PREM14A

PREM14A 1 d23662dprem14a.htm PREM14A PREM14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934

Filed by the Registrant ☒

Filed by a party other than the Registrant ☐

Check the appropriate box:

☒	Preliminary Proxy Statement

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))

☐	Definitive Proxy Statement

☐	Definitive Additional Materials

☐	Soliciting Material under § 240.14a-12

SOTHERLY HOTELS INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

☐	No fee required

☐	Fee paid previously with preliminary materials

☒	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

PRELIMINARY PROXY STATEMENT

SUBJECT TO COMPLETION DATED DECEMBER 1, 2025

SOTHERLY HOTELS INC.

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

, 2025

Dear Stockholder,

You are cordially invited to attend a special meeting of stockholders (the “Special Meeting”) of Sotherly Hotels Inc., a Maryland corporation (the “Company”), to be held on , 2026, at a.m., Eastern Time, at the Company’s corporate office at 306 South Henry Street, Suite 100, Williamsburg, Virginia 23185. At the Special Meeting, you will be asked to consider and vote on the merger of Sparrows Nest LLC (“Merger Sub”), a Maryland limited liability company and wholly owned subsidiary of KW Kingfisher LLC, a Delaware limited liability company (“Parent”), with and into the Company, with the Company being the Surviving Corporation (the “Merger”), pursuant to the Agreement and Plan of Merger, dated as of October 24, 2025 (the “Merger Agreement”), by and among Parent, Merger Sub, and the Company. If the Merger and the other transactions contemplated by the Merger Agreement are completed, you, as a holder of shares of the Company’s common stock, par value $0.01 per share (“Company Common Shares” or “Company Common Stock”), will be entitled to receive $2.25 in cash, without interest (the “Merger Consideration”), subject to certain adjustments as further described in the enclosed proxy statement, in exchange for each Company Common Share you own as of immediately before the effective time of the Merger (the “Effective Time”), as more fully described in the enclosed proxy statement. In addition, each share of the Company’s 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock and 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock (collectively, the “Company Preferred Shares” or “Company Preferred Stock”) issued and outstanding immediately before the Effective Time may elect to exercise a right to convert, on the terms and conditions set forth in the Company’s Amended and Restated Articles of Incorporation, (as amended and supplemented the “Articles”), some or all of the Company Preferred Stock held by such holder into Company Common Stock. Upon the election of a holder of Company Preferred Stock to convert such holder’s shares of Company Preferred Stock into Company Common Stock, in accordance with the terms and conditions of the organizational documents, upon exercise of conversion rights triggered by the closing of the Merger, such cancelled shares of Preferred Stock will automatically be cancelled and retired, will cease to exist, will be converted into the right to receive only an amount equal to the product of i) the Merger Consideration times (ii) the shares of Company Common Stock issuable to such holder. The Company shall also offer to purchase each limited partnership interest of the Operating Partnership (the “Limited Partnership Interests”) for the same per share Merger Consideration with respect to each share of Company Common Stock into which any Limited Partnership Interests are entitled to be converted (the “Limited Partner Compensation”) under the Operating Partnership’s Amended and Restated Agreement of Limited Partnership, as amended.

Our Board of Directors has, acting upon the unanimous recommendation of a special committee (the “Special Committee”) consisting solely of three independent directors, unanimously (i) determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of the Company and its stockholders, (ii) duly and validly authorized and approved, and declared advisable, the execution and delivery of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, (iii) directed that the Merger and the other transactions contemplated by the Merger Agreement be submitted for consideration at the Special Meeting of the Company’s stockholders and (iv) resolved to recommend that the Company’s stockholders vote in favor of the approval of the Merger and the other transactions contemplated by the Merger Agreement. Our Board of Directors recommends that you vote “FOR” the approval of the Merger.

The Merger must be approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter, to consummate the transactions contemplated by the Merger Agreement, including the Merger. The Notice of Special Meeting and proxy statement accompanying this letter provide you with more specific information concerning the Special Meeting, the Merger, the Merger Agreement and the other transactions contemplated by the Merger Agreement. The Company encourages you to read carefully the enclosed proxy statement, including the annexes. You may also obtain more information about the Company from documents filed with the U.S. Securities and Exchange Commission (the “SEC”).

Your vote is very important regardless of the number of Company Common Shares that you own. Whether or not you plan to attend the Special Meeting, the Company requests that you authorize a proxy to vote your shares by either completing and returning the enclosed proxy card as promptly as possible or authorizing your proxy (or submitting voting instructions to your bank, broker or other nominee) by telephone or through the Internet. The enclosed proxy card contains instructions regarding voting. If you attend the Special Meeting, you may continue to have your shares voted as instructed in your proxy, or you may withdraw your proxy at the Special Meeting and vote your shares in person. If you fail to authorize a proxy to vote your shares, fail to vote in person at the meeting, or fail to instruct your broker on how to vote, it will have the same effect as a vote “AGAINST” the approval of the Merger.

On behalf of the Board of Directors, thank you for your continued support.

Sincerely,

/s/ David R. Folsom

David R. Folsom

President and Chief Executive Officer

This proxy statement is dated , 2025, and is first being mailed to our stockholders on or about , 2025.

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

, 2025

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of Sotherly Hotels Inc.:

NOTICE IS HEREBY GIVEN that the special meeting of stockholders of Sotherly Hotels Inc. (the “Special Meeting”), a Maryland corporation (the “Company”), will be held on , 2026, at a.m., Eastern Time, at the Company’s corporate office at 306 South Henry Street, Suite 100, Williamsburg, Virginia 23185, for the following purposes:

To consider and vote on a proposal to approve the merger (the “Merger”) of Sparrows Nest LLC (“Merger Sub”), a Maryland limited liability company and wholly owned subsidiary of KW Kingfisher LLC, a Delaware limited liability company (“Parent”) with and into the Company and the other transactions contemplated by the Agreement and Plan of Merger, dated as of October 24, 2025, by and among Parent, Merger Sub and the Company (the “Merger Agreement” and such proposal, the “Merger Proposal”);

To consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to our named executive officers in connection with the Merger (the “Advisory Compensation Proposal”); and

To consider and vote on a proposal to approve any adjournment of the Special Meeting to a later date, if necessary or appropriate, including for the purpose of soliciting additional proxies if there are not sufficient votes at the Special Meeting to approve the Merger Proposal (the “Adjournment Proposal”).

