PURCHASE AGREEMENT
$500,000,000
8.250% Senior Notes due 2031
of
VERIMARK HOSPITALITY GROUP INC.
This PURCHASE AGREEMENT (this "Agreement") is dated as of and is entered into by and among:
(1) VERIMARK HOSPITALITY GROUP INC., a Delaware corporation (the "Issuer" or the "Company");
(2) Each of the GUARANTORS listed on Schedule I hereto (collectively, the "Guarantors" and each, a "Guarantor"); and
(3) KENSINGTON BARROW & CO., acting as representative (in such capacity, the "Representative") of the several initial purchasers listed on Schedule II hereto (the "Initial Purchasers").
Re: $500,000,000 aggregate principal amount of 8.250% Senior Notes due 2031 (the "Notes")
Right-click to update Table of Contents
RECITALS
WHEREAS, the Company proposes to issue and sell $500,000,000 in aggregate principal amount of its 8.250% Senior Notes due 2031 (the "Notes") in a private placement (the "Offering") exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to Rule 144A and Regulation S thereunder;
WHEREAS, the Notes will be issued pursuant to an Indenture to be dated as of June 25, 2024 (the "Indenture"), among the Company, the Guarantors, and Fidelitas Trust Company, N.A., a national banking association, as trustee (the "Trustee");
WHEREAS, the Notes will be guaranteed on a senior unsecured basis by each of the Guarantors pursuant to the terms of the Indenture and the Guarantor Joinder Agreements to be entered into by each Guarantor;
WHEREAS, the Company has prepared a Preliminary Offering Memorandum dated June 3, 2024 (the "Preliminary Offering Memorandum") and a Final Offering Memorandum dated (the "Final Offering Memorandum" and, together with the Preliminary Offering Memorandum, the "Offering Memoranda"), each relating to the Company, the Guarantors, and the Offering of the Notes, copies of which have been delivered to the Initial Purchasers;
WHEREAS, the Net Proceeds (as defined herein) of the Offering will be used to repay in full all outstanding obligations under the Company's Existing Credit Facility (as defined herein), to pay transaction fees and expenses, and for general corporate purposes, each as more fully described in the Offering Memoranda and Section 2.03 hereof; and
WHEREAS, the Company, the Guarantors, and the Initial Purchasers wish to confirm their respective agreements concerning the purchase and resale of the Notes on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.01 — Defined Terms
As used in this Agreement, the following terms shall have the meanings set forth below. Terms used but not otherwise defined herein shall have the meanings ascribed to them in the Indenture or, if not defined in the Indenture, the Final Offering Memorandum.
"144A Notes" means the Notes offered and sold to qualified institutional buyers in reliance on Rule 144A under the Securities Act, bearing CUSIP 923847 AA 5 and ISIN US923847AA52.
"Applicable Time" means
"Broadmark Rating Services Inc." means Broadmark Rating Services Inc., a nationally recognized statistical rating organization.
"Closing" has the meaning set forth in Section 2.02.
"Closing Date" means June 25, 2024, or such other date as may be agreed upon by the Company and the Representative in accordance with Section 2.02.
"Company" means Verimark Hospitality Group Inc., a Delaware corporation.
"Crestline Ratings Group" means Crestline Ratings Group, a nationally recognized statistical rating organization.
"Disclosure Package" means, as of the Applicable Time, the Preliminary Offering Memorandum, together with the Pricing Term Sheet dated and any other considered together as of the Applicable Time.
"DTC" means The Depository Trust Company, a New York limited purpose trust company.
"Escrow Account" means Account No. 7841-0293-551 maintained at Fidelitas Trust Company, N.A., as Escrow Agent, in accordance with the Escrow Agreement.
"Escrow Agent" means Fidelitas Trust Company, N.A., acting in its capacity as escrow agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated among the Company, the Representative, and Fidelitas Trust Company, N.A., as Escrow Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Existing Credit Facility" means the Amended and Restated Credit Agreement dated as of March 15, 2021, among Verimark Hospitality Group Inc., as borrower, the lenders from time to time party thereto, and Greystone National Bank, N.A., as administrative agent (Loan No. GNB-SYN-2021-04417), as the same may have been amended, restated, supplemented, or otherwise modified from time to time prior to the date hereof.
"Final Offering Memorandum" means the Final Offering Memorandum dated relating to the Offering of the Notes, including all documents incorporated by reference therein and all annexes, schedules, and exhibits thereto.
"GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time.
"Guarantor Joinder Agreements" means the several Guarantor Joinder Agreements to be executed and delivered by each Guarantor pursuant to the Indenture, pursuant to which each Guarantor will guarantee the obligations of the Company under the Indenture and the Notes.
"Guarantors" means, collectively, each of the entities listed on Schedule I hereto: Verimark Resort Holdings LLC, a Delaware limited liability company; VHG Properties Inc., a Delaware corporation; Bayshore Hotel Management LLC, a Florida limited liability company; Verimark Capital Holdings LLC, a Delaware limited liability company; and Pinnacle Lodging Enterprises Inc., a Delaware corporation.
"Guarantees" means the guarantees of the Notes by each Guarantor pursuant to Article 10 of the Indenture and the Guarantor Joinder Agreements.
"Indenture" means the Indenture to be dated as of the Closing Date, among the Company, the Guarantors, and the Trustee, as the same may be amended or supplemented from time to time in accordance with its terms.
