Item 1.01
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Entry into a Material Definitive Agreement.
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On June 18, 2021,
Ashford Hospitality Trust, Inc. (the “Company”) and Seven Knots, LLC (“Seven Knots”), entered into
a common stock purchase agreement (the “Purchase Agreement”), which provides that subject to the terms and conditions
set forth therein, the Company may sell to Seven Knots up to 40,093,080 shares of common stock, par value $0.01 per share, of the Company
(the “Common Stock”), from time to time during the term of the Purchase Agreement.
Additionally, on
June 18, 2021, the Company and Seven Knots entered into a registration rights agreement (the “Registration Rights Agreement”),
pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission (“SEC”)
covering the resale of shares of Common Stock that are issued to Seven Knots under the Purchase Agreement.
Under the terms
and subject to the satisfaction of the conditions set forth in the Purchase Agreement, the Company has the right, but not the obligation,
to sell to Seven Knots, and Seven Knots is obligated to purchase, up to 40,093,080 shares of Common Stock. Such sales of Common Stock
by the Company, if any, will be subject to certain limitations as set forth in the Purchase Agreement, and may occur from time to time,
at the Company’s sole discretion, over a 24-month period commencing on the date that all of the conditions to the Company’s
right to commence such sales are satisfied, including that the registration statement referred to above is declared effective by the SEC
and a final form of the prospectus included therein is filed with the SEC (the “Commencement Date”). Seven Knots has
no right to require the Company to sell any Common Stock to Seven Knots, but Seven Knots is obligated to make purchases as the Company
directs, subject to satisfaction of the conditions set forth in the Purchase Agreement.
Under the Purchase
Agreement, the Company may, at its discretion, from time to time from and after the Commencement Date, direct Seven Knots to purchase
(a “Fixed Purchase”) up to 350,000 shares of Common Stock on any trading day on which the closing sale price of the
Common Stock is not below $1.00 per share on the New York Stock Exchange (the “NYSE”). Seven Knots’s maximum
purchase commitment in any single Fixed Purchase may not exceed $2,000,000. The maximum share amount and the closing sale price referred
to above will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar
transaction occurring after the date of the Purchase Agreement.
In addition to
Fixed Purchases, and provided that the Company has directed Seven Knots to purchase the maximum allowable amount of shares of Common Stock
in a Fixed Purchase, the Company also may, at its discretion, from time to time from and after the Commencement Date, direct Seven Knots
to purchase additional amounts of our Common Stock on the trading day immediately following the purchase date for such Fixed Purchase
(each, a “VWAP Purchase”) and, under certain circumstances set forth in the Purchase Agreement, direct Seven Knots
to purchase additional amounts of Common Stock on the same trading day as such VWAP Purchase (each, an “Additional VWAP Purchase”),
in each case upon the terms and subject to the conditions set forth in the Purchase Agreement. Seven Knots’s maximum purchase commitment
in any single VWAP Purchase, together with any one or more Additional VWAP Purchases that are effected on the same trading day as such
VWAP Purchase, may not exceed $10,000,000 in the aggregate for such VWAP Purchase and Additional VWAP Purchases that are effected on the
same trading day.
The purchase
price per share for the shares of Common Stock that may be sold to Seven Knots in a Fixed Purchase will be based on prevailing
market prices of the Common Stock at or prior to the time of sale, as computed under the Purchase Agreement. The purchase price per
share for the shares of Common Stock that may be sold to Seven Knots in a VWAP Purchase and in an Additional VWAP Purchase will be
based on the volume weighted average price or closing price or closing price of our Common Stock at the time of sale, as computed
under the Purchase Agreement. There is no upper limit on the price per share that Seven Knots may be obligated to pay for the Common
Stock in any of the Fixed Purchases, VWAP Purchases and Additional VWAP Purchases we elect to make under the Purchase Agreement.
Under applicable
rules of the NYSE, in no event may the Company issue or sell to Seven Knots under the Purchase Agreement shares of Common Stock in excess
of 40,093,080 shares, which maximum number of shares is equal to 19.99% of the 200,565,683 shares of Common Stock outstanding immediately
prior to the execution of the Purchase Agreement (the “Exchange Cap”).
The Purchase Agreement
also prohibits the Company from directing Seven Knots to purchase any shares of Common Stock if those shares, when aggregated with all
other shares of Common Stock then beneficially owned by Seven Knots and its affiliates, would result in Seven Knots having beneficial
ownership of more than 4.99% of the outstanding shares of Common Stock.
The Purchase Agreement
contains customary representations, warranties, covenants, indemnification and termination provisions. Seven Knots has covenanted not
to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Common Stock. There are no limitations
on use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on the Company’s
ability to enter into additional “variable rate transactions” or substantially similar transactions as the transactions contemplated
by the Purchase Agreement, subject to certain exceptions, during certain periods beginning prior to the applicable purchase dates for
any Fixed Purchase, VWAP Purchase and Additional VWAP Purchase ending after the dates on which such purchases are fully settled, as set
forth in the Purchase Agreement), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement.
The Purchase Agreement may be terminated by the Company at any time, at the Company’s sole discretion, without any cost or penalty,
upon 10 trading days’ prior written notice to Seven Knots. Neither the Company nor Seven Knots may assign or transfer its rights
and obligations under the Purchase Agreement, and no provision of the Purchase Agreement or the Registration Rights Agreement may be modified
or waived by the parties.
The net proceeds
under the Purchase Agreement to the Company will depend on the frequency of sales and the number of shares sold to Seven Knots and prices
at which the Company sells shares to Seven Knots. The Company expects that any net proceeds received by the Company from such sales to
Seven Knots will be used for working capital and general corporate purposes. The Company believes that it is prudent capital management
to have the flexibility to sell Common Stock pursuant to the Purchase Agreement, subject to market conditions.
The foregoing descriptions
of the Purchase Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the full text of the Purchase
Agreement and the Registration Rights Agreement, each of which is attached hereto as Exhibit 10.1 and Exhibit 10.2, respectively, and
each of which is incorporated herein by reference.
The Purchase
Agreement and Registration Rights Agreement contain customary representations and warranties, covenants and indemnification
provisions that the parties made to, and solely for the benefit of, each other in the context of all of the terms and conditions of
such agreements and in the context of the specific relationship between the parties thereto. The provisions of the Purchase
Agreement and Registration Rights Agreement, including any representations and warranties contained therein, are not for the benefit
of any party other than the parties thereto and are not intended as documents for investors and the public to obtain factual
information about the current state of affairs of the parties thereto. Rather, investors and the public should look to other
disclosures contained in our annual, quarterly and current reports we may file with the SEC.
This Current Report
on Form 8-K shall not constitute an offer to sell or a solicitation of an offer to buy any shares of Common Stock, nor shall there be
any sale of shares of Common Stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state or other jurisdiction.