Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under anOff-Balance Sheet Arrangement.
On December 12, 2018, RLH DC LLC (“RLH DC”), a wholly owned subsidiary of RLS DC Venture LLC, a consolidated subsidiary of Red Lion Hotels Corporation (“RLH Corporation”) in which RLHC holds a 55% interest, and RLH Corporation, as guarantor, received a reservation of rights letter and notice from Pacific Western Bank, agent under that certain Loan Agreement between RLH DC, Pacific Western Bank, and the lenders party thereto dated October 29, 2015, as amended (the “Loan Agreement”). The letter notifies RLH DC and RLH Corporation that RLH DC was in breach of the Debt Service Coverage Ratio covenant as of September 30, 2018, as we disclosed in our quarterly report on Form10-Q for the quarter ended September 30, 2018, and in breach of the Loan to Value Ratio covenant, as determined by an appraisal of the underlying property provided to lenders dated November 21, 2018. A breach of one of these covenants constitutes an Event of Default under the Loan Agreement. The approximate amount owing under the Loan Agreement is $16.0 million, and RLH Corporation has provided a principal guaranty of $4.5 million.
The Loan Agreement permits Debt Service Coverage Ratio covenant defaults to be cured by an increase in the RLH Corporation principal guarantee, which can be exercised a maximum of two times during the remaining term of the loan. On December 14, 2018, RLH DC and RLH Corporation executed an amendment to the Loan Agreement to increase the RLH Corporation principal guarantee to $10.5 million, remediating the Debt Service Coverage Ratio covenant default, and increased the required Loan to Value Ratio through May 31, 2019, remediating the Loan to Value Ratio covenant default.
Item 5.02. Departure Of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b) RLH Corporation and William (Bill) Linehan, the company’s Chief Marketing Officer, entered into an amended offer letter effective December 15, 2018 to establish a mutually agreed upon separation date from the Company of May 31, 2019 (the “Separation Date”). Mr. Linehan will remain as Executive Vice President, Chief Marketing Officer through his Separation Date, reporting to the President and CEO. No changes were made to Mr. Linehan’s annual base salary of $342,060, and Mr. Linehan remains eligible to earn a bonus under the company’s 2018 variable pay plan, payable on his Separation Date, if the targets and goals for 2018 previously set by the company’s Compensation Committee are achieved.