"Initial Purchasers" means the several initial purchasers listed on Schedule II hereto: Kensington Barrow & Co., Ridgeline Capital Markets LLC, and Stonebridge Marvelo Securities Inc.
"Initial Purchasers' discount" means of the aggregate principal amount of the Notes, which equals in the aggregate.
"Investment Company Act" means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.
"Material Adverse Effect" means any change, event, occurrence, effect, or development that, individually or in the aggregate, (a) is or would reasonably be expected to be material and adverse to the business, properties, financial condition, results of operations, or prospects of the Company and its subsidiaries, taken as a whole, or (b) would reasonably be expected to prevent or materially impair the ability of the Company or any Guarantor to in each case other than changes, events, occurrences, effects, or developments arising from or relating to: (i) general economic, financial, or market conditions (including changes in prevailing interest rates, credit markets, or currency exchange rates); (ii) conditions generally affecting the hospitality industry in the United States or globally; (iii) changes in applicable law, regulation, or authoritative interpretations thereof, or changes in GAAP or other applicable accounting standards or the interpretation or enforcement thereof; (iv) the announcement or pendency of the transactions contemplated by this Agreement or the other Transaction Documents; (v) acts of war (whether or not declared), armed conflict, sabotage, terrorism, or natural disasters, pandemics, epidemics, or other force majeure events; or (vi) any failure by the Company or any of its subsidiaries to meet any published or internal projections, forecasts, estimates, or predictions in respect of revenues, earnings, or other financial or operating metrics for any period (provided that the underlying causes of any such failure shall not be excluded from the definition of Material Adverse Effect to the extent not otherwise excluded by clauses (i) through (v) above); provided, however, that in the case of clauses (i), (ii), such changes, events, occurrences, effects, or developments shall be taken into account in determining whether a Material Adverse Effect has occurred to the extent that such changes, events, occurrences, effects, or developments disproportionately affect the Company and its subsidiaries, taken as a whole, relative to other participants in the hospitality and lodging industry operating in the same geographic markets.
"Net Proceeds" means
"Notes" means the $500,000,000 aggregate principal amount of 8.250% Senior Notes due 2031 of the Company to be issued pursuant to the Indenture, including the 144A Notes and the Regulation S Notes.
"OFAC" means the Office of Foreign Assets Control of the U.S. Department of the Treasury.
"Offering Memoranda" means, collectively, the Preliminary Offering Memorandum and the Final Offering Memorandum.
"Preliminary Offering Memorandum" means the Preliminary Offering Memorandum dated June 3, 2024, relating to the Offering of the Notes, including all documents incorporated by reference therein and all annexes, schedules, and exhibits thereto.
"Pricing Term Sheet" means the Offering Memorandum Supplement — Pricing Term Sheet dated setting forth the terms of the Notes as priced, a copy of which has been filed with and approved by the Representative.
"Purchase Price" means of the aggregate principal amount of the Notes, which equals in the aggregate.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Notes" means the Notes offered and sold outside the United States in reliance on Regulation S under the Securities Act, bearing CUSIP U92384 AA 8 and ISIN USU92384AA83.
"Registration Rights Agreement" means the Registration Rights Agreement to be dated as of the Closing Date, among the Company, the Guarantors, and the Initial Purchasers, providing for the registration under the Securities Act of the exchange notes to be issued in exchange for the Notes.
"Representative" means Kensington Barrow & Co., acting as representative of the several Initial Purchasers.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"SOFR" means the Secured Overnight Financing Rate as published by the Federal Reserve Bank of New York (or a successor administrator).
"Transaction Documents" means this Agreement, the Indenture, the Notes, the Guarantees, the Registration Rights Agreement, together with all schedules, exhibits, and annexes thereto.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended, and the rules and regulations promulgated thereunder.
"Trustee" means Fidelitas Trust Company, N.A., a national banking association organized and existing under the laws of the United States, in its capacity as trustee under the Indenture.
ARTICLE II — PURCHASE AND SALE
Section 2.01 — Agreement to Purchase and Sell
Subject to the terms and conditions set forth in this Agreement, the Company hereby agrees to issue and sell to the several Initial Purchasers, and each of the Initial Purchasers, severally and not jointly, hereby agrees to purchase from the Company, the respective principal amounts of Notes set forth opposite such Initial Purchaser's name on Schedule II hereto, at a purchase price equal to of the aggregate principal amount thereof (the "Purchase Price").
The aggregate principal amount of the Notes to be issued and sold hereunder is $500,000,000. The aggregate Purchase Price payable by the Initial Purchasers for the Notes is The Initial Purchasers' discount is of the aggregate principal amount of the Notes, which equals in the aggregate. After deduction of the Initial Purchasers' discount, the Net Proceeds to the Company shall be The obligations of the Initial Purchasers hereunder are several and not joint. The failure of any Initial Purchaser to purchase its respective allocation of the Notes shall not relieve any other Initial Purchaser of its obligation to purchase the Notes it has agreed to purchase hereunder.
Section 2.02 — Closing
The closing of the purchase and sale of the Notes (the "Closing") shall take place at 10:00 a.m., New York City time, on June 25, 2024 (the "Closing Date"), at the offices of Calderwood & Harkness LLP, One Liberty Plaza, 45th Floor, New York, NY 10006, or at such other place, date, and time as may be mutually agreed upon in writing by the Company and the Representative.
