Item 1.01 Entry into a Material Definitive Agreement.
On January 14, 2021, Ashford Inc. ("Ashford Inc.") entered into the Second
Amended and Restated Advisory Agreement (the "Advisory Agreement"), by and
between Ashford Hospitality Trust, Inc. ("Ashford Trust"), Ashford Hospitality
Limited Partnership (the "Operating Partnership"), Ashford TRS Corporation
("TRS"), Ashford Inc. and Ashford Hospitality Advisors LLC ("Ashford LLC" and,
together with Ashford Inc., the "Advisor").
The Advisory Agreement amends and restates the terms of the Amended and Restated
Advisory Agreement, dated as of June 10, 2015, as amended by the Enhanced Return
Funding Program Agreement and Amendment No. 1 to the Amended and Restated
Advisory Agreement, dated as of June 26, 2018 (the "Original Agreement"), to
among other things, provide for the following revised terms:
Term. The Advisory Agreement replaces the existing perpetual term with an
initial 10-year term, subject to an extension by the Advisor for up to 7
successive additional 10-year renewal terms which such extensions shall permit
either party to elect to renegotiate the fees to be charged pursuant to the
Advisory Agreement.
Termination. Ashford Trust will no longer be permitted to terminate the Advisory
Agreement (i) at the end of each initial or renewal term based on Ashford
Trust's and the Advisor's inability to find a resolution on the fees to be
charged, based upon the then current market for such fees or (ii) upon a change
of control of the Advisor. Additionally, the Advisory Agreement includes certain
clarifying language, including provisions making clear that in the event a
tender offer, voting event or agreement that, upon consummation, would
constitute a Company Change of Control (as defined in the Advisory Agreement) is
terminated, any amounts deposited into the Termination Fee Escrow Account may be
disbursed to Ashford Trust.
Subordination and Deferral of Fees. The Advisor will agree to subordinate its
interest in the Termination Fee (as defined in the Advisory Agreement) to
Ashford Trust's lenders to the extent, on or before the first anniversary of the
Advisory Agreement, Ashford Trust enters into a loan agreement pursuant to which
Ashford Trust agrees to pledge all or substantially all of its assets to the
lenders thereunder. Additionally, the Advisor will agree to defer the portion of
Base Fees and Incentive Fees (each as defined in the Advisory Agreement) that
exceed 80% of the amount of such fees paid by Ashford Trust to the Advisor for
advisory services rendered during 2019 until the later of (i) 2 years after the
date of an applicable loan entered into by Ashford Trust and (ii) such time as
all capitalized interest under the applicable loan has been paid in full.
Payment of Fees. The percentage used to calculate the Base Fee will be fixed at
0.70% such that the Base Fee payable on a monthly basis will be in an amount
equal to 1/12th of the sum of (i) 0.70% of the Total Market Capitalization (as
defined in the Advisory Agreement) of Ashford Trust for the prior month, plus
(ii) the Net Asset Fee Adjustment (as defined below), if any, on the last day of
the prior month during which the Advisory Agreement was in effect; provided,
however, in no event shall the Base Fee for any month be less than the Minimum
Base Fee (as defined in the Advisory Agreement).
Peer Group. The list of peer group members will be revised to remove certain
companies which no longer exist.
Liquidated Damages. Upon a Liquidated Damages Event (as defined in the Advisory
Agreement) Ashford Trust shall pay to the Advisor the Liquidated Damages Amount
(as defined in the Advisory Agreement), which amount, less any outstanding
amount owed by the Advisor to Ashford Trust as a result of a judgment plus
reimbursable costs and expenses, shall be deemed liquidated damages and the
parties shall have no further obligations under the Advisory Agreement.
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Consolidated Tangible Net Worth. The requirement that Ashford Trust maintain a
minimum Consolidated Tangible Net Worth (as defined in the Advisory Agreement)
will be suspended until the first fiscal quarter beginning after June 30, 2023.
Officers. The concept of a "Designated CEO" was removed, such that in the event
the board of directors of Ashford Trust elects to appoint a chief executive
officer who was not an individual made available by the Advisor pursuant to the
Advisory Agreement, such officer made available by the Advisor will no longer
entitled to any role or responsibilities with Ashford Trust.
Company Change of Control. The sale or disposition by Ashford Trust of assets
which would constitute a Company Change of Control was revised in order to
provide Ashford Trust additional flexibility to dispose of underperforming
assets negatively impacted by the COVID-19 pandemic. A Company Change of Control
will include, from the date of the Advisory Agreement (the "Effective Date")
until the first anniversary thereof, the consummation of a sale or disposition
by Ashford Trust of assets constituting 40% of the gross book value of Ashford
Trust's assets, exclusive of assets sold or contributed to a platform also
advised by the Advisor (but including certain assets which were foreclosed upon
or otherwise returned to Ashford Trust's lenders during 2020). In addition,
Ashford Trust clarified its existing language such that, commencing after the
first anniversary of the Effective Date, the consummation of a sale or
disposition by Ashford Trust of assets constituting 20% of the gross book value
of Ashford Trust's assets over any one-year period, or the consummation of a
sale or disposition by Ashford Trust of assets constituting 30% of the gross
book value of Ashford Trust's assets over any three-year period, exclusive in
each case of assets sold or contributed to a platform also advised by the
Advisor, would constitute a Change of Control. Additionally, a change in the
majority composition of the board of directors of Ashford Trust shall no longer
be considered a Company Change of Control.
Project Management Fees. Ashford Trust and the Advisor shall cause the Master
Project Management Agreement (the "Master Project Management Agreement") dated
as of August 8, 2018, by and among TRS, the Operating Partnership, RI Manchester
Tenant Corporation, CY Manchester Tenant Corporation and Premier Project
Management, LLC to have a 10-year initial term commencing on the Effective Date
and shall cause the project management and related fees to be paid to Premier
Project Management, LLC thereunder to conform to the predetermined fee schedule
attached to the Advisory Agreement.
Certain additional revisions were made in line with market practice and to more
closely reflect the advisory terms between Ashford Inc. and Braemar Hotels &
Resorts Inc.
The summary of the Advisory Agreement contained in this Item 1.01 does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Advisory Agreement, which is filed as Exhibit 10.1 hereto and
incorporated by reference herein.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1 Second Amended and Restated Advisory Agreement, dated as of January
14, 2021, by and between Ashford Hospitality Trust, Inc., Ashford
Hospitality Limited Partnership, Ashford TRS Corporation, Ashford Inc.
and Ashford Hospitality Advisors LLC.
104 Cover Page Interactive Data File (formatted in Inline XBRL and
contained in Exhibit 101).
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