The foregoing items of business are more fully described in the attached proxy statement, which forms a part of this notice and is incorporated herein by reference. Pursuant to the Company’s Bylaws, only the matters set forth in this Notice of Special Meeting may be brought before the Special Meeting. The Board of Directors has fixed the close of business on as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the Special Meeting or any postponement or adjournment thereof. The Company knows of no other matters to come before the Special Meeting. Only holders of record of common stock, par value $0.01 per share, of the Company (“Company Common Shares”) on the Record Date are entitled to notice of, and to vote at, the Special Meeting or at any postponements or adjournments thereof. Neither the vote of the holders of the Company’s 8.0% Series B Cumulative Redeemable Perpetual Preferred Stock, 7.875% Series C Cumulative Redeemable Perpetual Preferred Stock, and 8.25% Series D Cumulative Redeemable Perpetual Preferred Stock, nor the vote of the OP Units (as defined below) is required to approve any of the proposals at the Special Meeting and their votes are not being solicited. On or around , 2025, the Company intends to commence mailing of this Notice to all stockholders entitled to notice of the Special Meeting.

The Board of Directors has, acting upon the unanimous recommendation of a Special Committee consisting solely of three independent directors, (i) determined that the Merger Agreement, the Merger and the other transactions are advisable, fair to and in the best interests of the Company and its stockholders, (ii) duly and validly authorized and approved, and declared advisable, the execution and delivery of the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, (iii) directed that the Merger and the other transactions contemplated by the Merger Agreement be submitted for consideration at the Special Meeting, and (iv) resolved to recommend that the Company’s stockholders vote in favor of the approval of the Merger and the other transactions contemplated by the Merger Agreement. The Board of Directors recommends that you vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal, and “FOR” the Adjournment Proposal.

The Merger must be approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter. Accordingly, your vote is very important regardless of the number of Company Common Shares that you own. Whether or not you plan to attend the Special Meeting, the Company requests that you authorize a proxy to vote your shares by either marking, signing, dating and promptly returning the enclosed proxy card in the postage-paid envelope or authorizing your proxy (or submitting voting instructions to your bank, broker or other nominee) by telephone or through the Internet. If you attend the Special Meeting, you may continue to have your shares voted as instructed in your proxy, or you may withdraw your proxy at the Special Meeting and vote your shares in person. If you fail to authorize a proxy to vote your shares, fail to vote in person, or fail to instruct your broker, bank or other nominee on how to vote, the effect will be that the Company Common Shares that you own will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote “AGAINST” the Merger Proposal. The approval of the Advisory Compensation Proposal and the approval of the Adjournment Proposal each require the affirmative vote of a majority of the votes cast on the matter. If you fail to authorize a proxy to vote your shares, fail to vote in person, or fail to instruct your broker on how to vote, it will have no effect on the outcome of such proposals. Abstentions, while present for purposes of determining the presence of a quorum, are not considered votes cast and therefore will have no effect on the outcome of the Advisory Compensation Proposal and the Adjournment Proposal. Abstentions will have the same effect as voting “AGAINST” the Merger Proposal.

Any proxy may be revoked at any time before its exercise by authorizing a proxy to vote again over the Internet or by telephone before 11:59 p.m., Eastern Time, on , signing and returning another proxy card with a later date, provided the Company receives the updated proxy card before the date of the Special Meeting, or voting in person at the Special Meeting. Attendance alone will not be sufficient to revoke a previously authorized proxy.

The Company encourages you to read the accompanying proxy statement in its entirety and to submit a proxy or voting instructions so that your Company Common Shares will be represented and voted even if you do not attend the Special Meeting. If you have any questions or need assistance in submitting a proxy or your voting instructions, please call the Company’s proxy solicitor, Georgeson LLC, toll-free at (866) 486-7611.

Regardless of the number of Company Common Shares you hold, as a stockholder your role is very important, and the Board of Directors strongly encourages you to exercise your right to vote.

BY ORDER OF THE BOARD OF DIRECTORS,

/s/ Anthony E. Domalski

Anthony E. Domalski

Corporate Secretary

TABLE OF CONTENTS


	Page
SUMMARY		1
The Parties to the Merger		1
The Special Meeting		2
The Proposals		2
Record Date, Notice and Quorum		3
Required Vote		3
Proxies and Revocation		3
The Merger; Effective Time; Closing Date		4
Reasons for the Merger		4
Recommendation of the Board		4
Opinion of the Special Committee’s Financial Advisor		5
Interests of the Company’s Directors and Executive Officers in the Merger		5
Material U.S. Federal Income Tax Consequences		6
Regulatory Matters		6
Delisting and Deregistration of Company Common Shares		6
ESOP Participant Voting and Treatment of the ESOP Following the Merger		6
The Merger Agreement		7
Treatment of Securities		7
Financing of the Merger		8
Financing Cooperation		9
No Solicitation of Transactions		9
Conditions to the Merger		10
Termination of the Merger Agreement		10
Termination by Either the Company or Parent		11
Termination Payments		12
Specific Performance; Remedies		13
Efforts Obligations		13
Promissory Note		13
Market Price of Company Common Shares		14
No Dissenters’ Rights of Appraisal		14
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER		15
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS		24
PROPOSAL 1 MERGER PROPOSAL		26
PROPOSAL 2 ADVISORY COMPENSATION PROPOSAL		27
PROPOSAL 3 ADJOURNMENT PROPOSAL		28
THE PARTIES TO THE MERGER		29
THE SPECIAL MEETING		31
Date, Time and Purpose of the Special Meeting		31
Record Date, Notice and Quorum		31
Required Vote		31
Solicitation of Proxies		32
Voting of Shares		32
Proxies and Revocation		33
Availability of Proxy Materials for the Special Meeting		34
Adjournments and Postponements		34
Voting in Person, Attendance at the Special Meeting		34
THE MERGER		35
General Description of the Merger		35
Background of the Merger		35


