Item 1.01.
Entry into a Material Definitive Agreement.
As previously disclosed, on August 22, 2016, Peak Resorts, Inc. (the “Company”) entered into the Securities Purchase Agreement (the “Securities Purchase Agreement”) with CAP 1 LLC (the “Investor”) in connection with the sale and issuance of $20 million of Series A Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), and three warrants to purchase the Company’s common stock, as described herein (the “Private Placement”). On November 2, 2016 (the “Closing Date”), the Company completed the sale and issuance of the Series A Preferred Stock and warrants to the Investor in the Private Placement.
Waiver and Amendment of Securities Purchase Agreement
On November 2, 2016, the Company entered into the Waiver and Amendment of Securities Purchase Agreement (the “Waiver”) with the Investor. The terms of the Securities Purchase Agreement included as a condition to the Private Placement closing the requirement that the Company’s lender eliminate any provision requiring the Company to fund a reserve or other similar account in the event of the failure to meet a specified financial ratio. In lieu of this condition, the Waiver stipulates that the Investor accepts the terms of the Modification of Master Credit Agreements (the “Modification Agreement”), dated effective as of October 24, 2016, by and among the Company and certain of its subsidiaries and affiliates and EPT Mount Snow, Inc., EPT Ski Properties, Inc. and EPT Mad River, Inc. The Modification Agreement stipulates that the additional debt service deposits due to the lender have been reduced to $1.1 million in cash or letter of credit, subject to adjustment, and the fixed charge coverage ratio will not be measured again until on or after May 1, 2017. The material terms of the Modification Agreement are described in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 28, 2016.
The foregoing description of the Waiver is qualified in its entirety by reference to the Waiver, which is filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Warrants
On November 2, 2016, in connection with the completion of the Private Placement, the Company issued the Investor three warrants to purchase shares of the Company’s common stock as follows: (i) 1,538,462 shares of the Company’s common stock at $6.50 per share (“Warrant No. 1”); (ii) 625,000 shares of common stock at $8.00 per share (“Warrant No. 2”); and (iii) 555,556 shares of common stock at $9.00 per share (“Warrant No. 3” and together with Warrant No. 1 and Warrant No. 2, the “Warrants”). The terms of the Warrants are all identical except for the number of shares for which the Warrants are exercisable and the exercise prices of each of the Warrants.
Each of the Warrants may be exercised in whole or in part at any time for a period of 12 years from the date of issuance. The exercise price must be paid in cash. The exercise price of the Warrants and the number of shares of common stock issuable upon exercise of the Warrants are subject to adjustment in the event of a stock split, stock dividend, reorganization, reclassification, consolidation, merger, sale and similar transaction.
The foregoing description of the Warrants is qualified in its entirety by reference to Warrant No. 1, Warrant No. 2, and Warrant No. 3, which are filed as Exhibits 4.1, 4.2 and 4.3, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
Registration Rights Agreement
In connection with the closing of the Private Placement, on November 2, 2016, the Company entered into a Registration Rights Agreement with the Investor that grants the following registration rights with respect to the common stock issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, exercisable by the holders of a majority of the registrable securities: (i) at any time after six months following the Closing Date, demand registration rights on a Form S-3 (i.e., a short-form registration); (ii) at any time after six months following the Closing Date, demand registration rights on a Form S-1 (i.e., a long-form registration); and (iii) piggyback registration rights.
The Company is not required to effect more than four short-form registrations or two long-form registrations during any nine-month period or any demand registration unless the number of registrable securities sought to be registered is at least 30% of the registrable securities for a short-form registration or 50% of the registrable securities for a long-form registration and, in any event, not less than 100,000 registrable securities. The Company may delay the filing of or causing to be effective any registration statement if the Company determines in good faith that such registration will (i) materially and adversely affect the negotiation or consummation of any actual or pending material transaction; or (ii) otherwise have a material adverse effect, provided that the Company may not exercise such right to delay more than once in any consecutive 12 month period or for more than 90 days. The Registration Rights Agreement also includes customary provisions regarding market standoffs, registration procedures and expenses, blackout periods, indemnification, reporting required to comply with Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), and confidentiality.
The foregoing description of the Registration Rights Agreement is qualified in its entirety by reference to the Registration Rights Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein by reference.
Stockholders’ Agreement
On November 2, 2016, in connection with the closing of the Private Placement, the Company entered into the Stockholders’ Agreement (the “Stockholders’ Agreement”) together with Timothy D. Boyd, Stephen J. Mueller and Richard K. Deutsch (the “Management Stockholders”) and the Investor.
The Stockholders’ Agreement provides that Investor has a right to nominate a director to sit on the Company’s Board of Directors so long as it beneficially owns, on a fully diluted, as-converted basis, at least 20% of the outstanding equity securities of the Company, subject to satisfaction of reasonable qualification standards and Nominating and Corporate Governance Committee approval of the nominee.
The Stockholders’ Agreement restricts transfers of the Company’s securities by the Investor and the Management Stockholders, or subjects such transfers to certain conditions, except (i) to permitted transferees; (ii) pursuant to a public sale; (iii) pursuant to a merger or similar transaction; or (iv) with respect to the Investor, with the prior consent of the Company, which shall not be unreasonably withheld. Transferees of Management Stockholders (other than transferees pursuant to a public sale or merger or similar transaction) generally remain bound by the Stockholders’ Agreement. Transferees of the Investor (other than affiliates) do not have all of the Investor’s rights thereunder.
In the event of a desired transfer of equity securities held by Management Stockholders (other than pursuant to clauses (i) through (iii) in the paragraph above) the Investor may exercise a right of first offer to purchase all, but not less than all, of the offered shares and has tag along rights providing the Investor the right to participate in the transfer in accordance with the terms of the Stockholders’ Agreement. In the event of a desired transfer of equity securities held by the Investor (other than pursuant to clauses (i) through
(iii) in the paragraph above) the Company shall have a right of first refusal to purchase all, but not less than all, of the offered shares.
Pursuant to the terms of the Stockholders’ Agreement, for so long as at least 50% of the Series A Preferred Stock issued in the Private Placement is outstanding and the Investor beneficially owns, on a fully diluted, as-converted basis, at least 11.4% of the outstanding equity securities of the Company (the “11.4% Ownership Requirement”), the Investor shall have pre-emptive rights with respect to future issuances of securities, subject to standard exceptions. Furthermore, for so long as the Investor meets the 11.4% Ownership Requirement, the Investor’s approval is required in order for the Company or any subsidiary to (i) materially change the nature of its business from owning, operating and managing ski resorts; (ii) acquire or dispose of any resorts, assets or properties for aggregate consideration equal to or greater than 30% of the enterprise value of the Company and its subsidiaries; or (iii) agree to do any of the foregoing.
The Stockholders’ Agreement terminates upon the earliest of (i) the date on which none of the Investor or the Management Stockholders owns any equity securities; (ii) the dissolution, liquidation or winding up of the Company; (iii) a change of control; or (iv) the unanimous agreement of all stockholders party to the Stockholders’ Agreement.
The foregoing description of the Stockholders’ Agreement is qualified in its entirety by reference to the Stockholders’ Agreement, which is filed as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference.