NOTE 17 — SUBSEQUENT EVENTS

Equity Transactions

On January 1, 2016, 113,903 of our outstanding performance-based restricted stock awards granted pursuant to our Equity Plan vested as the Company’s TSR exceeded the TSR for the U.S. Lodging REIT Index. Additionally, accrued dividends of $0.1 million were paid as a result of this vesting.

On January 1, 2016, 31,042 Common Units were tendered for redemption and were redeemed for an equivalent number of shares of our common stock.

On January 29, 2016, our board of directors declared cash dividends of $0.1175 per share of common stock, $0.578125 per share of 9.25% Series A Cumulative Redeemable Preferred Stock, $0.4921875 per share of 7.875% Series B Cumulative Redeemable Preferred Stock, and $0.4453125 per share of 7.125% Series C Cumulative Redeemable Preferred Stock. These dividends are payable February 29, 2016 to stockholders of record on February 16, 2016.

Debt Transactions

On January 15, 2016, the Operating Partnership, as borrower, the Company, as parent guarantor, and each party executing the loan documentation as a subsidiary guarantor entered into a $450 million senior unsecured facility (the “2016 Unsecured Credit Facility”) with Deutsche Bank AG New York Branch, as administrative agent, Deutsche Bank Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, and Regions Capital Markets as joint lead arrangers and joint bookrunners, and a syndicate of lenders including Deutsche Bank AG New York Branch, Bank of America, N.A., Regions Bank, Royal Bank of Canada, U.S. Bank National Association, PNC Bank, National Association, KeyBank National Association, Raymond James Bank, N.A., and Branch Banking and Trust Company.

The 2016 Unsecured Credit Facility is comprised of a $300 million revolving credit facility (the “$300 Million Revolver”) and a $150 million term loan (the “$150 Million Term Loan”) and replaces the former $300 million senior unsecured credit facility. The 2016 Unsecured Credit Facility has an accordion feature which will allow the Company to increase the total commitments by an aggregate of up to $150 million on the $300 Million Revolver and $150 Million Term Loan. The $300 Million Revolver will mature on March 31, 2020 and can be extended to March 31, 2021 at the Company’s option, subject to certain conditions. The $150 Million Term Loan will mature on March 31, 2021.

Outstanding borrowings on the 2016 Unsecured Credit Facility are limited to the least of (1) the aggregate commitments of all of the lenders, (2) the aggregate value of the unencumbered assets, multiplied by 60%, less the consolidated unsecured indebtedness of the Company (exclusive of outstanding borrowings under the 2016 Unsecured Credit Facility), all as calculated pursuant to the terms of the 2016 Unsecured Credit Facility agreement, and (3) the principal amount that when drawn under the 2016 Unsecured Credit Facility would result in an unsecured interest expense, calculated on a pro forma basis for the next consecutive four fiscal quarters of the Company after taking such draws into account, equal to 50% of the net operating income of the unencumbered assets, as adjusted pursuant to the 2016 Unsecured Credit Facility agreement. A minimum of 20 of the Company’s hotel properties must qualify as unencumbered assets, as defined in the 2016 Unsecured Credit Facility agreement, or the aggregate value of the unencumbered assets will be deemed to be zero.

Payment Terms. The Company is obligated to pay interest at the end of each selected interest period, but not less than quarterly, with all outstanding principal and accrued but unpaid interest due at the maturity of the respective facility. The Company has the right to repay all or any portion of the outstanding borrowings from time to time without penalty or premium, other than customary early payment fees if the Company repays a LIBOR loan before the end of the contract period. In addition, the Company will be required to make earlier principal reduction payments in the event of certain changes in the unencumbered asset availability.