	Page
Reasons for the Merger		45
Recommendation of the Board		49
Unaudited Prospective Financial Information		50
Opinion of the Special Committee’s Financial Advisor		51
Financing of the Merger		57
Interests of the Company’s Directors and Executive Officers in the Merger		60
Material U.S. Federal Income Tax Consequences		65
Regulatory Matters		69
Delisting and Deregistration of Company Common Shares and Company Preferred Shares		69
ESOP Participant Voting and Treatment of the ESOP Following the Merger		69
THE MERGER AGREEMENT		72
The Merger; Effective Time; Closing Date		72
Organizational Documents		73
Officers and Directors of the Surviving Corporation		73
Treatment of Securities		73
Payment Procedures		74
Treatment of Stock-Based Compensation		76
Representations and Warranties		76
Conduct of the Company’s Business Pending the Merger		79
Access and Information		82
Acquisition Proposals and Obligations of the Board with Respect to its Recommendation		82
Special Meeting		84
Directors’ and Officers’ Indemnification and Insurance		84
Efforts Obligations		85
Notification of Certain Matters; Transaction Litigation		86
Termination of Company Employee Plans		86
Financing Cooperation		86
Certain Other Covenants		89
Conditions to the Merger		90
Termination of the Merger Agreement		91
Termination Payment		93
Specific Performance; Remedies		93
Third Party Beneficiaries		94
Amendment; Extension and Waiver		94
ESCROW AGREEMENT		95
Purpose; Escrow Fund		95
Disbursements		95
Specific Performance		96
THE PROMISSORY NOTE		96
Effective Time; Funding Procedures; Conditions Precedent		96
Interest; Payment Terms; Prepayment.		97
Events of Default; Remedies		97
Representations and Warranties		98
Parent Termination Fee		98
Covenants and Limitations on Indebtedness		98
MARKET PRICE OF COMPANY COMMON SHARES		100
DIRECTORS AND EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS		101
STOCKHOLDER PROPOSALS		103
HOUSEHOLDING		104
NO DISSENTERS’ RIGHTS OF APPRAISAL		105
WHERE YOU CAN FIND ADDITIONAL INFORMATION		106
Available Information		106

SUMMARY

This summary highlights only selected information from this proxy statement relating to the merger of Sparrows Nest LLC (“Merger Sub”) with and into Sotherly Hotels Inc. (the “Company” and such transaction, the “Merger”) and certain related transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”), dated as of October 24, 2025, by and among KW Kingfisher LLC (“Parent” and, together with Merger Sub, the “Parent Parties”), Merger Sub and the Company. This summary does not contain all of the information about the Merger and related transactions contemplated by the Merger Agreement that may be important to you. As a result, to understand the Merger and the related transactions fully and for a more complete description of the terms of the Merger and related transactions, you should read carefully this proxy statement in its entirety, including the annexes and the other documents to which the Company has referred you, including the Merger Agreement attached as Annex A. This proxy statement is first being mailed to the Company’s stockholders on or about , 2025.

The Parties to the Merger (See Page 29)

Sotherly Hotels Inc.

Corporate Headquarters:

306 South Henry Street, Suite 100

Williamsburg, Virginia 23185

757-229-5648

The Company is a self-managed and self-administered lodging real estate investment trust, or REIT, that was formed in August 2004 to own, acquire, renovate and reposition full-service, primarily upscale and upper-upscale hotel properties located in primary markets in the mid-Atlantic and southern United States.

The Company owns its hotels and investments through its operating partnership, Sotherly Hotels LP (the “Operating Partnership”), for which the Company serves as the sole general partner. As of December 1, 2025, the Company owned an approximate 99.9% partnership interest in the Operating Partnership, including all of the general partnership interest.

As of the date of the Merger Agreement, the Company’s portfolio consisted of ten full-service, primarily upscale and upper-upscale hotels located in seven states with an aggregate of 2,786 hotel rooms, and interests in two condominium hotels and their associated rental programs. The Company’s hotels are located in Florida, Georgia, Maryland, Virginia, North Carolina, Pennsylvania and Texas. Seven of these hotels operate under franchise agreements with major hotel brands, and three are independent hotels. The Company also owns the hotel commercial condominium units of the Lyfe Resort & Residences and condominium hotels of Hyde Beach House Resort & Residences.

The Company’s website address is https://sotherlyhotels.com. The information found on, or otherwise accessible through, the Company’s website is not incorporated into, and does not form a part of, this proxy statement or any other report or document the Company files with or furnishes to the U.S. Securities and Exchange Commission (“SEC”). Company Common Shares are traded on the Nasdaq Stock Market (“NASDAQ”), under the symbol “SOHO”; Company 8.0% Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share (“Company Series B Preferred Shares”), trade on NASDAQ under the symbol “SOHOB”; Company 7.875% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share (“Company Series C Preferred Shares”), trade on NASDAQ under the symbol “SOHOC”, and Company 8.25% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share (“Company Series D Preferred Shares” and, together with the Company Series B Preferred Shares and Company Series C Preferred Shares, the “Company Preferred Shares” or “Company Preferred Stock”), trade on NASDAQ under the symbol “SOHOD.”

For additional information about the Company and its business, please refer to “Where You Can Find Additional Information.”

KW Kingfisher LLC

Sparrows Nest LLC

c/o Kemmons Wilson Hospitality Partners II, LP

20 Huling Ave.

Memphis, Tennessee 38103

(901) 346-8800

KW Kingfisher LLC (“Parent”) is a Delaware limited liability company that was formed on October 22, 2025 to enter into the Merger Agreement and related agreements and to consummate the transactions contemplated thereby and related thereto. Parent has not engaged in any business activities other than activities incidental to its formation in connection with the Merger Agreement and the transactions contemplated thereby and related thereto, including arranging the financing in connection with the Merger. Upon completion of the Merger, the Surviving Corporation will be a wholly-owned subsidiary of Parent.

Sparrows Nest LLC (“Merger Sub”) is a Maryland limited liability company that was formed on October 23, 2025 to enter into the Merger Agreement and related agreements and to consummate the transactions contemplated thereby and related thereto. Merger Sub has not engaged in any business activities other than activities incidental to its formation in connection with the Merger Agreement and the transactions contemplated thereby and related thereto. Upon completion of the Merger, the Merger Sub will be merged with and into the Company, and the Merger Sub will cease to exist.

