Item 1.01. Entry into a Material Definitive Agreement.
On November 12, 2020, CTO Realty Growth, Inc., a Florida corporation (the “Company”), and certain subsidiaries of the Company entered into a Fifth Amendment to the Second Amended and Restated Credit Agreement and Consent (the “Fifth Amendment”), which further amends that certain Second Amended and Restated Credit Agreement, dated as of September 7, 2017, by and among the Company, and certain subsidiaries of the Company that are parties thereto, as guarantors, and Bank of Montreal, as administrative agent and lender, Truist Bank and Well Fargo Bank, National Association, as Co-Syndication Agents and lenders, and the other lenders party thereto (as amended, the “Credit Agreement”).
The Credit Agreement, as amended by the Fifth Amendment, provides that, among other things, (i) the Company must comply with certain adjusted additional financial maintenance requirements, including (x) a new restricted payments covenant which limits the type and amount of cash distributions that may be made by the Company and (y) an adjusted fix charges ratio, which now excludes certain onetime expenses for purposes of calculation and (ii) the Company must, from and after the date that the Borrower elects to qualify as a REIT (as defined below), maintain its status as a REIT. In addition to the amendments discussed above, the lenders, pursuant to the Fifth Amendment, consented to the Merger (as defined below) and waived compliance with certain covenants contained in the Credit Agreement, which may otherwise be breached by consummating the Merger.
The foregoing description of the Fifth Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the Fifth Amendment, a copy of which is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information provided in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item 5.07. Submission of Matters to a Vote of Security Holders.
On November 9, 2020, the Company held a special meeting of shareholders (virtual format) at which the Company’s shareholders voted on two proposals related to the Company’s previously announced plan for the Company to elect to be subject to tax as a real estate investment trust (“REIT”) for U.S. federal income tax purposes commencing with the Company’s taxable year ending December 31, 2020.
The first proposal (the “Merger Proposal”) sought shareholder approval to a proposed merger pursuant to which the surviving entity will be a corporation organized in the state of Maryland whose charter will include certain standard REIT ownership limitations and transfer restrictions applicable to its capital stock. On September 3, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CTO NEWCO REIT, Inc., a Maryland corporation and a direct, wholly owned subsidiary of the Company (“NEWCO”). Pursuant to the Merger Agreement, the Company will merge with and into NEWCO, with NEWCO continuing as the surviving corporation (the “Merger”). As a result of the Merger, NEWCO will replace CTO as the publicly held corporation through which the Company’s operations are conducted, and promptly following the Merger, NEWCO will be renamed “CTO Realty Growth, Inc.”
The second proposal (the “Adjournment Proposal”) sought shareholder approval for the adjournment of the special meeting, if necessary, to solicit additional proxies in favor of the Merger Proposal.