The Company pays interest on revolving credit advances at varying rates based upon, at the Company’s option, either (i) 1, 2, 3, or 6-month LIBOR, plus a LIBOR margin between 1.50% and 2.25%, depending upon the Company’s leverage ratio (as defined in the 2016 Unsecured Credit Facility agreement), or (ii) the applicable base rate, which is the greatest of the administrative agent’s prime rate, the federal funds rate plus 0.50%, and 1-month LIBOR plus 1.00%, plus a base rate margin between 0.50% and 1.25%, depending upon the Company’s leverage ratio. The applicable margin for a term loan advance shall be 0.05% less than the revolving credit advances referenced above. In addition, on a quarterly basis, the Company will be required to pay a fee on the unused portion of the 2016 Unsecured Credit Facility equal to the unused amount multiplied by an annual rate of either (i) 0.25%, if the unused amount is greater than 50% of the maximum aggregate amount of the 2016 Unsecured Credit Facility, or (ii) 0.20%, if the unused amount is equal to or less than 50% of the maximum aggregate amount of the 2016 Unsecured Credit Facility. The Company will also be required to pay other fees, including customary arrangement and administrative fees.

Financial and Other Covenants. The Company is required to comply with a series of financial and other covenants in order to borrow under this credit facility. The material financial covenants include a maximum leverage ratio, a minimum consolidated tangible net worth, a maximum dividend payout ratio, a minimum consolidated fixed charge coverage ratio, a maximum ratio of secured indebtedness to total asset value, a maximum ratio of secured recourse indebtedness to total asset value, a maximum ratio of consolidated unsecured indebtedness to total unencumbered asset value, and a maximum ratio of unencumbered adjusted net operating income to assumed unsecured interest expense.

The Company is also subject to other customary covenants, including restrictions on investment, limitations on liens and maintenance of properties. This credit facility also contains customary events of default, including, among others, the failure to make payments when due under any of the credit facility documentation, breach of any covenant continuing beyond any cure period, and bankruptcy or insolvency.

Unencumbered Assets. The 2016 Unsecured Credit Facility is unsecured. However, borrowings under the 2016 Unsecured Credit Facility are limited by the value of hotel assets that qualify as unencumbered assets. Among other conditions, unencumbered assets must not be subject to liens or security interests, and the owner and operating lessee of such unencumbered asset must execute a guaranty supplement pursuant to which the owner and operating lessee become subsidiary guarantors of the 2016 Unsecured Credit Facility. In addition, hotels may be added to or removed from the unencumbered asset pool at any time so long as there is a minimum of 20 hotels in the unencumbered asset pool and the then-current borrowings on the 2016 Unsecured Credit Facility do not exceed the maximum available under the 2016 Unsecured Credit Facility given the availability limitations described above. Further, to be eligible as an unencumbered asset, the anticipated property must: be franchised with a nationally-recognized franchisor; satisfy certain ownership, management and operating lessee criteria; and not be subject to material defects, such as liens, title defects, environmental contamination and other standard lender criteria.

At February 19, 2016, 42 of our unencumbered hotel properties are included in the borrowing base supporting the 2016 Unsecured Credit Facility. Thus, none of these properties is available to be leveraged with other indebtedness while included in the borrowing base.

The Company transferred to the 2016 Unsecured Credit Facility the outstanding principal balance of $170.0 million on the former $300 million senior unsecured credit facility and the former $300 million senior unsecured credit facility was paid off in full and terminated upon entry into the 2016 Unsecured Credit Facility described above.

The interest rate swap entered into on September 5, 2013 with a notional value of $75.0 million, an effective date of January 2, 2014 and a maturity date of October 10, 2018 remains outstanding. This interest rate swap was designated as a cash flow hedge and effectively fixes LIBOR at 2.04% and the interest rate on borrowings under a portion of the $150 Million Term Loan to a fixed rate of 3.64%.

Acquisitions

On January 19, 2016, we acquired the 226-guestroom Courtyard by Marriott in the West End of Nashville, TN for $71.0 million. On January 20, 2016, we acquired the 160-guestroom Residence Inn in midtown Atlanta, GA for $38.0 million. Both hotels were Parked Assets in anticipation of completing reverse 1031 Exchanges with properties to be sold to ARCH as part of the ARCH Sale. The reverse 1031 Exchange related to the Courtyard by Marriott in the West End of Nashville, TN was completed upon the sale of six hotel properties to ARCH on February 11, 2016. The acquisitions were made using funds drawn on the Company’s revolving line of credit.