Parent and Merger Sub are at times referred to in this proxy statement as the “Parent Parties.”

The Parent Parties are affiliates of Kemmons Wilson Hospitality Partners II, LP (the “Sponsor” or “KWHP”). The Sponsor is a hospitality-focused investment management firm headquartered in Memphis, Tennessee and established by the Kemmons Wilson family, founders of the iconic Holiday Inn brand. Upholding the family’s legacy of innovation and excellence in lodging, KWHP manages hospitality funds across the United States. Using a hands-on investing approach, coupled with its deep proprietary network and experience investing across market cycles, the firm develops highly differentiated and attractive portfolios that include luxury resorts, limited to full-service hotels, timeshares, and short-term rentals.

The Special Meeting (See Page 31)

The Proposals (See Page 26)

The special meeting of the Company’s stockholders (the “Special Meeting”) will be held on , 2026, at a.m., Eastern Time at the Company’s corporate office at 306 South Henry Street, Suite 100, Williamsburg, Virginia 23185. At the Special Meeting, holders of common stock, par value $0.01 per share (the “Company Common Shares” or “Company Common Stock”), as of the close of business on (the “Record Date”), will be asked to consider and vote on (1) a proposal to approve the Merger and the other transactions contemplated by the Merger Agreement in accordance with the terms of the Merger Agreement (the “Merger Proposal”), (2) a proposal to approve, on a non-binding, advisory basis, the compensation that may be paid or become payable to the Company’s named executive officers in connection with the Merger (the “Advisory Compensation Proposal”), and (3) a proposal to approve any adjournment of the Special Meeting to a later date, if necessary or appropriate, including for the purpose of soliciting additional proxies if there are not sufficient votes at the Special Meeting to approve the Merger Proposal (the “Adjournment Proposal”).

Pursuant to the Company’s Third Amended and Restated Bylaws (the “Bylaws”), only the matters set forth in the Notice of Special Meeting may be brought before the Special Meeting.

Record Date, Notice and Quorum (See Page 31)

Record holders of outstanding Company Common Shares as of the Record Date are entitled to vote at the Special Meeting on all matters to be voted upon. As of the Record Date, there were Company Common Shares outstanding. On each matter presented to the Company’s stockholders for a vote at the Special Meeting, the holders of outstanding Company Common Shares are entitled to one vote per share held as of the Record Date. Neither the vote of the holders of our Company Preferred Stock nor the vote of the holders of OP Units is required to approve any of the proposals at the Special Meeting, and their votes are not being solicited.

The presence in person or by proxy of at least thirty-three and one-third percent of the outstanding shares of Company Common Stock entitled to vote is necessary to constitute a quorum at the Special Meeting. Abstentions and broker non-votes, if any, will be counted as shares present for the purposes of determining the presence of a quorum. If a quorum is not present at the Special Meeting, the Company expects that the Special Meeting will be adjourned to a later date.

Required Vote (See Page 31)

Completion of the Merger requires approval of the Merger by the affirmative vote of a majority of stockholders entitled to cast a majority of the votes entitled to be cast on the matter. This means that the Merger requires the approval of a majority of the issued and outstanding Company Common Shares. Each holder of Company Common Shares is entitled to cast one vote on each matter presented at the Special Meeting for each Company Common Share owned by such stockholder on the Record Date. Because the required vote for the Merger Proposal is based on the number of votes holders of Company Common Shares are entitled to cast rather than on the number of votes cast, if you fail to authorize a proxy to vote your shares or fail to vote in person, or fail to instruct your broker on how to vote, such failure will have the same effect as voting “AGAINST” the Merger Proposal. Abstentions will have the same effect as a vote “AGAINST” the Merger Proposal.

The approval of the Advisory Compensation Proposal and the approval of the Adjournment Proposal each requires the affirmative vote of a majority of the votes cast on the proposal. Approval of either or both of these proposals is not a condition to completion of the Merger. For the purpose of each of these proposals, if you fail to authorize a proxy to vote your shares, fail to vote in person, or fail to instruct your broker on how to vote, it will not have any effect on the outcome of such proposals, assuming a quorum is otherwise present at the meeting. Abstentions, while present for purposes of determining the presence of a quorum, are not considered votes cast and therefore will have no other effect on the outcome of these two proposals.

Proxies and Revocation (See Page 33)

If you authorize a proxy, your Company Common Shares will be voted at the Special Meeting as you indicate on your proxy. If no instructions are indicated when you authorize your proxy, your Company Common Shares will be voted in accordance with the recommendations of the Board. The Board recommends that you vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the Adjournment Proposal.

If you are a holder of Company Common Shares as of the Record Date, you may revoke your proxy at any time before your proxy is voted at the Special Meeting by taking any of the following actions: (i) delivering to the Company Secretary a signed written notice of revocation, bearing a date later than the date of the proxy, stating that the proxy is revoked; (ii) signing and delivering a new paper proxy, relating to the same shares and

bearing a later date than the original proxy; (iii) submitting another proxy by telephone or over the Internet (your latest telephone or Internet voting instructions are followed); or (iv) attending the Special Meeting and voting in person, although attendance at the Special Meeting, without more, will not, by itself, revoke a proxy.

The Merger; Effective Time; Closing Date (See Page 72)

Pursuant to the Merger Agreement, on the date of Closing (as defined below), Merger Sub will be merged with and into the Company, the separate existence of Merger Sub will cease, and the Company will survive the merger as a wholly owned subsidiary of Parent (such continuing entity, the “Surviving Corporation”).

The closing of the Merger (the “Closing”) will take place at 9:00 a.m., Eastern Time, as soon as practicable (and, in any event, within three (3) Business Days) after the satisfaction or, to the extent permitted, waiver of the last of the conditions set forth in the Merger Agreement, unless the Merger Agreement has been terminated pursuant to its terms or unless another time or date is agreed to in writing by the Parent Parties and Company (the “Closing Date”). Unless agreed in writing by the Parent Parties and Company, the Closing will not be required to occur before the date that is fifteen (15) Business Days after the Company Stockholders Meeting.

The Effective Time will be such time as (i) the articles of merger are accepted for record by the State Department of Assessments and Taxation of Maryland, or the SDAT, or (ii) on such other date and time (not to exceed thirty (30) days from the date the articles of merger are accepted for record by the SDAT) as will be agreed to by the Company and Parent (such date and time, the “Effective Time”).