At the Closing, delivery of the Notes shall be made through the facilities of The Depository Trust Company ("DTC") in book-entry form against payment of the Purchase Price. The Notes shall be registered in the name of Cede & Co., as nominee for DTC. The 144A Notes and the Regulation S Notes shall be represented by separate global certificates in fully registered form, without coupons attached. The Company shall cause the Trustee to authenticate and deliver the Notes to DTC on the Closing Date for crediting to the accounts of the Initial Purchasers or their respective designees.
Payment of the Purchase Price shall be made by wire transfer of immediately available funds in United States dollars to The Purchase Price shall be to the Company (or to such other persons as directed pursuant to the funds flow memorandum referenced in Section 7.01(n)) upon satisfaction or waiver of the conditions to Closing set forth in Article VII. In the event that the Closing does not occur and this Agreement is terminated, the Purchase Price shall be returned to the Initial Purchasers in accordance with the terms of the Escrow Agreement.
Section 2.03 — Use of Proceeds
The Company covenants and agrees that it shall the Net Proceeds received from the sale of the Notes as follows:
The aggregate payoff amount required to repay in full all obligations under the Existing Credit Facility (inclusive of principal, accrued interest, and prepayment premium) is The Company represents that the amounts set forth above accurately reflect the anticipated application of the Net Proceeds and that such application is consistent in all material respects with the description thereof contained in the Offering Memoranda under the heading "Use of Proceeds."
ARTICLE III — REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE GUARANTORS
Each of the Company and each Guarantor, jointly and severally, represents and warrants to each of the Initial Purchasers, as of the date hereof and as of the Closing Date (except where a representation or warranty is made as of a specific date, in which case as of such date), as follows:
Section 3.01 — Organization and Good Standing
(a) The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware. The Company has all requisite corporate power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted and as described in the Offering Memoranda. The Company is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company is qualified to do business and in good standing in, among other jurisdictions, the State of Florida. The Company's Employer Identification Number is 84-3291057. The Company's common stock is listed on the Nasdaq Global Select Market under the ticker symbol "VMRK." The Company's SEC Central Index Key is 0001847293.
(b) The principal executive offices of the Company are located at 2400 Brickell Bay Drive, Suite 3100, Miami, FL 33129. The Company's registered office in the State of Delaware is located at Cobalt Ridge Technologies, 1209 Orange Street, Wilmington, DE 19801, and the Company's registered agent in Delaware is Crowne Albany Corporation. The Company's registered agent in the State of Florida is Ashgrove Services Inc., 1200 South Pine Island Road, Plantation, FL 33324.
(c) Each Guarantor is duly organized, validly existing, and in good standing under the laws of its respective jurisdiction of organization. Each Guarantor has all requisite corporate or limited liability company power and authority to own, lease, and operate its properties and assets and to carry on its business as presently conducted and as described in the Offering Memoranda. Each Guarantor is duly qualified to do business and is in good standing in each jurisdiction where the nature of its business or the ownership, leasing, or operation of its properties requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The respective jurisdictions of organization of the Guarantors are as follows:
(i) Verimark Resort Holdings LLC — a limited liability company organized and existing under the laws of the State of Delaware;
(ii) VHG Properties Inc. — a corporation incorporated and existing under the laws of the State of Delaware;
(iii) Bayshore Hotel Management LLC — a limited liability company organized and existing under the laws of the State of Florida;
(iv) Verimark Capital Holdings LLC — a limited liability company organized and existing under the laws of the State of Delaware; and
(v) Pinnacle Lodging Enterprises Inc. — a corporation incorporated and existing under the laws of the State of Delaware.
Section 3.02 — Authorization; Enforceability
(a) The Company has full corporate power and authority to execute, deliver, and perform its obligations under each Transaction Document to which it is or will be a party, and to issue and sell the Notes as contemplated hereby. Each Guarantor has full corporate or limited liability company power and authority to execute, deliver, and perform its obligations under each Transaction Document to which it is or will be a party, including the Guarantees.
(b) All corporate and limited liability company action on the part of the Company and each Guarantor (including, without limitation, approval by the respective boards of directors, boards of managers, or members, as applicable) necessary for the authorization, execution, delivery, and performance by the Company and each Guarantor of each Transaction Document to which it is or will be a party, and for the issuance and sale of the Notes and the Guarantees, has been duly and validly taken. Without limiting the generality of the foregoing, the Board of Directors of the Company, at a meeting duly noticed and held on June 14, 2024, chaired by Eleanor M. Vasquez, Chairperson of the Board, unanimously adopted resolutions authorizing the transactions contemplated by this Agreement and the other Transaction Documents, and such resolutions remain in full force and effect as of the date hereof.
(c) This Agreement has been duly authorized, executed, and delivered by the Company and each Guarantor and constitutes a valid and binding obligation of the Company and each Guarantor, enforceable against the Company and each Guarantor in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith, and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).