Dispositions

On December 29, 2015, the Company and ARCH agreed to terminate the ARCH Agreement with respect to ARCH’s right to acquire fee simple interests in ten hotels containing a total of 996 guestrooms for an aggregate purchase price of $89.1 million at a closing that had been scheduled to occur on December 29, 2015 (the “Terminated Purchase Agreement”). As a result of the termination, ARCH forfeited and the Company retained, the $9.1 million earnest money deposit made by ARCH under the ARCH Agreement related to the sale of these ten hotels and the parties were released from further obligations, except those which expressly survive the termination of the ARCH Agreement pursuant to its terms. This transaction had not been structured as a 1031 Exchange.

On February 11, 2016, the Company and American Realty Capital Hospitality Portfolio SMT ALT, LLC, an affiliate of ARCH, as substitute purchaser (“New ARCH Purchaser”), entered into a letter agreement (the “Reinstatement Agreement”) and agreed, subject to the terms and conditions of the Reinstatement Agreement, to reinstate the Terminated Purchase Agreement in its entirety, except as modified by the Reinstatement Agreement (the Terminated Purchase Agreement, as reinstated and modified by the Reinstatement Agreement, is referred to herein as the “Reinstated Purchase Agreement”), to make null and void the prior termination of the Terminated Purchase Agreement and to proceed with the proposed sale of the ten hotels listed below (the “Reinstated Hotels”) pursuant to the Reinstated Purchase Agreement for an aggregate purchase price of $89.1 million. The Reinstated Hotels are being sold to the New ARCH Purchaser as part of the ARCH Sale. As stated above, the Company previously sold ten of the 26 hotels to ARCH at a closing that occurred on October 15, 2015 for a purchase price of $150.1 million. As disclosed below, the Company sold six of the 26 hotels to ARCH at a closing that occurred on February 11, 2016 for a purchase price of $108.3 million. The 16 hotels previously sold to ARCH were sold pursuant to a separate real estate purchase and sale agreement relating to the sale of those hotels.

The Reinstated Hotels are as follows:

Hotel	Location	Guestrooms
Aloft	Jacksonville, FL	136
Holiday Inn Express	Vernon Hills, IL	119
Courtyard by Marriott	Jackson, MS	117
Residence Inn	Jackson, MS	100
Courtyard by Marriott	Germantown, TN	93
Staybridge Suites	Ridgeland, MS	92
Homewood Suites	Ridgeland, MS	91
Courtyard by Marriott	El Paso, TX	90
Fairfield Inn & Suites	Germantown, TN	80
Residence Inn	Germantown, TN	78

		996

The Reinstatement Agreement requires the New ARCH Purchaser to deposit non-refundable earnest money in the amount of $7.5 million (the “New Deposit”) with an escrow agent to support the closing of the Reinstated Hotels. The New Deposit is non-refundable to the New ARCH Purchaser except in limited circumstances. The prior earnest money deposit in the amount of $9.1 million was retained by us in connection with the termination of the Terminated Purchase Agreement and will not be credited to the New ARCH Purchaser against the purchase price for the Reinstated Hotels. The closing of the sale of the Reinstated Hotels is scheduled to occur on or before December 30, 2016 (the “New Closing Date”), or at such later date as the closing may be adjourned or extended in accordance with the express terms of the Reinstatement Agreement. If the closing of the Reinstated Hotels does not occur as required by the Reinstatement Agreement because of a default by the New ARCH Purchaser, then the ARCH affiliated purchaser will forfeit the New Deposit to the Company as liquidated damages.

