SUBSEQUENT EVENTS

Series B Preferred Stock Matters

Under the Second and Amended and Restated Certificate of Designation for the Series B Preferred Shares, we cannot exceed 103% of the aggregate line item expenditures in our annual operating budget approved by the Series B Investors without their prior written approval. We were in breach of this covenant for the year ended December 31, 2018 for certain expenses that exceeded the approved budget by more than 103%. However, subsequent to December 31, 2018, we obtained a waiver of this breach from the Series B Investors.

As described in Note 16, at any time after July 24, 2019, each holder of our Series B-1 and B-2 Preferred Stock may require the Company to redeem, out of legally available funds, the shares held by such holder at a price (the “Redemption Price”) equal to the greater of (i) 150% of the sum of the original price per share plus all accrued and unpaid dividends or (ii) the sum of the tangible book value of the Company per share of voting Common Stock plus all accrued and unpaid dividends, as of the date of redemption. As of December 31, 2018, the Redemption Price would be approximately $39.6 million. We entered into an agreement effective April 1, 2019 with the holders of the Series B-1 and B-2 Preferred Stock to defer the redemption period for one year, or July 24, 2020, to allow the Company ample time to restructure the terms of the existing securities and/or to generate the liquidity necessary for such repayment. In exchange for this extension, the Company agreed to increase Redemption Price described above from 150% of the sum of the original price per share of the Series B-1 and B-2 Preferred Stock to 160%.

Exchange Offer Termination

In November 2018, the Company commenced an offering of up to $10.2 million in new notes (“New EO Notes”) to existing noteholders of its existing EO Notes to 1) extend the maturity date of the EO Notes from April 29, 2019 to December 15, 2021 and 2) to increase the coupon interest rate from 4% to 7%. In March 2019, the Company elected to terminate the offering due to low participation by existing noteholders and the Company will be required to pay off the notes at maturity.

Tender Offer

In December 2018, the Company launched a tender offer to common shareholders of its Class B and Class C common stock for up to 500,000 shares at $2.00 per share. The tender offer expired in January 2019 and was over-subscribed. The 500,000 shares were issued on a pro rata basis among the participating shareholders, and payment in the amount of $1.0 million was made following the tender offer expiration.

MidFirst Loan Modification

In March 2019, the Company entered into a loan modification agreement with MidFirst bank under which the MacArthur Loan was modified to, among other things, increase the total loan facility from $32.3 million to $37.0 million, increase our equity requirement from $17.4 million to $27.7 million, and increase our interest reserve balance and provide for the Company to establish certain reserves, including a $1.8 million reserve for anticipated future spa renovations at MacArthur. The timing of debt service ratio coverage tests were also modified to allow for the modified renovation project timing.

Bain Termination Agreement

The Employment Agreement between the Company and Mr. Bain, the Company’s Chairman of the Board and Chief Executive Officer, expires on July 24, 2019 (the “Expiration Date”). The Company and Mr. Bain have mutually agreed not to renew or extend Mr. Bain’s employment agreement. Accordingly, on April 11, 2019, the Company entered into a Termination of Employment Agreement, Release and Additional Compensation Agreement with Mr. Bain (the “Bain Termination Agreement”). The material terms of this agreement are summarized below.


1)	The Company and Mr. Bain agree that, effective on the Expiration Date, Mr. Bain’s employment with the Company will terminate and he will resign as an officer and director of the Company. Subsequent to the Expiration Date, the Company may engage Mr. Bain on a month-to-month basis as a consultant pursuant to a separate written agreement at a fee of $30,000 per month;


2)	Provided that Mr. Bain remains employed by the Company through the Expiration Date, he shall be entitled to receive bonus payments of $0.6 million for 2018 services (which have been accrued in the accompanying consolidated financial statements) and $0.35 million for 2019 services, respectively, to be paid no later than April 30, 2019 and March 31, 2020;


3)	The Company has agreed to pay Mr. Bain two payments of $0.25 million each by no later than each of January 31, 2020 and January 31, 2021;

Mr. Bain will be entitled to receive a Legacy Asset Performance Fee (“LAPF”), as calculated in accordance with his current employment agreement, in connection with the disposition of the Company’s interests in the assets of the New Mexico Partnerships (the “New Mexico Assets”) provided that such disposition occurs prior to December 31, 2022. The parties agree that these are the only assets as to which Mr. Bain may be entitled to receive a LAPF following the Expiration Date;

The Company agrees to enter into an agreement with an affiliate of Mr. Bain, ITH Consulting, LLC (“ITH”), pursuant to which ITH will assist the Company in selling the New Mexico Assets. The term of this agreement will commence on July 25, 2019 and terminate on the date of the sale of the New Mexico Assets or December 31, 2022, whichever is earlier. Under this agreement, ITH will be entitled to a fixed monthly fee of $5,000 plus expenses, and an incentive bonus if the net proceeds received by the Company meet certain thresholds and other requirements are met;


6)	The Company will cause any and all unvested equity awards and deferred compensation benefits granted to Mr. Bain to vest by no later than the Expiration Date;


7)	Mr. Bain has agreed to certain noncompetition and nonsolicitation covenants, cooperation covenants and certain other requirements.