Reasons for the Merger (See Page 45)

In reaching its unanimous decision to (a) authorize and approve, and declare advisable, the delivery and performance of the Merger Agreement and the consummation of the Merger and the other transactions contemplated by the Merger Agreement, (b) direct that the Merger and the other transactions contemplated by the Merger Agreement each be submitted for consideration at the Special Meeting and (c) recommend that the Company’s stockholders vote in favor of the approval of the Merger and the other transactions contemplated by the Merger Agreement, the Board of Directors, or the Board, considered the recommendations of the Special Committee established by the Board, or the “Special Committee.” Before making its recommendation, the Special Committee consulted with its independent legal and financial advisors. In reaching their respective determinations regarding the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, the Board and the Special Committee considered a number of factors, including the factors that the Board and the Special Committee viewed as supporting their respective decisions with respect to the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement. The Board and the Special Committee also considered a variety of risks and other potentially negative factors in considering the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

For a discussion of certain material factors considered by the Special Committee and the Board in reaching their decisions to approve the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, see the sections “The Merger-Reasons for the Merger” and “The Merger-Recommendation of the Board” in this proxy statement.

Recommendation of the Board (See Page 49)

The Board at a duly held meeting has, acting upon the unanimous recommendation of the Special Committee, unanimously:

•

determined that the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to, and in the best interests of the Company and its stockholders;

•

duly and validly authorized and approved, and declared advisable, the execution and delivery of the Merger Agreement, and the consummation of the Merger and the other transactions contemplated by the Merger Agreement;

•

directed that the Merger and the other transactions contemplated by the Merger Agreement be submitted for consideration at the Special Meeting; and

•

recommended that you vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the Adjournment Proposal.

Opinion of the Special Committee’s Financial Advisor (See Page 51)

The Special Committee retained Piper Sandler & Co. (“Piper Sandler”) to act as its exclusive financial advisor in connection with the Merger. On October 22, 2025, Piper Sandler rendered its opinion to the Special Committee and the Board (which was subsequently confirmed in writing by delivery of Piper Sandler’s written opinion addressed to the Special Committee dated the same date), to the effect that, as of such date, and subject to the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Piper Sandler, as set forth therein, the Merger Consideration in the Merger was fair, from a financial point of view, to the holders of Company Common Stock.

Piper Sandler’s opinion was directed to the Special Committee (in its capacity as such), and only addressed the fairness, from a financial point of view, to holders of Company Common Stock of the Merger Consideration in the Merger pursuant to the Merger Agreement and did not address any other aspect or implication (financial or otherwise) of the Merger. The summary of Piper Sandler’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, and other matters considered by Piper Sandler in preparing its opinion. However, neither Piper Sandler’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement are intended to be, and they do not constitute, advice or a recommendation to any Company stockholder as to how such holder should vote or act on any matter relating to the Merger. For a description of the opinion that the Special Committee received from Piper Sandler, see the section entitled “The Merger - Opinion of the Special Committee’s Financial Advisor” beginning on page 51.

Interests of the Company’s Directors and Executive Officers in the Merger (See Page 60)

In considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the Merger and in recommending that the Merger be approved by the stockholders of the Company. These interests include the following, among others:

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The Merger Agreement provides that each outstanding Company Restricted Stock Award, including those held by the Company’s directors and executive officers, will vest in full (to the extent unvested) and be cancelled and converted into the right to receive $2.25 per Company Common Share underlying each Company Restricted Share Award that is converted into a Company Common Share, in each case subject to the terms and conditions of the Merger Agreement, and as discussed in more detail in the section of this proxy statement captioned “The Merger Agreement-Treatment of Securities”;

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Pursuant to their employment agreements, the Company’s executive officers are eligible to receive certain severance payments and benefits in the event of a qualifying termination or resignation of their employment within one year following the consummation of the Merger; and

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Our directors and executive officers are entitled to continued indemnification and insurance coverage.

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Through their indirect ownership of Our Town Hospitality, LLC (“OTH”), certain of our directors and executive officers will receive approximately $9.7 million from Parent for OTH’s assignment of its hotel Management Agreements in connection with the Merger.

These interests are discussed in more detail in the section of this proxy statement captioned “The Merger-Interests of the Company’s Directors and Executive Officers in the Merger.”

Material U.S. Federal Income Tax Consequences (See Page 65)

If you are a U.S. holder (as defined in this proxy statement in “The Merger-Material U.S. Federal Income Tax Consequences”), you will generally recognize a gain or loss for U.S. federal income tax purposes upon exchanging your Company Common Shares for Merger Consideration. The gain or loss will equal the difference between (i) the Merger Consideration you receive (including any amounts withheld for taxes) and (ii) your adjusted tax basis in such Company Common Shares. A non-U.S. holder (as defined in this proxy statement in “The Merger-Material U.S. Federal Income Tax Consequences”) will generally be subject to U.S. federal income tax with respect to the exchange of such non-U.S. holder’s Company Common Shares for Merger Consideration in the Merger unless (1) such non-U.S. holder does not have certain connections to the United States, (2) Company Common Shares do not constitute United States real property interests with respect to such non-U.S. holder, and (3) subject to certain exceptions, the payment received by such non-U.S. holder is not attributable to gain from the Company’s deemed sale of United States real property interests. Because particular circumstances may differ, you should consult your tax advisor to determine the U.S. federal income tax consequences to you of the Merger in light of your particular circumstances and any consequences arising under the laws of any state, local, or foreign taxing jurisdiction. A more complete description of the U.S. federal income tax consequences of the Merger is provided in this proxy statement at “The Merger-Material U.S. Federal Income Tax Consequences.”

Regulatory Matters (See Page 69)

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 Merger, other than the acceptance for record of the Articles of Merger with respect to the Merger by the State Department of Assessments and Taxation of Maryland.

Delisting and Deregistration of Company Common Shares (See Page 69)

If the Merger is completed, it is anticipated that (i) the Company Common Shares will be delisted, will no longer be traded on NASDAQ and will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) the Company Preferred Shares will continue to be registered under the Exchange Act and trade on NASDAQ or another secondary market.

