Bridgeview Lease
Beginning June 1, 2010, we lease our 40,000 sq. ft. Bridgeview facility from an entity controlled by Mr. Langevin, the
Companys Chairman and CEO, and the beneficial owner of more than 5% of our outstanding Common Stock. The lease will expire on June 30, 2020 and has a provision for six
one-year
extension periods.
Pursuant to the terms of the lease, we made monthly lease payments of approximately $22,000. The Company is also responsible for all the associated operating expenses, including insurance, property taxes, and repairs. The lease contains a rental
escalation clause under which annual rent is increased during the initial lease term by the lesser of the increase in the Consumer Price Increase or 2.0%. Rent for any extension period shall however, be the then-market rate for similar industrial
buildings within the market area. The dollar value of Mr. Langevins interest in the lease transaction was approximately $264,000, $259,000 and $256,000 in 2017, 2016, and 2015, respectively. We have assumed for the purpose of calculating
Mr. Langevins interest in the lease transaction, that he and his affiliates own 100% of the equity interests of the entity that is a party to such transaction.
The Company has the option, to purchase the building by giving the landlord written notice at any time prior to the date that is 180 days prior to the expiration of the lease or any extension period. The
landlord can require the Company to purchase the building if a change of Control Event, as defined in the agreement, occurs by giving written notice to the Company at any time prior to the date that is 180 days prior to the expiration of the lease
or any extension period. The purchase price regardless whether the purchase is initiated by the Company or the landlord will be the Fair Market Value as of the closing date of said sale.
Transactions with Terex Corporation
Terex Corporation (Terex) owns 1,138,581 common shares of the Company or approximately 6.88% of the Companys outstanding
shares as of April 11, 2018.
Additionally, the Company has issued a subordinated convertible debenture with a $7,500
face amount payable to Terex. The convertible debenture, is subordinated, carries a 5% per annum coupon, and is convertible into Company common stock at a conversion price of $13.65 per share or a total of 549,451 shares, subject to customary
adjustment provisions. The debenture has a December 19, 2020 maturity date. See Note 13 to our consolidated financial statements in our Annual Report on Form
10-K
filed on April 10, 2018 for
additional details.
On May 11, 2017, in anticipation of an initial public offering, ASV Holdings converted from an LLC
to a
C-Corporation
and the Companys 51% interest was converted to 4,080,000 common shares of ASV Holdings. On May 17, 2017, in connection within its initial public offering, ASV Holdings sold
1,800,000 of its own shares and the Company sold 2,000,000 shares of ASV Holdings common stock. At December 31, 2017, the Company held a 21.2% interest in ASV Holdings, but no longer has a controlling interest in ASV Holdings. ASV Holdings was
deconsolidated during the quarter ended June 30, 2017 and is recorded as an equity investment starting with quarter ended June 30, 2017. Financial information (related to periods before June 2017) included in our Annual Report on Form
10-K
filed on April 10, 2018 reflect ASV Holdings as a discontinued operation. See Notes 1, 2 and 25 to our consolidated financial statements in our Annual Report on Form
10-K
filed on April 10, 2018 for additional details.
Approval Process
Transactions involving related persons are approved, or ratified if
pre-approval
is not feasible, by our Audit Committee, which approves or ratifies the transaction
only if our Audit Committee determines that it is in the best interests of our stockholders. In considering the transaction, our Audit Committee considers all relevant factors, including, as applicable (i) the business rationale for entering
into the transaction; (ii) available alternatives to the transaction; (iii) whether the transaction is on terms no less favorable than terms generally available to an unrelated third party under the same or similar circumstances;
(iv) the potential for the transaction
34