ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION
OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
On April 1, 2022, Ashford
Inc. (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) with Ashford Hospitality Holdings
LLC, a subsidiary of the Company (the “Borrower”), Ashford Hospitality Advisors LLC, a subsidiary of the Company (“Ashford
LLC”), Ashford Hospitality Services LLC, a subsidiary of the Company (“AHS”), Mustang Lodging Funding LLC, as administrative
agent, and the lenders from time to time party thereto.
The Credit Agreement evidences
a senior secured term loan facility (the “Credit Facility”) in the amount of $100 million, including a $50 million term loan
funded on the closing date of the Credit Facility (the “Closing Date”) and commitments to fund up to an additional $50 million
of term loans in up to five separate borrowings within 24 months after the Closing Date, subject to certain conditions. The Credit Facility
is a five-year interest-only facility with all outstanding principal due at maturity, with three successive one-year extension options
subject to an increase in the interest rate during each extension period. The proceeds of the Credit Agreement may be used for refinancing
existing indebtedness, working capital, capital expenditures and other general corporate purposes, including, without limitation, property
acquisitions; provided, however, not less than 50% of the proceeds of each term loan after the Closing Date shall be used for purposes
of acquisitions, other investments and growth capital expenditures.
The Credit Agreement is guaranteed
by the Company, the Borrower, and certain subsidiaries of the Company, and secured by: (i) all of the assets of Borrower and each
guarantor; (ii) an assignment of proceeds under certain advisory agreements and management agreements with Ashford Hospitality Trust, Inc.
and Braemar Hotels & Resorts Inc. and certain of their respective subsidiaries; and (iii) a pledge of the equity interests
in the Borrower and each guarantor. However, (a) the guarantees and collateral provided by Ashford LLC and its subsidiaries (the
“Advisory Companies”) are limited to the extent of proceeds of the term loans that are funded by the Borrower to the Advisory
Companies under an intercompany credit agreement between the Borrower and Ashford LLC, and (b) the guarantees and collateral provided
by AHS and its subsidiaries (the “Services Companies”) are limited to the extent of proceeds of the term loans that are funded
by the Borrower to the Services Companies under an intercompany credit agreement between the Borrower and AHS.
Borrowings under the Credit
Agreement will bear interest, at the Borrower’s option, at either the Eurodollar Rate (defined as LIBOR or a comparable or successor
rate, with a floor of 0.25%) plus an applicable margin, or the base rate (defined as the highest of the federal funds rate plus 0.50%,
the prime rate or the Eurodollar Rate plus 1.00%, with a floor of 1.25%) plus an applicable margin. The applicable margin for borrowings
under the Credit Agreement for Eurodollar loans will be 7.35% per annum and the applicable margin for base rate loans will be 6.35% per
annum, with increases to both applicable margins of 0.50%, 0.75% and 1.00% per annum during each of the three extension periods, respectively.
A default rate will apply on all obligations in the event of default under the Credit Facility at 3.50% per annum above the otherwise
applicable rate.
The Credit Facility contains
customary terms, covenants, negative covenants, events of default, limitations and other conditions for credit facilities of this type.
Subject to certain exceptions, the Company and the Borrower are subject to restrictions on incurring additional indebtedness and liens,
investments, mergers and fundamental changes, sales or other dispositions of property, dividends and stock redemptions, changes in the
nature of the Borrower’s business, transactions with affiliates, burdensome agreements and capital expenditures.
The Credit Facility does not
require the maintenance of financial covenants, but if the ratio (the “Leverage Ratio”) of consolidated funded indebtedness
that is recourse to the Borrower or any guarantor (less unrestricted cash) to consolidated EBITDA of the Company and its subsidiaries
is greater than 4.00 to 1.00 as of the end of any fiscal quarter during the term of the loan, including any extension period, then the
Borrower is required to apply 100% of the excess cash flow generated during such fiscal quarter to prepay the term loans. During any extension
period, the Borrower is also required to apply 100% of the excess cash flow generated during such period to prepay the term loans. The
Company may not pay dividends on the Company’s shares of common stock or preferred stock if the Leverage Ratio is greater than 3.00
to 1.00 after giving effect to the payment of such dividends.
The Credit Agreement includes
customary events of default, and the occurrence of an event of default will permit the lenders to terminate commitments to lend under
the Credit Agreement and accelerate payment of all amounts outstanding thereunder.
The foregoing summary is qualified
in its entirety by reference to the Credit Agreement filed as Exhibit 10.1 hereto and incorporated herein by reference.