ESOP Participant Voting and Treatment of the ESOP Following the Merger (See Page 69)

The Company maintains the Sotherly Hotels Inc. Employee Stock Ownership Plan (the “ESOP”) that, as of the Record Date, owns or % of the outstanding shares of Company Common Stock. The ESOP will be terminated in connection with the Merger. All shares of Company Common Stock held in the ESOP will be exchanged for the Merger Consideration on the same terms as other outstanding shares of Company Common Stock. Prior to the merger, ESOP participants will have the right to direct the ESOP’s Trustee how to vote the shares allocated to their accounts (“pass-through voting”) on the Merger proposal and any related matters. Shares for which no voting instructions are received will be voted by the ESOP Trustee in accordance with the terms of the ESOP (in the same proportion as directed shares are voted) and applicable law. After the exchange, participants’ ESOP accounts will reflect the cash consideration received, and distributions will be made in accordance with applicable law and plan provisions.

The Merger Agreement (See Page 72)

Treatment of Securities (See Page 73)

Company Common Shares

At the Effective Time, each Company Common Share issued and outstanding immediately before the Effective Time (other than Excluded Shares, as defined below) will be automatically converted into the right to receive an amount in cash equal to $2.25 per share (the “Merger Consideration”), without interest, subject to the terms and conditions set forth in the Merger Agreement.

Company Preferred Shares

In accordance with the Company’s Amended and Restated Articles of Incorporation, (as amended and supplemented the “Articles”), within 15 days of the closing of the Merger, the Company shall provide notice to the holders of Company Preferred Shares that the closing of the Merger has occurred (the “Preferred Notice”). The Preferred Notice will include certain details with respect to the Merger and specify a date (to be no less than 20 days nor more than 35 days after the date of the Preferred Notice) by which the holders of the Company Preferred Shares may receive the Merger Consideration if the holder therefor elects to convert, subject to the terms and conditions contained in the Articles, including but not limited to the share cap, as defined therein, their respective shares of Company Preferred Stock into Company Common Stock after the closing of the Merger. Upon the election of a holder of Company Preferred Stock to convert such holder’s shares of Company Preferred Stock into Company Common Stock, in accordance with the terms and conditions of the organizational documents, upon exercise of conversion rights triggered by the closing of the Merger, such cancelled shares of Preferred Stock will automatically be cancelled and retired, will cease to exist, will be converted into the right to receive only an amount equal to the product of i) the Merger Consideration times (ii) the shares of Company Common Stock issuable to such holder.

Any Company Series B, Series C, and Series D Preferred Shares for which the holder does not elect conversion will remain outstanding and subject to the terms of the Articles following the Effective Time as a membership interest of the Surviving Corporation, and such holder shall receive no consideration for their Company Preferred Shares in connection with the Merger.

Excluded Shares

At the Effective Time, each issued and outstanding Company Common Share and/or Company Preferred Share that is owned by Parent, Company, or any subsidiary of Parent or the Company immediately before the Effective Time (collectively, the “Excluded Shares”), if any, will be automatically cancelled and retired and cease to exist, and no consideration will be delivered in exchange therefor.

Limited Partnership Units

The Company shall offer to purchase for the same per share Merger Consideration that each share of Company Common Stock receives, simultaneously with the Closing of the Merger, the limited partnership interests held by the limited partner(s) (other than the Company) in the Partnership (the “LP Interests”).

Each LP Interest owned by the Company or any subsidiary of the Company (including the Operating Partnership), in each case, as of immediately before the Effective Time (collectively, the “Continuing LP Units”), will be unaffected by the Merger and will remain outstanding as a partnership unit of the Operating Partnership and no consideration will be delivered in exchange therefor.

General Partnership Units

Each general partnership interest in the Operating Partnership (the “GP Interests” and, together with the “LP Interests,” the “OP Units”) owned by the Company or any subsidiary of the Company (including the Operating Partnership), which constitutes all of the issued and outstanding GP Interests immediately before the Effective Time will be unaffected by the Merger and will remain outstanding as a partnership unit of the Operating Partnership held by the Surviving Corporation or relevant subsidiary of the Surviving Corporation and no consideration will be delivered in exchange therefor (the “Continuing GP Units”).

Preferred Company Partnership Units

Each Series B Preferred Unit, Series C Preferred Unit, and Series D Preferred Unit of the Operating Partnership (the “Preferred LP Interests”) owned by the Company or any subsidiary of the Company (including the Operating Partnership), which constitute all of the issued and outstanding Preferred LP Interests immediately before the Effective Time will be unaffected by the Merger and will remain outstanding as a partnership unit of the Operating Partnership held by the Surviving Corporation or relevant subsidiary of the Surviving Corporation and no consideration will be delivered in exchange therefor.

Company Restricted Stock Awards

At the Effective Time, each outstanding award of restricted stock of the Company (each, a “Company Restricted Stock Award”) as of immediately prior to the Effective Time, including those held by the Company’s directors and executives, will vest and all restrictions thereupon shall lapse, and each Company Restricted Stock Award will be canceled and converted into the right to receive a payment (without interest and subject to applicable tax withholding) equal to the product of (i) the number of Company Common Stock underlying such Company Restricted Stock Award as of immediately prior to the Effective Time and (ii) $2.25, subject to the terms and conditions of the Merger Agreement.

Company Permitted Dividends

Under the terms of the Merger Agreement, the Company is restricted from paying dividends or other distributions on Company securities (including both Company Common Stock and Company Preferred Stock) or subsidiaries of the Company (including partnership interests of the Operating Partnership), other than (i) dividends or distributions to the Company or its wholly owned subsidiaries, or (ii) distributions in connection with the vesting or settlement of Company equity awards.

