CDOR Condor Hospitality Trust Inc

PROPOSAL 3

THE ADJOURNMENT PROPOSAL

Although it is not currently expected, the special meeting may be adjourned to a later date or dates, if necessary or appropriate, including to solicit additional proxies if we have not received sufficient votes for approval of the Merger Proposal at the time of the special meeting. Any adjournments may be made without notice, other than by an announcement at the special meeting, upon approval by the affirmative vote of a majority of the votes cast on the proposal present in person or represented by proxy at the special meeting and entitled to vote.

If the persons named as proxies on the proxy card are asked to vote for one or more adjournments of the special meeting, including to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the Merger Proposal, they will only have the authority to vote on such matter as instructed by you or your proxy and, if no instructions are provided, will vote for such adjournment. Any adjournment of the special meeting, including for the purpose of soliciting additional proxies, will allow our shareholders who have already granted their proxies to revoke them at any time prior to their use.

Approval of this Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the holders of Company common stock present in person or represented by proxy at the special meeting and entitled to vote. If you fail to vote your shares or abstain from voting with respect to the Adjournment Proposal, or if you fail to provide instructions to your broker, bank or other nominee with respect to the Adjournment Proposal, your failure to vote will not have any effect on the outcome, assuming a quorum is present. Broker non-votes are not considered to be votes cast and therefore will not have any effect on the approval of the proposal.

Our board of directors unanimously recommends that you vote “FOR” the approval of the Adjournment Proposal.

24

THE PARTIES TO THE MERGERS

Condor Hospitality Trust, Inc.

4800 Montgomery Lane, Suite 220

Bethesda, Maryland 20814

Company Parties

The Company (Condor Hospitality Trust, Inc.)

Condor Hospitality Trust, Inc. is an externally managed real estate trust formed as a Maryland corporation, that specializes in the investment and ownership of upper midscale and upscale, premium-branded, select-service, extended-stay, and limited-service hotels in the top 100 MSAs with a particular focus on the top 20 to 60 MSAs. The Company currently owns 15 hotels in eight states. Condor’s hotels are franchised by a number of the industry’s most well-regarded brand families including Hilton, Marriott, and InterContinental Hotels Group.

The Company common stock trades on the NYSE American under the symbol “CDOR.”

The Operating Partnership (Condor Hospitality Limited Partnership)

Condor Hospitality Limited Partnership is a Virginia limited partnership through which the Company conducts substantially all of its business and owns, either directly or indirectly through subsidiaries all of the Company assets.

The Company’s and the Operating Partnership’s principal executive offices are located at 4800 Montgomery Lane, Suite 220, Bethesda, Maryland, 20814, and the telephone number is 402-371-2520.

The Company website is www.condorhospitality.com. The information contained on the Company website is not incorporated into, and does not form a part of, this proxy statement. For additional information about the Company and its business, please refer to “Where You Can Find More Information” on page 82.

Parent Parties

Parent (NHT Operating Partnership, LLC)

NHT Operating Partnership, LLC is a Delaware limited liability company. Parent is the operating partnership of NexPoint Hospitality Trust, an unincorporated, open-ended real estate investment trust established pursuant to a declaration of trust under the laws of the Province of Ontario (“NHT”) and listed on the TSXV under the ticker symbol “NHT”. NHT is primarily focused on acquiring and maintaining select service and extended stay, hospitality assets in the United States.

Merger Sub (NHT REIT Merger Sub, LLC)

NHT REIT Merger Sub, LLC is a Delaware limited liability company formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated thereby. Merger Sub has not carried on any activities on or prior to the date of this proxy statement except for activities incidental to its formation and activities in connection with the merger agreement.

Merger OP (NHT Operating Partnership II, LLC)

NHT Operating Partnership II, LLC is a Virginia limited liability company formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated thereby. Merger OP has not carried on any activities on or prior to the date of this proxy statement except for activities incidental to its formation and activities in connection with the merger agreement.

25

The executive offices of Parent, Merger Sub and Merger OP are located at 300 Crescent Court, Suite 700, Dallas, Texas 75201 and the telephone number is (972) 628-4024.

THE MERGERS

The following is a description of the material aspects of the mergers. While we believe that the following description covers the material terms of the mergers, the description may not contain all of the information that is important to our shareholders. We encourage our shareholders to carefully read this entire proxy statement, including the merger agreement and the other documents attached to this proxy statement and incorporated herein by reference, for a more complete understanding of the mergers.

General

Our board of directors has adopted and approved the merger agreement and the transactions contemplated by the merger agreement, including the Company merger. In the Company merger, Merger Sub will merge with and into the Company, with the Company being the surviving entity in the Company merger and continuing as a wholly owned subsidiary of Parent. Upon completion of the Company merger, all shares of Company common stock (other than treasury shares and shares held by the Parent Parties, which will be cancelled and retired and will cease to exist with no consideration being delivered in exchange therefor) and Series E preferred stock will be automatically cancelled and converted into the right to receive the cash consideration described below under “- Consideration to be received in the mergers.”

Immediately prior to the Company merger, Merger OP will merge with and into the Operating Partnership, with the Merger OP being the surviving entity in the Partnership merger. We already have taken all actions necessary to approve the Partnership merger and no approval of any of the limited partners of the Operating Partnership is required to complete the Partnership merger. As such, this proxy statement does not constitute any solicitation of consents with respect to the Partnership merger.

We were incorporated in Virginia on August 23, 1994 and we reincorporated in Maryland on November 19, 2014. Our Company common stock began trading on October 30, 1996 and today trades under the symbol “CDOR” on the NYSE American stock exchange. We are a self-administered real estate investment trust for federal income tax purposes that specializes in the investment and ownership of high-quality select-service, limited-service, extended stay, and compact full service hotels. As of August 9, 2019, the Company owned 15 hotels, representing 1,908 rooms, in eight states, including one hotel owned through an 80% interest in an unconsolidated joint venture (the “Atlanta JV”).

We conduct our business through a traditional umbrella partnership REIT, or UPREIT, in which our hotel properties are owned by our Operating Partnership and its subsidiaries, for which we serve as general partner. As of March 31, 2019, we owned an approximate 99.5% ownership interest in the Operating Partnership.

Background

The following chronology is a summary of the key meetings and events that led to the signing of the merger agreement. The following chronology does not purport to encompass every conversation among the parties to the transaction, the board of directors, our management or representatives and other parties.

The Company began as a public hotel REIT in 1994, when it conducted its initial public offering, focused on owning midscale and economy hotels, and at its peak ownership in 2008, owned 128 such hotels. The slow recovery of the Company’s legacy hotels compared to higher priced hotels following an economic downturn in 2008 led the Company to reevaluate its operating model and engage in a strategic plan to reduce ownership of midscale and economy hotels in favor of newer premium-branded upper-midscale and upscale select-service hotels located primarily in major secondary markets. The implementation of the change proceeded slowly over the next several years, and, in March 2015, Mr. J. William Blackham was appointed President and CEO of the Company as part of an effort to expedite the Company’s disposition of legacy hotels and the acquisition of new hotels that fit the Company’s strategic plan.

26

From October 1, 2015 through March 31, 2018, the Company acquired 14 such hotels in accordance with its strategic plan and substantially completed its exit from the ownership of midscale and economy hotels, retaining only one select service hotel from the previous portfolio.

In order to continue to execute the Company’s strategy, Mr. Blackham periodically explored potential avenues for raising capital to purchase additional hotels, and regularly reported on these efforts to the board of directors. However, as of June 30, 2018, new capital had not been sourced. Accordingly, on July 1, 2018, the Company engaged two investment banks – CS Capital Advisors, LLC (“CSCA”) and Robert W. Baird & Co. Incorporated (“Baird”) – to assist it in raising capital by identifying potential investors in the Company’s debt or equity securities or potential joint venture candidates for the purpose of acquiring hotels. CSCA contacted 27 parties, none of whom entered into confidentiality agreements or submitted indications of interest. Baird likewise contacted 27 parties, 10 of whom executed confidentiality agreements with the Company. None of the 10 submitted indications of interest in the near term. As discussed below, one of the 10 parties eventually delivered a draft non-binding letter of intent on November 5, 2018 to acquire less than 100% of the Company’s common stock (subject to other conditions).

On September 6, 2018, at its regularly scheduled quarterly meeting, the board of directors received presentations from five investment banks on potential capital raise opportunities and strategic alternatives for the Company. McGrath North Mullin & Kratz, PC LLO (“McGrath North”), the Company’s outside counsel, was present at the meeting. McGrath North reviewed with the board of directors its fiduciary duties under the MGCL in connection with the consideration of strategic alternatives. In the course of the presentations by the investment banks, the board of directors was provided information regarding, among other things, the lodging environment, preliminary Company valuations and potential strategic alternatives available to the Company. One of the investment banks focused exclusively on a brokered sale of each of the Company’s hotels, either alone or in groups. The other four banks presented a general overview of potential strategic alternatives, including, among other things, a sale of the Company, a merger transaction, and growth through a contribution of assets or investment by an equity partner. Two of the five presentations, those of Baird and KeyBanc, included more detailed and extensive valuation analyses and exhibited deeper familiarity with the Company’s hotels, operations and management. While both of these investment banks had previously provided investment banking services to the Company, KeyBanc had served as the lead book-runner on the Company’s successful March 23, 2017 $50.1 million public offering and was joint lead arranger in respect of the Company’s revolving credit facility (under which an affiliate of KeyBanc was also a lender and agent). The board of directors engaged in extended discussion regarding the benefits of retaining one of Baird or KeyBanc as its financial advisor, including, among other things, their superior familiarity with the Company as compared to the other banks. After careful deliberation and consideration, the board of directors determined to retain KeyBanc based on, among other factors, KeyBanc’s experience in the sector, familiarity with the Company and its operations, and wherewithal to conduct a robust strategic alternative review process.

KeyBanc was formally engaged as the board of directors’ financial advisor as of September 13, 2018. Over the ensuing weeks, KeyBanc, at the direction of the board of directors, reached out to over 200 potential bidders to gauge interest in a strategic transaction with the Company. The types of parties contacted included private equity investors, strategic investors, sovereign wealth funds, insurance companies, family offices, hedge funds and pension fund / endowments and public REITs. Between October 1, 2018 and October 25, 2018, the Company entered into 45 non-disclosure agreements with potential parties identified by KeyBanc, including NexPoint Real Estate Advisors L.P. (“NREA”), an affiliate of Highland Capital Management L.P. (“Highland Capital”), a multibillion-dollar global alternative investment manager founded in 1993. The parties entering into non-disclosure agreements, including NREA, were provided access by KeyBanc, at the direction of the Company, to a virtual data room which contained a confidential information memorandum, Company financial information and Smith Travel Research (“STR”) reports on the Company’s hotels.

On September 27, 2018, at the direction of the board of directors, the Company publicly announced that its board of directors had initiated a process to evaluate strategic alternatives to enhance shareholder value. The review process, to be conducted with the assistance of financial and legal advisors, would evaluate the full range of potential strategic alternatives, from remaining independent to consummating a sale of the Company or other business combination (including, without limitation, public and private capital raises, recapitalization, merger or acquisition, and joint venture opportunities).

27

During the strategic alternative process, at the direction of the board of directors, Mr. Blackham continued to explore potential acquisition opportunities, which resulted in a non-binding letter of intent with Party A on October 28, 2018 proposing that the Company purchase 15 hotels from Party A. The purchase was subject to substantial conditions, including financing conditions, commitment by the Company’s major shareholders to sell their Company securities to Party A, equity capital raises by the Company and board of director and shareholder approvals. Party A granted the Company a 15-day exclusivity period to negotiate the purchase of the hotels. While Mr. Blackham participated in discussions with Party A, the letter of intent expired with the expiration of the 15-day exclusivity period when numerous conditions, including the financing condition, were not satisfied.

On November 1, 2018, at a meeting of the board of directors, KeyBanc presented the first round expressions of interest and potential terms. After McGrath North reiterated the board of directors’ fiduciary obligations in connection with the process, KeyBanc reported that most of the parties contacted indicated that they would not participate in the process for reasons including the Company’s share price underperformance, lack of interest in the hospitality sector, concerns about the select-service hotel space, unfavorable pricing range and exit concerns from a potential investment, current stage of lodging cycle for supply and demand, and risk of potential dilution. KeyBanc reported that eight parties – NREA and Parties B, C, D, E, F, G and H – had provided written indications of interest. Seven of these parties, NREA and Parties B, C, D, E, F and G, proposed an all-cash acquisition of the Company. Party H proposed to acquire the Company through a reverse merger and recapitalization.

The indications of interest from NREA and Parties B, C, D, E, F and G for a cash acquisition of the Company ranged in implied share values and were based on varying assumptions, including the costs of property improvements (“PIP”) that would be required by the franchisors of the Company’s hotels in connection with a transaction. KeyBanc assisted the board of directors in evaluating the certainty of capital financing of these seven parties, noting that Party G’s proposal had the lowest indicated price per share for Company common stock and that Party G had never engaged in an entity-level transaction. By contrast, the indications of interest from Party A and Party H proposed transactions whereby only Company securities owned by RES and SREP (and no other Company stockholders) would be acquired. The board of directors discussed potential shareholder sentiment for remaining invested in the Company compared to the lack of a liquidity event for holders of Company common stock other than RES and SREP, and the significant conditionality of these indications of interest. The board of directors then instructed KeyBanc to invite NREA and Parties B, C, D, E and F (excluding Party G, in light of its non-competitive price and doubts about its wherewithal to complete a transaction) to engage in additional consideration and submit refreshed indications of interest for strategic transactions with the Company. Access to the virtual data room was terminated on November 6, 2018 for potential parties who did not submit an indication of interest, and thereafter for parties who were not invited to resubmit proposals or who did not resubmit a proposal when invited.