(d) Each of the other Transaction Documents, when duly authorized, executed, and delivered by the Company and/or each Guarantor party thereto, will constitute a valid and binding obligation of the Company and/or such Guarantor, enforceable against the Company and/or such Guarantor in accordance with its terms, subject to the same qualifications set forth in clause (c) above. The Notes, when duly executed by the Company, authenticated by the Trustee in accordance with the terms of the Indenture, and delivered against payment therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to the same qualifications set forth in clause (c) above, and will be entitled to the benefits of the Indenture. The Guarantees, when duly executed and delivered by the Guarantors in accordance with the Indenture and the Guarantor Joinder Agreements, will constitute valid and binding obligations of each Guarantor, enforceable against such Guarantor in accordance with their terms, subject to the same qualifications set forth in clause (c) above.
Section 3.03 — No Conflicts
Neither the execution and delivery of this Agreement or any other Transaction Document by the Company or any Guarantor, nor the consummation of the transactions contemplated hereby or thereby (including the issuance and sale of the Notes and the Guarantees, the application of the Net Proceeds as described in Section 2.03, and the repayment of the Existing Credit Facility), will:
(a) violate, conflict with, or result in a breach of any provision of the Amended and Restated Certificate of Incorporation, the Amended and Restated Bylaws, or equivalent organizational documents of the Company or any Guarantor;
(b) violate, conflict with, or result in a breach of, or constitute a default (or an event that with the giving of notice or lapse of time, or both, would constitute a default) under, any applicable law, statute, regulation, rule, judgment, order, decree, or governmental permit or license applicable to the Company, any Guarantor, or any of their respective subsidiaries or any of their respective properties or assets;
(c) result in a breach of, or constitute a default (or an event that with the giving of notice or lapse of time, or both, would constitute a default) under, or give rise to any right of termination, cancellation, amendment, acceleration, or prepayment under, any material agreement, indenture, mortgage, deed of trust, credit agreement, note, bond, lease, license, contract, or other instrument or obligation to which the Company, any Guarantor, or any of their respective subsidiaries is a party or by which any of them or any of their respective properties or assets may be bound; or
(d) result in the creation or imposition of any lien, charge, encumbrance, claim, or security interest upon any of the properties or assets of the Company, any Guarantor, or any of their respective subsidiaries (other than as contemplated by the Transaction Documents or liens arising under applicable securities laws);
except, in each case of clauses (b), (c), and (d), for such violations, breaches, defaults, terminations, cancellations, accelerations, or liens that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.04 — Offering Memoranda
(a) The Preliminary Offering Memorandum, as of its date (June 3, 2024), did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors make no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through the Representative specifically for inclusion in the Preliminary Offering Memorandum.
(b) The Disclosure Package, as of the Applicable Time ( did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors make no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through the Representative specifically for inclusion in the Disclosure Package.
(c) The Final Offering Memorandum, as of its date ( and as of the Closing Date, does not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company and the Guarantors make no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through the Representative specifically for inclusion in the Final Offering Memorandum.
(d) Each "free writing" communication or other written communication (as such terms are interpreted in the context of Rule 144A offerings and Regulation S offerings) prepared or authorized by the Company and used by the Initial Purchasers in connection with the Offering, when considered together with the Disclosure Package as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Section 3.05 — Financial Statements
(a) The audited consolidated financial statements (including the related notes thereto and schedules) of the Company and its consolidated subsidiaries included in the Offering Memoranda, which have been audited by Palladian & Howe LLP (engagement partner: Kenneth W. Sturgis), an independent registered public accounting firm, present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the respective dates indicated, and the consolidated results of operations, changes in stockholders' equity, and cash flows of the Company and its consolidated subsidiaries for each of the periods specified therein, in each case in conformity with GAAP applied on a consistent basis throughout the periods involved, except as otherwise stated in the notes thereto.
(b) The unaudited interim condensed consolidated financial statements of the Company and its consolidated subsidiaries included in the Offering Memoranda present fairly in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates indicated and the consolidated results of operations and cash flows of the Company and its consolidated subsidiaries for each of the periods specified therein, in each case in conformity with GAAP applied on a consistent basis throughout the periods involved, subject to normal year-end audit adjustments and the absence of footnotes required by GAAP.
(c) As of and for the twelve-month period ended March 31, 2024 (on a last-twelve-months, or "LTM," basis):
(i) LTM Revenue of the Company and its consolidated subsidiaries was $1,820,000,000; and
(ii) LTM Adjusted EBITDA (as defined in the Offering Memoranda) of the Company and its consolidated subsidiaries was $412,000,000.
(d) The pro forma financial information and other pro forma data included in the Offering Memoranda, including the estimated pro forma effects of the Offering and the application of the Net Proceeds, have been prepared by the Company on a basis consistent with the historical financial statements and in accordance with the applicable provisions of Regulation S-X under the Securities Act, and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Offering Memoranda.
Section 3.06 — No Material Adverse Effect
Since March 31, 2024 (the date of the most recent financial statements included in the Offering Memoranda), there has been no Material Adverse Effect, and no event or development has occurred that would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect. Except as disclosed in the Offering Memoranda, since March 31, 2024, the Company and its subsidiaries have conducted their respective businesses in the ordinary course of business consistent with past practice in all material respects.