Financing of the Merger (See Page 57)

Parent has entered into an equity commitment letter with the Sponsor, dated October 24, 2025 (the “Equity Commitment Letter”), pursuant to which Sponsor has committed to contribute (or cause to be contributed) to Parent an aggregate amount in cash equal to $47 million substantially contemporaneously with the Closing, which will be used by Parent to fund the amounts required to be funded by Parent pursuant to the Merger Agreement at the Closing, including, without limitation, (a) the aggregate amounts to be paid as Merger Consideration and (b) the related costs, fees and expenses incurred by Parent and its affiliates (collectively, the “Payment Obligations”). Funding of the equity commitment is subject to the terms set forth in the Equity Commitment Letter and satisfaction of certain conditions, which include (i) the satisfaction or waiver by Parent of all conditions precedent to Parent’s obligations to effect the Closing set forth in the Merger Agreement (other than those conditions that by their nature cannot be satisfied other than at the Closing, but subject to the satisfaction or waiver of such conditions) and (ii) the prior or substantially simultaneous funding of the debt financing (or, if applicable, any alternative debt financing). See “The Merger-Financing of the Merger-Equity Financing” for additional information.

In addition, Merger Sub has entered into a debt commitment letter with Apollo Global Funding, LLC and Apollo Global Real Estate Management, L.P. (collectively, the “Lenders”), dated October 24, 2025 (the “Debt Commitment Letter”), pursuant to which the Lenders have committed to provide upon the terms and subject to the conditions set forth in the Debt Commitment Letter, debt financing in an aggregate principal amount up to $350 million, the proceeds of which may be used by Merger Sub to fund certain amounts in connection with the transaction, including, without limitation, funding (a) the aggregate amounts to be paid as Merger Consideration pursuant to the Merger Agreement at the Closing in order to indirectly acquire the properties that will secure such debt financing (the “Properties”); (b) any brand-mandated property improvement plans for the Properties; (c) discretionary capital improvements for the Properties and (d) any working capital requirements of the Properties. Funding of the debt commitment is subject to the terms set forth in the Debt Commitment Letter and satisfaction of certain conditions, which include (i) receipt by the Lenders of certain documentation related to the Properties, such as final environmental reports and evidence of placement of insurance policies, and (ii) the absence of any material breach of the Merger Agreement by the parties thereto. See “The Financing of the Merger-Debt Financing Commitment” for additional information.

Finally, Parent and Merger Sub have also entered into a mezzanine commitment letter with Ascendant Capital Fund II LP (“Ascendant”), dated as of October 24, 2025 (the “Mezzanine Commitment Letter”), pursuant to which Ascendant has committed to provide upon the terms and subject to the conditions set forth in the Mezzanine Commitment Letter, (a) debt financing in an aggregate principal amount up to $45,000,000 and (b) an equity contribution to Parent of cash in an aggregate amount up to $20,000,000, the proceeds of which will be used by Parent and Merger Sub to fund certain amounts in connection with the transaction, including, without limitation, funding (a) the aggregate amounts to be paid as Merger Consideration pursuant to the Merger Agreement at the Closing in order to indirectly acquire the Properties, (b) any brand-mandated property improvement plans for the Properties, (c) discretionary capital improvements for the Properties and (d) any working capital requirements of the Properties. Funding of the debt commitment contemplated by the Mezzanine Commitment Letter is subject to the terms set forth in the Mezzanine Commitment Letter and satisfaction of certain conditions, which include (i) receipt by Ascendant of certain documentation related to the Properties, such as final environmental reports and a UCC title insurance policy, and (ii) the absence of any material breach of the Merger Agreement by the parties thereto. Funding of the equity commitment contemplated by the Mezzanine Commitment Letter is subject to funding of the debt commitment. See “The Financing of the Merger-Mezzanine Financing Commitment” for additional information.

Financing Cooperation (See Page 86)

Before the Closing Date, the Company agrees to, and will cause the Company subsidiaries to, use commercially reasonable efforts to provide, and will use commercially reasonable efforts to cause its representatives to provide such, cooperation as is reasonably requested and customary for financings of the type contemplated in connection with the arrangement of the debt financing contemplated by the debt financing commitments. Such requested cooperation may not unreasonably disrupt or interfere with the ongoing business or the operations of the Company or its subsidiaries. For more information, please see the section of this proxy statement captioned “The Merger Agreement-Financing Cooperation.”

No Solicitation of Transactions (See Page 82)

Under the terms of the Merger Agreement, the Company, its subsidiaries, and their respective officers, managers, directors and other representatives are subject to restrictions on its and their ability to solicit any competing proposals or offers that constitute or would reasonably be expected to lead to a Takeover Proposal, including, among others, restrictions on its and their ability to furnish to any third parties any non-public information in connection with any Takeover Proposal, to solicit, initiate, knowingly encourage or facilitate the making or submission of any Takeover Proposal or inquiry (or proposal or offer that would reasonably be

expected to lead to a Takeover Proposal or inquiry), and to engage or participate in any discussions or negotiations regarding a Takeover Proposal or inquiry. Subject to the terms of the Merger Agreement, the Company may furnish non-public information to, and engage in discussions or negotiations with, a third party if the Company receives a written Takeover Proposal it reasonably believes to be bona fide from such third party after the date of the Merger Agreement and that did not result from a breach of the Company’s obligations as specified in the Merger Agreement, and if the Board determines that such Takeover Proposal constitutes a Superior Proposal (as defined in the Merger Agreement) or would be reasonably expected to result in a Superior Proposal or the Board determines in good faith after consultation with outside legal and financial advisors, that such Takeover Proposal constitutes or could reasonably be expected to lead to a Superior Proposal (as defined in the Merger Agreement). Under certain circumstances and after following certain procedures and adhering to certain restrictions, the Company is permitted to terminate the Merger Agreement in order to enter into a definitive agreement relating to a Superior Proposal (subject to payment of the Company Termination Fee (as described below)).

Conditions to the Merger (See Page 90)

Completion of the Merger depends upon the satisfaction or waiver of a number of conditions, including, among others, that:

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the requisite Company stockholder approval must be obtained;

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no law has been enacted or promulgated by any governmental entity of competent jurisdiction (whether temporary, preliminary or permanent) which prohibits, restrains, enjoins or makes illegal the consummation of the Merger and there is no order (whether temporary, preliminary or permanent) of a court of competent jurisdiction in effect preventing, restraining or enjoining the consummation of the Merger;

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the Company’s, and the Parent Parties’ respective representations and warranties in the Merger Agreement must be true and correct in the manner described under the section entitled “The Merger Agreement-Conditions to the Merger”;

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Parent must have received a written REIT and tax opinion of Frost Brown Todd LLP (or other counsel selected by Company and reasonably satisfactory to Parent), dated as of the Closing Date (as described in the section entitled “The Merger Agreement-Conditions to the Merger”);

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the Company and Parent must have delivered closing certificates to each other, each dated as of the Closing Date, each signed by an applicable executive officer, certifying that certain specified conditions have been satisfied;

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from the date of the Merger Agreement through the Closing Date, there must not have occurred a Company Material Adverse Effect (as described in the section entitled “The Merger Agreement-Representations and Warranties”); and

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the Company and the Parent Parties must have performed and complied in all material respects with its and their respective covenants required by the Merger Agreement to be performed or complied with on or before the Effective Time.