On November 5, 2018, the Company received an unsigned draft non-binding letter of intent from Party I through Baird. Party I proposed to acquire Company common stock held by RES and SREP, seats on the board of directors, entry into a joint venture with the Company for the acquisition of certain hotels and a 120-day exclusivity period during which Party I would conduct due diligence prior to confirming its intent to move forward. Prior to November 29, 2018 Party I withdrew its indication of interest, citing issues with valuation, timing and the Company’s share price performance.

On November 6, 2018, the Company through KeyBanc updated the virtual data room with additional information including Company PIP assumptions, property-level profit and loss statements, updated Company financial information, estimated historical property capital expenditures, updated STR reports for the hotels, tax assessments, environmental reports, hotel management agreements, and franchise agreements. On November 13, 2018, KeyBanc invited NREA and each of Parties B, C, D, E and F to participate in additional due diligence and to submit revised proposals by November 20, 2018.

Five parties, NREA and Parties B, C, D and E submitted written refreshed indications of interests between November 20, 2018 and November 23, 2018 to KeyBanc.

On November 29, 2018, the board of directors met, with its legal and financial advisors in attendance. KeyBanc reviewed with the directors the refreshed round of proposals from NREA and Parties B, C, D and E, each of which contemplated an all-cash acquisition of the Company. Parties C and E proposed purchase prices per share of Company common stock of $11.95 and $10.77, respectively, unchanged from their initial indications of interest. Party B,

28

NREA and Party E proposed purchase prices per share of common stock of $10.52, $10.79 and $10.25, respectively, which were lower than their original indications of interest. KeyBanc reported that the parties cited increased concerns about the volatility in the capital markets and overall underperformance of the select-service lodging fundamentals. KeyBanc reported that Party H withdrew its reverse merger and recapitalization proposal, citing recent share price performance of public REITS. McGrath North discussed with the board of directors its fiduciary duties under the MGCL. After extensive discussion amongst itself and with KeyBanc, the board of directors determined that, based on proposal pricing and financing uncertainty, Parties D and E be dropped from the process and that NREA and Parties B and C be invited to engage in further due diligence of the Company and submit final proposals.

On December 17, 2018, KeyBanc invited NREA and Parties B and C to submit best and final proposals by January 18, 2019, and included invitations also for property tours. The Company updated the virtual data room with information including 2019 property manager budgets and year-to-date performance, updated STR reports, material contracts, guest satisfaction surveys and a draft agreement and plan of merger.

Party J, one of the potential parties previously contacted by KeyBanc, contacted KeyBanc on December 19, 2018 and asked to be included in the process. It signed a non-disclosure agreement on December 21, 2012, and was added to the group invited to submit final proposals and given access to the virtual data room.

Party K, one of the potential parties previously contacted by KeyBanc, contacted KeyBanc on January 11, 2019, and asked to be included in the process. It signed a non-disclosure agreement on that date, and was added to the group invited to submit final proposals and given access to the virtual data room.

Between December 17, 2018 and January 18, 2019, NREA and Parties B, C, J and K conducted due diligence. On January 18, 2019 Parties B, C, J and K submitted written proposals for an all-cash acquisition of the Company. NREA, though invited to participate in the final round and continued to conduct diligence, declined to submit a revised proposal. In particular, based on its diligence review and the Company’s performance, NREA opted against expending the time, resources and capital necessary to update its bid. At the time, NREA was not prepared to pay a premium for the Company because it lacked an existing platform that would allow it to generate synergies with the Company’s hotel portfolio.

On January 22, 2019, the board of directors met, together with its legal and financial advisors, and received KeyBanc’s report on the proposals. Parties B and C decreased their proposed price per share of Company common stock to $9.50 and $9.75, respectively. Party K’s proposed price per share of Company common stock was $10.00. Party J’s proposed price per share of Company common stock was $10.75, the highest received in the round. KeyBanc was directed by the board of directors to continue discussions with Party J and to work to enhance the proposed terms. Parties B, C and K were dropped from the process based on unsatisfactory proposal pricing. The board of directors then reviewed Party A’s proposal to sell certain of its hotel portfolios to the Company, along with potential transaction structures and capital financing. The directors discussed the significant financing challenges for the transaction and potential differential treatment of Company stockholders. The board of directors ultimately instructed Mr. Blackham to revert to Party A on various issues regarding the proposed transaction.

KeyBanc, as directed by the board of directors, engaged in discussions with Party J to enhance its proposals. After discussions over the weekend of February 16 – 17, 2019 between KeyBanc and Party J, a draft non-binding letter of intent was prepared by Party J for an all cash acquisition of the Company at a proposed per share price of Company common stock of $11.05 in a transaction not subject to a financing condition, and subject to customary due diligence and legal matters and the negotiation of a purchase agreement. A board of directors meeting was called for the afternoon of February 19, 2019 to consider the proposal. During the morning of February 19, 2019, Party J informed KeyBanc that its financing was no longer certain and asked for time to seek other sources of financing over the next week. The board of directors met on the afternoon of February 19, 2019 and was informed of the development. McGrath North’s was present on the call. When Party J did not secure a source of financing, Party J dropped from the process on March 1, 2019.

At the direction of the board of directors, Mr. Blackham continued to explore potential acquisition opportunities, which resulted in a non-binding letter of intent from Party L on February 28, 2019 regarding the potential purchase of seven hotels from Party L. The purchase was subject to substantial conditions, including tax agreements, financing conditions, purchase of Company’s securities by the seller from major shareholders, due

29

diligence, equity capital raises by the Company and board of director and shareholder approvals. Party L granted the Company a 15-day exclusivity period to negotiate the purchase of the hotels. While Mr. Blackham participated in discussions with Party L, multiple conditions to move forward with the transaction, including financing, were not satisfied, and the letter of intent expired with the expiration of the 15-day exclusivity period.

On March 28, 2019, the board of directors met by teleconference, with its legal and financial advisors in attendance, and Mr. Blackham reviewed with the directors of the strategic alternatives process timeline and results. After McGrath North reminded the board of directors of its fiduciary duties under the MGCL, Mr. Blackham noted that the process had essentially run its course. Mr. Blackham reported on broker valuations for a brokered sale of the hotels separately and in groups, in sales through the end of the year. The directors discussed the alternative proposals and observed that Party A’s and Party L’s proposals lacked financing certainty and involved a longer timeline, as well as potential differential treatment of stockholders other than RES and SREP. The board of directors decided to reconvene on April 10, 2019 with the intention of making a decision on the strategic alternative process.

As previously directed by the board of directors, Mr. Blackham continued to search for and evaluate acquisition opportunities, which resulted in a second non-binding letter of intent from Party A on March 29, 2019 regarding the potential purchase of a smaller group of seven hotels from Party A. The purchase was subject to substantial conditions, including financing conditions, commitment by the Company’s major shareholders to sell their Company securities to Party A, equity capital raises by the Company and board of director and shareholder approvals. Party A granted the Company a 15-day exclusivity period to negotiate the purchase of the hotels. While Mr. Blackham participated in discussions with Party A, multiple conditions to move forward with the transaction, including financing, were not satisfied, and the letter of intent expired with the expiration of the 15-day exclusivity period.

Over April 10 – April 11, 2019, the board of directors met on two teleconferences and received reports from Mr. Blackham on alternate strategic transactions for the acquisition of hotel portfolios by the Company and a brokered sale process for the sale of Company’s hotels, McGrath North was present on the calls. McGrath North discussed with the board of directors their fiduciary duties under MGCL. No parties remained active in improving their prior proposals, and the board of directors, after consideration of the progress of the strategic alternatives process and the decreasing per share value of the proposals, directed the Company to engage a broker for the prospective sale of hotel properties as the best alternative to achieve the highest value for shares of Company common stock, and to terminate the engagements with the investment bankers. The engagements with Baird and CSCA were terminated on April 15, 2019. KeyBanc’s engagement was terminated on April 19, 2019, subject to responsibilities and fees provided for during the “tail period”, the 12 months following termination of its engagement.

Prior to terminating the strategic alternative process, Mr. Blackham with the knowledge and agreement of the board of directors, suggested that KeyBanc engage the potential bidders once more to assess their ongoing interest in a potential transaction and, in particular, to ascertain whether any of the bidders were willing to enhance and/or further negotiate their prior proposals. KeyBanc contacted NREA and Parties D and K, the only bidders who, in KeyBanc’s view, were likely to fall in that category. Parties D and K declined to participate further.

On May 14, 2019, Mr. McGraner initiated a conversation with KeyBanc to discuss the possibility of a potential acquisition of the Company by one of NexPoint Advisors L.P.’s affiliated funds, NHT, a newly formed real estate investment trust, sponsored by Highland Capital. NHT focuses on acquiring, owning, renovating and operating a portfolio of income-producing hotel properties located in the United States, and following NHT’s initial public offering on the TSVX in March 2019, Mr. McGraner viewed the acquisition as way to grow and expand the existing NHT portfolio. Following the conversation with Mr. McGraner, KeyBanc reached out to Mr. Blackham to advise him of NREA’s renewed interest in a potential transaction. Mr. Blackham authorized KeyBanc to provide Mr. McGraner with a draft of the agreement and plan of merger that was previously provided in the virtual data room on December 4, 2018.

30

On May 18, 2019, the Company through KeyBanc opened a virtual data room containing due diligence materials for review by NHT, and its legal, financial, tax and accounting advisors. Representatives of NHT conducted due diligence of the Company and entered into negotiation of the merger agreement with representatives of the Company.

On May 21, 2019, NREA, on behalf of NHT, provided a comment memo to KeyBanc that was prepared by NHT’s legal counsel, Winston & Strawn LLP (“Winston & Strawn”). The comment memo summarized certain key issues and high-level comments relating to the draft agreement and plan of merger provided to Mr. McGraner. The comment memo addressed, among other matters, requested revisions to the non-solicitation covenant, revisions to the termination events and related liabilities in the event of termination, revisions to certain material defined terms, and the introduction of a reverse termination fee.

On May 23, 2019, NREA, on behalf of NHT, submitted an indication of interest to KeyBanc reflecting the acquisition of the Company through a merger.

On May 23, 2019, Mr. Blackham reported to the board of directors on current alternatives consisting of the sale of the hotels by a broker, and renewed interest by NREA and Highland Capital which had been communicated to KeyBanc. NREA, through KeyBanc, submitted a non-binding letter of interest for the board of directors’ consideration for an all cash transaction at $11.10 per share for Company common stock and $10.00 per share for Series E preferred stock, subject to customary due diligence and review of the Company. After discussion concerning the certainty of consummation of the transaction and timing, Mr. Blackham was authorized by the board of directors to move forward with negotiations pursuant to the letter of interest. Mr. Blackham was also directed to suspend the broker arrangement for the sale of the hotels.

Between May 31, 2019 and June 30, 2019, the Company’s management and representatives of NHT and their respective counsel engaged in negotiations regarding the transaction structure, including whether to structure the transaction as an asset deal or a merger transaction. On June 30, 2019, the parties determined to move forward with a merger structure, and Mr. McGraner and Mr. Blackham agreed to an extension of the due diligence period contemplated by the letter of intent.

On July 1, 2019, the Company and NexPoint Real Estate Advisors VI, L.P. (“NREA VI”), NHT’s external advisor, entered into an escrow agreement, pursuant to which NREA VI deposited $500,000, on behalf of NHT. The escrow deposit was made pursuant to the terms of the letter of intent executed by NREA and the Company on May 23, 2019. The escrow amount was fully refundable to NREA VI if a definitive agreement was not entered into by July 15, 2019. It is expected that the amount in escrow will be used to fund a portion of the merger consideration at closing.

On July 2, 2019, Winston & Strawn provided a revised draft of the merger agreement to McGrath North, reflecting the comment memo submitted on May 21, 2019, along with revisions to the interim covenants, expansion of the representations and warranties, and other mechanics surrounding the merger consideration.

On July 3, 2019, Winston & Strawn provided an initial draft of the voting agreement to McGrath North for further distribution to counsel for RES and SREP. During the period of July 3, 2019 until July 18, 2019, the parties negotiated the terms of the voting agreement, including the events in which RES and SREP could change or withdraw their support and the accrual and payment of dividends between signing and closing. Ultimately, the parties agreed that RES and SREP would vote their shares in favor of the mergers, unless, among other items, there is a change in recommendation as a result of a change in circumstances or the merger agreement terminated in accordance with its terms, including in the event of a superior proposal.

On July 8, 2019, a call was convened with Mr. Blackham and representatives of KeyBanc, McGrath North and Winston & Strawn on matters of legal due diligence of the Company, including with respect to employment matters, real estate matters and environmental matters.