Section 3.07 — Capitalization and Indebtedness
(a) The authorized, issued, and outstanding capitalization and indebtedness of the Company and its consolidated subsidiaries, on a historical and pro forma basis, are as described in the Offering Memoranda under the captions "Capitalization" and "Description of Other Indebtedness." As of April 1, 2024, the Company's existing indebtedness under the Existing Credit Facility consisted of:
(i) Term Loan A: $280,142,819.16 outstanding principal;
(ii) Term Loan B: $187,200,000.00 outstanding principal;
(iii) Aggregate outstanding principal under the Existing Credit Facility: $467,342,819.16; and
(iv) Revolving credit facility commitment: $150,000,000 (undrawn as of such date).
(b) The approximate total equity market capitalization of the Company as of the most recent practicable date is approximately $620,000,000.
(c) On a pro forma basis, after giving effect to the Offering and the application of the Net Proceeds (including the full repayment of the Existing Credit Facility):
(i) Pro Forma Total Debt: $500,000,000 (consisting solely of the Notes; the $150,000,000 revolving credit facility under the Existing Credit Facility is expected to be terminated upon repayment);
(ii) Pro Forma Net Leverage Ratio: approximately 1.21x (calculated as $500,000,000 of Pro Forma Total Debt divided by $412,000,000 of LTM Adjusted EBITDA); and
(iii) Pro Forma Interest Coverage Ratio: approximately 9.99x (calculated as $412,000,000 of LTM Adjusted EBITDA divided by $41,250,000 of estimated annual interest expense on the Notes, based on the 8.250% coupon rate applied to $500,000,000 principal amount).
Section 3.08 — Compliance with Indenture Covenants (Pro Forma)
On a pro forma basis, after giving effect to the Offering and the application of the Net Proceeds as described in Section 2.03 and the Offering Memoranda, the Company satisfies the incurrence-based Fixed Charge Coverage Ratio test of not less than 2.00 to 1.00 as set forth in Article 4 of the Indenture, and the Company would be permitted to incur the indebtedness represented by the Notes under the covenant described under "Description of Notes — Certain Covenants — Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" in the Final Offering Memorandum.
Section 3.09 — Existing Credit Facility
(a) The Existing Credit Facility is the Amended and Restated Credit Agreement dated as of March 15, 2021 (Loan No. GNB-SYN-2021-04417), among the Company, as borrower, the lenders from time to time party thereto (including Greystone National Bank, N.A.; Harborview Lending Group; Cascade Federal Bank; and Meriden Commercial Finance LLC, each as a lender), and Greystone National Bank, N.A., as administrative agent and collateral agent.
(b) The Existing Credit Facility bears interest at the following rates: (i) Term Loan A: SOFR plus 375 basis points per annum; and (ii) Term Loan B: SOFR plus 425 basis points per annum.
(c) The scheduled maturity date of the Existing Credit Facility is March 15, 2026.
(d) The Existing Credit Facility is secured by first-priority liens on substantially all of the assets of the Company and the Guarantors (other than Bayshore Hotel Management LLC), subject to certain exceptions set forth therein.
(e) As of the date hereof, the Company is not in default under the Existing Credit Facility, and no event has occurred that, with the giving of notice or lapse of time, or both, would constitute an event of default under the Existing Credit Facility. The consummation of the transactions contemplated by this Agreement and the other Transaction Documents, including the repayment in full of the Existing Credit Facility with the Net Proceeds, is permitted under the terms of the Existing Credit Facility without resulting in any default, event of default, or breach thereunder.
Section 3.10 — No Registration Required
Assuming the accuracy of the representations and warranties of the Initial Purchasers set forth in Article IV hereof and the compliance by the Initial Purchasers with the agreements set forth in Article VI hereof, no registration of the Notes under the Securities Act, and no qualification of the Indenture under the Trust Indenture Act of 1939, as amended, is required for the offer and sale of the Notes in the manner contemplated by this Agreement and the Offering Memoranda. The offer and sale of the Notes by the Company to the Initial Purchasers, and the initial resale of the Notes by the Initial Purchasers in the manner contemplated by this Agreement and the Offering Memoranda, are exempt from the registration requirements of the Securities Act.
Section 3.11 — Investment Company Act
The Company is not, and after giving effect to the Offering and the application of the Net Proceeds as described in Section 2.03 and the Offering Memoranda will not be, an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. The Company has been advised by its counsel of the basis for the Company's conclusion that it is not an "investment company" as defined in the Investment Company Act.
Section 3.12 — Tax Matters
(a) The Company and each of its subsidiaries have timely filed all material federal, state, local, and foreign tax returns required to be filed by any of them and have paid all material taxes, assessments, fees, and other governmental charges due and payable (including any interest or penalties thereon), except for taxes that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.
(b) There are no pending or, to the knowledge of the Company, threatened audits, examinations, investigations, or proceedings with respect to the taxes of the Company or any of its subsidiaries that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(c) The Notes will not constitute "applicable high yield discount obligations" within the meaning of Section 163(e)(5) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 3.13 — Properties and Assets
(a) The Company and its subsidiaries own or lease 47 full-service hotels and 12 resort properties located across 19 U.S. states and the U.S. Virgin Islands, comprising approximately 18,400 guest rooms in the aggregate. The properties, operations, and assets of the Company and its subsidiaries are as described in the Offering Memoranda.