Termination of the Merger Agreement (See Page 91)

The Company, Parent and Merger Sub may mutually agree to terminate the Merger Agreement and abandon the Merger and the other transactions contemplated by the Merger Agreement at any time before the Effective Time, even after the Company has obtained the requisite Company stockholder approval.

Termination by Either the Company or Parent

In addition, the Company, on the one hand, or Parent, on the other hand, may terminate the Merger Agreement, if:

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the Effective Time has not occurred on or before the End Date, April 22, 2026; provided, that the right to terminate the Merger Agreement under such provision will not be available to any party whose breach of any representation, warranty, covenant or agreement set forth in the Merger Agreement was a contributing cause of, or contributing factor that resulted in, the failure of the Merger to be consummated on or before the End Date;

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any court or other governmental entity of competent jurisdiction has enacted, promulgated, enforced or issued any law or final, non-appealable order in each case permanently enjoining or otherwise prohibiting the consummation of the Merger; provided, however, that the right to terminate the Merger Agreement under such provision will not be available to any party whose breach of any representation, warranty, covenant or agreement set forth in the Merger Agreement was a contributing cause of, or contributing factor that resulted in, the enactment, promulgation, enforcement or issuance of such law or order; or

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the Special Meeting (including any adjournments or postponements thereof) will have been held and been concluded and the requisite Company stockholder approval will not have been obtained.

Termination by Parent

Parent may also terminate the Merger Agreement if:

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the Company has breached or failed to perform or comply with any of its representations, warranties, covenants or other agreements contained in the Merger Agreement, and such breach or failure to perform or comply (1) would result in a failure of any of the mutual conditions to the Company and Parent’s obligations to effect the Merger or the additional conditions to the obligations of Parent to effect the Merger and (2) cannot be cured by the End Date or, if curable, is not cured by the earlier of (x) 20 days following Parent’s delivery of written notice to the Company stating Parent’s intention to terminate the Merger Agreement under this provision and the basis for such termination and (y) three business days before the End Date, provided, that Parent will not have a right to terminate the Merger Agreement under this provision if any Parent Party is then in breach of any representation, warranty, agreement or covenant contained in the Merger Agreement such that the mutual conditions to the Company and Parent’s obligations to effect the Merger or the additional conditions to the obligations of the Company to effect the Merger would not be satisfied; or

•

(1) at any time before receipt of the requisite Company stockholder approval, if the Board or a committee thereof has effected a Company Adverse Recommendation Change, (2) at any time before the receipt of the requisite Company stockholder approval, the Board failed to publicly reaffirm the Board Recommendation within 10 business days following the date that a Takeover Proposal has been first publicly announced, (3) the Company breached or failed to perform in any material respect any of its obligations under the non-solicitation provisions of the Merger Agreement or (4) the Company enters into an alternative acquisition agreement (other than an acceptable confidentiality agreement entered into in compliance with the Merger Agreement).

Termination by the Company

The Company may also terminate the Merger Agreement if:

•

before receipt of the requisite Company stockholder approval, the Board authorizes the Company, in accordance with the terms and conditions of the Merger Agreement, to enter into an alternative acquisition agreement (other than an acceptable confidentiality agreement entered into in compliance

with the Merger Agreement) in respect of a Superior Proposal; provided, however, that the Merger Agreement may not be so terminated unless substantially concurrently with the occurrence of such termination, the Company Termination Fee is paid in full to Parent and the definitive agreement relating to the Superior Proposal is entered into by the Company; or

•

any Parent Party has breached or failed to perform or comply with in any material respect any of their representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach or failure to perform or comply (1) would result in a failure of any of the mutual conditions to the Company and Parent’s obligations to effect the Merger or the additional conditions to the obligations of the Company to effect the Merger and (2) cannot be cured by the End Date, or if curable, is not cured by the earlier of (x) 20 days following the Company’s delivery of written notice to Parent stating the Company’s intention to terminate the Merger Agreement under this provision and the basis for such termination and (y) three business days before the End Date, provided, that the Company will not have a right to terminate the Merger Agreement under this provision if the Company is then in breach of any representation, warranty, agreement or covenant contained in the Merger Agreement such that the mutual conditions to the Company and Parent’s obligations to effect the Merger or the additional conditions to the obligations of Parent to effect the Merger would not be satisfied.

Termination Payments (See Page 93)

Company Termination Fee

The Company has agreed to pay Parent or its designee the Company Termination Fee of $4.0 million (the “Company Termination Fee”), if:

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Parent terminates the Merger Agreement pursuant to the second termination provision described in the section above entitled “Termination by Parent”;

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the Company terminates the Merger Agreement pursuant to the first termination provision described in the section above entitled “Termination by the Company”; or

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all of the following requirements are satisfied:

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the Merger Agreement is terminated by the Company or Parent pursuant to the third termination provision described in the section entitled “Termination of the Merger Agreement-Termination by Either the Company or Parent”;

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before such termination, a Takeover Proposal was publicly disclosed and not withdrawn; and

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within 12 months after the date of the termination referred to above, the Company has consummated such Takeover Proposal (it being understood that for purposes of such termination provision, all references in the definition of Takeover Proposal in the Merger Agreement to fifteen percent will be deemed to be references to fifty percent instead.

Parent Termination Fee

Parent has agreed to pay to the Company or its designee the Parent Termination Fee of $8.0 million (the “Parent Termination Fee”), if all of the following requirements are satisfied:

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the Company terminates the Merger Agreement pursuant to the second termination provision described in the section above entitled “Termination by the Company”;

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SEC Form PREM14A filed by Sotherly Hotels Inc.