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Item 1.01.
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Entry into a Material Definitive Agreement.
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On December 31,
2020, Presentation Technologies, LLC, a subsidiary of Ashford Inc. (“PTI”), and certain of its subsidiaries
(collectively, the “Loan Parties”), and Comerica Bank, a Texas banking association, amended that certain credit
agreement dated as of November 1, 2017, as amended (the “Credit Agreement”), and certain of the loan documents
delivered under the Credit Agreement (collectively, the “Amendment”).
As a result of
the Amendment, the Credit Agreement now contemplates a $3.0 million senior secured revolving line of credit (the “Revolving
Note”) and a $20.0 million senior secured term loan (the “Term Note”). The Amendment extended the
maturity date of PTI’s obligations under the Revolving Note and Term Note to January 1, 2024, with the potential for a further
one-year extension at PTI’s option subject to satisfaction of certain conditions, including the absence of defaults, payment
of a one-time, permanent principal reduction of the Term Note of not less than $2.5 million, and payment of an extension fee of
0.25% of the sum of: (i) the face amount of the Revolving Note; and (ii) the outstanding amount owed under the Term Note as of
the date of PTI’s election to extend.
Pursuant to the
Amendment, PTI’s obligations to comply with certain financial and other covenants in the Credit Agreement were waived, adjusted,
paused or eliminated, as described below:
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PTI’s failure to comply with the Leverage Ratio covenant for the fiscal quarters ended June 30, 2020 and September 30,
2020 was waived, and the Leverage Ratio covenant has been eliminated from the Credit Agreement;
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PTI’s failures to comply with the Pre-Distribution Fixed Charge Coverage Ratio and the Post-Distribution Fixed Charge
Coverage Ratio for the fiscal quarter ending September 30, 2020 were waived, and those covenants have been eliminated from the
Credit Agreement. Those covenants were replaced with a covenant, commencing with the fiscal quarter ending March 31, 2023, that
PTI maintain a Fixed Charge Coverage Ratio of not less than 1.2 to 1.0, calculated as of the end of each fiscal quarter for the
four fiscal quarterly periods most recently ended; and
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PTI’s failure to comply with covenants to make timely payments of principal and interest on indebtedness under the Credit
Agreement for the month ending December 31, 2020 and to remain solvent to continue to do business as a going concern were waived,
as were any other defaults under the Credit Agreement that occurred and were directly related to and as a result of any of the
foregoing.
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In addition, the
Amendment confirms that any direct material impact on the financial results and operations of PTI and the other Loan Parties arising
from the March 13, 2020 declaration of the national emergency relating to COVID-19 and the federal, state and local measures related
thereto, as disclosed to Comerica, will not be deemed to constitute a material adverse effect on the Loan Parties for purposes
of the Credit Agreement.
As a result of
the Amendment, amounts borrowed under the Revolving Note and the Term Note will bear interest at Comerica’s prime rate plus
a margin of 1.25%, with the margin increasing by 0.25% beginning on July 1, 2021 and at the beginning of each successive quarter
thereafter. PTI will pay a commitment fee of 1.5% of the Term Note in installments, with the possibility that the last $0.1 million
installment, scheduled to be paid on December 31, 2022, be forgiven if PTI’s obligations under the Credit Agreement have
been satisfied in full in advance of that date. The Amendment suspended PTI’s amortizing payment obligations under the Term
Note through December 2021. Commencing January 1, 2022, PTI will be required to make monthly payments under the Term Note of $0.2
million through June 2022, $0.25 million through December 2022, and $0.3 million thereafter.
The Amendment required
PTI to establish an operating reserve account with Comerica in an initial amount equal to $3.0 million, with such amounts to be
applied to scheduled interest payments due under the Revolving Note and the Term Note. PTI must replenish such amount quarterly
in an amount necessary to service interest expense and projected operating costs for the upcoming quarterly period based on projections
delivered by PTI to Comerica as part of an enhanced set of financial reporting requirements established by the Amendment. Funds
in the operating reserve account may be released to PTI if it is able to: (i) maintain a Fixed Charge Coverage Ratio of not less
than 1.2 to 1.0 for two consecutive fiscal quarters; and (ii) demonstrate average availability under the Revolving Note of at least
$1.0 million throughout the three-month period most recently ended. The Amendment also imposed a post-closing obligation on PTI
and the other Loan Parties to establish a lockbox and deposit account, exclusively accessed and controlled in each case by Comerica,
with amounts deposited into each to be applied daily against amounts owed to Comerica under the Revolving Note.
The descriptions
of the Amendment and the Credit Agreement, the Term Note and the Revolving Note, as revised thereby and described above, do not
purport to describe all of the terms of such documents and are qualified in their entirety by the full text of the composite version
of the Credit Agreement, the Term Note and the Revolving Note, copies of which are filed as exhibits to this Current Report on
Form 8-K and are incorporated herein by reference.