31

On July 8, 2019, a call was convened with McGrath North and Winston & Strawn on the merger agreement to discuss the parties to the merger agreement, dividends, termination end date, and termination fees.

On July 8, 2019, a call was convened with Mr. Blackham and representatives of Highland Capital, representatives of NHT, McGrath North and Winston & Strawn. The participants discussed amounts of the termination fees, end date for the merger agreement, the time period in which the Company could accept a superior proposal and terminate the merger agreement, and an appropriate entity to guarantee the Parent Parties termination fee.

On July 9, 2019, a call was convened with Mr. Blackham, representatives of Highland Capital, representatives of NHT, McGrath North and Winston & Strawn. The participants continued discussions of termination fees, guarantee of the Parent Parties termination fee by NHT, and the end date for the merger agreement.

On July 9, 2019 the board of directors met and received a report from Mr. Blackham on the status of the negotiations with NHT and the open matters requiring further discussion.

On July 10, 2019, a call was convened with Bill Blackham, representatives of Highland Capital, representatives of NHT, McGrath North and Winston & Strawn. After discussion, the amount of the termination fees were agreed upon. Proposals were discussed to permit extensions of the closing date after October 1, 2019, and agreement was reached to permit the Parent Parties three 30-day extensions from closing, and for the Company to be permitted to pay a dividend during the month in which an extension option for closing is exercised, subject to limitations on amounts and the Company’s prior month adjusted funds from operation.

On July 10, 2019 Mr. Blackham reported to the board of directors that the major open matters were being resolved and the parties were proceeding towards finalizing the merger agreement and advised that the board of directors should be expecting a call for a meeting during the week of July 15, 2019.

On July 11, 2019, Winston & Strawn provided a revised draft of the merger agreement to McGrath North reflecting its position from the calls that occurred between July 9, 2019 and July 10, 2019.

On July 12, 2019, Winston & Strawn provided draft financing commitment letters to McGrath North. Between July 12, 2019 and July 19, 2019, the parties negotiated the terms of the financing commitment letters, including the party to provide the guarantee, the coverage of the guarantee, and the amount of the commitment letters. Ultimately, the parties agreed that NHT was an acceptable entity to guarantee any termination fee to be paid by the Parent Parties, with assets sufficient to cover the amount, and the equity commitment letter would cover an amount up to approximately $308 million, which would be irrevocably reduced dollar-for-dollar in the event the Parent Parties delivered a customary debt commitment letter to the Company without any “diligence out” exceptions for funding.

On July 14, 2019, Mr. McGraner contacted KeyBanc to advise it that the board of NHT had approved the proposed transaction on the morning of July 14, 2019.

During the week of July 14, 2019, Winston & Strawn and McGrath North finalized the forms of the merger agreement, disclosure schedules to the merger agreement, financing commitment letters and voting agreement.

At 9:00 a.m. eastern time, on July 18, 2019, the board of directors held a telephonic meeting at which representatives of KeyBanc and McGrath North were present. KeyBanc reviewed its financial analysis of the merger consideration to be paid to the unaffiliated holders of the Company common stock with the board of directors. A representative of KeyBanc then delivered to the board of directors an oral opinion, which was subsequently confirmed by delivery of a written opinion dated July 19, 2019, to the effect that as of such date, and subject to the assumptions, limitations, qualifications and other matters set forth in KeyBanc’s written opinion, the consideration to be paid to each of the unaffiliated holders of the Company common stock was fair, from a financial point of view, to such holders. The board of directors discussed with KeyBanc its fairness opinion. McGrath North reviewed with the board of directors the fiduciary duties owed by the directors under the MGCL in connection with the proposed transaction, and then provided a summary of the material terms of the merger agreement. Discussions ensued regarding, among other items, the strategic alternative process, the declining proposals received, confidence in concluding the transaction,

32

timing, financing, dividend restrictions, and interim operations under the merger agreement. Representatives of McGrath North then presented a proposed amendment to the Company’s bylaws that would exempt the transaction from certain effects of the control share acquisition statutes under the MGCL. Representatives of McGrath North then reviewed the proposed resolutions prepared for the proposed transaction and the bylaw amendment. Following these presentations and discussions, the board of directors, by unanimous vote of all directors, declared the transactions contemplated by the merger agreement, including the merger, advisable in the best interests of the Company and its shareholders, approved the merger agreement and the mergers, and unanimously recommended that the Merger Proposal be submitted to the holders of the Company common stock and the Series E preferred stock for approval. Following the meeting of the board of directors, KeyBanc contacted Mr. McGraner to advise him that the board of directors had unanimously approved the proposed transaction.

In the evening of July 18, 2019, McGrath North circulated revised disclosure schedules and a revised merger agreement. During the evening of July 18, 2019 and the continuing through the day of July 19, 2019, legal representatives to the Company and NHT worked to resolve various open issues, including with respect to required repairs to the property, the dividend to be paid if the extension right is exercised by Parent, and activities to be permitted without the consent of the Parent Parties between signing and closing; reviewed and commented upon disclosure schedules and various exhibits to the draft merger agreement; and exchanged further revised drafts of the merger agreement and the disclosure letter.

On the evening of July 19, 2019, the Company Parties and the Parent Parties executed the merger agreement and RES, SREP and the Parent Parties executed voting agreements.

On July 22, 2019, NHT and the Company issued a joint press release regarding the execution of the merger agreement and the proposed acquisition of the Company by NHT for $11.10 per share of the Company common stock and $10.00 per share of the Series E preferred stock.

On July 23, 2019, SREP filed an amendment to its Schedule 13D disclosing that, on July 19, 2019, it entered into a voting agreement with the Parent Parties.

On July 23, 2019, RES filed an amendment to its Schedule 13D disclosing that, on July 19, 2019, it entered into a voting agreement with the Parent Parties.

On July 31, 2019, the Parent Parties filed a Schedule 13D, that on July 19, 2019 the Parent Parties entered into a voting agreement with each of RES and SREP.

Reasons for the Company merger and recommendation of our board of directors

In evaluating the merger agreement and the other transactions contemplated by the merger agreement, our board of directors consulted with legal and financial advisors. In reaching its determination that the merger agreement and the transactions contemplated by the merger agreement, including the Company merger, are fair, advisable and in the best interest of the Company and our shareholders, our board of directors considered a number of factors, including the following material factors which our board of directors viewed as supporting its decision to adopt and approve the merger agreement, and the other transactions contemplated by the merger agreement and for our board of directors to recommend approval of the Merger Proposal to our shareholders:

33

The board of directors also considered a variety of risks and other potentially negative factors in its consideration of the merger agreement, including the following material factors:

34

The foregoing discussion of the factors considered by our board of directors is not intended to be exhaustive and is not provided in any specific order or ranking, but rather includes the material factors considered by our board of directors. In reaching the decision to adopt and approve the merger agreement, the board did not quantify, rank or otherwise assign any relative weights to, and did not make specific assessments of, the factors considered, and individual directors may have given different weights to different factors.

The explanation of the factors and reasoning set forth above contain forward-looking statements and should be read in conjunction with the section of this proxy statement entitled “Cautionary Statement Regarding Forward-Looking Statements.” After considering the foregoing potentially negative and potentially positive factors, the board of directors concluded that the potentially positive factors relating to the merger agreement, substantially outweighed the potentially negative factors.

After careful consideration, for the reasons set forth above, the board (1) determined that the merger agreement and the transactions contemplated thereby, including, without limitation, the Company merger, are fair to, advisable and in the best interest of the Company and the shareholders and (2) adopted and approved the merger agreement.

Opinion of our financial advisor

The board of directors retained KeyBanc to act as its financial advisor in connection with the merger. In selecting KeyBanc, the board of directors considered, among other things, KeyBanc’s qualifications, expertise, reputation and knowledge of the business and affairs of the Company and the industry in which the Company operates.

35

On July 18, 2019, KeyBanc rendered an oral opinion to the board of directors, which was subsequently confirmed in a written opinion as of July 19, 2019, as to the fairness, from a financial point of view, to the unaffiliated holders of the Company common stock, and based upon and subject to the assumptions made, matters considered and limitations and qualifications upon the review undertaken by KeyBanc, of the consideration to be paid to the unaffiliated holders of the Company common stock pursuant to the merger agreement.

The full text of KeyBanc’s written opinion, dated July 19, 2019, is attached to this proxy statement as Annex B. You should read KeyBanc’s opinion carefully and in its entirety for a discussion of, among other things, the scope of the review undertaken, and the assumptions made, procedures followed, matters considered and qualifications and limitations upon the review undertaken by KeyBanc in connection with its opinion. This summary is qualified in its entirety by reference to the full text of the opinion. KeyBanc was retained to serve as an advisor to the board of directors and not as an advisor to or agent of any stockholder of the Company. KeyBanc’s opinion was prepared for the benefit and use of the board of directors (in its capacity as such), and addressed only the fairness from a financial point of view, as of the date of the opinion, of the consideration to be paid to the unaffiliated holders of the Company common stock pursuant to the merger agreement. It does not constitute a recommendation as to how any stockholder should vote with respect to the Company merger or any other matter, and does not in any manner address the price at which shares of the Company common stock will trade at any time, if ever.

In connection with rendering its opinion, KeyBanc, among other things:

In its review and analysis and in arriving at its opinion, KeyBanc assumed and relied upon the accuracy and completeness of all of the financial and other information provided to or otherwise reviewed by or discussed with KeyBanc or publicly available and further relied upon the assurances of our management that they were not

36

aware of any facts or circumstances that would make such information inaccurate or misleading in any material respect. KeyBanc also assumed that the representations and warranties of each of the parties to the merger agreement are and will be true and correct in all respects material to its analysis. KeyBanc was not engaged to, and has not independently attempted to, verify any of such information or its accuracy or completeness. KeyBanc also relied upon our management as to the reasonableness and achievability of the financial forecast (and the assumptions and bases therefor) provided to KeyBanc and, with our consent, KeyBanc assumed that such forecast was reasonably prepared on bases that reflected the best available estimates and judgments of our management of our future financial performance and other matters covered thereby. KeyBanc was not engaged to assess the reasonableness or achievability of such forecast or the assumptions on which it was based, and KeyBanc expresses no view as to such forecast or assumptions. In addition, KeyBanc has not conducted a physical inspection, valuation or appraisal of any of our assets (including properties or facilities) or liabilities. KeyBanc is also not expressing any view or opinion with respect to, and, at our direction, KeyBanc relied upon, the assessments of our representatives regarding legal, regulatory, accounting, tax and similar matters relating to the Company and the mergers, as to which matters KeyBanc understands that we obtained such advice as we deemed necessary from qualified advisors and professionals. KeyBanc also assumed that all governmental, regulatory or other consents, releases and approvals necessary for the consummation of the mergers will be obtained without any adverse effect on the Company or the mergers that would be meaningful to its analysis.

KeyBanc was not asked to, nor did it, offer any opinion as to the material terms of the merger agreement or the form of the mergers. In rendering its opinion, KeyBanc, with the consent of the board of directors, assumed that the final executed form of the merger agreement would not differ in any material respect from the draft that KeyBanc examined, and that the conditions to the mergers as set forth in the merger agreement would be satisfied and that the mergers would be consummated on a timely basis on the terms set forth in the merger agreement without waiver, modification or amendment of any term or condition that would be meaningful to KeyBanc’s analysis.    

KeyBanc’s opinion is based on economic and market conditions and other circumstances existing on, and information made available to KeyBanc as of, the date of its opinion and does not address any matters subsequent to such date. In addition, KeyBanc’s opinion is, in any event, limited to the fairness, as of the date of its opinion, from a financial point of view, of the consideration to be paid to the unaffiliated holders of the Company common stock pursuant to the merger agreement and does not address our underlying business decision to engage in the mergers or any other terms of the mergers, including the merger consideration paid in the Partnership merger, or the fairness of the mergers, or any consideration paid in connection therewith, to any preferred stockholders of the Company, preferred unitholders of the Operating Partnership or our creditors or other constituencies. In addition, KeyBanc does not express any opinion as to (i) the fairness of the mergers or (ii) the amount or the nature of the compensation now paid or to be paid, in each case, to any of our directors, officers or employees, or class of such persons, relative to the consideration to be paid to public stockholders of the Company. KeyBanc has not evaluated nor does it express any opinion on the solvency or viability of the parties to the merger agreement or their respective affiliates or the ability of such parties to pay their respective obligations when they come due. It should be noted that although subsequent developments may affect KeyBanc’s opinion, KeyBanc does not have any obligation to update, revise or reaffirm its opinion. KeyBanc’s opinion was approved by a fairness committee of KeyBanc.

KeyBanc’s opinion does not constitute a recommendation as to any action the board of directors should take in connection with the mergers or the other transactions contemplated by the merger agreement or any aspect thereof and is not a recommendation to any director of the Company, any security holder or other party on how that person should act or vote with respect to the mergers or related transactions and proposals or any other matter.

The summary set forth below does not purport to be a complete description of the financial analyses performed by KeyBanc, but describes, in summary form, the material elements of the presentation that KeyBanc made to the board of directors on July 18, 2019, in connection with KeyBanc’s opinion. The following is a summary of the material financial analyses performed by KeyBanc in arriving at its opinion. These summaries of financial analyses alone do not constitute a complete description of the financial analyses KeyBanc employed in reaching its conclusion.