(b) The Company and its subsidiaries have good and marketable title to all real property owned by them (or valid and enforceable leasehold interests in real property leased by them), and good title to all personal property owned by them, in each case free and clear of all liens, charges, encumbrances, claims, and defects, except for (i) liens described in the Offering Memoranda, (ii) liens for taxes not yet due and payable or being contested in good faith by appropriate proceedings, (iii) mechanics', carriers', workmen's, repairmen's, and other similar liens arising in the ordinary course of business, (iv) easements, restrictive covenants, and other similar encumbrances of record that do not, individually or in the aggregate, materially impair the use or value of the properties subject thereto, and (v) liens to be released upon repayment of the Existing Credit Facility, which liens are expected to be released on or promptly following the Closing Date.
Section 3.14 — Litigation
There is no action, suit, proceeding, arbitration, or governmental investigation pending or, to the knowledge of the Company, threatened in writing against or affecting the Company, any Guarantor, or any of their respective subsidiaries, before any court, governmental agency, body, or authority, or any arbitral tribunal, that (a) would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect or (b) seeks to prevent, enjoin, alter, or materially delay any of the transactions contemplated by this Agreement or the other Transaction Documents. Neither the Company nor any of its subsidiaries is subject to any outstanding order, judgment, decree, injunction, stipulation, or consent order of or with any court or governmental authority that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.15 — Insurance
The Company and its subsidiaries maintain, with financially sound and reputable insurance companies, insurance coverage in such amounts (including reasonable deductibles and retentions) and against such risks as is customary for companies of comparable size engaged in the hospitality and lodging industry. Without limiting the generality of the foregoing, the Company maintains directors' and officers' liability insurance through Atlantic Indemnity Insurance Co. (Policy No. DOP-2024-881437), with coverage limits and terms that are adequate and customary for companies of comparable size and operations. Neither the Company nor any of its subsidiaries has received notice of any pending or threatened claim under any insurance policy that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.16 — Compliance with Laws
The Company and each of its subsidiaries are in compliance in all material respects with all applicable federal, state, local, and foreign laws, statutes, regulations, rules, ordinances, codes, permits, licenses, and orders (including, without limitation, those relating to zoning, land use, building codes, fire safety, accessibility, employment, health and safety, liquor licensing, gaming (to the extent applicable), data privacy, and consumer protection), except where the failure to be in compliance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and its subsidiaries hold all material permits, licenses, franchises, approvals, consents, and other authorizations necessary for the lawful conduct of their respective businesses as presently conducted, and all such permits, licenses, franchises, approvals, consents, and authorizations are in full force and effect.
Section 3.17 — Environmental Matters
(a) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (i) the Company and its subsidiaries are in compliance with all applicable Environmental Laws (as defined below); (ii) the Company and its subsidiaries have obtained and are in compliance with all environmental permits, licenses, and authorizations required for the ownership, operation, and use of their properties and assets and the conduct of their businesses; (iii) no Environmental Claim (as defined below) is pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries; and (iv) no Hazardous Material has been released, discharged, or disposed of at, on, under, or from any property owned or operated by the Company or any of its subsidiaries in a manner that has given or would reasonably be expected to give rise to any Environmental Claim or other liability under Environmental Laws.
(b) For purposes of this Section 3.17, "Environmental Laws" means any federal, state, local, or foreign law, statute, regulation, rule, ordinance, code, permit, order, decree, judgment, or common law relating to pollution, the protection of the environment or natural resources, or the management, release, or threatened release of any Hazardous Material, and "Environmental Claim" means any action, suit, claim, demand, investigation, notice of violation, notice of potential responsibility, or proceeding under any Environmental Law, and "Hazardous Material" means any substance, material, or waste that is regulated by or the subject of any Environmental Law, including petroleum and petroleum products, asbestos, polychlorinated biphenyls, per- and polyfluoroalkyl substances, and lead-based paint.
Section 3.18 — ERISA Compliance
(a) No ERISA Event (as defined below) has occurred or is reasonably expected to occur that, individually or in the aggregate, would reasonably be expected to result in a Material Adverse Effect. The Company and each of its ERISA Affiliates (as defined below) are in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, as they relate to any "employee benefit plan" (as defined in Section 3(3) of ERISA) maintained, sponsored, or contributed to by the Company or any ERISA Affiliate.
(b) For purposes of this Section 3.18, "ERISA Affiliate" means any entity that is (or at any relevant time was) a member of a group of which the Company is a member and that is treated as a single employer under Section 414(b), (c), (m), or (o) of the Code, and "ERISA Event" means (i) a "reportable event" (as defined in Section 4043 of ERISA and the regulations promulgated thereunder) with respect to any "employee pension benefit plan" (as defined in Section 3(2) of ERISA), (ii) a failure to satisfy the minimum funding standards under Section 412 of the Code or Section 302 of ERISA, (iii) the filing of a notice of intent to terminate any employee pension benefit plan under Section 4041 of ERISA, (iv) the institution of proceedings to terminate any such plan under Section 4042 of ERISA, or (v) the incurrence of any liability under Title IV of ERISA (other than for premium payments to the Pension Benefit Guaranty Corporation in the ordinary course).
