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Item 1.01.
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Entry into a Material Definitive Agreement.
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On June 30, 2020, Coca-Cola Consolidated, Inc. (the “Company”) entered into a first amendment to lease agreement (the “Amendment”) with Harrison Limited Partnership One (“HLP”), pursuant to which the Company will continue to lease the Snyder Production Center and an adjacent sales facility in Charlotte, North Carolina (the “Leased Property”). HLP is directly and indirectly owned by trusts of which J. Frank Harrison, III, the Company’s Chairman of the Board of Directors and Chief Executive Officer, and Sue Anne H. Wells, a director of the Company, are trustees and beneficiaries and of which Morgan H. Everett, Vice Chair of the Company’s Board of Directors, is a permissible, discretionary beneficiary.
The Amendment amended and modified that certain lease agreement, dated as of March 23, 2009, between the Company and HLP with respect to the Leased Property (the “Lease”). A copy of the Lease was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 26, 2009. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Lease.
The Amendment extended the term of the Lease (the “Term”) for a period of 15 years from January 1, 2021 through December 31, 2035 (the “Extended Term”), with an option for the Company to further extend the Term for an additional five years (the “Renewal Term”). Under the Amendment, the annual base rent will be approximately $4.5 million for each of the first three years of the Extended Term, which is the current annual base rent under the Lease. For years four through six of the Extended Term, the annual base rent will increase each year as of the anniversary of the Commencement Date by 3% of the annual base rent in effect for the immediately preceding year. For years seven through 15 of the Extended Term and the Renewal Term (if exercised by the Company), the annual base rent will increase each year as of the anniversary of the Commencement Date by an amount equal to the CPI Increase (as defined in the Amendment), with a minimum increase of 2% and a maximum increase of 6% of the annual base rent in effect for the immediately preceding year.
Pursuant to the Lease, the Company is also responsible for all of the Leased Property’s operating expenses, including property taxes, incurred during the Term.
Under the Amendment, the Company may elect to terminate the Lease effective as of January 1, 2033 or any time thereafter prior to the expiration of the Term by providing at least two years’ prior written notice of its election to HLP. In the event of such early termination, the Company would pay a fee at the time of termination in an amount equal to the monthly base rent in effect at the time of termination multiplied by 25% of the total number of full calendar months that otherwise would have remained in the Term following the time of termination.
The Amendment and the transactions contemplated thereby were approved and recommended to the Company’s Board of Directors by a Special Committee of the Board of Directors, consisting solely of disinterested, independent directors, that was formed to consider purchase, lease and other alternatives available to the Company in connection with the scheduled expiration of the Lease. The Amendment and the transactions contemplated thereby were also approved by the Audit Committee of the Company’s Board of Directors.
The foregoing description of the terms and conditions of the Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed as Exhibit 10.1 hereto and incorporated herein by reference.