37

KeyBanc’s opinion was only one of many factors considered by the board of directors in evaluating the proposed mergers. The terms of the merger agreement, including the Company merger consideration, were determined pursuant to arms-length negotiations between the parties thereto. Neither KeyBanc’s opinion nor its financial analyses were determinative of the Company merger consideration or of the views of the board of directors or its management with respect to the Company merger consideration or the mergers. None of the analyses performed by KeyBanc were necessarily assigned a greater significance by KeyBanc than any other, nor does the order of analyses described represent relative importance or weight given to those analyses by KeyBanc. The summary text describing each financial analysis does not constitute a complete description of KeyBanc’s financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by KeyBanc. The summary text set forth below does not represent and should not be viewed by anyone as constituting conclusions reached by KeyBanc with respect to any of the analyses performed by it in connection with its opinion. Rather, KeyBanc made its determination as to the fairness, from a financial point of view, to the unaffiliated holders of the Company common stock of the Company merger consideration to be paid to those stockholders in the Company merger pursuant to the merger agreement on the basis of its experience and professional judgment after considering the results of all of the analyses performed.

Except as otherwise noted, the information utilized by KeyBanc in its analyses, to the extent that it is based on market data, is based on market data as it existed on or before July 16, 2019 and is not necessarily indicative of current market conditions. The analyses described below do not purport to be indicative of actual future results, or to reflect the prices at which any securities may trade in the public markets, which may vary depending upon various factors, including changes in interest rates, dividend rates, market conditions, economic conditions, and other factors that influence the price of securities.

Summary of financial analyses of our financial advisor

Analysis of Selected Precedent Transactions

KeyBanc performed an analysis of selected comparable transactions in the hospitality industry that shared certain characteristics with the mergers. Based on publicly available information and industry research reports, including certain financial data and the purchase prices paid, KeyBanc identified six transactions in the hospitality industry announced since November 2012.

KeyBanc then narrowed its analysis to focus on only those transactions that included upper-midscale and upscale hospitality assets in order to more closely match the Company’s portfolio (the “Selected Transaction Comparables”). As used in this summary, (1) “EBITDA” refers to earnings before interest, taxes, depreciation and amortization, adjusted to exclude nonrecurring and other similar items and one-time charges and (2) “EV” refers to aggregate enterprise value, calculated as equity value, plus book value of total debt, plus non-controlling interest (as appropriate for the company being analyzed), less cash, cash equivalents and marketable securities.

KeyBanc focused on EV to EBITDA multiples for the twelve-month period prior to the public announcement of each respective transaction (“TTM”), which we refer to in the table below as “Implied EV / TTM EBITDA Multiple,” for comparison purposes. The overall median EV / TTM EBITDA Multiple for the Selected Transaction Comparables was 13.4x. For comparison purposes, KeyBanc utilized the information regarding the Company’s TTM financial results, as provided to KeyBanc by the Company’s management and further described in “The Mergers—Certain prospective financial information” on page 41.

The following table sets forth the analysis for the three Selected Transaction Comparables:

KeyBanc then calculated the implied EV range for the Company by first (a) adding and subtracting 1.0x from the median EV / TTM EBITDA multiple and then (b) applying the implied EV / TTM EBITDA multiple range of 12.4x to 14.4x to the Company’s TTM EBITDA.

38

This analysis indicated the following implied share price reference range for each share of common stock based on the Company’s TTM EBITDA, as compared to the Company merger consideration:

No company or transaction utilized as a comparison in the analysis of Selected Transaction Comparablesis identical to the Company or directly comparable to the mergers, including in business mix, timing or size. Accordingly, an analysis of the results of the foregoing necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that would affect the value of the companies to which we are being compared. In evaluating the selected precedent transactions, KeyBanc made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters which are beyond our control, such as the impact of competition on the Company and the industry generally, industry growth and the absence of any adverse material change in our financial conditions and prospects or the hospitality industry or the financial markets in general.

Analysis of Comparable Public Companies

KeyBanc reviewed and compared certain publicly available financial information and valuation multiples for comparable publicly traded companies focused on lodging assets, including publicly traded REITs, that KeyBanc believed, based on its professional judgment and experience, to be comparable to the Company for purposes of this analysis. Financial data of the selected companies were based on public filings and other publicly available information, such as SEC filings and third party equity research reports.

For each of these comparable companies, KeyBanc calculated the ratio of the comparable companies’ EV to estimated calendar year 2019 (“2019E”) EBITDA. The multiples for each of the selected companies were calculated using their respective closing prices on July 16, 2019.

KeyBanc then calculated the implied EV range for the Company by first (a) adding and subtracting 1.0x from the median EV / 2019E EBITDA multiple and then (b) applying the implied EV / 2019E EBITDA multiple range of 11.5x to 13.5x to the Company’s 2019E EBITDA.

This analysis indicated the following implied share price reference range for each share of common stock based on the Company’s 2019E EBITDA, as compared to the Company merger consideration:

39

No company utilized in the selected public companies analysis was identical to the Company. In particular, each of the selected publicly traded companies is meaningfully larger than the Company and has more liquidity in the stock. In evaluating selected public companies, KeyBanc made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters which are beyond our control, such as the impact of competition on us and the industry generally, industry growth, and the absence of any material adverse change in our financial condition and prospects or the lodging industry or the financial markets in general.

Historical Stock Trading Analysis

KeyBanc also reviewed the historical common equity pricing and stock trading volume of the Company over the preceding one-year period from July 17, 2018 through July 16, 2019. The trading range reflected the low closing stock price as $6.89 per share (on December 31, 2018) and the high closing stock price as $11.24 per share (on each trading day throughout the period October 4, 2018 through October 8, 2018). In addition, KeyBanc analyzed the consideration to be paid to the unaffiliated holders of the Company common stock pursuant to the merger agreement in relation to the lowest closing price of the common stock for the one-year period, the average trading price over the one-year period and the closing price as of market close on July 16, 2019, the last day of the one-year period, respectively.

This analysis indicated that the price per share to be paid to the unaffiliated holders of the Company common stock pursuant to the merger agreement represented:

Premiums Paid Analysis

KeyBanc also reviewed publicly available data for 20 transactions in which the consideration consisted 100% of cash involving publicly traded REITs in the U.S. since December 2011.

For each of the target companies involved in the reviewed transactions, KeyBanc examined the closing stock price one trading day, one week (five trading days) and four weeks (20 trading days) prior to the public announcement of the transaction in order to calculate the premium paid by the acquirer over the target’s closing stock price at those points in time. In the event of a pre-announcement, or market noise which may have impacted the trading of the target’s stock price, KeyBanc used as a starting point the unaffected closing price of the target prior to any market noise. KeyBanc then determined the group average and median percentage premiums observed for the reviewed transactions (i.e., the 20 transactions referenced above) for each of the examined time periods, as set forth in the chart below:

KeyBanc applied the group median low and the group average high (i.e., 15.0% and 22.7%, respectively) to the Company’s trading price of $8.44 as of market close on July 16, 2019, which implied a fair value range of $9.70 per share to $10.36 per share.

No company, business or transaction used in the premiums paid analysis was identical to the Company or its portfolio. Accordingly, this analysis involved complex considerations and judgments by KeyBanc concerning differences in financial and operating characteristics and other factors that could affect the transaction or other values of the companies, businesses or transactions to which the Company and the mergers were compared. Mathematical analysis of comparable transaction data (such as determining averages and medians) in isolation from other analyses is not an effective method of evaluating transactions.

40

Miscellaneous

In connection with KeyBanc’s services as the financial advisor to the board of directors, pursuant to a letter agreement dated September 13, 2018, we will pay KeyBanc an aggregate fee of approximately $2.3 million, $0.5 million of which was payable upon KeyBanc’s delivery of its opinion, and the remaining portion of which is payable upon, and subject to, consummation of the mergers. In addition, we have agreed to reimburse KeyBanc for its reasonable out-of-pocket expenses and to indemnify KeyBanc against certain liabilities that may arise in connection with KeyBanc’s engagement. The terms of the fee arrangement were negotiated at arm’s length between the Company and KeyBanc.

KeyBanc acted as a lead underwriter on a follow-on equity transaction priced by the Company in March 2017 and as sales agent for the Company’s equity issuances through its at-the-market equity program beginning in September 2017, for which KeyBanc received fees in the aggregate amount of approximately $0.9 million. In addition, KeyBanc acted as joint lead arranger and KeyBank National Association (“Key”), an affiliate of KeyBanc, acted as agent and lender in connection with the credit agreement entered into in March 2017 among the Operating Partnership as borrower and the other parties party thereto, for which KeyBanc and Key received fees in the aggregate amount of approximately $1.1 million. Key and its affiliates have also previously provided commercial lending, mortgage banking and derivatives services to Parent and its affiliates, and have received compensation from Parent and its affiliates in the aggregate amount of approximately $21.0 million from January 1, 2017 through June 30, 2019 (consisting of $5.2 million in 2017, $15.0 million in 2018 and $0.9 million in the first six months of 2019). Key is in discussions to provide acquisition financing to Parent in connection with the mergers, for which the fee is estimated to be between $1.5 million and $2.2 million.

KeyBanc, as part of its investment banking business, is engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, and private placements. In the ordinary course of KeyBanc’s businesses, KeyBanc and its affiliates, their employees and affiliates, and funds or other entities that such persons manage or invest in or have other economic interests or with which they co-invest, may at any time purchase, sell, hold or vote long or short positions and investments in securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments of the Company or Parent or any of their respective affiliates and third parties, or any currency or commodity that may be involved in the mergers, in each case for their own accounts or for the accounts of customers. KeyBanc and its affiliates may in the future provide financial advisory, commercial banking and/or underwriting services to the Company, Parent or their respective affiliates for which they may receive compensation.

Certain prospective financial information

We do not as a matter of course make public long-term projections as to future revenues, earnings or other results, due to, among other reasons, the uncertainty of the underlying assumptions and estimates. In connection with the Company’s strategic alternatives process, the Company’s management prepared and provided to KeyBanc, our financial advisor in connection with its financial analyses described above under the section above entitled “–Opinion of our financial advisor,” certain nonpublic, internal financial projections our future operations for fiscal year 2019.

We have included the following financial projections for the purpose of providing shareholders access to certain nonpublic information that was furnished to certain parties in connection with our strategic alternatives process, and such information may not be appropriate for other purposes, and is not included to influence your decision to vote for the Merger Proposal.    

41

The financial projections were not prepared with a view toward public disclosure and, accordingly, do not necessarily comply with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information or GAAP. The financial projections were prepared solely for our internal use and for KeyBanc and are subjective in many respects. Our independent registered public accounting firm has not compiled, examined, audited, or performed any procedures with respect to the financial projections, and has not expressed any opinion or any other form of assurance regarding this information or its achievability. The inclusion of the financial projections in this proxy statement does not constitute an admission or representation by us that the information is material.

The above financial projections above were not prepared in accordance with GAAP. We use non-GAAP financial measures in analyzing our financial results and believe that they enhance investors’ understanding of our financial performance and the comparability of our results to prior periods, as well as against the performance of other REITs. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. The Company’s calculation of non-GAAP financial measures may differ from others in the industry. Financial measures provided to a financial advisor are excluded from the definition of non-GAAP financial measures and therefore, are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure. Accordingly, we have not provided a reconciliation of the financial measures included in the financial projections above.

While presented with numeric specificity, these financial projections were based on numerous variables and assumptions that are inherently subjective and uncertain and are beyond the control of our management. Important factors that may affect actual results and cause these financial projections to not be achieved include, but are not limited to, risks and uncertainties relating to our business (including our ability to achieve goals, objectives and targets over applicable periods), industry performance, general business and economic conditions and other factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” on page 17. These financial projections also reflect numerous variables, expectations and assumptions available at the time they were prepared that are subject to change. As a result, actual results may differ materially from those contained in these financial projections. Accordingly, there can be no assurance that the projected results summarized below will be realized. Our shareholders are urged to review our most recent SEC filings for a description of the reported results of operations and financial condition which is incorporated by reference into this proxy statement.

The inclusion of a summary of these financial projections in this proxy statement should not be regarded as an indication that any of our officers, directors, affiliates, advisors or other representatives considered these financial projections to necessarily be predictive of actual future events, and these financial projections should not be relied upon as such nor should the information contained in these financial projections be considered appropriate for other

42

purposes. None of our officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from these financial projections. We undertake no obligation to update or otherwise revise or reconcile these financial projections to reflect circumstances existing after the date these financial projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying these financial projections are shown to be in error.

We have not made and make no representation to the Parent Parties, any shareholder, in the merger agreement or otherwise, concerning these financial projections or regarding our ultimate performance compared to the information contained in these financial projections or that the projected results will be achieved. We urge all shareholders to review our most recent SEC filings for a description of our reported financial results.

In light of the foregoing factors and the uncertainties inherent in the financial projections, our shareholders are cautioned not to place undue, if any, reliance on the financial projections.

Consideration to be received in the mergers

Common stock

At the effective time of the Company merger, each share of our common stock (other than treasury shares and shares held by Parent Parties, which will be cancelled and retired and will cease to exist with no consideration being delivered in exchange therefor) issued and outstanding immediately prior to the effective time of the merger will automatically be cancelled and converted into the right to receive $11.10, without interest and less any applicable withholding taxes. If we declare a distribution reasonably necessary to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) or to avoid the payment of income or excise tax under the Code as permitted under the merger agreement, the merger consideration will be decreased by an amount equal to the per share amount of such distribution.