Section 3.19 — Anti-Corruption; Sanctions
(a) Neither the Company nor any of its subsidiaries, nor any of their respective directors, officers, employees, or, to the knowledge of the Company, agents or other persons acting on behalf of the Company or any of its subsidiaries, has (i) used any corporate funds for any unlawful contribution, gift, entertainment, or other unlawful expense relating to political activity, (ii) made, offered, promised, or authorized any direct or indirect unlawful payment or benefit to any "foreign official" (as defined in the Foreign Corrupt Practices Act of 1977, as amended (the "FCPA")) or domestic government official, (iii) violated or is in violation of any provision of the FCPA, the UK Bribery Act 2010, or any other applicable anti-corruption or anti-bribery law, or (iv) made, offered, agreed, requested, or taken an act in furtherance of any unlawful bribe, rebate, payoff, influence payment, kickback, or other unlawful payment or benefit.
(b) The Company and its subsidiaries have implemented and maintain in effect policies and procedures reasonably designed to ensure compliance with the FCPA and all other applicable anti-corruption laws.
(c) Neither the Company nor any of its subsidiaries, nor any of their respective directors, officers, or employees, nor, to the knowledge of the Company, any agent or representative of the Company or any of its subsidiaries, is (i) a Person currently the subject or target of any sanctions administered or enforced by OFAC, the United Nations Security Council, the European Union, His Majesty's Treasury of the United Kingdom, or other relevant sanctions authority (collectively, "Sanctions"), (ii) organized or resident in a country or territory that is, or whose government is, the subject of comprehensive Sanctions (currently, Cuba, Iran, North Korea, Syria, and the Crimea, so-called Donetsk People's Republic, and so-called Luhansk People's Republic regions of Ukraine), or (iii) an entity owned, directly or indirectly, 50% or more by one or more Persons described in clause (i) or (ii).
(d) The Company will not, directly or indirectly, use the Net Proceeds, or lend, contribute, or otherwise make available such Net Proceeds to any subsidiary, joint venture partner, or other Person (i) to fund or facilitate any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject or target of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the transactions contemplated by this Agreement, whether as an Initial Purchaser, advisor, investor, or otherwise).
Section 3.20 — Intellectual Property
The Company and its subsidiaries own, or have adequate and enforceable rights to use, all patents, patent applications, trademarks, trademark registrations and applications, service marks, service mark registrations and applications, trade names, domain names, copyrights, copyright registrations and applications, trade secrets, licenses, know-how, proprietary technology, and other intellectual property rights (collectively, "Intellectual Property") that are material to the conduct of their businesses as presently conducted and as described in the Offering Memoranda, including all hotel brand trademarks, resort brand marks, and related brand intellectual Property. To the knowledge of the Company, no third party is infringing, misappropriating, or otherwise violating any material intellectual Property owned by the Company or any of its subsidiaries in a manner that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any written notice alleging that any of them is infringing, misappropriating, or otherwise violating the intellectual Property of any third party, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.21 — Internal Controls; Sarbanes-Oxley
(a) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(b) Since the end of the Company's most recent audited fiscal year, there has been (i) no material weakness in the Company's internal control over financial reporting (whether or not remediated) and (ii) no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
(c) The Company is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder by the SEC and the Nasdaq Stock Market.
Section 3.22 — Independent Auditors
Palladian & Howe LLP, which has audited and reported on the consolidated financial statements of the Company and its consolidated subsidiaries included in the Offering Memoranda, is an independent registered public accounting firm with respect to the Company and its consolidated subsidiaries within the meaning of the Securities Act and the applicable rules and regulations adopted by the SEC and the Public Company Accounting Oversight Board (United States). No event has occurred since the issuance of Palladian & Howe LLP's audit report that would require such firm to withdraw such audit report or to modify the opinion expressed therein.
Section 3.23 — Rating Agencies
(a) As of the date hereof, the Notes have been rated B1 with a stable outlook by Crestline Ratings Group and B+ with a stable outlook by Broadmark Rating Services Inc.
(b) The Company has not been informed, and has no reason to believe, that either Crestline Ratings Group or Broadmark Rating Services Inc. has placed the Notes on "CreditWatch" or any similar credit watch list for a possible downgrade, withdrawal, or qualification, or otherwise taken any action that would reasonably be expected to result in a downgrade, withdrawal, or qualification of the rating assigned to the Notes.
(c) The Company has not been informed by any other "nationally recognized statistical rating organization" (as defined in Section 3(a)(62) of the Exchange Act) that such organization has assigned, or intends to assign, a credit rating to the Notes.
ARTICLE IV — REPRESENTATIONS AND WARRANTIES OF THE INITIAL PURCHASERS
Each Initial Purchaser, severally and not jointly, represents and warrants to the Company and the Guarantors as follows:
Section 4.01 — Qualified Institutional Buyers; Regulation S
(a) Each Initial Purchaser represents and warrants that it is a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act) and has and will offer and sell the 144A Notes only to persons that it reasonably believes are "qualified institutional buyers" within the meaning of Rule 144A under the Securities Act, and in connection with each such sale, it has taken and will take reasonable steps to ensure that the purchaser of such 144A Notes is aware that such sale is being made in reliance on Rule 144A.
(b) Each Initial Purchaser represents and warrants that it has offered and will offer and sell the Regulation S Notes only in "offshore transactions" (as defined in Regulation S under the Securities Act) in compliance with Rule 903 or Rule 904 of Regulation S under the Securities Act, and it has not and will not engage in any "directed selling efforts" (as defined in Regulation S under the Securities Act) with respect to the Regulation S Notes.
(c) Each Initial Purchaser acknowledges that the Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act.
