ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On April 15, 2022, Ashford
Hospitality Holdings LLC, a Delaware limited liability company (“AHH”), a subsidiary of Ashford Inc., a Nevada corporation
(the “Company”), and Remington Holdings, L.P., a Delaware limited partnership and an indirect subsidiary of the Company
and AHH (“Remington”), closed on an acquisition of the Chesapeake Companies (defined below) pursuant to a Membership
Interest Purchase and Contribution Agreement (the “Purchase Agreement”) with MHI Hotels Services, LLC, a Maryland limited
liability company (“Seller”), Chesapeake Hospitality, LLC, a Maryland limited liability company (“Chesapeake
I”), Chesapeake Hospitality II, LLC, a Maryland limited liability company (“Chesapeake II”), Chesapeake Hospitality
III, LLC, a Maryland limited liability company (“Chesapeake III”), Chesapeake Hospitality IV, LLC, a Maryland limited
liability company (“Chesapeake IV”), Chesapeake Hospitality V, LLC, a Maryland limited liability company (“Chesapeake
V”), Chesapeake Hospitality VI, LLC, a Maryland limited liability company (“Chesapeake VI”), ACSB Hospitality,
LLC, a Maryland limited liability company (“ACSB” and together with Chesapeake I, Chesapeake II, Chesapeake III, Chesapeake
IV, Chesapeake V and Chesapeake VI, each a “Chesapeake Company” and collectively, the “Chesapeake Companies”),
KES Family Partnership, R.L.L.L.P, a Virginia limited partnership (“KES”), CLS Family Partnership, R.L.L.L.P, a Virginia
limited partnership (“CLS”), Steven McDonnell Smith Family Partnership, LLP, a Maryland limited liability partnership
(“SMS”), W. Chris Green (“Green”), Clifford G. Ferrara (“Ferrara”) and Louis
Schaab (“Schaab” and together with KES, CLS, SMS, Green and Ferrara, each an “Owner” and collectively,
the “Owners”); and solely for purposes of Section 6.15 of the Purchase Agreement, Kim Sims, Chris Sims and Steven
Smith.
Purchase Agreement
Under the terms of the Purchase
Agreement, (i) Seller sold to Remington, 40% of the membership interests in each Chesapeake Company (collectively, the “Purchased
Interests”) and (ii) Seller contributed to AHH, 60% of the membership interests in each Chesapeake Company (the “Contributed
Interests”). At the closing of the transactions contemplated by the Purchase Agreement (collectively, the “Transactions”),
(i) in consideration for the sale of the Purchased Interests by Seller to Remington, Remington paid to Seller $6.3 million in cash,
subject to certain adjustments, and (ii) in consideration for the contribution of the Contributed Interests by Seller to Parent,
Parent issued to Seller 378,000 Series CHP Convertible Preferred Units of AHH (the “Series CHP Units”) at
$25 per Unit, for a total value of $9.45 million. Seller also has the ability to earn up to $10.25 million of additional consideration
based on its base management fee contribution for the trailing twelve month periods ending March 2024 and March 2025, respectively, for a total
potential consideration of $26 million, subject to certain adjustments. The first $6.3 million of such additional consideration is payable
by Remington in cash and any amounts payable in excess of such $6.3 million may be satisfied by the issuance of shares of common stock
of the Company, common units of AHH or additional Series CHP Units, as determined by AHH in its sole discretion. Upon the closing
of the Transactions, AHH immediately contributed the Contributed Interests, through its subsidiaries, to Remington such that Remington
owns all of the issued and outstanding membership interests of the Chesapeake Companies.
The Board unanimously (i) determined
that the Transactions were advisable, fair to and in the best interests of the Company and its stockholders and (ii) approved and
adopted the Purchase Agreement, the other Transaction Documents (as defined in the Purchase Agreement) and the Transactions.
Amendment to Holdings LLC Agreement
On April 4, 2022, the
members of the Board of Directors of the Company approved Amendment No. 2 (the “Amendment”) to the Third Amended
and Restated Limited Liability Company Agreement of AHH, dated as of November 6, 2019 (the “LLC Agreement”). The
purpose of the Amendment is to create the Series CHP Units, a new class of Units in AHH, the terms of which are discussed below.
The Amendment was approved in order to provide certain equity consideration to the Seller in connection with the Transactions contemplated
by the Purchase Agreement set forth above.
Terms of Series CHP Units
The Amendment establishes
the terms of the Series CHP Units to be issued in exchange for the Contributed Interests pursuant to the Purchase Agreement, and
provides that each Series CHP Unit will (i) have a liquidation value of $25 per share, (ii) be entitled to cumulative dividends
at the rate of 7.28% per annum, payable quarterly in arrears, (iii) participate in any dividend or distribution on the common stock
of the Company in addition to the preferred dividends set forth in clause (ii), (iv) be convertible into common units of AHH at $117.50
per unit, which common units of AHH will then be exchangeable into common stock of the Company on a 1:1 ratio, and (v) provide for
customary anti-dilution protections. In the event AHH fails to pay the required dividends on the Series CHP Units for two consecutive
quarterly periods (a “Preferred Unit Breach”), then until such arrearage is paid in cash in full, the dividend rate
on the Series CHP Units will increase to 10.00% per annum until no Preferred Unit Breach exists.
Except with respect to certain
protective provisions, no holder of Series CHP Units will have voting rights in its capacity as such. The Amendment
provides that, so long as any Series CHP Units are outstanding, AHH is prohibited from taking specified actions without the consent
of at least 50% of the holders of Series CHP Units, including (i) modifying the terms, rights, preferences, privileges or voting
powers of the Series CHP Units, or (ii) altering the rights, preferences or privileges of any Units of AHH so as to adversely
affect the Series CHP Units.
This summary of the Amendment
is qualified in its entirety by reference to the full text of the Amendment, which is attached as Exhibit 10.1 to this Current Report
on Form 8-K and incorporated by reference as though fully set forth herein.