Series E preferred stock

At the effective time of the Company merger, each share of Series E preferred stock issued and outstanding immediately prior to the effective time of the Company merger will automatically be cancelled and converted into the right to receive $10.00, without interest and less any applicable withholding taxes.

Company compensatory awards

Immediately prior to the effective time of the Company merger, each of the outstanding awards granted pursuant to the Company’s equity incentive plans will automatically become fully vested and all restrictions thereon will lapse, and thereafter, all Company common stock represented thereby will be considered outstanding for all purposes under the merger agreement and will only have the right to receive an amount in cash equal to $11.10 in cash, without interest and less any applicable withholding taxes.

Partnership merger consideration

Each Partnership common unit held by a holder (excluding Partnership common units held by the general partner of the Operating Partnership) that is issued and outstanding immediately prior to the effective time of the Partnership merger will be converted into, and shall be cancelled in exchange for, the right to receive $0.21346, without interest and less any applicable withholding taxes.

Closing and extensions

We anticipate completing and closing the mergers during the 4 ^th quarter of 2019. The closing of the mergers may not occur prior to October 1, 2019, without the consent of the parties. If we notify Parent that we are prepared to close and all conditions to Parent’s obligations to close are met, then Parent, at its option, may extend the closing time for a 30-day period (or such shorter period so as not to extend beyond December 31, 2019), provided, that no Parent Party is then in breach of the merger agreement in any material respect. Parent may exercise an extension up to three times during the term of the merger agreement.

43

Dividends

During the term of the merger agreement, we have agreed to not pay cash dividends to holders of the Company common stock or the Series E preferred stock, except we are permitted to declare and pay a dividend to shareholders during the month in which an extension option for closing is exercised by the Parent, subject to limitations as set forth in the merger agreement and Section 7.4 of the disclosure schedules delivered therewith and attached hereto as Annex D on amount and our prior month adjusted funds from operations.

Financing

In connection with the closing of the mergers, Parent will cause an aggregate of approximately $142.1 million to be paid to the unaffiliated holders of the Company common stock and Series E preferred stock and to the holders of Partnership common units. In addition, Parent may, in connection with the closing of the mergers, cause all of our outstanding indebtedness that can be terminated to be paid in full. As of June 30, 2019, we had approximately $135.9 million in aggregate principal amount of consolidated indebtedness. It is currently anticipated that all but approximately $9 million will be refinanced and paid off at the consummation of the mergers.

Parent has delivered to us a commitment letter from NexPoint Advisors, L.P. (the “Investor”) pursuant to which the Investor (or any of its assignees as permitted thereunder) has committed to fund up to $308.2 million of equity financing for the mergers. In addition, NexPoint Hospitality Trust has provided a guaranty of the Parent termination fee of $11,925,000.

Parent is currently in the process of obtaining a debt commitment letter on the terms provided in the merger agreement, and if obtained, the amount committed under the debt commitment letter would irrevocably reduce the amount committed under the equity commitment letter on a dollar-for-dollar basis.

The merger agreement does not contain a financing condition to the closing of the mergers. We have agreed to use commercially reasonable efforts to provide, and to cause our subsidiaries to use their commercially reasonable efforts to provide, all cooperation reasonably necessary and customary in connection with the arrangement of financing with respect to us or our subsidiaries, or our or our subsidiaries’ real property. For more information, see the section entitled “The Merger Agreement–Financing and Cooperation” on page 72.

Material U.S. Federal Income Tax Consequences

The following is a summary of the material U.S. federal income tax consequences of the Company merger to holders of our common stock whose shares are cancelled in the Company merger and automatically converted into the right to receive the merger consideration as described herein. This summary is based on current law, is for general information only and is not tax advice. This summary is based on the Code, applicable Treasury Regulations, and administrative and judicial interpretations thereof, each as in effect as of the date hereof, all of which are subject to change or to different interpretations, possibly with retroactive effect. We have not requested, and do not plan to request, any rulings from the Internal Revenue Service (the “IRS”) concerning our tax treatment or the tax treatment of the Company merger, and the statements in this proxy statement are not binding on the IRS or any court. We can provide no assurance that the tax consequences contained in this discussion will not be challenged by the IRS, or if challenged, will be sustained by a court.

This summary assumes that shares of our common stock are held as capital assets within the meaning of Section 1221 of the Code and does not address all aspects of taxation that may be relevant to particular holders in light of their personal investment or tax circumstances or to persons that are subject to special tax rules and does not address the tax consequences of the Company merger to holders of restricted stock or the tax consequences of the Partnership merger to the holders of the Partnership common units. In addition, this summary does not address all aspects of U.S. federal income taxation that may be relevant to a holder in light of such holder’s particular circumstances, including holders that are subject to special treatment under U.S. federal income tax law, including, for example:

44

If any entity that is treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of its partners or members generally will depend upon the status of the partner or member and the activities of the entity. If you are a partner of a partnership or a member of a limited liability company or other entity classified as a partnership for U.S. federal income tax purposes and that entity holds our common stock, you should consult your tax advisor with respect to the tax consequences of the transactions in your specific circumstances.

The tax consequences of the transactions will depend on your specific situation. You should consult with your own tax advisor as to the tax consequences of the transactions in your particular circumstances, including the applicability and effect of the alternative minimum tax and any state, local, foreign or other tax laws and of changes in those laws.

45

For purposes of this section, a “U.S. holder” means a beneficial owner of our common stock that is, for U.S. federal income tax purposes:

As used in this section, a “non-U.S. holder” means a beneficial owner of shares of our common stock that is not a U.S. holder.

The U.S. federal income tax rules applicable to the Company merger, holding and disposing of our common stock, and to REITs generally are highly technical and complex. Holders of our common stock are urged to consult their tax advisors regarding the specific tax consequences to them of the Company merger and the ownership of our common stock, including the applicability and effect of U.S. federal, state, local and non-U.S. income and other tax laws, and potential changes in applicable tax laws, in light of their particular circumstances.

Consequences to the Company of the Company merger

For U.S. federal income tax purposes, we will treat the Company merger as a taxable sale by holders of our common stock in exchange for the per share merger consideration . Accordingly, we anticipate that we will not be subject to U.S. federal income tax on any gain recognized by holders of our common stock in connection with the Company merger and the other transactions contemplated by the Merger Agreement.

Consequences of the Company merger to U.S. holders of company stock

General . The receipt of cash by U.S. holders in exchange for their stock pursuant to the Company merger will be a taxable transaction for U.S. federal income tax purposes (and also may be a taxable transaction under applicable state, local and foreign income and other tax laws). In general, a U.S. holder of our common stock will recognize gain or loss for U.S. federal income tax purposes equal to the difference between:

Gain or loss will be calculated separately for each block of shares of stock, with a block consisting of shares acquired at the same cost in a single transaction. This gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if at the time of the Company merger the stock has been held for more than one year. An individual U.S. holder will be subject to tax on net capital gain at a maximum U.S. federal income tax rate of 20%. Additionally, the 3.8% tax on net investment income will apply to any gain recognized by individuals, trusts and estates whose income exceeds certain threshold levels.

Capital gains of corporate U.S. holders generally are taxable at the regular tax rates applicable to corporations (generally a maximum rate of 21%). The deductibility of a capital loss recognized in the exchange is subject to limitations under the Code. In addition, the IRS has the authority to prescribe, but has not yet prescribed, regulations that would apply a tax rate of 25% to a portion of capital gain realized by a non-corporate shareholder on the sale of REIT stock that would correspond to the REIT’s “unrecaptured Section 1250 gain.”

46

Special Rule for U.S. holders who have held our common stock less than six months . A U.S. holder who has held our common stock for less than six months at the time of the Company merger, taking into account the holding period rules, and who recognizes a loss on the exchange of our common stock in the Company merger, will be treated as recognizing a long-term capital loss to the extent of any capital gain dividends received from us, or such holder’s share of any designated retained capital gains, with respect to such stock.

Consequences of the Company merger to Non-U.S. holders of company stock

General . The following discussion applies only to non-U.S. holders and assumes that no item of income, gain, deduction or loss derived by the non-United States Holder in respect to our common stock at any time is effectively connected with the conduct of a United States trade or business. Special rules, not discussed herein, may apply to certain non-U.S. holders, such as:

Taxable sale of our common stock . If the Company merger is treated as a taxable sale of our common stock, a non-U.S. holder should not be subject to U.S. federal income taxation on any gain or loss from the Company merger unless: (1) the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, or, if an applicable income tax treaty applies, the gain is attributable to a permanent establishment maintained by the non-U.S. holder in the United States; (2) the non-U.S. holder is an individual present in the United States for 183 days or more in the taxable year of the Company merger and certain other requirements are met; or (3) such shares of stock constitute a “United States real property interest” under FIRPTA.

A non-U.S. holder whose gain is effectively connected with the conduct of a trade or business in the United States will generally be subject to U.S. federal income tax on such gain on a net basis in the same manner as a U.S. holder. In addition, a non-U.S. holder that is a corporation may be subject to the 30% branch profits tax on such effectively connected gain described in clause (1) of the previous paragraph.

A non-U.S. holder who is an individual present in the United States for 183 days or more in the taxable year of the Company merger and who meets certain other requirements will be subject to a flat 30% tax on the gain derived from the Company merger, which may be offset by United States source capital losses. In addition, the non-U.S. holder may be subject to applicable alternative minimum taxes.

If a non-U.S. holder’s stock constitutes a United States real property interest under FIRPTA, any gain recognized by such holder in the Company merger will treated as income effectively connected with a United States trade or business of the non-U.S. holder and generally will be subject to U.S. federal income tax on a net basis in the same manner as a U.S. holder (subject to any applicable alternative minimum tax and special alternative minimum tax in the case of nonresident alien individuals). In addition, 15% of any amounts realized by a non-U.S. holder will be withheld and remitted to the IRS. A non-U.S. holder’s shares of our common stock generally will not constitute a U.S. real property interest if either:

47

As discussed above, our common stock is regularly traded on an established securities market as of the date of this proxy statement. If the company is not a “domestically controlled qualified investment entity” and our common stock is not “regularly traded” on an “established securities market,” the company generally would be required to withhold and remit to the IRS 15% of the per share merger consideration.

Income tax treaties . If a non-U.S. holder is eligible for treaty benefits under an income tax treaty with the United States, the non-U.S. holder may be able to reduce or eliminate certain of the U.S. federal income tax consequences discussed above, such as the branch profits tax. Non-U.S. holders should consult their tax advisor regarding possible relief under an applicable income tax treaty.

Information reporting and backup withholding to holders of company common stock

Backup withholding, currently at a rate of 24%, and information reporting may apply to the cash received pursuant to the exchange of our common stock in the Company merger. Backup withholding will not apply, however, to a holder who:

Backup withholding is not an additional tax and any amount withheld under these rules may be credited against the holder’s U.S. federal income tax liability and may entitle the holder to a refund if required information is timely furnished to the IRS.

Additional withholding tax on payments made to foreign accounts

Withholding taxes may be imposed under Sections 1471 through 1474 of the Code (such Sections commonly referred to as FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. If withholding is required under FATCA under a payment related to our common stock, holders that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available). Holders should consult their tax advisors regarding the effect of FATCA on their particular circumstances.

The application of FATCA to the payment of the merger consideration made to a non-U.S. holder with respect to our common stock pursuant to the Company merger is not entirely clear. We urge you to consult your tax advisor regarding FATCA and the application of these rules to such payment.

THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE POTENTIAL TAX CONSIDERATIONS RELATING TO THE REIT MERGER AND IS NOT TAX ADVICE. THEREFORE, HOLDERS OF OUR COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE REIT MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS IN THEIR PARTICULAR CIRCUMSTANCES.

48

Interests of certain shareholders, our directors, officers and employees

In considering the recommendation of our board of directors with respect to the Merger Proposal, shareholders should be aware that our directors, executive officers and employees and certain shareholders have interests in the mergers that may be different from, or in addition to, those of our shareholders generally. These interests may create potential conflicts of interest. Our board of directors and certain shareholders were aware of these interests and considered them, among other matters, in reaching their respective decisions to adopt and approve the merger agreement.

RES and SREP

As of the Record Date, RES and SREP by virtue of their significant voting power and certain governance rights, each have the power to significantly influence our business and affairs and the outcome of matters required to be submitted to shareholders for approval, including the election of our directors, amendments to our charter, mergers or sales of assets. RES or SREP’s influence over our business and affairs may not be consistent with the interests of some or all of our shareholders.

Our board of directors consist of nine members, of which six were nominated for election to the board of directors pursuant to our agreements with RES and SREP entered into at the time of their investment in the Company. Three of the directors were designated for nomination by RES. These three directors are also employees of RES’s affiliates. Three of the directors were designated for nomination by SREP. One of these directors is an employee of an SREP affiliate.

As of the Record Date, RES and its affiliates have shared voting and shared dispositive power over [●] shares of common stock, representing approximately [●]% of the shares of our outstanding common stock, and [●] shares of Series E preferred stock, representing approximately [●]% of our outstanding Series E preferred stock.

