restated the existing Master Lease
Agreement between the parties, dated September 28, 2018 (the "Initial Lease").
Pursuant to the Restated Lease, the Lessee will lease the ALS Facilities and the
facilities subject to the Initial Lease from Purchaser (together with the ALS
Facilities, the "Facilities"), subject to the terms and conditions of the
Restated Lease. The Restated Lease provides for a 20-year term (the "Primary
Term"), commencing on the Effective Date and expiring on August 31, 2042. The
Restated Lease provides the Lessee with the option to extend the Primary Term by
four separate renewal terms of approximately five years each (each a "Renewal
Term"). If the Lessee exercises each Renewal Term, then the Restated Lease will
expire on August 31, 2062. The Lessee is required to give written notice to
Purchaser not later than 120 days before the end of the then current Primary
Term or Renewal Term, as applicable, if the Lessee desires to exercise its right
to extend such term.
Subject to adjustment as set forth in the Restated Lease, the combined annual
minimum rent payable to Purchaser during the Primary Term and the first and
second Renewal Terms is an amount equal to $2,939,139 (the "Base Annual Rent"),
payable in equal monthly installments. On October 1, 2022 and each anniversary
of such date prior to the third and fourth Renewal Terms, the Base Annual Rent
will increase by the lesser of: (a) two and two hundredths percent or (b) 1.25
times the change in the Price Index (as defined in the Restated Lease). During
the third and fourth Renewal Terms, the Base Annual Rent will be the Fair Market
Rent (as defined in the Restated Lease), which shall be determined, generally,
by reference to the then-prevailing annual rents being charged for comparable
facilities in the markets in which the Facilities are located, as otherwise in
accordance with the terms and conditions of the Restated Lease.
The Restated Lease contains certain representations, warranties, covenants,
obligations, conditions, indemnification provisions and termination provisions
customary for sale and leaseback transactions.
Pursuant to the terms and conditions of the Restated Lease, the Lessee has an
option to repurchase all of the Facilities included in the Restated Lease by
delivering written notice to Purchaser no later than 45 days prior to the tenth
anniversary of the Effective Date for a price equal to the greater of: (a) 115%
of Lessor's Total Investment or (b) Fair Market Value (each as defined in the
Restated Lease).
In connection with the execution of the Restated Lease, UES and Purchaser
entered into that certain Disbursement Agreement dated August 30, 2022 (the
"Disbursement Agreement"), pursuant to which Purchaser agreed to provide up to
$2.5 million to UES for construction of improvements and related costs at the
property commonly known as 825 Bell Avenue, Carnegie, Pennsylvania 15106. The
Base Annual Rent under the Restated Lease includes UES's obligations to repay
the amount advanced under the Disbursement Agreement, and such repayment will be
amortized over the Primary Term and is secured by the improvements. The initial
rate of amortization is eight and twenty-five hundredths percent, which rate
begins to float on January 1, 2023 at the greater of: (a) eight and twenty-five
hundredths percent or (b) five and twenty-four hundredths percent above the
fifteen year Swap Rate (as defined in, and determined by, the Disbursement
Agreement). The Disbursement Agreement contains certain representations,
warranties, covenants, obligations, conditions, indemnification provisions and
termination provisions customary for construction finance agreements. Pursuant
to a security interest waiver agreement, the banks to the Company's revolving
credit facility have subordinated their security interest in such improvements
to the Purchaser's interest in the improvements.
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In consideration of, and as an inducement to, Purchaser's agreement to enter
into the above described Restated Lease, Ampco entered into an Unconditional
Guaranty of Payment and Performance with the Purchaser (the "Guaranty"), whereby
Ampco has guaranteed the full payment by the Lessee of all rent and other
amounts and charges required to be paid by the Lessee pursuant to the Lease, and
the full performance of the Lessee of all other obligations of the Lessee to be
performed under the Restated Lease.
The foregoing descriptions of the Restated Lease and the Guaranty do not purport
to be a complete description of the parties' rights and obligations under the
Lease and the Guaranty. The above descriptions are qualified in their entirety
by reference to the complete Restated Lease and Guaranty, copies of are filed
herewith.
Sublease Agreement
In connection with the sale and leaseback transaction and the execution of the
Restated Lease, ALS and UES entered into a Sublease Agreement dated August 30,
2022 (the "Sublease"), pursuant to which ALS will sublease the ALS Facilities
from the Lessee on an absolute net basis. Under the Sublease, ALS assumes and
indemnifies the Lessee for all financial obligations under the Restated Lease,
including base rent, additional rental and any and all maintenance, repair and
replacement obligations arising thereunder with respect to the ALS Facilities.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
To the extent applicable, the information included in Item 1.01 under the
heading "Real Estate Sale and Leaseback" is incorporated by reference into this
Item 2.03
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 10.1† - Amended and Restated Master Lease Agreement between Union
Electric Steel Corporation and Store Capital Acquisitions, LLC,
dated August 30, 2022, filed herewith.
Exhibit 10.2† - Amended and Restated Unconditional Guaranty of Payment and
Performance between Ampco-Pittsburgh Corporation and Store
Capital Acquisitions, LLC, dated August 30, 2022, filed herewith.
Exhibit 104 - Cover Page Interactive Data File (embedded within the Inline XBRL
document)
† Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of
Regulation S-K and will be provided to the Securities and Exchange Commission
upon request.
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