Section 4.02 — No General Solicitation
Each Initial Purchaser represents and warrants that neither it nor any person acting on its behalf has offered or sold, or will offer or sell, the Notes by means of any form of "general solicitation" or "general advertising" within the meaning of Rule 502(c) under the Securities Act, including (a) any advertisement, article, notice, or other communication published in any newspaper, magazine, or similar medium, or broadcast over television, radio, or the internet, or (b) any seminar or meeting whose attendees had been invited by any general solicitation or general advertising. Each Initial Purchaser represents that it has not solicited offers for, or offered or sold, the Notes by means of any "directed selling efforts" within the meaning of Regulation S under the Securities Act.
Section 4.03 — Authorization
The Representative represents and warrants that it has full power and authority to execute and deliver this Agreement on behalf of the several Initial Purchasers and to take all actions required to be taken by the Representative hereunder. This Agreement has been duly authorized, executed, and delivered by the Representative, and constitutes a valid and binding obligation of the Representative, enforceable against the Representative in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and similar laws affecting creditors' rights generally and general principles of equity.
ARTICLE V — COVENANTS OF THE COMPANY AND THE GUARANTORS
Each of the Company and each Guarantor covenants and agrees with the Initial Purchasers as follows:
Section 5.01 — Delivery of Offering Memoranda
(a) The Company shall deliver or cause to be delivered, without charge, to each of the Initial Purchasers and to counsel for the Initial Purchasers, of the Final Offering Memorandum (and any amendments or supplements thereto) as the Initial Purchasers may reasonably request for the purposes contemplated by this Agreement.
(b) The Company shall not amend or supplement the Offering Memoranda, the Disclosure Package, or any free writing communication used in connection with the Offering without the prior written consent of the Representative, which consent shall not be unreasonably withheld, conditioned, or delayed.
(c) If, at any time prior to the completion of the resale of the Notes by the Initial Purchasers (as determined by the Representative), any event occurs or condition exists as a result of which the Final Offering Memorandum, as then amended or supplemented, would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any reason it shall be necessary during such period to amend or supplement the Final Offering Memorandum in order to comply with applicable law, the Company shall promptly notify the Representative and shall promptly prepare and furnish to the Initial Purchasers, at the Company's expense, either amendments or supplements to the Final Offering Memorandum so that the statements therein, as so amended or supplemented, will not include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Section 5.02 — Notification of Material Events
The Company shall promptly notify the Representative, in writing, of (a) any event occurring, or condition existing, at any time prior to the Closing Date that would cause any representation or warranty of the Company or any Guarantor contained in this Agreement to be untrue or inaccurate in any material respect, (b) any event occurring, or condition existing, at any time prior to the Closing Date that would cause any condition to the obligations of the Initial Purchasers set forth in Article VII not to be satisfied, (c) the receipt by the Company or any Guarantor of any communication from any governmental authority or any court relating to the transactions contemplated by this Agreement or the other Transaction Documents, and (d) any Material Adverse Effect or any development that is reasonably likely to result in a Material Adverse Effect.
Section 5.03 — Blue Sky Compliance
The Company shall cooperate with the Initial Purchasers and counsel for the Initial Purchasers in connection with the qualification or registration of the Notes for offer and sale under the securities or "Blue Sky" laws of such jurisdictions as the Representative may reasonably request, and shall continue such qualification in effect for as long as may be necessary to complete the resale of the Notes by the Initial Purchasers; provided, however, that the Company shall not be obligated to (a) qualify as a foreign corporation in any jurisdiction in which it is not already so qualified, (b) take any action that would subject it to general service of process or taxation in any jurisdiction in which it is not already so subject, or (c) file a general consent to service of process in any such jurisdiction.
Section 5.04 — DTC Eligibility
The Company shall use commercially reasonable efforts to cooperate with DTC and the Trustee so as to permit the Notes to be eligible for clearance and settlement through the facilities of DTC, including the book-entry transfer facilities thereof, and to that end, the Company shall execute and deliver, or cause to be executed and delivered, such documents, instruments, and agreements (including a Letter of Representations to DTC) as may be required to permit such eligibility.
Section 5.05 — Use of Proceeds
The Company shall apply the Net Proceeds from the sale of the Notes solely in the manner described in Section 2.03 hereof and as described in the Offering Memoranda under the heading "Use of Proceeds." Without limiting the generality of the foregoing, the Company shall not, and shall not permit any of its subsidiaries to, use the Net Proceeds, directly or indirectly, (a) for the purpose of funding any activities or business of or with any Person or in any country or territory that, at the time of such funding, is the subject or target of Sanctions, or (b) in any other manner that would result in a violation of applicable Sanctions or applicable anti-corruption laws (including the FCPA).
Section 5.06 — No Stabilization
Neither the Company nor any of its affiliates shall take, directly or indirectly, any action designed to, or that has constituted or that would reasonably be expected to cause or result in, the stabilization or manipulation of the price of any security of the Company or its subsidiaries to facilitate the sale or resale of the Notes, in violation of applicable law.
Section 5.07 — Execution and Delivery of Transaction Documents
The Company and each Guarantor shall execute and deliver, or cause to be executed and delivered, on or prior to the Closing Date, each of the following Transaction Documents to which it is or is required to be a party:
(a) the Indenture;
(b) the Notes;