As of the Record Date, SREP and its affiliates have shared voting and shared dispositive power over [●] shares of common stock, representing approximately [●]% of our outstanding common stock, and [●] shares of Series E preferred stock, representing approximately [●]% of our outstanding Series E preferred stock.

RES and SREP have entered into agreements with Parent to vote all shares of their common stock and Series E preferred stock held by them and their affiliates affirmatively for the proposals. The aggregate voting power of RES and SREP is sufficient to assure approval of the proposals at the special meeting.

Restricted stock held by our directors and employees

Under the terms of the merger agreement, immediately prior to the effective time of the Company merger, the vesting and forfeiture restrictions on shares of our restricted stock granted under our shareholder approved 2016 stock plan (the “2016 Stock Plan”) will lapse and such shares will be fully vested in the holder thereof. Shares of restricted stock will have the same rights and be subject to the same conditions in the Company merger as shares of our Company common stock not subject to any vesting or forfeiture restrictions, including the right to receive the Company merger consideration. Upon completion of the Company merger, holders of restricted stock will be entitled to receive $11.10, without interest and less applicable withholding taxes, as more fully described above in the section entitled “—Material U.S. Federal Income Tax Consequences”, for each share of restricted stock that is vested immediately prior to the effective time of the Company merger. In connection with the Company merger and pursuant to the merger agreement, our 2016 Stock Plan and the award agreements thereunder, restricted stock owned by our independent directors, officers and employees will vest and will convert into the right to receive cash (prior to reduction for any applicable tax withholding) as set forth in the following table. The table assumes the closing of the mergers will occur on October 1, 2019 (the assumed date of the closing of the mergers solely for purposes of this compensation disclosure):

49

Additionally, 4,116 shares of restricted stock owned by our employees (other than Mr. Blackham and Ms. Cavey) will vest and convert into the right to receive cash in the aggregate amount of $45,687 (prior to reduction for any applicable withholding tax). See the section below entitled “–Golden parachute compensation” with respect to the acceleration of restricted stock owned by Mr. Blackham and Ms. Cavey.

Prorated 2019 annual incentive

Pursuant to the merger agreement and Mr. Blackham’s employment agreement, a prorated annual cash incentive may be paid to Mr. Blackham of up to $400,000 and Ms. Cavey of up to $92,500, each prorated as applicable depending on the time of the closing and as determined by the compensation committee of our board of directors based on their achievement of their 2019 incentive plans. The compensation committee of our board of directors may approve for Mr. Blackham to receive up to 23,479 shares of Company common stock, with a value of $260,617 based on the merger consideration of $11.10 per share, on a prorated basis with respect to performance bonuses under his employment agreement as determined by the compensation committee of our board of directors for achievement of budgeted funds from operation targets for 2019. Other employees may earn up to an aggregate of $65,150 (prorated as applicable) in annual incentive compensation for 2019.

Change in control payments and benefits for employees

Change in control payments and benefits for the Company employees, other than Mr. Blackham and Ms. Cavey, assuming that the closing of the mergers occurs on October 1, 2019, are estimated, before any applicable withholding, to be an aggregate of $421,719 for change in control payments, $52,463 for the premiums for medical insurance continuation coverage for eligible employees electing such coverage and their dependents (as applicable) and $47,590 for estimated accrued, but unpaid vacation. Pursuant to the merger agreement, severance payments and change in control awards are subject to a general release of claims in favor of the Company. Additionally, prorated incentive compensation for 2019 may be paid to the Company employees. See “Prorated 2019 annual incentive” above.

Golden parachute compensation

The information set forth below is intended to comply with Item 402(t) of Regulation S-K regarding specified compensation that is based on or otherwise relates to the mergers that is payable or may become payable to each of our named executive officers. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules. Our named executive officers are J. William Blackham, President and Chief Executive Officer, and Arinn Cavey, Interim Chief Financial Officer and Chief Accounting Officer.

The table below sets forth an estimate of the approximate values of “golden parachute” compensation that may become payable to our named executive officers in connection with the mergers pursuant to Mr. Blackham’s employment agreement with the Company and other payments upon change of control of the Company as approved

50

by the compensation committee of the Company board of directors for Mr. Blackham and Ms. Cavey. The closing of the mergers and the termination of their employment will be a change of control of the Company for purposes of triggering the payments described below for Mr. Blackham and Ms. Cavey. Subject to any delay required by Section 409A of the Code, all such amounts to be paid in cash will be paid promptly at the closing of the mergers in a lump sum and the merger consideration for the shares of Company common stock will be paid upon exchange of those shares with the exchange agent. The table assumes (i) that the closing of the mergers will occur on October 1, 2019 (the assumed date of the closing of the mergers solely for purposes of this golden parachute compensation disclosure), (ii) that a termination of employment occurs immediately following the closing of the mergers (for Mr. Blackham, a termination considered to be “without cause” or by the executive for “good reason”, each as defined under his employment agreement, that occurs in connection with a change in control of the Company), (iii) base salary, target bonus levels and equity award holdings as of October 1, 2019, and (iv) that no amount of withholding taxes are applicable to any payments set forth in the table. As a result of these reasonable assumptions, and the additional assumptions set forth in the footnotes, the actual amounts, if any, that a named executive officer receives may materially differ from the amounts set forth in the below table. The amounts set forth in the table values shares of our common stock at $11.10 per share, the merger consideration for each share. Pursuant to the merger agreement and Mr. Blackham’s employment agreement, severance payments and change in control awards are subject to a general release of claims in favor of the Company.

51

Indemnification and insurance

The merger agreement provides that rights relating to indemnification, exculpation, advancement of expenses and directors’ and officers’ insurance for our current and past directors and officers will be continued for six years after the completion of the Company merger. These arrangements are described more fully in the section entitled “The Merger Agreement–Indemnification; Directors’ and Officers’ Insurance” beginning on page 70.

Payment of merger consideration

On or before the effective time, Parent will deposit, or cause to be deposited, with a bank or trust company as exchange agent, reasonably satisfactory to us, for the benefit of the holders of our common stock, Series E preferred stock and the Partnership common units, the respective merger consideration described above in the section above entitled “–Consideration to be received in the mergers.” The exchange agent will mail to each holder of record of a certificate or certificates that, immediately prior to the effective time of the Company merger, represented our outstanding common stock or Series E preferred stock or that, immediately prior to the effective time of the Partnership merger, represented Partnership common units, a letter of transmittal and instructions for use in effecting the surrender of the certificates previously representing such Company common stock, Series E preferred stock or Partnership common units in exchange for the merger consideration to which the holder thereof is entitled. The letter of transmittal and instructions will tell you how to surrender your certificates representing common stock, Series E preferred stock and any Partnership common units, as applicable, in exchange for the merger consideration to which you are entitled.

Upon surrender of a certificate that previously represented our common stock or Series E preferred stock or the Partnership common units to the exchange agent, together with a letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such certificate will promptly receive in exchange therefor the amount of cash to which such holder is entitled. Exchange of book-entry shares or book-entry units representing our common stock, Series E preferred stock or Partnership common units will be effected in accordance with the exchange agent’s customary procedures with respect to securities represented by book entry.

Regulatory matters

We are unaware of any material federal, state or foreign regulatory requirements or approvals that are required for the execution of the merger agreement or the completion of the mergers, other than the acceptance for record of the articles of merger with respect to the Company merger by the State Department of Assessments and Taxation of the State of Maryland, and the filing of the certificate of merger with respect to the Company merger with the Secretary of State of the State of Delaware and the certificate of merger with respect to the Partnership merger with the Virginia State Corporation Commission .

THE MERGER AGREEMENT

The following summarizes the material provisions of the merger agreement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. The summary of the material terms of the merger agreement below and elsewhere in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which we incorporate by reference into this proxy statement. We recommend that you read the merger agreement attached to this proxy statement as Annex A carefully and in its entirety, as the rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement.

52

The representations, warranties, covenants and agreements described below and included in the merger agreement (1) were made solely for the benefit of the parties to the merger agreement; (2) were made solely for the benefit of the parties to the merger agreement; and (3) may be subject to important qualifications, limitations and supplemental information agreed to by the parties in connection with negotiating the terms of the merger agreement. In addition, the representations and warranties have been included in the merger agreement for the purpose of allocating contractual risk between the parties instead of establishing such matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to shareholders. Shareholders are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or its subsidiaries. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the merger agreement. You should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company or its subsidiaries. In addition, you should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of the parties because the parties may take certain actions that are either expressly permitted in the confidential disclosure schedules to the merger agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The disclosure schedules to the merger agreement contain or refer to information that has been included in the Company’s prior public filings with the SEC and may also include other non-public information. The disclosure schedules have not been made public because, among other things, they include confidential or proprietary information. The parties believe, however, that all information material to a shareholder’s decision to approve the Merger Proposal is included in or incorporated into this document.

The Mergers

The Company Merger

At the effective time of the Company merger, Merger Sub will be merged with and into the Company, the separate existence of Merger Sub will cease and the Company will be the Surviving Entity and will be a wholly-owned subsidiary of Parent. Following the completion of the Company merger, our common stock will no longer be traded on the NYSE American and will be deregistered under the Exchange Act.

The Partnership Merger

Immediately prior to the Company merger, Merger OP will be merged with and into the Operating Partnership, the separate existence of the Operating Partnership will cease, Merger OP will be the surviving entity in the Partnership merger and Merger OP will become a wholly owned subsidiary of the Surviving Entity.

Closing; Effective Times

The closing of the mergers (the “closing date”) will take place at 10:00 a.m., Eastern time, as soon as practicable (and in any event, within seven business days) following the satisfaction or waiver of the conditions set forth in the merger agreement as described in the section below entitled “–Conditions to the Mergers” (other than those conditions that by their nature are to be satisfied or waived at the closing of the mergers, but subject to the satisfaction or waiver of such conditions) or at such other date as may be mutually agreed to in writing by the parties to the merger agreement; provided, however, that in no event will the closing occur prior to October 1, 2019.

On the closing date and immediately after the effective time of the Partnership merger, Merger Sub and the Company will file articles of merger with the State Department of Assessments and Taxation of Maryland and the Secretary of the State of Delaware. The Company merger will become effective upon the acceptance for record of the articles of merger with respect to the Company merger by the State Department of Assessments and Taxation of Maryland or on such other date and time as may be mutually agreed to by us and Parent and specified in the articles of merger.

53

On the closing date, the Operating Partnership and Merger OP will file articles of merger with the State Corporation Commission of the Commonwealth of Virginia. The Partnership merger will become effective upon acceptance of record of the certificate of merger with respect to the Partnership merger by the State Corporation Commission of the Commonwealth of Virginia or on such other date and time as may be mutually agreed to by us and Parent and specified in the Partnership merger articles of merger.

Unless otherwise agreed in writing by the parties to the merger agreement, the effective time of the Partnership merger and the effective time of the Company merger will occur on the closing date, with the effective time of the Company merger occurring immediately after the effective time of the Partnership merger.

Organizational Documents

At the effective time of the Company merger, the articles of incorporation and bylaws of the Surviving Entity shall be amended and restated in substantially the form attached to the merger agreement, until further amended in accordance with applicable law. The certificate of formation and the limited liability agreement of Merger OP will be the certificate of formation and the limited liability agreement of Merger OP (the “Surviving Partnership”), until amended in accordance with their terms and applicable law.

Following the effective time of the Company merger, until successors are duly elected or appointed and qualified in accordance with applicable law, (A) Matt McGraner will be the sole director of the Surviving Entity and (B) the officers of Merger Sub immediately prior to the effective time of the Company merger will be the officers of the Surviving Entity.

Following the effective time of the Partnership merger, (A) until successors are duly elected or appointed and qualified in accordance with applicable law, the officers of Merger OP immediately prior to the effective time of the Partnership merger will be the officers of the Surviving Partnership and (B) the Company, as the sole member following the effective time of the Partnership merger, will manage the affairs and businesses of the Surviving Partnership.

Company Merger Consideration; Series E Preferred Stock Merger Consideration; Effect on Capital Shares

Common Stock

At the effective time of the Company merger, each share of our common stock (other than treasury shares and shares held by Parent Parties, which will be cancelled and retired and will cease to exist with no consideration being delivered in exchange therefor) issued and outstanding immediately prior to the effective time of the Company merger will automatically be cancelled and converted into the right to receive $11.10, without interest and less any applicable withholding taxes. If we declare a distribution reasonably necessary to maintain our status as a REIT under the Code or to avoid the payment of income or excise tax under the Code as permitted under the merger agreement, the merger consideration will be decreased by an amount equal to the per share amount of such distribution.

Series E preferred stock

At the effective time of the Company merger, each share of Series E preferred stock issued and outstanding immediately prior to the effective time of the Company merger will automatically be cancelled and converted into the right to receive $10.00, without interest and less any applicable withholding taxes.

Company Compensatory Awards

Immediately prior to the effective time of the Company merger, each of the outstanding awards granted pursuant to the Company’s equity incentive plans will automatically become fully vested and all restrictions thereon will lapse, and thereafter, all Company common stock represented thereby will be considered outstanding for all purposes under the merger agreement and will only have the right to receive an amount in cash equal to $11.10 in cash, without interest and less any applicable withholding taxes.