Prior to the New Closing Date, we have the right to continue to market and ultimately sell, without the consent of the New ARCH Purchaser, any or all of the Reinstated Hotels to a bona fide third-party purchaser that is not an affiliate of the Company. If the Company sells some, but not all, of the Reinstated Hotels to a bona fide third-party purchaser, then the purchase price to be paid by the ARCH affiliated purchaser for the remaining Reinstated Hotels will be reduced accordingly (the “Revised Purchase Price”), but the New Deposit will remain with the escrow agent except in limited circumstances.

On February 11, 2016, the Company completed the sale of the following six hotels as part of the ARCH Sale:

Hotel	Location	Guestrooms
Fairfield Inn & Suites	Denver, CO	160
Fairfield Inn & Suites	Bellevue, WA	144
SpringHill Suites	Denver, CO	124
Hilton Garden Inn	Fort Collins, CO	120
Fairfield Inn & Suites	Spokane, WA	84
Hampton Inn	Fort Collins, CO	75

		707

The six hotels were sold to ARCH for an aggregate purchase price of $108.3 million, and proceeds from the sale of the six hotels were used to complete certain reverse 1031 Exchanges. The hotels acquired by the Company for the reverse 1031 Exchanges included the 179-guestroom Courtyard by Marriott in Atlanta (Decatur), GA on October 20, 2015 for $44.0 million and the 226-guestroom Courtyard by Marriott in the West End of Nashville, TN for $71.0 million on January 19, 2016. The completion of the reverse 1031 Exchanges resulted in the deferral of taxable gains of approximately $74.0 million and the pay-down of the Company’s unsecured revolving credit facility by $105.0 million, resulting in additional borrowing capacity under the unsecured revolving credit facility. Additionally, the Company repaid a mortgage loan totaling $5.8 million related to sale of the Springhill Suites in Denver, CO to ARCH.

On February 11, 2016, the Operating Partnership, entered into a loan agreement with ARCH, as borrower, which provides for a loan by the Operating Partnership to ARCH in the amount of $27.5 million (the “Loan”). The proceeds of the Loan were required to be applied by ARCH as follows: (i) $20.0 million was applied toward the payment of a portion of the $108.3 million purchase price for the six hotels containing 707 guestrooms, which were acquired by an ARCH affiliated purchaser on February 11, 2016 as part of the ARCH Sale; and (ii) the remaining $7.5 million was applied by ARCH to fund the New Deposit under the Reinstated Purchase Agreement.

The entire principal amount of the Loan, and any accrued and unpaid interest, will be due and payable on February 11, 2017 (the “Maturity Date”), unless extended pursuant to the Loan agreement. ARCH will repay a portion of the outstanding principal balance of the Loan in an aggregate amount equal to $5.0 million, to be paid in five equal installments of $1.0 million, on the last day of May, June, July, August and September 2016 (the “Amortization Payments”). The Loan may be prepaid in whole or in part at any time by ARCH, without payment of any penalty or premium. ARCH may extend the maturity date of the Loan under certain conditions by up to two years pursuant to two one-year extension options (each an “Extension Option”).

Interest will accrue on the unpaid principal balance of the Loan at a rate of 13.0% per annum from the date of the Loan to the initial Maturity Date, 14.0% per annum during the first extension period and 15.0% per annum during the second extension period. An amount equal to 9.0% per annum is to be paid monthly. The remaining 4.0%, 5.0% and 6.0%, as the case may be, will accrue and be compounded monthly (the “PIK”). The PIK must be paid in order to exercise any Extension Option, otherwise the PIK is payable at the initial Maturity Date. The PIK may be paid in cash prior to the initial Maturity Date, or any extension thereof.

To secure the payment of the Amortization Payments, ARCH will cause the rents from certain hotel properties or assets of its taxable REIT subsidiaries to be deposited to a separate controlled account (the “Control Account”) and ARCH has granted the Operating Partnership a continuing security interest in all of its right, title and interest in and to the Control Account until the Amortization Payments have been satisfied in full in accordance with the terms of the Loan agreement.