54

Partnership Merger Consideration; Effect on Partnership Units

Each Partnership common unit held by a holder (excluding Partnership common units held by the general partner of the Operating Partnership) that is issued and outstanding immediately prior to the effective time of the Partnership merger will be converted into, and shall be cancelled in exchange for, the right to receive $0.21346, without interest and less any applicable withholding taxes.

Further, at the effective time of the Partnership merger:

No Further Ownership Rights

At the effective time of the Company merger and the effective time of the Partnership merger, as applicable, holders of our common stock and Series E preferred stock and the holders of the Partnership common units, will cease to be, and will have no rights as our shareholders or limited partners of the Operating Partnership other than the right to receive their respective merger consideration. The merger consideration paid upon the surrender for exchange of certificates representing common stock, Series E preferred stock and any certificate representing the Partnership common units will be deemed to have been paid or delivered, as the case may be, in full satisfaction of all rights and privileges pertaining to the common stock, Series E preferred stock and such Partnership common units exchanged therefor.

Payment of Merger Consideration

On or before the effective time, Parent will deposit, or cause to be deposited, with a bank or trust company as exchange agent, reasonably satisfactory to us, for the benefit of the holders of our common stock, Series E preferred stock and the Partnership common units, the respective merger consideration described above in the sections above entitled “–Company Merger Consideration; Series E Preferred Stock Merger Consideration; Effect on Capital Stock” and “–Partnership Merger Consideration; Effect on Partnership Units.” The exchange agent will mail to each holder of record of a certificate or certificates that, immediately prior to the effective time of the Company merger, represented our outstanding common stock or Series E preferred stock or that, immediately prior to the effective time of the Partnership merger, represented Partnership common units, a letter of transmittal and instructions for use in effecting the surrender of the certificates previously representing such Company common stock, Series E preferred stock or Partnership common units in exchange for the merger consideration to which the holder thereof is entitled. The letter of transmittal and instructions will tell you how to surrender your certificates representing common stock, Series E preferred stock and any Partnership common units, as applicable, in exchange for the merger consideration to which you may be entitled.

Upon surrender of a certificate that previously represented our common stock or Series E preferred stock to the exchange agent, together with a letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such certificate will promptly receive in exchange therefor the amount of cash to which such holder is entitled. Exchange of book-entry shares or book-entry units representing our common stock, Series E preferred stock or Partnership common units will be effected in accordance with the exchange agent’s customary procedures with respect to securities represented by book entry

55

No interest will be paid or will accrue on any cash payable upon surrender of any certificate. The Company, the Surviving Entity, the Surviving Partnership or the exchange agent, as applicable, will be entitled to deduct and withhold from any amounts otherwise payable pursuant to the merger agreement to any person such amounts as it is required to deduct and withhold with respect to the making of such payment (and, with respect to our equity awards, the vesting, cancellation or redemption of such equity awards, as applicable) under the Code, and the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law, and such amounts deducted or withheld shall be treated as having been paid to the person in respect of which deduction or withholding was made.

On the closing date, the share transfer books of the Company and the unit transfer books of the Operating Partnership will be closed and thereafter there will be no further registration of transfers of common stock or Series E preferred stock or Partnership common units.

On or after the first anniversary of the effective time of the Company merger and the effective time of the Partnership merger (collectively, the “effective time”), any funds made available by Parent to the exchange agent which have not been disbursed to the holders of the certificates of any common stock, Series E preferred stock or Partnership common units, and thereafter such holders will be entitled to look to the Parent and the Surviving Entity with respect to the cash amounts payable upon surrender of their certificates. Neither the exchange agent nor the Surviving Entity nor any of the Parent Parties or the Company, its subsidiaries and the Operating Partnership will be liable to any holder of a certificate for any amount properly paid to a public official pursuant to any applicable abandoned property or escheat law. Any amounts remaining unclaimed by holders of the certificates, book-entry shares or book-entry units immediately prior to the time at which such amounts would otherwise escheat to, or become the property of, any governmental entity shall, to the extent permitted by applicable law, become the property of the Surviving Entity, free and clear of any claims or interest of any such holders or their successors, assigns or personal representatives previously entitled thereto.

If any certificate has been lost, stolen or destroyed, then, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed to the reasonable satisfaction of Parent and the exchange agent and if required by the Surviving Entity, the posting by such person of a bond in such reasonable amount as the Surviving Entity may direct, as indemnity against any claim that may be made against it with respect to such certificate, and the taking of such other actions as may be reasonably requested by the exchange agent, the exchange agent will issue, in exchange for such lost, stolen or destroyed certificate, the merger consideration pursuant to the merger agreement.

Company Compensatory Awards

Immediately prior to the effective time of the Company merger, each of the outstanding awards granted pursuant to the Company’s equity incentive plans will automatically become fully vested and all restrictions thereon will lapse, and thereafter, all Company common stock represented thereby will be considered outstanding for all purposes under the merger agreement and will only have the right to receive an amount in cash equal to $11.10 in cash, without interest and less any applicable withholding taxes.

Appraisal Rights

No appraisal or dissenters’ rights or rights of objecting shareholders are available with respect to the mergers or the other transactions contemplated by the merger agreement.

Representations and Warranties of the Company Parties

We and the Operating Partnership, jointly and severally, have made customary representations and warranties in the merger agreement that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement or in the disclosure schedules delivered in connection therewith. These representations and warranties relate to, among other things:

56

57

Certain of our representations and warranties are qualified by the concept of a “Company material adverse effect.” Under the terms of the merger agreement, a Company material adverse effect means any effect, change, event, occurrence, circumstance or development that has had or would reasonably be expected to have a material adverse effect on (1) the business, financial condition, assets or results of operations of us and our subsidiaries, taken as a whole, or (2) the ability of us or the Operating Partnership to consummate the mergers before the end date; provided, however, that in the case of clause (1), no change, event, state of facts or development resulting from any of the following shall be deemed to be or taken into account in determining whether there has been or will be, a “material adverse effect”:

58

provided, that (1) with respect to the exceptions set forth in the third, fourth, fifth, sixth, seventh, eighth and ninth bullet points above, such changes, events, state of facts or developments may be taken into account to the extent they disproportionately affect us relative to other companies in the United States in the industry in which we operate, in which case only the incremental disproportionate impact or impacts may be taken into account in determining whether or not there has been a Company material adverse effect and (2) the ninth bullet point above do not apply to the references to Company material adverse effect in certain representations and warranties.

Representations and Warranties of the Parent Parties

The merger agreement also contains customary representations and warranties made, jointly and severally, by the Parent Parties that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. These representations and warranties relate to, among other things:

59

60

Under the terms of the merger agreement, a Parent material adverse effect means, with respect to Parent, any effect, change, event, occurrence, circumstance or development that, individually or taken together with all other effects, changes, events, occurrences, circumstances or developments that have occurred prior to the date of determination of the occurrence of the Parent material adverse effect, is or would be reasonably likely to prevent or delay the abilities of the Parent Parties to consummate the mergers. The representations and warranties of each of the parties to the merger agreement will expire upon the closing of the mergers.

Interim Operations of the Company Parties

Under the merger agreement, we have agreed that, subject to certain exceptions in the merger agreement and the disclosure schedules delivered in connection therewith, between the date of the merger agreement and the earlier of the closing date and the termination of the merger agreement in accordance with its terms (which period we refer to as the interim period), we will, and will cause our subsidiaries to, operate our and our subsidiaries respective businesses in all material respects in the ordinary course of business and in a manner consistent with past practice and use commercially reasonable efforts:

We have also agreed that during the interim period, subject to certain exceptions set forth in the merger agreement and the disclosure schedules delivered in connection therewith or unless Parent consents in writing (which consent may not be unreasonably withheld, delayed or conditioned except with respect to the first, second, third, fourth, sixth, seventh and twentieth bullet points below), we and the Operating Partnership will not, among other things:

61

62

63

No Solicitations

We have agreed that we will, and will cause our subsidiaries and our and our subsidiaries’ employees, officers, trustees and directors or equivalents to, and will instruct and use our reasonable best efforts to cause our and their other representatives to;

We have agreed that, from and after the date of the merger agreement, until the earlier of the effective time and termination of the merger agreement in accordance with its terms, we will, and will cause our subsidiaries and our and our subsidiaries’ employees, officers, trustees and directors or equivalents to, and will instruct and use our reasonable best efforts to cause our and their other representatives not to:

64

If prior to the earlier of August 18, 2019 or obtaining Company shareholder approval of the Merger Proposal, in response to an unsolicited bona fide written acquisition proposal made after the date of the merger agreement that did not result from a breach of our obligations described under this section “–No Solicitation” and in the section below entitled “–Obligations with Respect to Board of Directors Recommendation,” and provided the Company board of directors has determined in good faith, after consultation with the Company’s outside legal counsel and financial advisor, that such acquisition proposal either constitutes a superior proposal (as described below) or would reasonably be expected to result in a superior proposal and that failure to take such action would reasonably be expected to constitute a breach of the directors’ duties set forth in Section 2-405.1 of the MGCL, we may:

65

If we receive an acquisition proposal or inquiry, then we will:

Obligation with Respect to Board Recommendation

The Company has agreed that the Company board of directors will not, except as permitted below:

66

However, the Company board of directors may at any time prior to the earlier of obtaining the Company shareholder approval of the Merger Proposal and August 18, 2019 make a change in recommendation and terminate the merger agreement if and only if:

67

Additionally, at any time prior to obtaining the Company shareholder approval, the Company board of directors may make a change in recommendation not related to an acquisition proposal if:

For purposes of the merger agreement an acquisition proposal means any proposal or offer from any third Party relating to, in a single transaction or series of related transactions:

68

For purposes of the merger agreement, a superior proposal means a bona fide written acquisition proposal (with all of the references to 15% included in the definition of acquisition proposal increased to more than 50%):

For purposes of the merger agreement a change in circumstances means any material event, development or occurrence with respect to the Company and its subsidiaries, taken as a whole, that was not known or reasonably expected to have been known or foreseen to or by the Company board of directors (assuming consultations with appropriate officers and representatives of the Company) as of or prior to the date of the merger agreement and becomes known to the Company board of directors after the date of the merger agreement; provided, however, that in no event shall any of the following constitute or be taken into account in determining whether a change in circumstances has occurred:

69

Shareholders Meeting

Pursuant to the merger agreement we have agreed to promptly call this special meeting of shareholders promptly after the clearance of this proxy statement by the SEC for the purpose of obtaining shareholder approval of the Merger Proposal, the Advisory Compensation Proposal and the Adjournment Proposal. We may postpone or adjourn the special meeting with (1) the consent of Parent, (2) for the absence of a quorum, (3) to ensure that any required supplement or amendment to this proxy statement is provided to shareholders within a reasonable amount of time in advance of the shareholder meeting, or (4) to allow for the additional solicitation of votes for approval of the Merger Proposal, provided that in the case of (2) and (4), without the written consent of Parent the meeting will not be postponed more than 30 days.

Unless the Company board of directors has withdrawn its recommendation that shareholders approve the Merger Proposal in compliance with the merger agreement, the Company, through the Company board of directors, shall recommend to the shareholders that they vote in favor of the Merger Proposal. We will use commercially reasonable efforts to solicit shareholder approval of the Merger Proposal and will take all other action necessary or advisable to secure such approval.

Filings; Other Actions

Each party to the merger agreement has agreed to use commercially reasonable efforts to take all actions, and to assist and cooperate with each other, to consummate as promptly as practicable, the mergers and the transactions contemplated by the merger agreement.

Each of the parties to the merger agreement has agreed to furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required governmental filings or submissions and will cooperate in responding to any inquiry from a governmental entity

Each of Parent and the Company will use its reasonable best efforts to give any notices to third parties, and each of Parent and the Company will use its reasonable best efforts to obtain any third Party consents not covered above that are necessary, proper or advisable to consummate the mergers and the transactions contemplated by the merger agreement.

Other Employee Benefits

Parent will or will cause the Surviving Entity to: (a) terminate the employment of all employees of the Company effective immediately upon the effective time of the Company merger; and (b) subject to the terms of the merger agreement, to pay amounts then due to such terminated employees as set forth in the specific part of the Company disclosure schedule as promptly as practicable following the Company effective time; provided, that such employees execute and deliver a release in form and substance satisfactory to Parent as previously reviewed and approved by the Company.

Indemnification; Directors’ and Officers’ Insurance

Prior to the effective time, we will obtain and fully pay the premium for, and Parent will cause to be maintained in full force and effect (and the obligations under to be honored), during the six-year period beginning on the date of the effective time of the Company merger, a “tail” prepaid insurance policy or policies (which policy or policies by their respective express terms will survive the mergers) from the Company’s current insurance carrier or an insurance carrier with the same or better credit rating as the Company’s current insurance carrier, of at least the same coverage and amounts and containing terms and conditions, retentions and limits of liability that are no less favorable than the Company’s and its subsidiaries’ existing policy or policies, for the benefit of each individual who at the effective time of the Company merger is, or at any time prior to the effective time of the Company merger was, a trustee, director or officer of the Company or of a subsidiary of the Company and acting in such capacity.

70

For a period of six years following the effective time, each of Parent and the Surviving Entity will indemnify and hold harmless each individual who at the effective time is, or at any time prior to the effective time was, a trustee, director or officer of the Company or of a subsidiary of the Company and acting in such capacity for any and all costs and expenses (including reasonable fees and expenses of legal counsel, which will be advanced as they are incurred; provided that the indemnified party will have made an undertaking to repay such expenses if it is ultimately determined that such indemnified party was not entitled to indemnification under this provision), judgments, fines, penalties or liabilities (including amounts paid in settlement or compromise) imposed upon or reasonably incurred by such indemnified party in connection with or arising out of any action, suit or legal proceeding (whether civil or criminal) in which such indemnified party may be involved or with which he or she may be threatened (regardless of whether as a named party or as a participant other than as a named party, including as a witness) by reason of such indemnified party’s being or having been such trustee, director or officer of the Company or of a subsidiary of the Company or otherwise in connection with any action taken or not taken at the request of the Company or of a subsidiary of the Company at, or at any time prior to, the effective time of the Company merger.

Transaction Litigation

We will promptly as reasonably practicable notify Parent and give Parent the opportunity to participate in the defense, negotiations and settlement of, any litigation asserted or commenced by any shareholder of the Company or any holder of the Company’s other securities (whether directly or on behalf of the Company or otherwise) against the Company Parties, the Company board of directors, any committee thereof and/or any of the Company’s directors or officers relating to the merger agreement, the mergers or any of the transactions contemplated under the merger agreement, will keep Parent reasonably informed with respect to the status thereof and will give consideration to Parent’s advice with respect to such litigation.

Distribution by Company of REIT Taxable Income

Prior to the closing date, we and our REIT subsidiaries may declare and pay a dividend to shareholders distributing cash in such amounts determined by the Company in its sole discretion exercised in good faith to be required to be distributed in order for the Company or a subsidiary REIT of the Company to qualify as a REIT for such year and to avoid to the extent reasonably possible the incurrence of income or excise tax by the Company or a subsidiary REIT of the Company. If we declare a distribution to our shareholders pursuant to this provision, the merger consideration will be decreased by an amount equal to such distribution.

Certain Tax Matters

We have agreed to take such actions as we determine is reasonably necessary to ensure that the Company and any subsidiary REIT of the Company (i) will qualify for taxation as a REIT for U.S. federal income tax purposes for the current taxable year, and (ii) will not become liable for U.S. federal income tax under Section 857(b) or 4981 of the Code for the current taxable year.

All transfer, stamp, documentary, sales, use, registration, value-added and other similar taxes (including all applicable real estate transfer taxes) incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be borne by Parent.

On the closing date, prior to the Company merger we are required to deliver to Parent a duly executed certificate, dated as of the closing date, that the Company has been a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code during its entire existence, and therefore, the Company capital shares are not “United States real property interests.”

Parent and the Company will, upon written request, use commercially reasonable efforts to obtain any certificate or other document from any governmental entity or any other person as may be necessary to mitigate, reduce or eliminate any tax that could be imposed (including with respect to the transactions contemplated in the merger agreement).

71

Stock Exchange Delisting; Deregistration

Prior to the effective time of the Company merger, we will cooperate with Parent and shall use our reasonable best efforts to take, or cause to take, all actions necessary, proper or advisable to cause the delisting by the Surviving Entity of the Company capital shares from the NYSE American and the deregistration of the Company capital shares under the Exchange Act as promptly as practicable after the effective time of the Company merger.

Takeover Statutes

We agreed not to take any action that would cause the transactions contemplated by the merger agreement, including the mergers, to be subject to requirements imposed by any takeover statute.

Notification of Certain Matters

We have agreed to give prompt notice to Parent, and Parent has agreed to give prompt notice to the Company, of any notice or other communication received by such party from any governmental entity in connection with the merger agreement, the mergers or the other transactions contemplated by the merger agreement, or from any person alleging that the consent of such person is or may be required in connection with the mergers or the other transactions contemplated by the merger agreement.

We have agreed to give prompt notice to Parent, and Parent has agreed to give prompt notice to the Company, upon becoming aware (i) that any representation or warranty made by it contained in the merger agreement has become untrue or inaccurate, such that the applicable closing conditions would reasonably be expected to be incapable of being satisfied by the end date or (ii) of any failure to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under the merger agreement; provided, however, that no such notification will affect or be deemed to modify the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under the merger agreement and shall not limit or otherwise affect the remedies available under the merger agreement to the party receiving such notice.

Financing and Cooperation.

At our request, Parent will keep us reasonably informed in reasonable detail of the status of its efforts to arrange its financing. Parent’s debt financing is not a condition to closing and the consummation of the transactions contemplated by the merger agreement are not conditioned on, or delayed or postponed as a result of the obtaining of (or the failure to obtain) the financing.

We will, and will cause our subsidiaries to, use our and their commercially reasonable efforts to cause our and their respective representatives to, provide to the Parent Parties and their representatives, at Parent’s sole expense, all cooperation reasonably requested by Parents and/or its affiliates to assist them in connection with the arrangement of financing, to the extent not unreasonably interfering with the business of the Company and its subsidiaries.

Capital Expenditures

We will execute in all material respects a capital expenditure plan provided to Parent in the Company disclosure schedule to the merger agreement, including with respect to the amount of spending. Deviation from the capital expenditure plan will not be deemed a breach of this covenant to the extent such breach is reasonably attributable to delays caused by fire, earthquakes, floods, wind or other acts of God, acts of public enemies, riot, insurrection, government regulation, labor disputes, general market shortages of materials or labor or other causes beyond the Company’s reasonable control. We will obtain the prior written consent of Parent (which shall not be unreasonably withheld, conditioned or delayed) in connection with any material deviation from such plan.

72

Atlanta JV

We will exercise our right to acquire the remaining 20% equity interest of the Atlanta JV that we do not own, pursuant to the terms of the Atlanta JV organizational documents, with the purchased financed from our line of credit. Parent has also consented to the refinancing of the indebtedness of the Atlanta JV pursuant to the financing term sheet provided to Parent and included in the Company disclosure schedule to the merger agreement. We will not agree to any indemnification or financial obligations that will be binding on Parent following the closing, without Parent’s written consent.

Repairs

We have agreed to our use best efforts to make certain repairs prior to the closing date, and keep Parent informed in reasonable detail of the status of the repairs. Parent will have the right to review and comment on all repair plans and to inspect the repairs in advance of final payments to the contractors. However, if Parent does not approve the work or if there is a contractor lien because Parent has not approved final payment then neither event will be a condition to not consummate the mergers.

Debt Commitment Letter

Parent may, in its discretion, deliver to the Company, an executed commitment letter from a lender party pursuant to which the lender party commits to lend the amount set forth therein to Parent for the purpose of funding a portion of the merger consideration and the obligations of the Parent Parties in the merger agreement. To the extent the debt commitment letter is so delivered by Parent, is customary in form and substance, and does not include any condition that is a “diligence out,” the amount set forth in the equity commitment letter will automatically and irrevocably be reduced by the amount set forth in the debt commitment letter. We have agreed to provide all information necessary and cooperate with Parent in providing any necessary diligence items to complete the lender’s due diligence and underwriting process in order to execute the debt commitment letter.                

Conditions to the Mergers

The obligation of the parties to consummate the mergers are subject to the satisfaction or waiver of each of the following conditions:

The obligation of the Parent Parties to consummate the mergers and the other transactions contemplated by the merger agreement on the closing date are subject to the satisfaction (or, to the extent permitted by applicable Law, waiver by Parent) at or prior to effective time, of each of the following conditions:

73

74

The obligation of the Company Parties to consummate the mergers is subject to the satisfaction, or waiver by the Company, at or prior to closing, of the following conditions:

None of the Parent Parties, on the one hand, nor the Company Parties, on the other hand, may rely on the failure of any condition set forth above, as the case may be, to be satisfied (or to be able to be satisfied) to excuse it from its obligation to effect the mergers if such failure (or inability to be satisfied) was caused by such party’s failure to comply with or perform its obligations under the merger agreement.

Termination

The merger agreement may be terminated and the mergers may be abandoned at any time prior to the closing (notwithstanding the receipt of the Company shareholder approval of the Merger Proposal):

75

76

Effect of Termination.

If the merger agreement is terminated as provided above, the merger agreement will become void and of no further force or effect without liability of any party (or any affiliate or representative of such party); provided, however, that this provision and certain other provisions described in the merger agreement will survive termination; provided, however, that subject to certain other provisions described in the merger agreement, (i) nothing herein shall relieve any party from liability for damages resulting from such party’s fraud prior to such valid termination; and (ii) nothing will relieve the Company Parties of any liability for damages resulting from any Company Party’s willful breach prior to such valid termination (in the case of each of clauses (i) and (ii), which the parties have acknowledged and agreed will not be limited to reimbursement of expenses or out-of-pocket costs). The confidentiality agreement of the parties will survive the termination of the merger agreement and will remain in full force and effect in accordance with its terms; provided that the Parent Parties shall each be treated as if they were a party thereto to the same extent as Parent.

Fees and Expenses

Except as described below under the section entitled “–Parent Expense Amount”, all fees and expenses incurred in connection with the merger agreement and the transactions contemplated by the merger agreement will be paid by the party incurring such cost or expense, whether or not the mergers or any other transaction contemplated by the merger agreement are consummated.

Company Termination Fee

The Company will pay to Parent a fee equal to $9,540,000 (such fee, the “Company termination fee”) if:

Parent Expense Amount

If the merger agreement is terminated pursuant to the provisions described in the fourth of fifth bullet points in the section above entitled “–Termination”, the Company will pay to Parent up to $3,180,000 of the documented out-of-pocket expenses paid or payable on behalf of any of the Parent Parties in connection with the merger agreement (the “Parent expense amount”), provided, that the payment by the Company of the Parent expense amount will not relieve the Company of any subsequent obligation to pay the Company termination fee (but in the event such Company termination fee is or becomes payable, it will be reduced on a dollar for dollar basis for the Parent expense amount actually paid). In no event will the Company be required to pay the Parent expense amount on more than one occasion.

77

Parent Termination Fee

Parent will pay to the Company a fee equal to $11,925,000 (such fee, the “Parent termination fee”) if the Company terminates the merger agreement pursuant to the provisions described under the sixth or ninth bullet points in the section above entitled “–Termination.”

Amendment

The merger agreement may be amended with the mutual agreement of the Company Parties and the Parent Parties at any time, whether before or after the Company shareholder approval of the Merger Proposal has been obtained; provided, however, that after the Company shareholder approval of the Merger Proposal has been obtained, no amendment may be made that pursuant to applicable law requires further approval or adoption by the shareholders of the Company without such further approval or adoption.

Waiver; Extension and Dividends

At any time prior to the effective time, the parties may: (a) extend the time for the performance of any of the obligations or other acts of the other parties; (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant to the merger agreement; (c) waive compliance with any covenants and agreements contained therein; or (d) waive the satisfaction of any of the conditions contained herein.

The closing of the mergers may not occur prior to October 1, 2019, without the consent of the parties. If the Company notifies the Parent that it is prepared to close and all conditions to Parent’s obligations to close are met, then Parent, at its option, may extend the closing time for a 30-day period (or such shorter period so as not to extend beyond December 31, 2019), provided, that no Parent Party is then in breach of the merger agreement in any material respect. Parent may exercise an extension up to three times during the term of the merger agreement.

During the term of the merger agreement, the Company agreed to not pay cash dividends to holders of the Company common stock or the Series E preferred stock, except the Company is permitted to declare and pay a dividend to shareholders during the month in which an extension option for closing is exercised by the Parent, subject to limitations as set forth in the merger agreement and Section 7.4 of the disclosure schedules delivered therewith and attached hereto as Annex D on amount and the Company’s prior month adjusted funds from operations. The holders of the Series E preferred stock have agreed to waive accrual of any unpaid dividends between signing and closing.

Non-Survival of Representations, Warranties, Covenants and Agreements

None of the representations, warranties, covenants and agreements in the merger agreement, or in any instrument delivered pursuant to the merger agreement, shall survive the effective time of the Company merger, except for those covenants and agreements that by their terms apply or are to be performed in whole or in part after the effective time of the Company merger.

Specific Performance

The parties have agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches or threatened breaches of the merger agreement and to enforce specifically the performance of the terms and provisions of the merger agreement. While Company or Parent may pursue both a grant of specific performance or other equitable relief as provided in the merger agreement, the payment of the Parent termination fee and Company termination fee, as applicable, under no circumstances will the Company or Parent be permitted or entitled to receive both a grant of specific performance or other equitable relief and any money damages (including the Parent termination fee or the Company termination fee, as applicable) in connection with the merger agreement or any termination of the merger agreement.

78

The Company is only entitled to specific performance of the Parent Parties’ obligations to consummate the mergers and the transactions contemplated by the transaction documents and cause the equity financing to be funded if, and only if, (i) all of the conditions to close have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing, but subject to such conditions being able to be satisfied); (ii) to the extent the debt commitment letter is delivered to the Company as contemplated by the merger agreement, the debt financing will be funded at the closing if the equity financing is funded at the closing; and (iii) the Company has irrevocably confirmed in writing to Parent that if specific performance is granted and the debt financing is funded, then the Company will cause the closing to occur.

79